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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 ?

3. 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.

2. 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 ?

3. 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 ?

4. 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 ?


BUSINESS ENVIRONMENT ISMS ONGOING EXAM ANSWER SHEETS PROVIDED

BUSINESS ENVIRONMENT ISMS ONGOING EXAM ANSWER SHEETS PROVIDED WHATSAPP 91 9924764558

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

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 .


Public Relation Management ISMS ONGOING EXAM ANSWER SHEET PROVIDED

Public Relation Management ISMS ONGOING EXAM ANSWER SHEET PROVIDED WHATSAPP 91 9924764558
CONTACT:
DR. PRASANTH MBA PH.D. DME MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com

Masters Program in Business Administration (MBA 4 SEM)
( Semester IV )
Specializations:- Public Relation Management

Note :-
a) Solve any 4 cases
b) Each case carries equal marks

Case 1 :-
Reaping the benefits of customer insight
During the late 1990s, companies invested millions in customer relationship management (CRM) systems such as sales force automation, campaign management and call centre systems. Given the importance to any business of establishing and building relationships with customers, this is not surprising. But despite this rush, many companies have been disappointed by the low return of investment from CRM. Being able to handle more calls per agent or run more marketing campaigns has been of limited value.
The real returns come when business intelligence software is used to drive these operational systems. This software opens up opportunities such as up- or cross-selling in the call centre, targeting campaigns at specific customer segments and increasing the relevance of the offer made and its value to the customer, thereby increasing response rates.
The ultimate aim is to combine CRM with business intelligence to produce a ‘closed loop’ systems in which business intelligence analyses customer behaviour and produces a list of targets for a specific product or service. The campaign is managed using the CRM software and the business intelligence systems and then assess the results to produce a more refined campaign.
However, few organisations have reached this level of sophistication. As Colin Shearer, vice president of customer analytics at SPSS, a supplier of predictive analytics software, says: ‘Most companies have always dealt with their customers en masse.’
According to Mr Shearer, business intelligence software is ideal for assessing the profitability of individual customer by matching the cost of serving each one against the revenue he or she generates. The organization can then develop marketing campaigns that target its more profitable customers. At the same time, unprofitable customers can be diverted towards lower cost channels, such as automated voice systems or a website.
‘You need to identify the small percentage of very high-value customers that are generating 80 to 90 per cent of value in the company,’ he says. ‘You also interested in the trends, such as customers who are dropping out of the top to become less valuable and take their business elsewhere.
The final stage of the process is to use data mining software to predict how individual customers behave. This software uses advanced mathematics algorithms to reveal hidden paterns and relationships in sales data. The results can be used in a number of ways: to group customers into different segments according to similar behavior and characteristics; to determine which products or services a customer is likely to buy; to identify which customers are most likely to defeat to another company; or to assess how much of a credit risk a potential customer poses.
David Bradshaw, a senior analyst at Ovum, explains that such assessments once required advanced mathematical knowledge to build and run data mining models. ‘You still need people with expertise to set up the business intelligence systems, ‘he says, ‘ but business users are increasingly being trained to build, analyse and exploit segments. You are “handling over the toys “ to the business people to do the analysis themselves.’
Vodafone, the mobile network operator, has a single contacts number for its call centre and routes each caller to the appropriate team of agents for his or her segment. According to Julian Moss, UK development manager: ‘Business intelligence enables our touch points to target the right groups of customers, to understand them and to have a close relationship with them.’
Spaarbelg, a Dutch subsidiary of Aegon, the life insurer, has a growth strategy based on expanding sales to its existing customer base, rather than on acquiring new clients. It uses SPSS real-time predictive software to suggest cross-sell opportunities to agents in its inbound call centre, which handles 1m calls a year from 1.6m customers. To avoid pestering them, its agents gathered enough information in just 180,000 calls to develop a targeted recommendation. In a third of these calls, the agent determined that the customer was respective enough to make the offer and sales worth $30m.
Business intelligence reporting is also ideal for managing performance in contact centres. It can help set and track targets and spot trends, and it can provide management dashboards that display key performance indicators, such as how many calls agents are handling and how many are closed within agreed service levels. The use of business intelligence is becoming increasingly important in the face of new legislation introduced to guard against unwanted e-mail and to allow individuals to bar cold telephone calling. Mr Shearer points out that with fewer opportunities for outbound marketing, organisations, must take advantage of cross-selling at service call centres.
As Mr Bradshaw explains: ‘You may only have one chance of approaching a customer. This is pushing people into micro-segmentation of their customers. Rather than having five or six major segments, they may have many thousands, each with 100 to 1000 customers. You analyse the behavior of the micro-segments so that you know what they want to buy, how they want to buy, how they want to buy it and how to approach them.’ ‘The problem with the business intelligence vendors’. He adds, ‘is that they have targeted the technical experts. They haven’t yet really got to use their marketing analytics. They are trying to do better, but [the CRM vendors, such as Unica Corporation, Siebel and E.piphany] have targeted people actually do the marketing.
It is clear that business intelligence is needed to drive CRM activities. However, the trick is to create a closed loop systems that combines customer profitability with data mining. Only then will an organization be able to concentrate on giving profitable customers the best and most relevant products and services.

Questions
1 What is the different between business intelligence (BI) and (analytical) CRM?
2 Do you agree with the following statement in the text: ‘The ultimate aim is to combine CRM with business intelligence’? Give detailed arguments why you do or do not agree.

Case 2 :-

Customer knowledge at Centre Parcs: a life-long holiday!
Introduction
Centre Parcs is a holiday resort with locations in several European countries, for example Germany, France and the Netherlands. Customer relationship management is one of its successes. The secret: ‘it is not about the value he or she wants.’
Richard Verhoeff, director of E-commerce at Center Parcs: ‘None of our customers is equal. The market and the customer do not exist for us. All that our guests have in common is the money and the time they spent with us. It is our challenge to get to know them better…. It was the objective of our yield management systems to optimize cottage rental, but nowadays we also want to actively offer services at different contact moments. Experience tells us that guests who participate in more activities are more likely to return. But before you can do this, you will have to answer questions such as: who are our guests? When do they come? What do they want? In other words: we need customer profiles. Of course, segmentation is nothing new. In most cases customer groups are distinct and differ in the value they represent for the organisation (customer value). Customer relationship management then simply means retaining the good customers and stimulating them to increase their expenditure, while in the meantime the bad customers can leave.

Profiling customers
BPK Acxiom, a database and CRM consulting firm, approached it from a different perspective and began by analysing the emotional and instrumental values of a stay Center Parcs. These values change with the life cycle of a customer. He comes as a little child with his parents, when he is older he brings his girlfriend, and again later his family. Each of these roles asks for different approach. Also, the value of the attractions differs for each customer, depending on his life cycle, the time of his stay and the people that accompany him. Verhoeff: ‘ The swimming pool on a Saturday morning has a completely different function from that on a Sunday afternoon, when there are a lot of small children around.’
To clarify this, BPK Acxiom developed life scenarios. Peter Severens, director at BPK Acxiom: ‘We write life stories. What are the motives that drive people? Where do they come from? What are the events in their life and in specific situations? And what goods and services are consumed during these events? We map people’s life cycles and store them in the database. ‘The scenarios have been tested and refined in panel research together with a market research agency, named Signicom. It resulted in the definition of a number of customer groups and a customer-value pyramid per customer group. The value pyramid contains suggestions for product development and communication. The tone-of- voice, the actual proposition and the sales arguments match the values and preferences of the segment.
CRM software
CRM Software plays an important role during the implementation of this customer group project. Center Parcs uses the forecasting software developed by DataDistilleries (now owned by SPSS) during direct and telemarketing actions. Relations are selected that have the best chance of booking during a specific period. But also, salespersons benefits from the software. Marcel Holsheimer, founder of DataDistillers: ‘Ours software helps to predict the interests of a person during a contact moment. ‘Specific phone scripts and offerings can be formulated. Verhoeff: ‘Some customer groups appreciate it if you give them a discount right from the start, others first asks for an explanation of your products and services and formats help, one should never forget that it remains people’s business.
To predict what Center Parcs’ customers are interested in, DataDistilleries can benefit from an enormous database with customer data that have been collected over the years. As early as 1984, Center Parcs started to store relationship and transaction data. However, through the years the organisation has been reactive in its use of these data. Erna ter Weele from BPK Acxiom: ‘Currently, changes are focusing on improving customer insight and exploiting this information in actions. ‘Since DataDistilleries’ software is user friendly, marketers no longer have to rely on IT specialists and can act faster. Verhoeff: ‘Time to market is very important. It you notice the occupancy rate of your park is not optimal for a particular weekend, you only have a few days to do something about it’

Results
Although Center Parcs is pleased with the results to date, Verhoeff is convinced the potential of the system is larger. ‘Additional positive result of $3 million is a beginning. We have 3.2 million customers a year and if they spend an additional 2 per cent, revenue will increase by several tens of millions. By making more active use of the call centre in outbound actions, by stimulating cross-selling in the call centre, via the Internet and during contact moments in the park itself, revenues have to grow.’

Questions
1 Consider the way Center Parcs and its consulting and research firms profile its customers. Apply the method, described by Peter Severijins, to yourself or someone who visited a holiday park once before. What kind of customer profile can you construct?
2 What are two advantages and two disadvantages of applying this customer profiling approach?
3 In what ways can Center Parcs differentiate its marketing for different customer groups?

Case 3 :-

Project Direct: testing e-mail marketing is effective
Direct writer Proteq Direct used e-mails in experiments to acquire new customers and the result is: although the response on a physical direct mailing is higher, the costs per order for an e-mailing are lower, and in combination with a direct mailing the conversion improves. Sending more than one mailing to the same address works, but is, however, expensive.
The pros of an e-mail marketing campaign – low costs, extending the market reach – will only become evident when the medium is applied in the right way. Only few companies, however, test before they send out the bulk mailing and are confronted with disappointing low response rates.
For direct writer Proteq this was the reason to organise, together with an e-mail marketing agency, a test case for a new car insurance campaign. Finding out how effective and appropriate e-mail actually is to acquire new customers was the motive for Proteq to initiate the test… The marketing manager at Proteq Direct: ‘In traditional direct marketing it is always a trade-off. On the one hand you want to make a sharp selection to increase your response, but on the other hand you want to reach many people. We wanted to learn if with e-mailing we can increase our market reach. Besides that, an e-mailing is a lot cheaper. The economic climate and the maturity level of the market are reasons for a decrease in reponse on traditional mailing. ‘Michael Bres, managing partner of the e-mail marketing agency E-Profile: ‘It is the challenge to come up with a targeted offering and in the meantime to maintain the size of the mailing list. E-mail marketing can also seriously reduce the costs of an order.’ Peter: ‘But first we wanted to see if this was true.’
‘The subject of the mailing was a new car insurance with a price that decreases when the customers’ driving experience increases and therefore has fewer accidents and a safer driving style. Not only will the customer have a higher no-claim, but also a lower contribution. Prospects were private drivers without lease cars in the age categories of 29 to 65, living in areas with a high penetration of older and smaller cars up to a purchase price of $20,000.’ These criteria were used by E-Profile to select addresses in the online databases of Jecomputerisjelot and Testnet. Five equal experimental groups have been formed with the help of Experian; in the online database the e-mail addresses were related to names and addresses for which segmentation profiles were available in the Experian database.
Different ways were used to approach prospects; in a one-step approach or a multi-step approach, with or without a message informing the prospect of the upcoming e-mailing and with or without a physical direct mailing followed up by an e-mail as reminder.
The proposition remained the same in all mailings. Also in all experiments the main mailing was sent out at the same time. Further, by clicking through the e-mailing prospects could, in an interactive way, directly calculate their premium. Peter: ‘E-mail allows you to make an offer directly when people show interest. Therefore a functional use of the medium is to be preferred.’ There were three ways for people who did not want any e-mail offerings in the future to get off the list. Bres: ‘You could chose to be removed from all mailings, to be removed from mailings of this advertiser, or to receive mailings on selected topics.’ The sender was clearly visible on the mailing to avoid complaints about spamming. Furthermore, an e-mail address will never be used more than once or twice a month for an e-mailing. And, of course, we only mail when we have something to tell. By following this approach, the agency achieved that only 1 per cent of the receivers state they want to be removed from the list.’
E-Profile selected five equal experimental groups of 5000 consumers. Addresses were selected based upon the drivers’ experience, the geographical spread, the purchase value of the car (when new) and the kilometer usage per year. Sex was not a selection criterion. Peter: ‘men have no significantly different claiming behavior from women. Therefore it is a not a criterion. Besides that, we do not think it is a relevant segmentation criterion.’ For previous Proteq Direct mailings profile analyses were made for the best responding addresses (Ideal Profiles). A part of the mailing list was formed by these ideal Profiles.
The quality of the e-mail addresses is good as only 1 per cent of the e-mails bounced.

Results
Mailing consumers more than once will have a positive impact on the response, but will also affect the costs. An increase in the share of e-mails in the campaign will reduce the costs per order. The Ideal Profile consumers responded best (37 per cent). The one-step approach with only the digital main mailing had the lowest response (index 41) but ranked seconds in costs. To measure what the results would be if not 5000 but 60,000 mailings were sent out, a new calculation was made in which economy of scale effects were incorporated. The Ideal Profile remains the most profitable group with an index of 89, but experimental group 4 becomes more lucrative with an index of 60 and test group 2 with only an e-mailing, will cost less than half the average cost per policy. It is the result of avoiding the physical print and postal costs.

Conclusion
Proteq is satisfied; e-mail appears to be an effective medium to acquire new customers. Although the response on a physical mailing is higher, e-mailings are cheaper and offer opportunities to reach a larger share of the target market. The combination of direct and e-mail has synergistic effects. Approaching consumers more than once has a positive impact on the conversion, but a negative one on the costs. Peter: ‘We will continue to develop and send out direct mailings and keep on learning in experiments. E-mail databases will be expanded and improved, profiles will be expanded and improved, profiles will be expanded and improved, profiles will be combined and for sure we will combine media in the future.’

Questions
1 What are the pros and cons of combining a physical direct mailing with an e-mailing?
2 Why can you increase the reach of your campaign with an e-mailing?
3 What is meant by the statement that e-mailings should be used functionally?
4 How do you evaluate the sampling in this test/experiments?
5 What is the reason that the outcomes in the entire population are different from those in the sample?
6 Can you think of two other relevant experiments that Proteq might initiate in the future?

Case 4 :-

Secrets of success for going mobile
The mobile Internet has been a huge success in Japan, but can it spread as explosively in the west? I believe that it can – in fact it can spread as fast as the fixed Internet in the 1990s and the GSM mobile standard has done in the past ten years. Achieving this will require mobile operators, equipment suppliers and content providers to learn from – but also to adapt from – the Japanese business model. The power of the fixed Internet derives from its ability to create highly connected ‘nodes’ – take, for example, the Amazon website, which links millions of prospective purchasers with the items they are seeking. In mobile telephony, by contrast, the core secret to success is in the way agreement is sought between the various players involved to ensure they all get their ‘cut’ from the value chain. This ‘agreement’ force was present in building NMT, the first generation mobile standard, and has been present in different mobile initiatives ever since. As I see it, these two forces are clashing in the mobile
Internet. I argue that the force of ‘agreement’ is losing power while the force of ‘highly connected nodes’ is still very much understand, at least in the west.
To explain, let’s have a look at how the Japanese mobile Internet has developed. In 1999 – in contrast to the situation in the west – most Japanese did not have fixed (PC) Internet access in their homes, so the concept of the mobile Internet fell on to fertile ground. The Japanese emphasized open access to the Internet, but also wanted to standardize the quality of access for the user, and this led to the practice known as ‘cut in five seconds’, in which the connection would be lost if the site failed to download in five seconds.
This virtually closed access to the existing World Wide Web of 1999, but the Japanese consumer did not notice, since the web at that time was a non-Japanese medium. NTT DoCoMo, the Japanese mobile operator best known for its competitors focused on creating Japanese content. In the beginning this was free (or almost free), which meant high access rates and the emergence of the type of highly connected nodes I mentioned above.
This explains why the mobile Internet has become so popular in Japan. But can we do the same in the west – that is, create super-connected mobile nodes and introduce some form of quality criteria which in practice denies access to (or makes accessing) the ‘tradition’ web , less interesting?
I believe this can be done and already there are some initiatives (such as the ‘dotmob’ domain name that identifies specific Internet content for mobile devices, and price reductions of content) which are following this path. Free and highly interesting mobile content is one necessity along this path, which emphasizes the importance of creating ‘highly connected super nodes’ and disagrees with, or downplays, the traditional ‘Nordic agreement’ model.
Another reason for the success of the mobile internet in Japan was the ‘orchestration’ business model, which went beyond the traditional agreement model. NNT DoCoMo used its competence and market power to design and procure the handsets it wanted from Japanese suppliers and it also set the rules and price levels to content producers and suppliers.
This model, which I refer to as ‘orchestration’, has proved successful in Japan, where it was pioneered. But it has taken a long time for the west to understand the power of the Japanese model. Western players have learnt its value through a step-by-step approach of trial and error. Presently Vodafone live! and also the Nokia Ngage device might be regarded as attempts to orchestrate in the west. However, I do not believe that the ‘orchestration’ business model can be successful in the west. The next business model in the west might be based on some type of ‘cultivation’ of the market.
What is, however very clear is that the ‘Nordic force of agreement’ is losing ground. This is evident also by looking at the implication of Moore’s law on mobile business. Moore’s law implies that phones will increasingly become more like computers. This brings a completely new set of players into the market and thus simply because of the number of players in the value chain, agreement cannot be reached in the Nordic sense.
So, to spread with explosive speed the mobile Internet needs super-connected nodes and a ‘cultivating’ business model. But one can also ask if there is something that is presently slowing down the speed of introduction of the mobile Internet in the west? I would argue that SMS (text messaging) is doing this, for example, at how the Minitel slowed down the introduction of the Internet in France.
SMS is a barrier to the growth of the mobile Internet for several reasons. ‘Super-nodes’ are difficult and in some cases impossible to create with SMS. SMS value-added services are based on remembering numbers and people remember numbers rather poorly. SMS value-added services work on a national level only – it is a limit of the technology and no market (single country) in Europe, for example, is bigger than Japan, i.e. the individual size of the SMS markets limit the maximum size of the super-nodes. Third, SMS value-added services always have a price (transaction based) and thus would restrict the experimentation with free content that the creation of super-nodes would encourage.
I would like to emphasise, however, that not everything in the mobile Internet has to be super-connected or free. In fact, a lot of the content in Europe will be language-specific and thus limited in market size. The present content industry is focused on personalizing the user’s phone for a price – a lot of this industry might remain. A lot of the content will be peer-to peer in character (therefore free), but limited and unable to create highly connected nodes. But, I am arguing that super- connected nodes – as big as possible – are worth striving for and their existence is the catalyst of the fixed Internet, as it should be for the mobile Internet, too.
Interestingly the barrier SMS presents to the growth of the mobile Internet derives not only from value-added services, but might also reside in the SMS message itself. In Japan SMS has lost ground to e-mail via mobile phones for several reasons. I recognize that the Japanese did have some initial difficulties with e-mail, e.g. junk mail. However, the price of a single message bit in Japan is far below our current price level, and according to studies on communication patterns made in Japan, the way the Japanese use e-mail does not differ from the way SMS is used in the west.
It is actually also interesting to study how SMS is at the very core of the present western business models; so the barrier to a more Internet-based messaging and content culture is not necessarily a choice of the user, but something that is thoroughly embedded in western mobile operations’ business structures.

Questions
1 Analyse why the mobile Internet has become a huge success in Japan. Where do you agree or disagree with the author of this article?
2 How do you think the mobile Internet can become a success in your country? What can you learn from the Japanese best Practice case?

Case 5 :-

We have got a huge success on our hands
Cristina Zanchi, CRM director KLM
Despite difficulty market circumstances the number of KLM Flying Dutchmen (FD) members grew in a little less than six months by 20 per cent; the numbers tripled. This triumph was the reason for KLM winning the Gartner CRM Excellence Award 2004. CRM director Cristina Zanchi loves to show these glorious figures, especially to Air France. The two companies share the same CRM vision and that opens a window of opportunity for the future. ‘I am so impatient because I have the evidence of a huge success in my hands.’
Zanchi: ‘The award is a recognition for our team. I really pushed them. There are few airlines that are so focused on CRM – Continental, Lufthansa and Southwest Airlines make good progress – and there is certainly no airline that implemented CRM the way we did it. I wanted to leap forward; speed these days is as important as quality. And, yes, I am an impatient person.’ This personality trait of the Italian is her greatest strength. ‘If people think something is too complex, they slow down. Some people warned me of a mission impossible. Why would KLM pursue CRM while all fights are full? Well, then I learned to say: the chairs of Sabena and Swiss Air were also occupied, but see what happened. If you cannot enlarge your capacity you should think of another solution. You can increase the revenues per customer and that is something you achieve when you utilize your customer insight to improve the service. In interaction with customers you intensify the customer experience and therefore also the turnover.’

Delay
The reason why many airlines postpone CRM is clear to Cristina Zanchi. CRM requires large investments and the current margins in the airline industry are low. In the meantime the financial effects of CRM are vague. Several years ago KLM also withdrew a CRM initiative. ‘In 1997 KLM performed a very valuable CRM study, but the system never got implemented then. CRM software was much more expensive then and probably the organization was not up to it.’
But between 1997 and 2002 – the year the first building block of an integral CRM vision was constructed – the airline industry changed dramatically. Competition is heavy. ‘Internally, I had a good reason to sell CRM as a way to distinguish ourselves on emotional elements. We wanted to realize our positioning of reliability and comfort with a personal touch.’
The ambition of Zanchi to implement CRM quickly seems to contradict the opinion of many that CRM implementation above all requires a steady approach hard facts play a crucial role. Form the beginning she involved financial management and asked for frequent reports. Transparency is key to success and at KLM’s headquarters there is a panel the size of a man, showing all key indicators. Little planes mark the status and target. ‘To get an overview of CRM in one shot is impossible. It was my intention to split up our plan in pieces; a plan in three phases – change management, customer database and campaign management – with underlying steps. Phase one is ended and we far beyond the start of phase two now. Almost with one snap of my finger I can show you the total overview, the result we realized and the plans we have for 2005 and 2006.’
CRM targets are defined as a sort of acronyms: CARE, Customer acquisition, Activation, Retention and Extension. The entire KLM organization is organized around these objectives; everyone has his target. From August 2003 onwards KLM applied the first instruments of E.piphany’s CRM suite. The centralized customer database became operational in December 2003. The software company presented a solution that was as ingenious as it was simple: build a software layer above the current systems – ranging from booking, checking-in to customer complaint handling – and import the data you need to fill your virtual customer model. As a consequence employees will not only see the check-in data on their screen, but also directly get information about past customer behavior and preferences.
Zanchi: ‘The turnaround in airline marketing is that we do not sell flights any more, but processes. We sell lounges, gates, websites, seat environments… We need to understand our customers and their wishes. The database allows us to get a complete view, no matter if it is about the lounge or about onboard facilities – real time at the end of this year. A simple example. Among our Flying Dutchman members there are several people with of height of 1.95 – 2.05 meters. Every time they make a reservation they have to ask for a seat with additional space. Why can an airline not remember this? Or, why would you not reassure a customer with a bad luggage experience during check-in that his baggage has, been checked-in properly? KLM check-in stewards will get a signal on their screen that the customer previously had a problem and needs reassurance. The screen will give indications on the way to start a dialogue. Customer satisfaction has risen sharply since we give customers this type of attention.’

Incubation
KLM’s next step is to identify individual customers and customer wishes to introduce one-to-one marketing. Mass marketing through television has been replaced by focused ‘dialogue marketing’ in which use is made of customer profiles. Flying Dutchman members are categorized based upon age, customer profitability, recency (date of the last flight) and frequency of flying. For passengers who have not flown with KLM in the last twelve months a re-activation campaign has been developed; ‘ if you fly with us between now and the coming six months you can double your Flying Dutchman points’. Also campaigns are adapted to customers’ wishes and hobbies, such as golf and sailing.
Another objective is to win new FD members. ‘The Flying Dutchman programme is our starting point, we have to be able to identify our customer. A new customer, however, has no past. So we start with an incubation period; we start broad. If this new FD customer did not fly for a month, he will receive an e-mail with opportunities. If he does fly, he will receive different information after four weeks. We start a dialogue with the customer tailoring information to his segment, profitability and behaviour.’
In the past seven months the database with e-mail addresses tripled. ‘Of course, we strive towards online communication. The costs are lower and besides that the response is higher than offline; between 5 and 12 per cent.’
At the moment the customer experience is being improved. Flying Dutchman Platinum and Gold members are printed separately on the boarding lists and get a label ‘special and valuable’. Employees are trained in master classes to improve their services towards FD members even in future. Changing the mindset will take years, says Zanchi. It sounds uncommon for on airline with a cabin crew that has a service orientation by nature. ‘The difference is we enable our people with tools now.’ Besides that, additional attention is given to complaint handling.
‘Complaints are a gift. A complaining customer gives you another chance. We think we should respond to customers if in their eyes something goes wrong; within five working days we react. Letters are being signed by the CEO, Leo van Wijk. In doing so we give the customer the opportunity to give feedback and the new customer information.’ Within less than a year the number of FD customers increased by 20 per cent and the profit 5 per cent. The payback time of CRM tools was less than Zanchi expected initially. Under the current circumstances, with SARS, the war is Iraq, this is tremendous. Cristina Zanchi will miss no opportunity to present these results, especially to Air France. The partner shares the same vision and in some situations the same tools are applied or existing systems can be integrated. But the new alliance and the new decision procedures mean a slight delay for CRM. ‘I am so impatient because I have the proof of mega success in my hands. In the future the database will count twelve million customers. Twelve million. A world of opportunities.’
Next year she hopes to make her big bang, although she makes a correction to this statement. Maybe she is too fast. ‘First the training programme, the alliance with Air France and the culture changes. Then the opportunities are almost unlimited.’

Questions
1 If you were a member of the CRM Award Jury, what would be the reason(s) for you to choose Klm as the winning company of this global award?
2 Where do you criticize KLM’s CRM approach?
3 What are the major risks for KLM’s CRM future?

Case 6 :-

Life of novice call centre agent
These days, more and more young people entering the workforce are applying for jobs at call centres. Since Asia is at the heart of the growing call centre industry, the Philippines have become one of the biggest providers of this service, along with India and China. But how attractive is the job of a novice call centre agent.
Gracious accommodation. Pilipinas Teleserv Inc., the company that care of the NSO Helpline Plus and DFA Passport Direct Service, among others, was gracious enough to accommodate me. Malou Bermio, operations head and Hr and training manager, took charge of my training and job performance. Since a few hours of training would not sufficiently prepare me for the more difficult jobs, I was assigned to the order processing area for a food outlet.
Waking up early on Wednesday morning, I went to their headquarters in Quiapo. Taking the elevator to the fourth floor, I was greeted by the sight of a pool table. At least it’s not just all work and no play, I thought. And so my tutelage in the world of customer care began. Although training depends on the type of service the company offers, it usually covers four essential skills: phone ethics, phone skills or verbal communication, customer service and phonetics.
Your tone of voice must match the script to delivered, and you must learn how to project a professional telephone image. Trainees also learn the military alphabet, since spelling needs to be accurate. A good part of the training, at least in the order processing service, has to do with learning the company background. The history of the company, the pioneers of the company and the decisions that were crucial in making the company attain a certain competitive advantage are all taken up. I also had to study the food outlet’s menu.
Amazing system. When the battle officially began, I was led past the busier areas of a wide carpeted room, where every station had a customer care officer (CCO) catering to the needs of the customer. The least busy part of the room was where I found myself. But it was no reason to slack off. This was, after all, my first (and only) day on the job. After Malou led me to my station, I was introduced to their computer systems. As the CCO enters the customer’s particulars, the computer tells him whether the person is the new customer or not, and what branch will deliver his order. Then, the CCO simply uses the mouse to click on the customer’s order by scrolling down the menu, which is conveniently classified into sizes and flavours. The bill is also automatically displayed. It’s no wonder, then, that placing delivery calls now is much shorter and has less chance of getting the orders mixed up.
About an hour later, after learning the program options by heart, or so I thought, I was introduced to a pleasant girl by the name of Jasmin – my buddy for the day. While waiting for my turn at the headsets and watching Jasmin take calls. I decided to invent a name for myself (Tammy). In a way, this job is a bit like having another side of yourself show through.
First blooper. The first call came from a computer shop. Jasmin and I put on our headsets – she was assigned to listen in on the conversation in case I forgot something in the script. Noise filtered in from the caller’s background, so the speaker could not hear himself, or me for that matter, very well. My first blooper was rattling off the standard greetings: ‘Good afternoon, this is Tammy speaking, may I have your telephone number?’ without releasing the ‘mute’ button. But during the rest of the call, Delusional Me actually thought I did okay, taking the customer’s order, thanking him and even remembering to inform him of the new loyalty programme that started that day. I ended the call, feeling relieved and strangely accomplished, and turned to Jasmin for her verdict. She was laughing as she took off her headset. ‘You forget to recap the order!’ she said.
Rats. Well, so much for breaking the ice. And yet as the hours wore on, the calls became easier and the waiting time in between made me fidgety and impatient. Since distractions such as reading materials or music are prohibited to enable the CCOs to focus more on the job, just staying put was something I had to get used to. The waiting time between the first and second calls was a bit torturous for me, so the ringing of the phone was like the tinkling bell of an ice cream cart in the middle of summer.
Bad luck. From the noise in the background, I could tell this call was coming from a guy in a bowling alley. Another noisy call: I was getting anxious at the thought that this was a streak of bad luck. But I managed to finish the call. When working intensely on a task, you become more aware of the things you use the most. Here, I became conscious of how my throat felt dry after taking a call. I periodically needed to sip water and warm up my voice to make sure I could still speak. You also need hand-eye-voice coordination; the voice to keep talking to the customer, and the hands and eyes to enter all the information in the computer system. You need to break some habits when it comes to enter all the information in the computer system. You need to break some habits when it comes to the phone; I could never end up saying ‘Thank you for using [name of company] delivery service; please order with us again’ as a parting shot. Despite being glued to my station for most of the day, to say that the job was mind-numbering and sedentary is largely inaccurate. Flexibility is essential, especially in the mental aspect. You need to be alert all the time. Two other skills required are diplomacy and confidence, since the ability to interact with people is hard to fake when dealing with irate customers.
Although I don’t think anyone would recommend doing this job for a lifetime, it does address the big problem of employment in our country. Whether you are taking the job because you want a break before graduate studies, or you want earn to help your family or you’ve simply no idea what to do for now, working at the call centre may prove to be an enjoyable and fulfilling experience. Not only will it keep you in the workforce, you also get to help people with their needs.
At the end of the day, like most jobs out there, it’s good money for an honest day’s work.
Special thanks to Raffy David and Malou Bermio, Call Pilipinas Teleserv Inc.

Questions
1 What are the pros and cons of outsourcing call centre activities to countries such as the Philippines, India, etc.?
2 The quality of a contact depends to a large extent on the people working in the call centre (and, of course, on the resources they have). How will you evaluate the quality of the workforce here? Mention positive and negative aspects. What are your recommendations to improve the quality?


HUMAN RESOURCE MANAGEMENT ISMS ONGOING EXAM ANSWER SHEET PROVIDED

HUMAN RESOURCE MANAGEMENT ISMS ONGOING EXAM ANSWER SHEET PROVIDED
CONTACT:
DR. PRASANTH MBA PH.D. DME MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com

Specializations :- Human Resource Management
Note: – Solve any 4 Case Study
All Case Carry equal Marks.
Case 1 :-
Meeting the Challenge of Sexual Harassment
At an office of Goldman, Sachs and Company in Boston, some male employees allegedly pasted photos of bare-breasted women on company newsletters, next to biographies of new female employees (suggesting that the photos were pictures of the new staff members). Copies of the newsletters were circulated around the office. Sexist literature such as “The Smart Man’s Creed or Why Beer Is Better Than Women” (“After you’ve had a beer, the bottle is still worth a dime”) was allegedly also distributed. Kristine Utley, a former Goldman sales associate, has made these allegations in a suit charging that the environment at Goldman, Sachs constitutes sexual harassment. Fired for refusing a transfer to a New York office, she is suing to gain reinstatement and damages and to eliminate the harassment.
Joanne Barbetta has filed a similar suit seeking damages for harassment caused by an environment that she asserted “was poisoning my system.” Ms. Barbetta reports that during her tenure as a clerk at Chemlawn, male employees circulated pornographic magazines and pinup posters. She viewed a slide presentation that included suggestive pictures (e.g., a nude woman) put there, according to management, “to keep the guys awake.” After these experiences and continual breast-grabbing by a male employee, Ms. Barbetta quit.
Marie Regab, formerly an 18-year employee of Air France, has filed similar charges concerning the Washington office where she worked as a salesperson. She alleges that several characteristics of the office environment combined to create harassment, including propositions by one of her bosses, circulation of Playboy and Penthouse magazines in the office, and open discussion of sexual activity by male employees. “It was sickening and an insult to women in the office,” she claims. Ms. Regab was fired; she is suing to gain reinstatement, for $1.5 million in damages, and to eliminate the harassment in the office.
These three situations are examples of a growing number of suits being filed by women who charge that a sexist environment in the workplace constitutes sexual harassment and that their employers are therefore liable. Plaintiff actions in this area have been fueled by the Supreme Court’s ruling that sexist behavior that creates an “intimidating, hostile, or offensive working environment” is sexual harassment and violates Title VII of the 1964 Civil Rights Act.
The Court’s ruling has spurred an increasing number of companies to act to prevent sexual harassment in the workplace and to deal with if effectively when the problem occurs. Other factors have also triggered company action. Employers are realizing that the costs of harassment can be high in terms of lowered productivity, absenteeism, and turnover. One study of female employees in the federal government concluded that the government loses about $200 million each year to the effects od sexual harassment. Costs can also be high if an employee sues. Even if the plaintiff opts for an out- of-court settlement, the costs of these settlements are often in six figures, and it’s the company that pays. Companies are also realizing that sexual harassment is a very real issue in today’s workplace; from 20 to over 50 percent of working women have experienced sexual harassment (and so have at least 15 percent of male employees).
Thus, companies are tackling the issue; the more effective strategies developed so far contain four primary features:
1. Training programs the educate employees concerning the meaning of sexual harassment and the behaviors that constitute a hostile and harassment workplace: Training is especially important simply because men and women often differ in their perception of what constitutes harassment. Most training is in the form of seminars and workshops, often with films and videos. Philip Morris USA conducts a mandatory training program for its field managers that include viewing a video called “Shades of Gray”. General Motors conducts an awareness seminar for employees and offers this benchmark for judging the appropriateness of office conduct: “would you be embarrassed to see your remarks or behavior in the newspaper or described to your own family?”
Du Pont has developed one of the most comprehensive antiharassment programs in business (begun in 1981). Recently, the corporation added a $500,000 course on personal safety, rape, and harassment prevention primarily for its female employees (many of whom are moving into traditionally male jobs at Du Pont such as agricultural products sales). The course offers no-nonsense advice on how to handle a harasser. For example, if a male customer fondles a women’s knee, Du Pont advises that she “firmly remove his hand . . . and then say, ‘Let’s pretend this didn’t happen. “If she receives a verbal proposition, Du Pont advises that she say, “No, I wouldn’t want our business relationship to be jeopardized in any way.” About 1,600 employees have completed the course.
Like General Motors, Du Pont offers its employees a guideline for evaluating their behavior. Said a Du Pont spokesman, “We tell people, it’s harassment when something starts bothering somebody.”
Some other companies provide advice concerning how to handle harassment. One popular piece of advice: Document the incident as soon as possible by describing on paper what happened in full detail and talking to someone informally about the incident. A relatively mild case of harassment can be handled by taking to the harasser, explaining what he or she did , how it made you feel, and telling the harasser to stop. In a more serious situation, communicating these points via a certified letter sent to the harasser, with the victim keeping a copy, is often recommended (and reportedly proves to be quite effective).
2. An internal complaint procedure: Ideally, the procedure provides for fast action and confidentiality and ensures that the employee can report the problem to a manager who is not involved in the harassment. Some companies encourage employees to report a problem to their immediate supervisor but also designate an individual (often a woman) in the HR department as someone employees can speak with in cases where the immediate supervisor is involved in the problem. To ensure speedy action, some companies require that an investigation begin within 24 hours after the harassment complaint has been reported. Ideally, the procedure also stipulates how investigations will be conducted.
3. Speedy, corrective action that solves the problem: If the investigation supports the employee’s claims, corrective action is quickly taken. Such action can range from simply talking to the harasser to discharge, depending on the severity of the offense. One federal agency requires offending employees to publicly apologize to the individuals they’ve harassed. Staffing changes also sometimes occur. Our New York bank faced a problem of a highly talented male executive who generated much profit for the bank-and also several costly EEOC complaints from his secretaries. The bank solved the problem by assigning the executive an all-male secretarial staff. Corrective action is particularly important because it communicates to both victims and potential offenders that harassment will not be tolerated.
4. A written and communicated antiharassment policy. The written policy is documented and distributed to all employees. The policy contains a definition of harassment, the company’s position prohibition harassment, the grievance procedure, and penalties.
While a growing number of companies are implementing antiharassment policies, the courts have yet to establish consistent record concerning the issue of “hostile environment” as illegal harassment. For example, a federal district court in Michigan dismissed a claim by Vivienne Rabidue that sexual posters and obscene language in her office at Osceola Refining Co. constituted illegal sexual harassment.
However, Joanne Barbetta has won the first round of her court battle with Chemlawn. The judge hearing her complaint rejected Chemlawn’s motion to dismiss the suit; he has ordered Ms. Barbetta’s case to trial. Chemlawn is expected to present a vigorous defense, asserting that the men involved in the newsletter incident have been disciplined and that the situations Ms. Barbetta cites fall far short of creating a hostile, harassing environment because they occurred “over the course of two years.”

Questions
1. Assumes that you are an HR executive for a company that manufactures and sells agricultural products (for example, fertilizers and grain feeds). The company’s workforce of 1,200 employees is 70 percent male and 30 percent female. Drawing from this case and the chapter content, develop an antiharassment policy and program. What are the major challenges you see in implementing the program?
2. Many experts assert that reported cases of sexual harassment represent only a small percentage of the total number of incidents that actually occur in the workplace. If their assertion is true, why do so many cases go unreported? How would your HRM policy on harassment address this situation?
3. As research indicates, people differ widely in their perceptions of sexual harassment. What is a harmless remark to one individual can be an annoying, even infuriating insult to another. In your view, what separates harmless conduct from harassing behavior? In the same vein, when does a sexist environment become a hostile, harassing one?

Case 2 :-
Are New Recruits Looking for Work – Life Balance?
Anyone who has tried to balance his or her time between a busy job and a fulfilling personal life knows challenging this can be. An Indisputable fact is that work and personal lives are interconnected. Companies know this. Potential recruits also know this. It’s become more of an issue in recent years due to some important demographic changes that are affecting many workers. For example, companies are experiencing rising demand for the expansion of child care and elder care programs. This is not surprising given the aging of the U.S. population and that Gen Xers are starting to have families. Thus, many recruits who are members of the “sandwich generation” (i.e., they are sandwiched between elderly parents and young children and therefore have to provide care both sets of family members) consider as part of their employment decisions the number and type of work-life balance programs that potential employers offer. Other demographic changes that are contributing to this rise in the demand for work-life balance programs include the increase of single parents entering the workforce and an increase of dual-career couples. In both cases, parents who shoulder care-giving responsibilities often seek flexible work arrangements and more flexible career cycles. Flexible career cycles allow individuals to leave their career tracks temporarily to raise a child, care for sick parent, and so on. These individuals are welcomed back to work and placed back into career-oriented positions.
Are companies using work-life balance programs to attract top candidates to join their firms? The answer is yes. Whirlpool attempts to attract recruits with the company’s family friendly culture. To illustrate, the company arranged for housing for an intern and his family for the entire summer.
At Xerox, two executives successfully share one job so that they can have more time at home with their young children. After 10 years, the job sharing arrangement is working whereby both executives report high levels of satisfaction with the arrangement, and the company has been able to retain two productive and experienced employees.
Flextime programs that allow employees limited control over which days and hours they have to be working at the office are becoming popular at many companies. For example, an employee may prefer to work a 4-day/10-hours-a-day week instead of a traditional 5-days/8-hours-a-day week. The shorter workweek may allow the employee to attend children’s sporting events, provide weekend care for an elderly parent, or engage in other important activities. Companies such as Hewlett-Packard, Merrill Lynch, Deloitte Touche, and Cigna have implemented flextime programs.
Related to flextime is telecommuting, which allows employees to work in their home part or full time while being connected to the office via the Internet, phone lines, and the like. Although some managers and supervisors fear a loss of control from this type of work-family arrangement, companies like Pfizer have been careful to create an effective telecommuting policy. For example in order to qualify for this program, Pfizer employees are required to demonstrate that the work can be accomplished odd-site to no more than two per week.
Work-life balance programs such as job sharing, flextime, and telecommuting are designed for both retaining current employees and attracting potential employees to the firm. As new college graduates increasingly find themselves providing care to both their aging parents and young children, the value of these programs will only increase. Undoubtedly, this will make work-life friendly companies more attractive in the marketplace.
Questions
1. Why is there a need for companies to offer work-family balance programs such as flextime, telecommuting, and job sharing?
2. Of the three programs discussed above, which be the most important program for you personally when deciding whether or not to join an employer? Why?
3. Some organizations do not believe in offering any of these work-life balance programs. What do you think their reasoning is? Explain.

Case 3 :-
Creative Staffing Solutions: A Pipeline of Human Assets
Finding the talent, competence, and expertise needed to operate a business, run a project, or grow a company is always a challenging job. In the recent labor market, even with an economic downturn, firms have had difficulty finding enough employees who are skilled in specific areas such as management information technology, software programming, and technical sales.
There are also firms interested in attracting people willing to work part-time or on a temporary basis to develop and complete a particular project. A temporary work basis differs from “traditional” temporary assignments, which often last a week or two while a permanent employee is ill or on vacation. Instead, some companies want people who can stay on the job for six months or a year.
Creative Staffing Solutions (CSS), a temporary and alternative staffing firm, provides workers to companies “Temping,” as it used to be called, is a $40 billion industry as more and more companies turn to staffing agencies for help. Companies are willing to pay for these employees. “For high-tech workers, this is an employee’s market,” notes Marc Brailov of the American Electronics Association. “It is very important for Internet companies to create and offer incentives to attract and retain employees.” That’s where Creative Staffing Solution (CCS) comes in.
CSS, a minority-owned firm founded by Mel Rhone, now has clients ranging from small companies to large organizations such as AT & T, Hershey’s, and Lockheed Martin. CSS specializes in finding IT professionals, engineers, computer programmers, and other high-tech workers for its clients. On one side of the process, a CSS manager meets with and interviews the HR manager at the client firm to determine the firm’s needs. On the other side, CSS managers screen, interview, and test prospective job candidates’ work history, grammar, spelling, math, computer skills, and so forth. CSS makes it possible for the job hunters to post their resumes on the CSS Web site, where staffing managers can review them. In addition, CSS’s staffing managers peruse Internet job sites in search of potential matches.
According to CSS managers, the alternative staffing solution meets the needs of both the company and the worker. Firms obtain screened, highly skilled, and motivated workers for a designated period. Currently, many high-tech firms prefer to hire temporary workers. They like to hire people to complete a specific project, such as development of a new computer system. Workers also benefit. “You get to make your own schedule,” remarks CSS staffing manager Joy Thomas. Because CSS tests and trains candidates, people who want to improve their job skills can find plenty of opportunity through the company. Some workers are looking to change careers but are afraid to make a total commitment without knowing whether they will like the new field. Filling a temporary position can give them a good taste for what the field will be like. Occasionally CSS sends a worker to fill one temporary position at a company, and the person moves on to a completely different job at the firm. The arrangement gives both parties convenience and flexibility.
Rhone foresees a future in which temporary and alternative staffing will be routine in American industry, and he wants his company to be ready to grab every opportunity that comes its way. A study by National Association of Temporary and Staffing Services found that 90 percent of companies surveyed employ temporary help. “Companies are incorporating temp workers in long-term plans, whereas 15 years ago they used temps just to fill occasional holes,“ remarks Richard Wahlquist, executive vice president of the association. The same holds true for today’s workers. “The way Americans seek work has fundamentally shifted-so many young adults look to temp agencies first, to get a taste of different fields, that we are a central part of the job search process,” says Wahlquist. Creative Staffing Solution intends to remain part of the process as well.
Questions
1. How can Creative Staffing Solutions create a learning environment for job candidates before they accept a position or while they are between positions?
2. What type of job candidates would use the temporary job support and services provided by a firm like CSS?
3. What difficulties might Creative Staffing Solutions have to deal with in using electronic job and resume posting?

Case 4 :-
Human Resource Planning and Virtual Human Resource Management
Just a few years ago, computer technology offered a revolutionary change in human resource management. Organizations experimented with computerized skills inventories, pay and benefits administration, and applicant tracking systems. Today, the revolution continues but is undergoing fundamental changes as computer technology and the Internet grow at unprecedented rates. Human resource management is moving away from a mainframe technology to the world of virtual reality, with the Internet at its core. Although many forces drive this change, one of the most important is the globalization of business. As organizations spread their operations and personnel worldwide, the need for a truly global, integrated human resource information system has reached critical levels. The most obvious answer-virtual human resource management on the World Wide Web.
Surveys indicate that in the past year alone, the percentage of U.S. companies using the Web for its HR system has almost doubled. As recently as 1997, approximately 27 percent of surveyed organizations reported such use. Now that number has reached 50 percent, and almost 75 percent of organizations indicate they plan to integrate their HR activities with the Web sometime during the next two years.
The most common uses of the Internet in human resource planning are in corporate communications, applicant and resume tracking, and benefits and retirement planning. In the area of recruiting, Human Inc. has created one of the most advance applicant identification and tracking systems in the world. Humana is an HMO with approximately 20,000 employees and 6 million subscribers. Their human resource recruiters can rapidly identify, contact, and track qualified applicant, Softshoe Select, provided by and linked to Hotjobs.com. This software automatically searches millions of individual Web pages looking for resumes that meet any need that Humana may have. While setup costs are relatively large (a one-time fee of $50,000 for licensing and configuration in addition to a $2,000 per month lease), organizations such as Humana find that the costs are well worth the efforts. Humana, for example, estimates that it previously spent an average of $128 in advertising to find a single qualified applicant’s resume. Today, they estimate that the cost is approximately $.06. For Humana, that translates into an annual savings of $8.3 million.
The Internet is also helping revolutionize a number of other human resource planning activities for many organizations, Citibank, for example, has a single global HRIS that maintains a detailed skills inventory, compensation database, and HR practices for 98 countries and 10,000 managerial personnel worldwide. Numerous other global employers have created employee self-service compensation and benefits systems that allow employees from around the globe to manage many of their own HR activities. For example, employees at Shell Oil Company manage their retirement plans, maintain and/or change health care coverage, and track other personally relevant information all through an automated self-service system.
Use of the Internet in these kinds of human resource planning activities is not, however, without danger. The ease of access to so much information always has the potential to create both legal and ethical abuse, both by employees and by external “hackers,” or unauthorized users of the systems. Organizations must take all necessary precautions to safeguard the privacy and integrity of these virtual human resource systems. The challenges are immense, but the organizational consequences can be invaluable.
Questions
1. How has the emergence of the Internet changed the way that organizations plan and mange their human resource needs?
2. What kinds of future human resource activities might we see developed over the next several years?
3. What are the legal and ethical issues surrounding the use of the Internet by Individual employees for human resource activities? Are you concerned about violations of your own privacy because of these kinds of Web applicants?
4. What specialized skills will the future HRIS professional need in order to effectively manage an organization’s virtual human resource function?

Case 5 :-
Toyota in France: Culture Clash?
Hiroaki Watanabe, the Japanese general manager of the first major Toyota plant in Valenciennes, France (and in continental Europe), has a lot at stake. He is in charge of a modern and efficient $570 million Toyota Motor factory designed to manufacture the Yaris, a subcompact car. The plant was designed to employ 2,000 workers. Currently, there are about 200 Japanese managers and 150 Japanese trainers on staff. The remaining employees are mostly French. Culturally speaking, there were many potential areas of conflict between the Japanese and French customs. For example, the plant holds calisthenics at 8:00 A.M. every morning to avoid starting off the day “cold” and being more prone to injuries. This is a common Japanese practice that is not frequently done in France. Also, the plant does not serve wine at lunch, a common practice in other French organizations. As is common in other Japanese firms, blue and gray windbreaker jackets are made available with the word “Toyota” on the back and the employee’s name on the front.
To help bridge these and other potential cultural gaps, the leadership of the venture needs to understand the potential cultural clashes that these issues can cause. How did Mr. Watanabe prepare himself for this high-profile assignment? Although fluent in English, he decided that he would learn French and as much about French culture as possible. After all, the vast majority of workers at the plant would be from northern France. To prepare himself, he traveled to France as a tourist and visited the Toyota plant in Canada. He conducted interviews in French, with assistance of an interpreter, in order to improve his language skills.
Are his efforts succeeding? Toyota had high hopes for this first major undertaking in continental Europe. Its goal was to increase its market share that was 3.7 percent in 2001, less than half its share in the United States in that year. In 2004, Toyota surpassed this goal by achieving a 5.3 percent market share in Europe, higher than both Mercedes and Audi. The French employees at the Toyota plant have a lot at stake when one considers that the Valenciennes area, a former coal and steel region, suffers from high unemployment with closing of many companies in heavy industry over the past 20 years. To underscore the importance of Toyota to this region, more than 30,000 people applied for the 2,000 jobs at the factory when it first opened its doors.
Questions
1. What potential conflicts could arise between the Japanese managers/trainers and the French employees? Explain.
2. What do you think of Mr. Watanabe’s approach to preparing himself for French culture? Do you think that his approach would be useful for American managers? Why or Why not?
3. What kind of organizational culture did Mr. Watanabe want to establish at the factory in Valenciennes, France? Do you think he’ll try to manage the plant just like a Toyota factory in Tokyo? Why or Why not?
4. What implications are there for the French employees of the plant if its good fortune takes a turn for the worse, and the factory consequently shuts its doors? Explain.

Case 6 :-
OSHO and Unions versus Manufactures: Is Workplace Ergonomics a Problem?
During the Industrial Revolution a century ago, workplace injuries were so commonplace that they were simply considered one of the hazards of having a job. Children and adults were often maimed or disfigured in factory accidents. Today strict regulations cover safety in the workplace, guided by the U.S. Department of Labor’s Occupational Safety and Health administration (OSHO).
During the past couple of decades, as industry itself has changed, a different type of injury has emerged; musculoskeletal disorders (MSDs). MSDs are injuries resulting from overexertion and repetitive motion, such as constantly lifting heavy loads or grabbing and twisting a piece of machinery. People who sit at computer workstations all day are susceptible to MSDs as well, particularly carpal tunnel syndrome, which affects the nerves of the hand, wrist, and arm. According to OSHO, about one third of repetitive stress injuries, or 600,000, are serious enough to require time off the job, which means that businesses pay for these injuries not only in medical costs but in lost productivity. They can also contribute to high employee turnover. No one disputes that these injuries occur. But various experts, industry leaders, and politicians argue about how severe the injuries are, who should pay for them, what should be done about them, and who takes ultimate responsibility for the safety of workers.
One aspect of the whole issue of workplace injuries is ergonomics: “The applied science of equipment design, intended to reduce operator fatigue and discomfort, or as OSHO puts it, the science of fitting the job to the worker.” Ergonomics involves everything from developing new equipment, including desk chairs that support the back properly and flexible splints to support the wrist while typing, to designing better ways to use the equipment, such as the proper way to hold a computer mouse.
OSHO has proposed new guidelines for better ergonomic standards, targeting jobs where workers perform repetitive tasks, whether they are in processing poultry or delivering packages. The proposal required employers that received reports from workers who were suffering from MSDs to respond promptly with an evaluation and follow-up health care. Workers who needed time off could receive 90 percent of their pay and 100 percent of their benefits. Not surprisingly, arguments for and against the proposal broke out. OSHO spokesperson Charles Jeffers claimed that the guidelines “will save employers $9 billion every year from what they’ve currently been spending on these problems.” Peg Seminario of the AFL-CIO noted that the guidelines did not go far enough because they did not cover “workers in construction, agriculture, or maritime, who have very serious problems.” Pat Cleary of the national Association of Manufacturers argued that “there’s a central flaw here and that is that there is no . . . consensus in the scientific or medical community about the causes of ergonomics injuries.” Debates over the proposed ruled’ merit were further clouded by the Small Business Administration’s prediction that implementing the standards would cost industries $18 billion. OSHO had forecast a mere $4.2 billion.
Just before he left office, President Bill Clinton signed the bill into law which was overturned by incoming President George Bush and the new Congress. Calling the workplace safety regulations “unduly burdensome and overly broad,” Bush signed a measure to roll back the new rules.
Where do these actions leave workers and businesses in regard to workplace injuries? Legally, businesses are not required to redesign work systems or continue full pay and benefits for an extended period after work-related injury. But if the goal of a company is to find and keep the best employees, perhaps developing good ergonomic practices makes good business sense. The high cost of treatment and turnover, not to mention lowered productivity, points toward prevention as a competitive strategy. “Good ergonomics in the office should not be a big burden in a company and may be a way to retain good employees.”
Questions
1. Do you agree or disagree that ergonomics in the workplace should be covered by federal regulations? Explain your answers.
2. Choose a job with which you are familiar and discuss the possibilities for repetitive stress injuries that could occur on this job and ways they could be prevented.
3. Imagine that you are the human resources manager for a company that hires workers for the selected in question 2. What steps might you encourage company officials to take to identify and prevent MSDs?


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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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Bachelors Program in Business Management (BBA) Year-II

Note :- Solve any four cases
All cases carry equal marks.

Case No 1 :- MARKETING SPOTLIGHT- NIKE
Nike hit the ground running in 1962. Originally known as Blue Ribbon Sports, the company focused on providing high-quality running shoes designed especially for athletes by athletes. Founder Philip Knight believer that high-tech shoes for runners could be manufactured at competitive prices if imported from abroad. The company’s commitment to designing innovative footwear for serious athletes helped it build a cult following among American consumers. By 1980, Nike had become the number-one athletic shoe company in the United States.
From the start, Nike’s marketing campaigns featured winning athletes as spokespeople. The company signed on its first spokesperson, runner Steve Prefontaine, in 1973. Prefontaine’s irreverent attitude matched Nike’s spirit. Marketing campaigns featuring winning athletes made sense. Nike saw a `pyramid of influence’’ – it saw that product and brand choices are influenced by the preferences and behavior of a small percentage of top athletes. Using professional athletes in its advertising campaigns was both efficient and effective for Nike.
In 1985, Nike signed up then-rookie guard Michael Jordan as a spokesperson. Jordan was still an up-and-comer, but he personified superior performance. Nike’s bet paid off: The Air Jordan line of basketball shoes flew off the shelves, with revenues of over $100 million in the first year alone. Jordan also helped build the psychological image of the Nike brand. Phil Knight said. “Sports are at the heart of American culture, so a lot of emotion already exists around it. Emotions are always hard to explain, but there’s something inspirational about watching athletes push the limits of performance. You can’t explain much in 60 seconds, but when you show Michael Jordan, you don’t have to.’’
In 1988, Nike aired its first ads in the “Just Do It’’ ad campaign. The $20 million month-long blitz-subtly encouraging Americans to participate more actively in sports-featured 12 TV spots in all. The campaign challenged a generation of athletic enthusiasts to chase their goals; it was a natural manifestation of Nike’s attitude of self-empowerment through sports. The campaign featured celebrities and noncelebrities. One noncelebrity and featured Walt Stack, an 80-year-old long-distance nunnery, running across the Golden Gate bridge as part of his morning routine. The “Just Do It’’ trailer appeared on the screen as the shirtless Stack ran on a chilly morning. Talking to the camera as it zoomed in, and while still running. Stack remarked, “People ask me how I keep my teeth from chattering when it’s cold.’’ Pausing, Stack matter-of-factly replied, ‘’I leave them in my locker.’’
As Nike began expanding overseas to Europe, it found that its American style ads were seen as too aggressive. The brand image was perceived as too fashion-oriented. Nike realized that it had to “authenticate’’ its brand in Europe the way it had in America. That meant building credibility and relevance in European sports, especially soccer. Nike became actively involved as a sponsor of soccer youth leagues, local clubs, and national teams. Authenticity required that consumers see the product being used by athletes, especially by athletes who win. The big break came in 1994, when the Brazilian team (the only national team fro which Nike had any real sponsorships) won the World Cup. The victory led Nike to sign other winning teams, and by 2003 overseas revenues surpassed U.S. revenues for the first time. Nike also topped $10 billion in sales for the first time in the year as well.
Today, Nike dominates the athletic footwear market. Nine of the 10 top-selling basketball shoes, for example, are Nikes. Nike introduces hundreds of shoes each year for 30 sports – averaging one new shoe style every day of the year. Swooshes abound on everything from wristwatches to golf clubs to swimming caps.
Discussion Questions
1. What have been the key success factors for Nike?
2. Where is Nike vulnerable? What should it watch out for?
3. What recommendations would you make to senior marketing executives going forward? What should they be sure to do with its marketing?

Case NO. 2
MARKETING SPOTLIGHT- DISNEY
The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customers value in the Disney brand: a fun experience and homespun entertainment based on old-fashioned family values. Disney responds to these consumer markets. Say a family goes to see a Disney movie together. They have a great time. They want to continue the experience. Disney Consumer Products, a division of the Walt Disney Company, lets them do just that through product lines aimed at specific age groups.
Take the 2004 Home on the Range movie. In addition to the movie, Disney created an accompanying soundtrack album, a line of toys and kid’s clothing featuring the heroine, a theme park attraction, and a series of books. Similarly, Disney’s 2003 Pirates of the Caribbean had a theme park ride, merchandising program, video game, TV series, and comic books. Disney’s strategy is to build consumer segment around each of its characters, from classics like Mickey Mouse and Snow White to new hits like Kim Possible. Each brand is created for a special age group and distribution channel. Baby Mickey & Co. and Disney Babies both target infants, but the former is sold through department stores and specialty gift stores whereas the latter is a lower-priced option sold through mass-market channels. Disney’s Mickey’s Stuff for Kids targets boys and girls, while Mickey Unlimited targets teens and adults.
On TV, the Disney Channel is the top primetime destination for kids age 6 to 14, and Playhouse Disney is Disney’s preschool programming targeting kids age 2 to 6. Other products, like Disney’s co-branded Visa card, target adults. Cardholders earn one Disney “dollar’’ for every $ 100 charged to the card, up to the card, up to $75,000 annually, then redeem the earnings for Disney merchandise or services, including Disney’s theme parks and resorts, Disney Stores, Walt Disney Studios, and Disney stage productions. Disney is even in Home Depot, with a line of licensed kid’s room paint colors with paint swatches in the signature mouse-and-ears shape.

Disney also has licensed food products with character brand tie-ins. For example, Disney Yo-Pals Yogurt features Winnie the Pooh and Friends. The four-ounce yogurt cups are aimed at preschoolers and have an illustrated short story under each lid that encourages reading and discovery. Keebler Disney Holiday Magic Middles are vanilla sandwich cookies that have an individual image of Mickey, Donald Duck, and Goofy imprinted in each cookie.
The integration of all the consumer product lines can be seen with Disney’s “Kim Possible’’ TV program. The series follows the action-adventures of a typical high school girl who, in her spare time, saves the world from evil villains. The number-one-rated cable program in its time slot has spawned a variety of merchandise offered by the seven Disney Consumer Product divisions. The merchandise includes:
 Disney Hardlines – stationery, lunchboxes, food products, room décor.
 Disney Softlines – sportswear, sleepwear, daywear, accessories.
 Disney Toys – action figures, wigglers, beanbags, plush, fashion dolls, poseables.
 Disney Publishing – diaries, junior novels, comic books.
 Walt Disney Records – Kim Possible soundtrack.
 Buena Vista Home Entertainment – DVD/video.
 Buena Vista Games – Game Boy Advance.
“The success of Kim Possible is driven by action – packed storylines which translate well into merchandise in many categories,’’ said Andy Mooney, chairman, Disney Consumer Products Worldwide. Rich Ross, president of entertainment, Disney Channel, added: “Today’s kids want a deeper experience with their favorite television characters, like Kim Possible. This line of products extends our viewer’s experience with Kim, Rufus, Ron and other show characters, allowing (kids) to touch, see and live the Kim Possible experience.
Walt Disney created Mickey Mouse in 1928 (Walt wanted to call his creation Mortimer until his wife convinced him Mickey Mouse was better). Disney’s first feature-length musical animation, Snow White and the Seven Dwarfs, debuted in 1973. Today, the pervasiveness of Disney product offerings is staggering – all in all, there are over 3 billion entertainment-based impressions of Mickey Mouse received by children every year. But as Walt Disney said. “I only hope that we don’t lose sight of one thing – that it was all started by a mouse.’’

Discussion Questions
1. What have been the key success factors for Disney?
2. Where is Disney vulnerable? What should it watch out for?
3. What recommendations would you make to their senior marketing executives going forward? What should it be sure to do with its marketing?

Case NO. 3
MARKETING SPOTLIGHT- HSBC
HSBC is known as the “world’s local bank.’’ Originally called the Hong Kong and Shanghai Banking Corporation Limited, HSBC was established in 1865 to finance the growing trade between China and the United Kingdom. HSBC is now the second-largest bank in the world, serving 100 million customers through 9,500 branches in 79 countries. The company is organized by business line (personal financial services; consumer finance; commercial banking; corporate investment banking and markets; private banking), as well as by geographic segment (Asia-Pacific, U.K./Eurozone, North America/NAFTA, South America, Middle East).
Despite operating in 79 different countries, the bank works hard to maintain a local feel and local knowledge in each area. HSBC’s fundamental operating strategy is to remain close to its customers. As HSBC chairman Sir John Bond said in November 2003, ‘’Our position as the world’s local bank enables us to approach each country uniquely, blending local knowledge with a world-wise operating platform.’’
For example, consider HSBC’s local marketing efforts in New York City. To prove to jaded New Yorkers that the London-based financial behemoth was ‘’the world’s local bank, “HSBC held a ‘’New York City’s Most Knowledgeable Cabbie’’ contest. The winning cabbie gets paid to drive full-time for HSBC for the year and HSBC customers win, too. Any customer showing an HSBC bankcard, checkbook, or bank statement can get a free ride in the HSBC-branded Bankcab. The campaign demonstrates HSBC’s local knowledge. ‘’In order to make New Yorkers believe you’re local, you have to act local,’’ said Renegade Marketing Group’s CEO Drew Neisser.
Across the world in Hong Kong, HSBC undertook a different campaign. In the region hit hard by the Severe Acute Respiratory Syndrome, (SARS) outbreak, HSBC launched a program to revitalize the local economy. HSBC’’ plowed back interest payments’’ to customers who worked in industries most affected SARS (cinemas, hotels, restaurants, and travel agencies). The program eased its customer’s financial burden. The bank also promoted Hong Kong’s commercial sector by offering discounts and rebates for customers who use an HSBC credit card when shopping and dining out, to help businesses affected by the downturn. More than 1, 5000 local merchants participated in the promotion.
In addition to local marketing, HSBC does niche marketing. For example, it found a little-known product area that was growing at 125 percent a year: pet insurance. In December 2003 it announced that it will distribute nationwide pet insurance through its HSBC Insurance agency, making the insurance available to its depositors.
HSBC also segments demographically. In the United States, the bank will target the immigrant population, particularly Hispanics, now that it has acquired Bital in Mexico, where many migrants to the United States deposit money.
Overall, the bank has been consciously pulling together its worldwide businesses under a single global brand with the ‘’world’s local bank’’ slogan. The aim is to link its international size with close relationships in each of the countries in which it operates. The company spends $600 million annually on global marketing and will likely consolidate and use fewer ad agencies. HSBC will decide who gets the account by giving each agency a ‘’brand-strategy exercise.’’ Agencies will by vying for the account by improving on HSBC’s number 37 global brand ranking.

Discussion Questions
1. What have been the key success factors for HSBC?
2. Where is HSBC vulnerable? What should it watch out for?
3. What recommendations would you make to senior marketing executives going forward? What should they be sure to do with its marketing?

Case NO .4
MARKETING SPOTLIGHT- KRISPY KREME
Krispy Kreme makes 2.7 billion donuts a year. But it took more than fresh, hot donuts to earn Krispy Kreme the title of ‘’hottest brand in America’’ in 2003. Krispy Kreme’s stock price quadrupled in the three years following its IPO in 2000, and the entire chain now generates a billion dollars in annual revenues across more than 300 outlets.
How did Krispy Kreme turn donuts into dollars? Careful brand positioning and local marketing tell the story. ‘’We have a humble brand and product,’’ says Krispy Kreme CEO Scott Livengood. ‘’It’s not flashy.’’ The company is not new – it was founded in 1937- and part of its brand image is an old-fashioned feel. The plain red, green, and white colors and retro graphics evoke the squeaky-clean Happy Days of the 1950s, as do the Formica-filled, kid-friendly shops. ‘’We want every customer experience to be associated with good times and warm memories,’’ Livengood says.
That company’s brand image also rests on its fresh, hot donuts – a freshness that’s measured in hours. In a world of processed, prepackaged food, nothing beats a fresh, hot donut. The company’s marketing is grassroots local. Krispy Kreme has no traditional media advertising budget. Rather, local ‘’community marketing managers’’ enlist the aid of local groups and charities. For example, the company helps charities raise money by selling them donuts at half price which they can re-sell at full price. Local bake sales become a promotional tool for Krispy Kreme.
Another tactic is giving away free donuts to TV, newspapers, and radio stations before entering a market. Krsipy Kreme scored a publicity coup in 1996 when it opened its first store in New York City. The company delivered boxes of donuts to the Today Show, garnering millions of dollars worth of national exposure for the price of a few donuts. Even the day of the IPO relied on the buzz from free Krispy Kreme donuts on the floor of the stock exchange.
Each local outlet is an emissary for the brand, and Krispy Kreme’s signature Doughnut Theater defines the brand image. A multisensory experience, Doughnut Theater occurs several times a day at each shop. When the store flicks on its ‘’Hot Doughnuts Now’’ sign, the performance is about to begin. A large plate glass wall lets customers watch the whole process.
The Doughnut Theater experience works on three levels. On a direct level, the performance entertains customers and draws them into the donut-making experience. On an indirect level, it shows that the products are freshly made in a clean environment. On a subliminal level, as CEO Livengood describes it, ‘’The movement of the products on the conveyor through our proofbox has this relaxing, almost mesmerizing effect. The only other thing like it is standing on the oceanfront and watching the tide come in. it has that same consistent, relaxing motion that is really positive to people.’’ People flock to the store to see wave after wave of donuts emerge hot and deliciously fresh. They happily stand in long lines around newly opened outlets to get the aroma of the donuts being made, the sight of the vanilla glaze waterfall, and the warmth of the hot donut that ‘’just melts in your mouth and tastes so good,’’ Livengood says.
Doughnut Theater is a bit of show business that draws customers into the baking experience and makes them feel like they are a part of the process. Another aspect of show business is product placements on hit shows like. The Sopranos and Will & Grace and movies like Bruce Almighty. Finally, international expansion is fueled by celebrities like Dick Clark, Hank Aaron, and Jimmy Buffet, who clamored for Krispy Kreme franchises of their own. Krispy Kreme doesn’t just grant franchise rights to anyone.
Krispy Kreme makes 65 percent of its revenue selling donuts directly to the public through its 106 company-owned stores. Another 31 percent comes from selling flour mix, donut-making machines, and donut supplies to its 186 franchised stores. The final 4 percent of revenue comes from franchisee licenses and fees.
Krispy Kreme is now expanding and selling donuts through convenience stores. Will this hurt the brand? Stan Parker, Krispy Kreme’s senior vice president of marketing, says it won’t because the company continues to emphasize freshness. It replenishes the packaged donuts daily from the local Krispy kreme store and removes any unsold packages. The donuts’ presence in convenience stores will help remind people of the taste of a fresh, hot Krispy Kreme donut, and that brings them back into a Krispy Kreme shop.
The success of Krispy Kreme has been a wake-up call for competitor Dunkin’ Donuts, which had become complacent. The one-two punch of Krispy Kreme in donuts and Starbucks in coffee led Dunkin’ Donuts to revamp its menu and its stores, neither of which had changed in years. Rather than innovate, Dunkin’ Donuts looked at what customers were already eating elsewhere. It brought in basic products like bagels, low-fat muffins, and breakfast sandwiches. Dunkin Donuts still dwarfs Krispy Kreme in size, with 2003 revenues of $3 billion, but it must work to find new ways of creating excitement that builds customer pride, because one thing is sure: Krispy Kreme refuses to be dull.

Discussion Questions
1. What have been the key success factors for Krispy Kreme?
2. Where is Krispy Kreme vulnerable? What should it watch out for?
3. What recommendations would you make to senior marketing executives going forward? What should they be sure to do with its marketing?

Case NO. 5
MARKETING SPOTLIGHT- SOUTHWEST AIRLINES
Southwest Airlines entered the airline industry in 1971 with little money, but lots of personality. Marketing itself as the LUV airline, the company featured a bright red heart as its first logo. In the 1970s, flight attendants in red-orange hot pants served Love Bites (peanuts) and Love Potions (drinks). With little money for advertising in the early days, Southwest relied on its outrageous antics to generate word-of-mouth advertising.
Later ads showcased Southwest’s low fares, frequent flights, on-time arrivals, and top safety record. Throughout all the advertising, the spirit of fun pervades. For example, one TV spot showed a small bag of peanuts with the words, ‘’This is what our meals look like a Southwest Airlines…. It’s also what our fares look like.’’ Southwest used ads with humor to poke fun at itself and to convey its personality.
Southwest’s fun spirit attracts customers and employees alike. Although Southwest doesn’t take itself seriously, it does take its work seriously. Southwest’s strategy is to be the low-cost carrier. Indeed, the strategy takes on epic proportions. An internal slogan, ‘’It’s not just a job, it’s a crusade,’’ embodies the company mission to open up the skies, to give ordinary people a chance to fly by keeping costs so low that it competes with ground transportation like cars and buses. Employees see themselves as protecting ‘’small businesses and senior citizens who count on us for low fares.’’
Southwest can offer low fares because it streamlines operations. For example, it only flies one type of aircraft, Boeing 737s, which have all been fitted with identical flight instruments. This saves time and money by simplifying training pilots, flight attendants, and mechanics only need to know procedures for a single model of Boeing 737. Management can substitute aircraft, reschedule flight crews, or transfer mechanics quickly. The tactic also saves money through lower spare-parts inventories and better deals when acquiring new planes. Southwest also bucks the traditional hub-and-spoke system and offers only point-to-point service; it chooses to fly to smaller airports that have lower gate fees and less congestion, which speeds aircraft turnaround. Southwest’s 15- to 20- minute turnaround time (from flight landing to departure) is half the industry average, giving it better asset utilization (flying more flights and more passengers per plane per day.) The point is, if the plane and crew aren’t in the air, they aren’t making money.
Southwest grows by entering new markets that are overpriced and underserved by current airlines. The company believes it can bring fares down by one-third to one-half whenever it enters a new market, and it grows the market a every city it serves by making flying affordable to people who previously could not afford to fly.
Even though Southwest is a low-cost airline, it has pioneered many additional services and programs like same-day freight service, senior discounts, Fun Fares, and Fun Packs. Despite Southwest’s reputation for low fares and no-frills service, the company wins the hearts of customers. It has been ranked number one in terms of customer service, per the Department of Transportation’s rankings, for 12 years in a row, yet the average price of a flight is $87. Southwest has been ranked by Fortune magazine as America’s most admired airline since 1997, as America’s third-most-admired corporation in 2004, and as one of the top five best places to work in America. Southwest’s financial results also shine: The company has been profitable for 31 straight years. Following 911, it has been the only airline to report profits every quarter, and one of the few airlines that has had no layoffs amid a travel slump created by slow economy and the threat of terrorism.
Although the hot pants are long gone, the LUVing spirit remains at the heart of Southwest. The company’s stock symbol on the NYSE is LUV and red hearts can be found everywhere across the company. These symbols embody the Southwest spirit of employees ‘’caring about themselves, each other and Southwest’s customers’’, states an employee booklet. ‘’Our fares can be matched; our airplanes and routes can be copied. But we pride ourselves on our customer service,’’ said Sherry Phelps, director of corporate employment. That’s why Southwest look for and hires people who generate enthusiasm. In fact, having a sense of humor is a selection criteria it uses for hiring. As one employee explained, ‘’We can train you to do any job, but we can’t give you the right spirit.’’
Southwest is so confident of its culture and its employees that in 2004 it allowed itself to be the subject of a reality TV show called Airline. It’s not worried about competitors copying the company. ‘’What we do is very simply, but it’s not simplistic,’’ said president and COO Colleen Barrett. ‘’We really do everything with passion.’’

Discussion Questions
1. What are the key success factors for Southwest Airlines?
2. Where is Southwest Airlines vulnerable? What should it watch out for?
3. What recommendations would you make to senior marketing executives moving forward? What should they be sure to do with its marketing?

Case NO. 6
MARKETING SPOTLIGHT- WAL-MART
Wal-Mart Stores, Inc., is the largest retailer in the world, with sales of $259 billion in 2003, 1.5 million employees, and 4,300 facilities. Each week, over 100 million customers visit a Wal-Mart store. Sam Walton founded the company in 1962 with a simple goal: Offer low prices to everyone. His notions of hard work and thrift continue to permeate Wal-Mart today, although he died in 1992. Employees see their jobs as a mission ‘’to lower the world’s cost of living.’’ Wall –Mart’s philosophy is to enable people of average means to buy more of the same products that were previously available only to rich folks. The company works hard at being efficient and using its buying clout to extract lower prices from suppliers, and then passes those savings on to customers.
Wal-Mart succeeds in the competitive American retail market for several reasons. First, its low prices, vast selection, and superior service keep the customers coming in the door. But one of Wal-Mart’s biggest strengths is not even inside the store. Its unrivaled logistics ensure that it can keep prices low while keeping the right goods on the shelves. As the biggest retailer in the United States. Wal-Mart’s logistics demands are considerable. The company must coordinate with more than 85,000 suppliers, manage billions in inventory in its warehouses, and bring that inventory to its retail shelves.
To streamline these tasks, Wal-Mart set up a ‘’hub-and-spoke’’ network of 103 massive distribution centers (DC). Strategically spaced across the country, no store location is more than a day’s drive away from a DC. Wal-Mart is known as ‘’the king of store logistics’’ for its ability to effectively manage such a vast network.
Sam Walton was something of a visionary when it came to logistics. He had the foresight to realize, as early as the 1960s, that his goals for company growth required advanced information systems to manage high volumes of merchandise. The key to low-cost retail is knowing what goods would sell and in what quantities – ensuring that store shelves never have too much or too little of any item. In 1966, Walton hired the top graduate of an IBM school and assigned him the task of computerizing Wal-Mart’s operations. As a result of this forward-looking move, Wal-Mart grew to be the icon of just-in-time inventory control and sophisticated logistics. By 1998, Wal-Mart’s computer database was second only to the Pentagon’s in terms of capacity.
Wal-Mart’s logistics success is astounding considering its size: Over 100 million items per day must get to the right store at the right time. To accomplish this goal, Wal-Mart developed several IT systems that work together. It all begins at the cash register or point-of-sale (POS) terminal. Every time an item is scanned, the information is relayed to headquarters via satellite data links. Using up-to-the-minute sales information, Wal-Mart’s Inventory Management System calculates the rate of sales, factors in seasonal and promotional elements, and automatically places replenishment orders to distribution centers and vendor partners.
Wal-Mart uses its information systems for more than just logistics. Suppliers can use its voluminous POS database to analyze customers’ regional buying habits. For example, Proctor & Gamble learned that liquid Tide sells better in the North and Northeast while Tide powder sells better in the South and Southwest. P & G uses information such as this to tailor its product availability to specific local regions. This means that it delivers different Tide products to different Wal-Mart locations based on local customer preferences. Wal-Mart’s may look the same on the outside, but the company uses its information systems and logistics to customize the offerings inside each store to suit regional demand.
Wal-Mart continues to grow. Despite already having 3,200 stores in the united States, Wal-Mart plans to add another 220-230 Super centers, 50-55 discount stores, 35-40 Sam’s Clubs, and 25-30 Neighborhood Markets in the United States alone, and an additional 130 units internationally. If Wal-Mart maintains the average growth rate of the past 10 years, it could become the world’s first trillion-dollar company.
Discussion Questions
1. What have been the key success factors for Wal-Mart?
2. Where is Wal-Mart vulnerable? What should it watch out for?
3. What recommendations would you make to senior marketing executives going forward? What should the company be sure to do with its marketing?


INFORMATION TECHNOLOGY ISMS BBA ONGOING EXAM ANSWER SHEETS PROVIDED

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CONTACT:
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Bachelors Program in Business Administration (BBA)

Note:
1. All questions are compulsory.
2. Use analytical description where required.
3. Cite references used if any while proposing solution to any question.

Case 1
HOW GENERAL MOTORS IS COLLABORATING ONLINE

The Problem
Designing a car is a complex and lengthy task. Take, for example, General Motors (GM). Each model created needs to go through a frontal crash test. So the company builds prototypes that cost about one million dollars for each car and tests how they react to frontal crash. GM crashes these cars, makes improvements, then makes new prototypes and crashes them again. There are other tests and more crashes. Even as late as the 1990s, GM crashed as many as 70 cars for each new model.
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The information regarding a new design and its various tests, collected in these crashes and other tests, has to be shared among close to 20,000 designers and engineers in hundreds of divisions and departments at 14 GM design labs, some of which are located in different countries. In addition, communication and collaboration is needed with design engineers of the more than 1,000 key suppliers. All of these necessary communications slowed the design process and increased its cost. It took over four years to get a new model to the market.

The Solution
GM, like its competitors, has been transforming itself into an e-business. This gradual transformation has been going on since the mid-1990s, when Internet band width increased sufficiently to allow Web collaboration. The first task was to examine over 7,000 existing legacy IT systems, reducing them to about 3,000, and making them Web-enabled. The EC system is centered on a computer-aided design (CAD) program from EDS (a large IT company, subsidiary of GM). This system, known as Unigraphics, allows 3-D design documents to be shared online by both the internal and external designers and engineers, all of whom are hooked up with the EDS software. In addition. Collaborative and Web-conferencing software tools, including Microsoft’s NetMeeting and EDS’s eVis, were added to enhance teamwork. These tools have radically changed the vehicle-review process.
To see how GM now collaborates with a supplier, take as an example a needed cost reduction of a new seat frame made by Johnson Control GM electronically sends its specifications for the seat to the vendor’s product data system. Johnson Control’s collaboration systems (eMatrix) is integrated with EDS’s In graphics. This integration allows joint searching, designing. Tooling, and testing of the seat frame in real time, expediting the process and cutting costs by more than 10 percent.
Another area of collaboration is that of crashing cars. Here designers need close collaboration with the test engineers. Using simulation, mathematical modeling, and a Web-based review process. GM is able now to electronically “Crash” cars rather than to do it physically.

The Results
Now it takes less than 18 months to bring a new car to market, compared to 4 or more years before, and at a much lower design cost. For example, 60 cars are now “Crashed” electronically, and only 10 are crashed physically. The shorter cycle time enables more new car models, providing GM with a competitive edge. All this has translated into profit. Despite the economic show down. GM’s revenues increased more than 6 percent in 2002. while its earnings in the second quarter of 2002 doubled that of 2001.

Questions:

1. Why did it take GM over four years to design a new car?
2. Who collaborated with whom to reduce the time-to-market?
3. How has IT helped to cut the time-to-market?

Case 2
Intranets: Invest First, Analyze Later?

The traditional approach to information systems projects is to analyze potential costs and benefits before deciding whether to develop the system. However for moderate investments in promising new technologies that could offer major benefits. Organizations may decide to do the financial analyses after the project is over. A number of companies took this latter approach in regard to intranet projects initiated prior to 1997.

Judd’s

Located in Strasburg. Virginia, Judd’s is a conservative, family-owned printing company that prints Time magazine, among other publications. Richard Warren. VP for IS. Pointed out that Judd’s “usually waits for technology to prove itself…. But with the Internet the benefits seemed so great that our decision proved to be a no-brainer.” Judd’s first implemented internet technology for communications to meet needs expressed by customers. After this it started building intranet of the significance of these applications to the company is the bandwidth that supports them. Judd’s increased the bandwidth by a magnitude of about 900 percent in the 1990s without cost-benefit analysis.

Eli Lilly & Company

A very large pharmaceutical company with headquarters in Indianapolis, Eli Lilly has a proactive attitude toward new technologies. It began exploring the potential of the Internet in 1993. Managers soon realized that, by using intranets, they could reduce many of the problems associated with developing applications on a wide variety of hardware platforms and networking configurations. Because the benefits were so obvious, the regular financial justification process was waived for intranet application development projects. The IS group that helps user departments develop and maintain intranet applications increased its staff from three to ten employees in 15 months.

Needham Interactive

Needham, a Dallas advertising agency, has offices in various parts of the country. Needham discovered that, in developing presentations for bids on new accounts, employees found it helpful to use materials from other employees’ presentations on similar projects. Unfortunately, it was very difficult to locate and then transfer relevant ,materials in different locations and different formats. After doing research on alternatives, the company identified intranet technology as the best potential solution.

Needham hired EDS to help develop the system. It started with one office in 1996 as a pilot site. Now part of DDB Needham, the company has a sophisticated corporate wide intranet and extranet in place. Although the investment was “substantial”, Needham did not do a detailed financial analysis before starting the project. David King, a managing partner explained. “the system will start paying for itself the first time an employee wins a new account because he had easy access to a co-worker’s information.”

Cadence Design Systems

Cadence is a consulting firm located in San Jose, California. It wanted to increase the productivity of its sales personnel by improving internal communications and sales training. It considered Lotus Notes but decided against it because of the costs. With the help of a consultant, it developed an internet system. Because the company reengineered its sales training process to work with the new system, the project took somewhat longer than usual.

International Data Corp., an IT research firm, helped cadence do an after-the-fact financial analysis. Initially the analysis calculated benefits based on employees meeting their full sales quotas. However, IDC later found that a more appropriate indicator was having new scales representatives meet half their quota. Startup costs were $280,000, average annual expenses were estimated at less than $400,000, and annual savings were projected at over $2.5 million. Barry Demak, director of sales, remarked, “we knew the economic justification…would be strong, but we were surprised the actual numbers were as high as they were.”

Questions:

1. Where and under what circumstances is the “invest first, analyze later” approach appropriate? where and when is it inappropriate? Give specific examples of technologies and other circumstances.
2. How long do you think the “invest first , analyze later” approach will be appropriate for intranet projects? When (and why) will the emphasis shift to traditional project justification approaches? (Or has the shift already occurred?)
3. What are the risks of going into projects that have not received a through financial analysis? How can organization reduce these risks?
4. Based on the numbers provided for Cadence Design System’s intranet project, use a spread sheet to calculate the net present value of the project. Assume a 5-year life for the system.

Case 3
Putting IT to Work at Home Depot

Home Depot is the world’s largest home-improvement retailer, a global company that is expanding rapidly (about 200 new stories every year). With over 1500 stories (mostly in the United States and Canada, and now expanding to other countries) and about 50,000 kinds of products in each store, the company is heavily dependent on It, Especially since it started to sell online.

To align its business and IT operations, Home Depot created a business and information service model, known as the Special Projects Support Team (SPST). This team collaborates both with the ISD and business colleagues on new projects, addressing a wide range of strategic occur at the intersection of business process. The team is composed of highly skilled employees. Actually, there are several teams, each with a director and mix of employees, depending on the project. For example, system developers, system administrators, security experts, and project managers can be on a team. The teams exist until the completion of a project; then they are dissolved and the members are assigned to new teams. All teams report to the SPST director, who reports to a VP of technology.
To ensure collaboration among end users, the ISD and the SPST created structured (formal) relationships. The basic idea is to combine organizational structure and process flow, which is designed to do the following:

• Achieve consensus across departmental boundaries with regard to strategic initiatives.
• Prioritize strategic initiatives.
• Bridge the gap between business concept an detailed specifications.
• Result in the lowest possible operational costs.
• Achieve consistently high acceptance levels by the end-user community.
• Comply with evolving legal guidelines.
• Define key financial elements (cost-benefit analysis, ROI, etc.).
• Identify and render key feedback points for project metrics.
• Support very high rates of change.
• Support the creation of multiple, simultaneous threads of work across disparate time lines.
• Promote known, predictable, and manageable work flow events, event sequences, and change management processes.
• Accommodate the highest possible levels of operational stability.
• Leverage the extensive code base, and leverage function and component reuse.
• Leverage Home Depot’s extensive infrastructure and IS resource base.

Online File W 15.11 shows how this kind of organization works for home depot’s e-commerce activites. There is a special EC steering committee which is connected to the CIO (who is a senior VP), to the Vp for marketing and advertising, and to the VP for merchandising (merchandising deals with procurement). The SPST is closely tied to the ISD, to marketing, and to merchandising. The data centre is shared with non-EC activities.

The SPST migrated to an e-commerce team in Aughust 2000 in order to construct a Website supporting a national catalog of products, which was completed in April 2001. (This catalog contains over 400,000 products from 11,000 vendors.) This project requires the collaboration of virtually every department in Home depot (e.g., in the figure). Also contracted services were involved. (the figure in online file W15.11 shows the work flow process.)

Since 2001, SPST has been continuously busy with Ec Intivatives, including improving the growing Home Depot online store. The cross departmental nature of the SPSt explains why it is an ideal structure to support the dyanamic, ever-changing work of the EC-related projects. The structure also consider the skills, strengtyhs, and the weeknesses of the It employees. The company offer both the online and offline training aimed at improving those skills. Home Depot is consistently ranked among the best places to work for IT employees.

Questions:

1. Explain why the team based structure at Home Depot is so successful.
2. The structure means that the SPST reports to both marketing and technology. This is known as a matrix structure. What are the potential advantages and problems?
3. How is collaboration facilitated by IT in this case?
4. Why is the process flow important in this case?

Case 4
Dartmouth College Goes Wireless

Dartmouth College, one of the oldest in United States (founded in 1769), was one of the first to embrace the wireless revolution. Operating and maintain a campuswide information system with wires is very difficult. Since there are 161 buildings with more than 1,000 rooms on campus. In 2000, the college introduced a campuswide wireless network that includes more than 500 Wi-Fi (wireless fidelity: see chapter 6) systems. By the end of 2002, the entire campus became a fully wireless, always connected community – a microcosm that provides a peek at what neighborhood and organizational life may look like for the general population in just a few years.

To transform a wired campus to a wireless one requires lots of money. A computer science professor who initiated the idea at Dartmouth in 1999 decided to solicit the help of alumni working at cisco systems. These alumni arranged for a donation of the initial system, and cisco then provided more equipment at a discount. (Cisco and other companies now make similar donations to many collages and universities, writing off the difference between the retail and the discount prices for an income tax benefit.)

As a pioneer in campuswide wireless, Dartmouth has made many innovative usuages of the system, some of which are the following:

• Students are developing new applications for the Wi-Fi. For eample, one student has applied for a patent on a personal-security device that pinpoints the location of the campus emergency services to one’s mobile device.
• Students no longer have to remember campus phone numbers, as their mobile devices have all the numbers and can be accessed any where on campus.
• Students primarily use laptop computers on the network. However, an increasing number of Internet-enabled PDAs and cell phones are used as well. The use of regular cell phones is on the decline on campus.
• An extensive messaging system is used by the students, who send SMSs (Short Message Services) to each other. Messages reach the recipients in a split second, any time, anywhere, as long as they are sent and received within the network’s coverage area.
• Usage of the Wi-Fi system is not confined just to messages, students can submit their class work by using the network, as well as watch streaming video and listen to Internet radio.
• An analysis of wireless traffic on campus showed how the new network is changing and shaping campus behavior patterns. For example, students log on in short bursts, about 16 minutes at a time, probably checking their messages. They tend to plan themselves in a few favourite spots (dorms, TV room, student centre, and on a shaded bench on the green) where they use their computers, and they rarely connect beyond those places.
• The student invented special complex wireless games that they play online.
• One student has written some code that calculates how far away a networked PDA user is from his or her next appointment, and then automatically adjusts the PDA’s reminder alarm schedule accordingly.
• Professors are using wireless-based teaching methods. For example, students armed with Handspring visor PDA’s equipped with Internet access cards, can evaluate material presented in class and can vote on a multiple-choice questionnaire relating to the presented material. Tabulated results are shown in seconds, promoting discussions. According to faculty, the system “makes students want to give answers,” thus significantly increasing participation.
• Faculty and students developed a special voice-over-IP application for PDAs and iPAQs that uses live two-way voice-over-IP chat.

Questions:

1. In what ways is the Wi-Fi technology changing the Dartmouth students?
2. Some says that the wireless system will become part of the background of everybody’s life – that the mobile devices are just an afterthought. Explain.
3. Is the system contributing to improved learning, or just adding entertainment that may reduce the time available for studying? Debate your point of view with students who hold a different opinion.
4. What are the major benefits of the wireless system over the previous wire line one? Do you think wire line systems will disappear from campus disappear from campus one day? (Do some research on the topic.)


HUMAN RESOURCE MANAGEMENT ISMS BBA ONGOING EXAM ANSWER SHEETS PROVIDED

HUMAN RESOURCE MANAGEMENT ISMS BBA ONGOING EXAM ANSWER SHEETS PROVIDED WHATSAPP 91 9924764558
CONTACT:
DR. PRASANTH MBA PH.D. DME MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com

Bachelors Program in Business Management (BBA) Year-II
Note :- Solve any 4 case study
All case carries equal marks

CASE I

EMPLOYEE MOTIVATION IN A GOVERNMENT ORGANIZATION”

Bhumika Services Ltd., one of the largest public sector companies of India, was serving more than 31 million customers. Along with its vast customer base, BSNL’s financial and asset bases too were vast and strong. Changing regulations, converging markets, competition and ever demanding customers had generated challenges for BSNL. The Indore division of BSNL was the first in the country, which faced competition in basic telecom services from 1998. In spite of being a government department, Indore telephones had to face the competition, and relentless efforts were put in to improve the services and provide world¬class telecom services to its customers. Among the various services offered by Indore Telecom, 197 and 183 were two special services. 197 provided non-metered enquiry services to obtain telephone numbers by simply giving the name of person/name of organization/ name and designation of person, or by giving address. 183 on the other hand, was a non¬metered enquiry service that provided similar services for distant stations. There were a large number of complaints related to these services. Complaints were either directly forwarded to the district office by customers or raised during Telephone Adalats or pointed out by correspondents during press conferences, which were conducted quarterly. Complaints ranged from non-response, long waiting time to rude responses.

S. Baheti took charge as Area Manager (North) on July 25, 2001 In the Indore Division. Immediately after taking charge, he realized that special services like 197 and 183 required urgent attention as they were directly affecting the image of the organization amongst customers. Since most of the complaints during Telephone Adalats and press conferences were related to these services, Baheti wanted to reach the root cause of the problem, to solve it forever. In this process, he looked at the background of the employees involved in the special services and found that most of the employees were office bearers of various unions that were active in the organization. The problem was more complicated than it seemed to during interactions, the employees indicated that they were not to be blamed for poor services since they were facing a number of problems in providing services and senior officials were not paying enough attention to alleviate their problems. Defective handsets, non-operating telephone lines, disturbance in lines, jacks not making proper connections, fans and air conditioners not working properly and non availability of typewriter/computer terminals were some of the problems brought to the notice of Baheti by operators.

Further investigation revealed that in addition to these technical problems, there were some Human Resource Management problems as well, such as frequent short leave, extended breaks, uninformed leave and indifferent attitude of employees towards customers. Baheti identified that despite technical problems, some operators were sincere towards their viork and tried their best to provide better services. To improve these services, Baheti decided to use multipronged strategies. Most of the technical problems were solved immediately, other problems that could not be solved at his level were forwarded to higher authorities and pursued rigorously. As the technical problems were taken care of, efficiency of sincere employees went up. Moreover, Baheti also began regular interaction with the operators, appreciating their good work, listening to their problems and explaining them the;-i. importance of their jobs. The employees were made aware of the facts that B5NL did not enjoy a sole monopolistic position any more and had to compete with private players. So the laidback attitude towards customer complaints was not only detrimental to the image of the organization, but also could lead to a reduced market share.

After gaining the confidence of operators, the next step was to motivate them. Towards this end, Baheti started announcing the best operator of the month and recognition was given to the operator by displaying his name on the board of honor. The criteria for award were minimum 200 calls attended per day and 20 days’ attendance. In addition, based on last six months performance, three best performers were identified. Appreciation letters from Area Manager and General Manager were conferred upon these operators in a public function and prizes of their own choice were given to them. These efforts had a desired result and the performance of all the operators showed a marked improvement. The number of calls attended by some operators increased from 200 to 700 calls per day. Further, quick and polite response had reduced customer complaints. While reviewing the situation, Baheti was quite contended to see a remarkable change in the behavior of operators just four months. He wondered whether this change was a permanent phenomenon or he would have to strategize further.

QUESTIONS

1. Discuss the long-term relevance of motivational techniques used by Baheti in the light of prevailing environment in the organization.
2. Had you been Baheti, what other techniques you would have used to improve the special services provided by the organization?

CASE II

EMPLOYEE RELATIONS AUDIT

Triveni Foods Pvt. Ltd., a multinational confectionary company, having its branches in more than 50 countries and marketing its products in about 135 countries, established one of its production units in 1988 at Mathura near Delhi. It had a workforce of nearly 320 employees and sales turnover was more than Rs. 150 crores. Being a confectionary unit, hygiene was given the upper most priority to the extent that no one was allowed to enter the production area without taking bath and wearing sterilized clothes provided by the company. The entire process was automatic and required only food specialists and labor. In order to match the required standards, emphasis was given on training and welfare of employees on regular basis. Facilities like transportation were also provided since delay by ten minutes could cause production losses at the time of shift changes.

Over a period of time due to start and workers’ redundancy, it was observed that problems like lethargy, absenteeism, violation of work practices were increasing. Absenteeism rate went up to 18 percent. Employees visited canteen for drinking water and started gossiping during working hours. Buses did not arrive on time due to which production suffered. Operators came late and left shop floor early without waiting for relievers. Employees were found hovering in administration building without any reason. It was also found that employees were violating personal hygiene standards. Malpractices were also reported with attendance process and records. These activities were having a negative impact on managerial effectiveness and performance of the unit. The management tried to take number of initiatives to overcome these problems. However, these initiatives seemed ad hoc solutions and did not serve the purpose in the long run.

In 1996, Alok Trivedi joined the company as Head of the Department H.R. While facing these problems, he realized that the causes of these problems were deep rooted and required a proactive approach. He started with an approach called Employee Relation Audit, developed by him, where everything was to be monitored, regulated and reported on regular intervals. He along with his team prepared an action plan (Appendix 1) and corrective measures were taken accordingly. Facilities of drinking water were arranged at 3 to 4 places in the production area which stopped employees from going to canteen for this purpose. Action was taken against the late arrivals of the buses. A proper time study was done and they were given ten minutes margin so that they could report on time. Operators were frequently questioned and stringent vigilance was kept for amenities. Regular counseling was also arranged. A grievance register was also kept and effective grievance redressal was undertaken. Groups were formed called ‘Pragati’ groups for solving work related problems. Employees were frequently checked for ensuring their strict adherence to personal hygiene standards. For ensuring timely processing and printing of attendance records, training was given to al! line officers and production of records was made mandatory on shift basis.

It was further decided that based on this action plan an audit should be carried out at regular periods so that actual performance could be measured. For quantification, a 5 point. scale 0- poor, 2-below average, 3-average, 4-good, 5-v.good) audit report was prepared featuring practices, criteria for evaluation, standards, observations/comments and rating :Appendix 2). For example, in canteen criteria for evaluation there were food quality, menu, timings and unauthorized presence of the employees in the kitchen. The standards were strict adherence to the rules defined. For transportation, arrival, departure and punching of cards by drivers were the criteria for evaluation. Internal teams of auditors were asked to observe and comment against the set standards and give the rating accordingly. Performance vas evaluated on the basis of percentage, the highest point being 215. For example, if the total points scored on various parameters in a audit report was one hundred and fifty five, hen percentage score would be seventy-two (l55/215xl00 = 72 per cent). The first audit “as carried out in August 1999 and percentage of performance was sixty two.

In the year 2000, the performance rose to sixty-five per cent. Proactive approach of solving le problems was adopted. For example, registers were maintained at different work areas, write down the complaints experienced by employees and action was taken by the concerned person. A complaint of tap leaking in a bathroom was recorded in register by a workman. It was attended by a supervisor in charge and he got it repaired immediately. At times these were reviewed and signed by H.R. department and the higher management. Due to these practices, a lot of improvement was observed. Better working conditions, increased productivity, rise in employees’ commitment towards their goals and better superior -subordinate relationship could be seen. In 2001, the percentage of the performance rose to seventy two. While reviewing the Employee relation audit, Alok Trivedi was quite satisfied to note the steady though slow improvement in the figures of performance.

QUESTIONS

1. Had you been in place of Alok Trivedi, what additional measures would you have taken?
2. Critically analyze the Employee Relations Audit in the light of its contribution to self motivation of employees.

CA S E III

EMPLOYEE TURNOVER AT XYZ MOON LIFE INSURANCE

In 1950, with the enactment of the Insurance Act, Government of India decided to bring all the insurance companies under one umbrella of the Life Insurance Corporation of India (LIC). Despite the monopoly of LIC, the insurance sector was not doing well. Till 1995, only 12% of the country’s people had insurance cover. The need for exploring the insurance market was felt and consequently the Government of India set up the Malhotra Committee. On the basis of their recommendations, Insurance Development and Regulatory Authority (IRDA) Act was passed in parliament in 2000. This move allowed the private insurers in the market with the stop foreign players with 74:26% stake. XYZ- Moon life was one of the first three private players getting the license to operate in India in the year 2000.

XYZ Moon Life Insurance was a joint venture between the XYZ Group and Moon Inc. of US. XYZ starred off its operations in 1965, providing finance for industrial development and since then it had diversified into housing finance, consumer finance, mutual funds and now its latest venture was Life Insurance. Its foreign partner Moon Inc. was established in 1858 and had grown to be the largest life insurance and mutual fund company in the U.S. Moon Inc. had its presence in Asia since the past 75 years catering to over 1 million customers across 11 Asian countries.

Within a span of two years, twelve private players obtained the license from IRDA. IRDA had provided certain base policies like, Endowment Policies, Money back Policies, Retirement Policies, Term Policies, Whole Life Policies, and Health Policies. They were free to customize their products by adding on the riders. In the year 2003, the company became one of the market leaders amongst the private players. Till 2003, total market share of private insurers was about 4%, but Moon Life was performing well and had the market share of about 30% of the private insurance business.

In June 2002, XYZ Moon Life started its operations at Nagpur with one Sales Manager (SM) and ten Development Officers (DO). The role of a DO was to recruit the agents and sell a career to those who have an inclination towards insurance and could work either on part time or full time basis. They were very specific in recruiting the agents, because their contribution directly reflected their performance. All DOs faced three challenges such as Case Rate (number of policies), Case Size (amount of premium), and Recruitment of advisors by natural market, personal observations, nominators, and centre of influence. Incentives offered by the company to development officers and agents were based on their performance, which resulted into internal competition and finally converted into rivalry.

In August 2002, ,a Branch Manager joined along with one more Sales Manager and ten Development Officers. Initially, the branch was performing well and was able to build their image in the local market. As the industry was dynamic in nature, there were frequent opportunities bubbling in the market. In order to capitalize the outside opportunities, one sales manager left the organization in January 2003. As the sales manager was a real performer, he was able to convince all the good performers at XYZ Moon Life Insurance to join the new company. As a result of this, the organizational structure got disturbed and the development officers, who were earlier reporting to the SM had started reporting directly to the branch manager. Now, nepotism crept in and the branch manager began reallocating good agents to his favorite development officers. The sales team of another sales manager became weak (low performer). Seeing the low performance of the sales manager and his development officers, the company decided to terminate their services. As the employees’ turnover rate of the organization was more than the industry rate, the company had to continuously recruit sales agents as well as development officers to sustain itself in a highly competitive environment. The internal competition among development officers resulted into problems like, high employee turnover and dissatisfaction. Hence the branch was not able to perform as per the benchmarks set by the company. Its performance was not even comparable to that of other branches of the same company.

In April 2004, the company faced a grave problem, when the Branch Manager left the organization for greener pastures. To fill the position, in May 2004, the company appointed a new Branch Manager, Shashank Malik, and a Sales Manager, Rohit Pandey. The Branch Manager in his early thirties had an experience of sales and training of about 12 years and was looking after two branches i.e., Nagpur and Nasik.

Malik was given one Assistant Manager and 25 Development Officers. Out of that, ten were reporting to Assistant Manager and remaining fifteen were directly reporting to him. He was given the responsibility of handling all the operations and the authority to make all the decisions, while informing the Branch Manager. Malik opined that the insurance industry is a sunrise industry where manpower plays an important role as the business is based on relationship. He wanted to encourage one-to-one interaction, transparency and 4iscipline in his organization. While managing his team, he wanted his co-workers to analyze themselves i.e., to understand their own strengths and weaknesses. He wanted them to be result-oriented and was willing to extend his full support. Finally, he wanted to introduce weekly analysis in his game plan along with inflow of new blood in his organization. Using his vast experience, he began informal interactions among .the employees, by organizing outings and parties, to inculcate the feelings of friendliness and belonging. He wanted to increase the commitment level and integrity of his young dynamic team by facilitating proper civilization of their energy. He believed that proper training could give his team a proper understanding of the business and the dynamics of insurance industry.

QUESTIONS:

1. If you were Malik, what strategies would you adopt to solve the problem?
2. With high employee turnover in insurance industry, how can the company retain a person like Malik?


CASE IV

FRAGRANCE COMPANY LIMITED

Petals Company Limited (PCL) was initiated in the year 1919. Since then, it had produced a number of brands which enjoyed customer loyalty. It had adapted well with the changing environment and had entered into a strategic alliance with the S & G Limited, the producer of personal care products. The new company Fragrance Company Limited Was formed as a result in 1993 with equity participation from S& G and Petals Company Limited. This company marketed the products manufactured by the PCL. This alliance had given PCL access to the latest international technology in soaps and detergents. Thus, Fragrance Company Limited was now ideally placed to offer high value, international quality products at competitive prices. It was already an exporter of toilet soaps, detergents and cosmetics. It was a private organisation headed by Dharamchand, with its company’s headquarters at Mumbai and seven units all over the country with one of the units at Faridabad. The turnover of the company was Rs 900 crores. The company marketed the products using the latest international technology in soaps and detergents.

The organization structure was traditionally hierarchical with the senior vice president at the top of the management, the supervisory heads at the middle level and the workers at the shop floor. The company had 450 permanent workers, and 150 contract workers, with an average age of 32 years. The recruitment policy framed was to employ freshers. The various departments in the organization were: purchase, finance, systems, engineering services, excise and dispatch, operations and personnel department. The personnel and administration department were headed by Gyanchand and the functions of the personnel administration department were: recruitment, selection, training, counseling, performance appraisal, internal mobility of employees, negotiation With workers, fixation and implementation of rules and regulations regarding wages, salary, allowances and benefits to the workers. The philosophy of the company was based on Total Quality Management (TQM) and Kaizen. The company was highly environment-friendly and was oriented towards customer’s satisfaction.

Fragrance was facing an acute crisis due to high rate of absenteeism among its permanent workers. The losses were soaring high. There was loss in production, and high expenses and indiscipline were also observed. The personnel administration department conducted a survey in the year 1998. They found that the rate of absenteeism was about 20% on an average. The rules and regulations regarding leave were-12-17 days of leave with pay, 7 days casual leave with pay, 5 day sick leave with pay, extra leave without any pay. The benefits were provided as per the Employees State Insurance Act. The data collected revealed that 36% of the absenteeism was due to transportation problem, 48% was because of the workers staying away from their families, 52% due to festivals, 32% due to farming, 48% on account of alcholism, 80% on account of social occasions/marriages and 76% due to sickness of family members.

The other findings were that approximately 80% of the workers were married and they had children to look after and hence had a greater tendency towards taking leave, 8% of workers possessed dual jobs ,e.g., driving for others, mechanic work etc., so they felt that they could earn more on a particular day by remaining absent; 96% of the workers did not like night shifts and they remained absent from duty; 28% of the workers were not satisfied with the working conditions i.e. canteen facilities, drinking water, social and cultural activities and cleanliness. In 1998, the company tried to reduce absenteeism by introducing conveyance allowance for attendance and night shift allowance. The scheme called Inaam; was launched in which a worker who did not avail leave in three months, received Rs 200 per month. In¬house training was imparted to workers In order to educate them about the consequences of absenteeism. They were also sent for 3-6 months training to the Central Board of Workers Education on rotation.

Counseling sessions were held for the workers in order to increase their awareness. The company also introduced the philosophy of workers participation in the management to increase their involvement and commitment towards the work. The practice of organizing picnics, festival celebration, informal get-togethers, and sports activities were also adopted to increase the commitment. Regularity was made an important component of performance appraisal and promotion. After one year, Gyanchand was highly perplexed to see only a negligible improvement in the report of the survey conducted by the personnel administration department. The rate of absenteeism had dropped by only 3%, i.e. from. 20% to 17% in spite of introducing the aforesaid schemes.

QUESTIONS:

1. What role do the non-financial incentives play in motivating the workers and minimizing the rate of absenteeism?
2. What innovative solutions would you suggest to minimize the rate of absenteeism?

C A S E V

Vetements Ltee

Vetements Ltee is a chain of men’s retail clothing stores located throughout the province of Quebec, Canada. Two years ago, the company introduced new incentive systems for both store managers and sales employees. Store managers receive a salary with annual merit increasing based on sales above targeted goals, store appearance, store inventory management, customer complaints, and several other performance measures. Some of this information (e.g., store appearance) is gathered during visits by senior management, while other information is based on company records (e.g., sales volume).

Sales employees are paid a fixed salary plus a commission based on the percentage of sales credited to that employee over the pay period. The commission represents about 30 per cent of a typical paycheck and is intended to encourage employees to actively serve customers and to increase sales volume. Because returned merchandise is discounted from commission, sales staff are discouraged from selling products that customers do not really want.

Soon after the new incentive systems were introduced, senior management began to receive complaints from store managers regarding the performance of their sales staff. They observed that sales employees tended to stand near the store entrance waiting for customers and would occasionally argue over “ownership” of the customer. Managers were concerned that this aggression behavior intimidated some customers. It also tented to leave some parts of the store unattended by staff.
Many managers were also concerned about inventory duties. Previously, sales staff would share responsibility for restocking inventory and completing inventory reorders forms. Under the new compensation system, however, few employees were willing to do these essential tasks. On several occasions, stores experienced stock shortages because merchandise was not stocked or reorder forms were not completed in a timely manner. Potential sales suffered from empty shelves when plenty of merchandise was available in the back storeroom or at the warehouse. The company’s new automatic inventory system could reduce some of these problems, but employees must still stock shelves and assist in other aspects of inventory management.
Store managers tried to correct the inventory problem by assigning employees to inventory duty, but this has created resentment among the employees selected. Other managers threatened sales staff with dismissals if they did not do their share of inventory management. This strategy has been somewhat effective when the manager is in the store, but staff members sneak back onto the floor when the manager is away. It has also hurt staff morale, particularly relations with the store manager.
To reduce the tendency of sales staff to hoard customers at the store entrance, some managers assigned employees to specific areas of the store. This also created some resentment among employees stationed in areas with less traffic or lower-priced merchandise. Some staff openly complained of lower paychecks because they were assigned to a slow area of the store or were given more than their share of inventory duties.

Question

1. What symptom(s) exist in this case to suggest that something has gone wrong?

2. What are the root causes that have led to these symptoms?

3. What actions should the organization take to correct these problems?


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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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Bachelors Program in Business Management (BBA) Year-I

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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 ?

3. 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.

2. 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 ?

3. 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 ?

4. 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 ?


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Specialization: – 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)

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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Master Program in Business Administration (MBA)

Specialization: – Project Management

Note :- Solve any 5 Questions
All Question carry equal marks

Q 1 ) Read the case below and answer the question (s) given at the end.
Electran Manufacturing Ltd, is a diversified manufacturer in two primary fields: electronic applications and transportation equipment. In the transportation equipment field. Electran products are in the forefront of technological applications, especially in terms of electrical circuitry and component packages. Electran management takes great pride in its technological leadership and has decided to support a substantial research and development (R&D) effort. Currently 74 persons are employed full-time in the R&D division, and at any one time at least twice that many more are involved to some degree in R&D projects. These employees are assigned primarily to engineering, finance marketing and production.
Electran organizes its R&D effort by functional area within the division. Engineers, scientists, and technical and grouped separately. Additionally, within each of these technical specialties, employees are grouped and housed together. Electrical engineers, mechanical engineers, and merallurgical engineers, for example, are each grouped and located together. Projects rotate from group to group depending upon what work needs to be accomplished. There is a department head of the engineering, science and technical support areas and three additional project managers have individual project responsibility. There is considerable pressure on project managers, but they have limited control over staff within the R&D division and even less control over the approximately 150 employees who assist the R&D division on an occasional basis. The R&D division manager has recently read a brief article about matrix organization. He wonders if matrix organization might be helpful in relieving some of the burden from his project managers and in increasing division productivity.
One of the three project managers is trying to grasp the basis of PERT. He has assembled the following data for a project soon to be started. He wants to establish a PERT, diagram for the project, and determine the earliest completion data from project start using expected times, and find the minimum cost plan. This project manager does not know whether he has enough data to proceed; even if he does have enough data, he does not know how to analysis them and apply the results.
Activity Required Processors Expected Time (in days) Cost of Expedite (in $ day)
A–B –– 2 100
A–C –– 4 80
A–D –– 5 70
B–E A–B,A–C 3 100
E–F B–E 6 150
F–H E–F 2 50
D–H A–D 11 100
H–I F–H,D–H 1 100
Case questions: (Assume date, if not available, with appropriate reasons)
1. Establish a PERT diagram and determine the earliest completion time.
2. The project manager has budget $200 for expending should he want to use it.

Q 2 ) A small project is having seven activities (A to G). The relevant data about these activities is given below:
Activity Dependence Normal Duration (Days) Crash Duration (Days) Normal Cost (Rs.) Crash Cost (Rs.)
A ––– 7 5 500 900
B A 4 2 400 600
C A 5 5 500 500
D A 6 4 800 1000
E B,C 7 4 700 1000
F C,D 5 2 800 1400
G E,F 6 4 800 1600
(I) Draw the project network. Find out the duration of each path in the network.
(II) Mark the critical path in the network and find out its length.
(III) What is the percentage increase in cost to complete the project in 21 days.

Q 3 ) In a transmission line project, the normal estimate and the ‘crash’ estimate are as given below:
Activity Normal Estimate ‘Crash’ Estimate
Time (Weeks) Direct cost for the activity (Rs. lakhs) Time (weeks) Direct cost for the activity (Rs. lakhs)
(1,2) 12 1 9 2.5
(2,3) 4 ––- 3 0.4
(2,4) 20 ––– 20 –––
(3,5) 20 5 14 6.5
(3,6) 8 ––– 4 0.2
(3,7) 8 ––– 4 0.2
(4,7) 8 0.5 4 1.0
(6,7) 8 0.4 5 1.0
(7,8) 12 3 9 4.0
(8,9) 4 0.1 1 0.5
Indirect costs: Rs. 35,000 per week
(i) Draw the project network. Find out the critical path and its duration.
(ii) Calculate the cost slope of various activities.
(iii) Crash the project to 43 weeks and calculate the total cost.

Q 4 ) What are the objectives of project management information system? (b) The time and cost estimates of different activities of a project and their precedence relationship are ‘ given below:
Activity Preceding activity Time (weeks) Cost (Rs.)
Normal Crash Normal Crash
A –– 6 4 10,000 14,000
B –– 4 3 5,000 8,000
C A 3 2 4,000 5,000
D B 8 3 1,000 6,000
E B 14 6 9,000 13,000
F C,D 8 4 7,000 8,000
Overhead costs amount to Rs. 1,000 per week. It is stipulated that the contractor will have to pay a penalty of Rs. 2,000 per week for completing the project beyond 16 weeks
(i) Show the critical path in the network Diagram.
(ii) Find out the cost slope for every activity using normal and crash date for time and cost.
(iii) Crash the project to 16 weeks, Estimate the total cost of crashing.

Q 5 ) A project comprising of eight tasks (A to H) has the following characteristics:

Tasks Predecessor Time duration (weeks)
Optimistic Most Likely Pessimistic
A None 2 4 12
B None 10 12 26
C A 8 9 10
D A 10 15 20
E A 7 7.5 11
F B,C 9 9 9
G D 3 3.5 7
H E,F,G 5 5 5
(a) Calculate the time duration of each activity and the variance.
(b) Draw the network diagram, determine the critical path and mark in the network. What is the total project duration?
(c) What is the probability of achieving the project within the deadline of 30 weeks?

Q 6 ) If a project requires the expenditure of Rs.1,00,000 new and will yield RS.2,00,000 in six years, how will the manager evaluate whether or not this is viable? (Assume 10% discount rate) Discuss.

Q 7 ) The U.K National Lottery was set up with the intention of providing a fund raising tool for culture and arts. The government put out an open innitation to tender for the contract to run the £5 billion – a – year business. With costs allowed, it would be worth in the region of £ 700 million in profit per annum to the winning bidder. The bidders were a consortia of companies. The project was too big and required a wide range of skills for one company. The idea was for people to be able to select their own lottery numbers, enter them at £1 a time in a range of retail stores, and for the winning number to be drawn on prime time TV once a week. The winner could receive between £1 and £10 million. The bids were submitted in February and on Wednesday 25th May 1994, the contestants were informed of the outcome. The came out consortium would be awarded the contract. The main players in the consortium were:

Racal – to provide electronics expertise.
G. Tech – an American Lottery organises.
De la Rue – to provide printing and security.
ICL – to provide computing expertise.

Cadbury Schweppes – consumer marketing Saatchi and Saatchi – an advertising agency.
The bids were speculative and there was no guaranteed returns for the consortia. They had spent £5 million on the bid and this level of commitment is what had swing the decision in their favour. They had played as if they had expected to win; and had a system in place that could be fully operational only after six months after the contracts were awarded. This had taken three years to prepare and would be almost impossible to justify under connectional accounting practices yet by sharing their risks and by presenting the best project plan, the profits for all concerned would be considerable.

How could expenditure on such a project be justified?
Q 8 ) Why is a Project Management Information System of immense importance in a project ? Discuss the objectives of Project Management Information System. In designing a Project Management Information System what parameters are to be spelt out clearly ?

Q 9 ) What are the important phases of a project life cycle? Discuss each phase briefly with key issues involved in it.

Q 10 ) (a) What do you mean by Technical Analysis?
(b) Explain briefly Project Management Information System.
(c) What do you mean by Network analysis?
(d) What is Project Evaluation?
(e) What is a Project Report?
(f) What is computerisation?

Q 11 ) . If a project requires the expenditure of Rs.1,00,000 new and will yield RS.2,00,000 in six years, how will the manager evaluate whether or not this is viable? (Assume 10% discount rate) Discuss.


INTERNATIONAL BUSINESS MANAGEMENT ISMS ONGOING EXAM ANSWER PROVIDED

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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 non¬flexible.
• 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.
4. If the respondents were accurate in their ad interpretation, they were asked to express their intentions to purchase.
5. 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?
3. Do you think such promotions are likely to influence the quality image of the retail store? Explain.

GENERAL MANAGEMENT

Master Program in Business Administration (MBA)

Note :- Solve any 4 case study
All case carries equal marks

Case I

PANDIT TO AFAUZI
The case is based on an actual incident which took place in an Army unit operationally deployed in a field area just a few months before the 1971 showdown with Pakistan. The opposing forces of India and Pakistan were taking their respective positions in a pre-war scenario. The clouds of showdown were looming large over the horizons of both the countries. The rumbling of own tanks and guns, the reconnaissance, leaders of different arms and services establishing liaison with one another in the process of formulating plans for both defence and attack, digging of main and contingency positions was in progress, complete war machinery was being mobilized, camouflaged, and concealed. Ammunition and other explosives were being unloaded and dug down. Junior leaders were being briefed and rebriefed, communications were being checked, and troops were being motivated and looked after as most of them were green because of their sudden induction in the Army in post war days of 1965. Such was the scene which convinced all and sundry that war was imminent. Most of the troops looked forward to a showdown mainly because they wanted to get rid of the heavy ammunition as also for the mere thrill of it. Those who had not seen a battle, seemed excited over the prospects of a war and those who had seen the war, took everything in their stride, displaying a perfect cool, calm and confident countenance.

One Ram Bali Mishra (RBM) was a raw and green jawan of about 20 years of age and two years’ service and naturally had not seen a war. He was relatively tall, well built with fair complexion. He had pleasant manners, turned himself out well and spoke well. He was a complete teetotaler, non-smoker, and a vegetarian. He was well educated and well versed in religious affairs, particularly, of the religion to which most of the unit belonged. In the absence of the religious teacher of the unit, he held religious institute (dharamsthal) and gave religious discourses at the dharamsthal to all officers, junior commissioned officers JCOs), non-commissioned officers (NCOs) and jawans. During the pre-war days, he was performing the duties of a Sahayak (assistant, formerly known as orderly) to Gun Position Officer (GPO), a young officer, of the rank of a Second Lieutenant with one year of service.

RBM’s charter of duties included:
(a) attending all the training activities of his trade (telephone operator) which were being organized in the sub-unit;
(b) making arrangements to get the food from the officers’ mess and water from the tube- well for the office; and
(c) attending the telephone and noting down all the messages for the office.
By virtue of the nature and timings of these duties, RBM was excused physical training in the morning and games in the evening which all other jawans of the sub-unit attended. He was generally happy with these duties and working with the officer: After a short span of a week or so, the officer noticed some changes in the behavior of RBM. He also looked pale and worried. He was less talkative, less lively and his interaction with other jawans decreased. He started keeping aloof except where his duties warranted interaction with others. The officer tried to find the reasons from RBM but nothing emerged except a shy and coy smile and “aisi to koi baat Nai, Sahib”. The officer tried to probe further to find out if some guilt conscience was bothering him because of some bad habit which young man of his age is likely to fall prey to, in the absence, of even visual contact of civil life and members of the opposite sex.

This was denied vehemently. After another week or so, it was noticed that RBM had developed constipation, ate very little, felt tired after walking even a few hundred yards and had become weak. He was interviewed by the officer but nothing emerged once again. He was sent to the Regimental Medical Officer (RMO). The RMO inspected him and gave some medicines. On being contacted by the officer, the RMO mentioned that there was nothing wrong medically with RBM except that he was scared of the prospects of war. He even disclosed that after having been medically examined, RBM even started giving a discourse to the RMO on the bad effects of a war on environment, economy, costs, etc. He stated that people would be loaded with sufferings; killed, injured, maimed, and would become homeless. The children would become orphans, women widowed, and the humanity would suffer. He vehemently advised the RMO to make all attempts to stop the war and if he could, at least oppose it. After a brief conversation, the RMO was convinced that all the symptoms pointed to a fear psychosis of war. He gave some medicines to RBM and sent him to the sub-unit.

The RMO told the GPO that because of the worry about the war, RBM had developed problems of digestion and hence, ate less, became inactive and felt tired quickly. He had earlier been feeling shy of expressing his apprehensions about the war to others, lest they consider him a coward. The GPO gave a thought to the whole problem and interviewed RBM, advising him to attend• all physical activities, including physical training, weapon training, games, etc. thence on. The officer also planned to keep RBM among the persons of his trade, specially in the command post which controlled the firing of the guns, where from the officer himself was expected to control the’ fire in case of breakout of war.

A small cadre (class) was organized for all ranks of the sub-unit to apprise them of the organization of all arms and services in the army, starting from the level of a sub-unit. They were explained the tactics in the battlefields, the deployment patterns of different arms, the pattern and modes of support by the Air Force, the capabilities of weapons held by them, the comparative sizes of the countries, India versus Pakistan, and the level of forces held by them. They were also explained the cause for which they were there. They were there to make their contribution towards the liberation of Bangladesh (then East Pakistan), wherefrom about a crore refugees had entered India because of the repression by Pakistan forces. These refugees had become a burden on the Indian economy and social structure which India could not afford. Thus, India, the foremost leader of peace loving nations, had to prepare for war to ensure return of these refugees to liberated Bangladesh. At times, to maintain peace, it becomes necessary to resort to war.

The participants were also told about the strength of their Army and deployment in that area, of course, within the constraints of security requirements. They were also told that none of them would remain alone even during the war and that their sub-unit and the unit would always fight together. They would always have their weapons and ammunitions with them, which they were very good at firing. The process of medical care, the claim of evacuation in case of serious injuries and the enhanced benefits and compensation to families in case of death of a soldier, then announced by the government, were also communicated to them. The reliability of India’s friends on the international scene was also intimated. The tactics, capabilities of aircrafts and weapons, and reliability of Pakistan’s friends were also brought out. The disadvantages and difficulties of supply to the then East Pakistan were explained to the participants. The geographical location of East Pakistan in relation to our country was also described. Everybody was convinced of the great advantages and superiority we had vis-a-vis Pakistan.

Thence on, RBM was a totally changed man. He was noticed to be more active, intermingling with others at the slightest pretext and opportunity, giving discourses about loyalty to the country and martyrdom. He took keen interest in all the training activities, including the digging of a number of contingency gun positions. He volunteered to go with night patrols too, which operated to shoot bursts of rounds with light machine guns in trees and groves close-by, whenever the guns were deployed at a new place. He volunteered to venture out with the line party which was earmarked to lay telephone lines over long distances through sugarcane fields. He started watching the slaughtering of goats in the unit. Above all, he started eating eggs, though he did not touch meat.

This transformation in RBM was a welcome sight and appreciated by all. Everyone heaved a sigh of relief on seeing RBM becoming a brave “Fauzi” from a timid “Pandit”. The RMO was informed of this transformation. He too felt happy. His contribution had been no less in diagnosing the cause of sickness correctly. The cadre was conducted for the whole sub-unit with a view to eradicate any apprehensions from the minds of others too, in case there were any, and to educate all. The cadre proved to be a great success. It motivated the whole lot, made them more confident and ready to face the challenge bravely. This was subsequently apparent when the hostilities started.
QUESTIONS:
1. What was the cause of fear in RBM?
2. What were the symptoms of fear displayed by RBM?
3. How did the RMO come to know of the war phobia of RBM?
4. What actions should be taken to avoid building up of fear among the troops? Which of these steps were taken by the officer?

Case II

HE WHO RIDES A TIGER

In the Year of the Youth, the author took up a research project on young industrial workers. It involved comparing young and old workers. Two industries producing the same machines at similar technological level were selected. One belonged to the private sector and the other to the public sector. While the latter was started a decade later than the former, it had achieved greater expansion. Both were located in the same state.

After we obtained necessary permission to conduct our study, we reached the mofussil town where the private sector industry was located. Before we could launch our study, as a matter of principle, we wanted to meet the General Secretary of the workers’ union. The Personnel Department was not willing for this. On our insistence they called the union official. We talked to him for about half an hour but Personnel Department people were all the time hovering around.

So we fixed a time in the evening to meet him in the union office in the town. We visited the union office in the evening. The union was having problem regarding wage deduction of some workers who did not show up for overtime. The overtime notice was short and they had not consented either, even then the management was threatening wage deduction for one week.

The union could hardly do a thing’ as they in the past had burnt their hands when they had to unilaterally call off the 106 day old strike in which even their Treasurer had committed suicide. They were scared to the extent that they had productivity linked bonus agreement for even 12% bonus. Moreover, a new minuscue union was recently started in the company.

We visited the new union’s office next evening and held a long discussion. They asked for’ our suggestions. The union believed in legal battles more than agitations. After a visit to the industry the author visited the state headquarters of the new union. There every office bearer was surprisingly a lawyer. In the HQ we learnt that after we left, their union took out a procession and held a meeting in the temple. Perhaps this was the result of our discussion. While the older union was a prisoner of its past, the new union was free to write its own history. Workers’ interests were being served perhaps by both.

QUESTIONS FOR DISCUSSION
1. Discuss merits/demerits of the role of strike, agitation and legal approach in union¬management relations.
2. What role does mutual trust play in building union-management relations?

CASE III

COMPETITION AHEAD: VSNL AT CROSS ROADS

The telecom sector had been functioning as a typical government department right from its inception. With the Department of Telephones (DoT) being under the exclusive control of the Ministry of Communications, Government of India (GO!), the system functioned more as a monopoly., With the advent of the LPG process (liberalization, privatization and globalization) in the early nineties, the telecom department went through a phase of modernization. A number of new and sophisticated electronic exchanges were installed which enhanced the capacity and lead to the disappearance of waiting list for telephone connections. In a landmark decision in 1995-96, the Government of India threw open its gates for private players in the area of cellular services. LCG and ACG were the two major players to enter this area in Karnataka region, while DoT decided to remain as an observer and continued as a provider of basic services only. Subsequently the Internet, ISD and other services were also opened to private participation.

The year 1998 saw the entry of Vikas Telenet (VTNL) as a basic service provider in the state of Karnataka. It launched its basic services in Bangalore district, the commercial capital of the state, in January 1998. The impact of this entry was felt by DoT as it resulted in a mass customer churning, challenging the market leadership of DoT in basic services. This growing challenge from VTNL made General Manager DoT Indore, R.L. Rawat realized the need for a comprehensive review of the competitive scenario. The situation faced by the Bangalore district was one of its kind. It was the only city where four companies were providing telephone services. LCG and ACG were providing cellular services while VTNL and DoT were providing basic services. To attract the customers all the providers had attractive tariff plans. DoT’s market share was not affected by the entry of LCG and ACG as – they operated only as cellular service providers and their services carried a premium price. But the entry of VTNL as a basic service provider with attractive tariff plans showed a marked shift in customer base from DoT to VTNL specially in case of heavy users make it necessary for DoT to come up with similar competitive tariff plans.

General Manager Operations DoT Bangalore, S.N. Dutt, felt that improved services, customer care and proper pricing would help in winning back the heavy users who accounted for almost 60 to 65% of the total revenue. Keeping this in mind, a review of VTNL’s tariff plans was done (Annexure I). The review revealed that the customers were getting a distinct price advantage in the rentals and free calls given by VTNL.

Along with this, a discount ranging from 2.5 to 16% was also announced by VTNL. S.N. Dutt formulated a comprehensive plan to guard DoT’s market share. Officers were appointed as account holders and were responsible for rendering personalized customer care to commercially important customers hoping to retain them with better services. He also formulated a proposal of discounts which was forwarded to the Circle Head Office (Annexure-II) and a presentation was made by DGM – Marketing K.K. Sen, highlighting the rate at which customer churning was taking place and the need for implementation of new tariff plan. He pleaded with the senior officers that DoT needed to be at least reactive if not proactive, to sustain itself in the market. The proposal was well received and forwarded to the Ministry of Communications for approval. Responding to the need of the hour, the Ministry decided to offer a comprehensive discount of 2.5 to 16% for its heavy users. The scheme was introduced in Bangalore, which was extended first to the state of Karnataka and later on to the entire nation.

VTNL, which had so far been concentrating only on the heavy users, decided to now expand its network to get a wider customer base. With this view in mind, a number of promotional schemes were introduced e.g., web phone, a facility for internet usage where access to the net was provided at a cost of 60 paise per call only. It also announced free Internet facility for a year on every new connection. Besides this, VTNL went in for heavy promotion of its schemes. The careful wording of the schemes and enhancement of the number of free calls made the customers feel that they were gainers as far as rentals were concerned. These schemes when launched created very difficult times for VTNL during May -August 2001. By then, DoT had been Corporatised (October 1, 2000) and came to be known as VSNL. The Bangalore office was extremely hopeful that the corporatisation would facilitate. the implementation of new innovative schemes. For drafting a proposal of innovative schemes, VSNL first conducted a market research where in -the database of surrendered connections was used as sample and effort were made to identify the cause of disconnections. The survey revealed that of the total number of disconnections 30% were due to economic recession while 40% were due to customer turning in favor of VTNL while the remaining were due to a multitude of factors interplaying with one another.

To redeem the situation, VSNL, Bangalore prepared an innovative plan known as Business Special Plan – Plan 600-800, which offered 800 free calls on a monthly rental of Rs.600 only. The plan was put forward to Chief General Manager at Bangalore for approval. The persistent efforts of K.K. Sen bore fruits and the proposal was approved at the Circle level.

However, at the time of launch K. K. Sen realized that they needed TRAI’s (Telecom Regulatory Authority of India) approval for going ahead. To ensure the unhindered approval of TRAI, modified tariff plans called 500-700 and an economy plan were suggested and sent for approval. While formulating these plans, an attempt was made to segment the market with an intention to target each segment with a customized/specific set of services. Plan 500-700 was targeted at high end users. Here, 700 calls were offered free on a monthly rental of Rs. 500 only. The economy plan carried a rental of just Rs.160 per month with a rate of Rs.l.20 per call. This plan was specially targeted at customers who had more of incoming calls and needed a facility for meeting their specific requirements. The rolling out of these schemes had an immediate impact with nearly 8,000 customers coming over to VSNL Bangalore. Along with these new tariff proposals a number of innovative strategies were introduced by VSNL, Bangalore.

• The initial registration amount was reduced and new subscribers were offered the facility of paying the amount in installments.
• Call centre functioning since February 2001 to deal with customer grievances was made proactive to ensure better customer care.
• Training was given to the front-end-people for updating their skills and changing the mindsets.
• Tele-shopping service was started which provided a one stop shopping facility, giving the customers the option to choose their telephone numbers, instrument and service.. Installation was assured within 48 hours.
• Phone-on-Phone facility was started wherein customers could obtain a connection installed by simply ringing up for it.
• A bill collecting facility was also introduced to further assist the customers.
• VCC Le., prepaid cards were introduced and even delivered at the doorsteps of the customers.
• Bill collection in the rural areas by mobile vans was introduced.
• Linemen were given pagers to facilitate prompt servicing of faulty telephone lines.
• Regular meetings between call centre members and maintenance staff were held to exchange information and solve grievances.
• For motivating and facilitating their employees, free telephone service was provided to all the employees.
• An advertising budget of Rs.30,00,000 (0.2% of the total sales revenue) was outlined for launching a comprehensive promotion programme using both indoor and outdoor media ensuring a good coverage of the market.

VSNL – Tariff Structure
Scheme Rental (Rs.) Free Colis Facilities
Business Plan – 500-700* 500 (Monthly) 700 Without STD
Economy Plan ** 160 (Monthly) Nil With STD
Standard Plan* 500 (Bimonthly) 150 With STD
* 0.80 Per Call ** Rs.1 .20 Per Call

VTNL – Tariff Structure
Scheme Rental (Rs.) Free Calls
Silver 300 349 (Monthly) 300
Golden – 500 499 (Monthly) 500

Questions:

1. What were the strengths and weaknesses of VSNL?
2. Do you think that VSNL should have changed its thrust from basic telephony to cellular services?
3. If you were the Deputy General Manager, what strategies would you have undertaken to deal with the competition?

Case IV
DISNEY’S DESIGN
The Walt Disney Company is heralded as the world’s largest entertainment company. It has earned this astounding reputation through tight control over the entire operation : control over the open – ended brainstorming that takes place 24 hours a day ; control over the engineers who construct the fabulous theme – park rides; control over the animators who create and design beloved characters and adventurous scenarios ; and control over the talent that brings the many concepts and characters to life. Although control pervades the company, it is not too strong a grip. Employees in each department are well aware of their objectives and the parameters established to meet those objectives. But in conjunction with the pre-determined responsibilities, managers at Disney encourage independent and innovative thinking.
People at the company have adopted the phrase “Dream as a Team” as a reminder that whimsical thoughts, adventurous ideas, and all – out dreaming are at the core of the company philosophy. The over all control over each department is tempered by this concept. Disney managers strive to empower their employees by leaving room for their creative juices to flow. In fact, managers at Disney do more than encourage innovation. They demand it. Projects assigned to the staff “ imaginers” seem impossible at first glance. At Disney, doing the seemingly impossible is part of what innovation means. Teams of imaginers gather together in a brainstorming session known as the “Blue Sky” phase. Under the “Blue Sky”, an uninhibited exchange of wild, ludicrous, outrageous ideas, both “ good” and “ bad”, continues until solutions are found and the impossible is done. By demanding so much of their employees, Disney managers effectively drive their employees to be creative.
Current Disney leader Michael Eisner has established the “Dream as a Team” concept. Eisner realized that managers at Disney needed to let their employees brainstorm and create with support. As Disney president Frank Weds says, “If a good idea is there, you know it, you feel it, you do it, no matter where it comes from.”

Questions :
1. What environmental factors influenced management style at Disney?
2. What kind(s) of organizational structure seem to be consistent with “Dream as a Team” ?
3. How and where might the informal organization be a real asset at Disney ?

Case V
“THAT’S NOT MY JOB” – LEARNING DELEGATION AT CIN-MADE
When Robert Frey purchased Cin – Made in 1984, the company was near ruin. The Cincinnati, Ohi-based manufacturer of paper packaging had not altered its product line in 20 years. Labor costs had hit the ceiling, while profits were falling through the floor. A solid quarter of the company’s shipments were late and absenteeism was high. Management and workers were at each other’s throats.
Ten years later, Cin – Made is producing a new assortment of highly differentiated composite cans, and pre-tax profits have increased more than five times. The Cin – Made workforce is both flexible and deeply committed to the success of the company. On-time delivery of products has reached 98 percent, and absenteeism has virtually disappeared. There are even plans to form two spin – off companies to be owned and operated by Cin-Made employees. In fact, at the one day “Future of the American Workforce” conference held in July 1993, Cin-Made was recognized by President Clinton as one of the best – run companies in the United States.
“ How did we achieve this startling turnaround ?” mused Frey. “Employee empowerment is one part of the answer. Profit sharing is another.”
In the late spring of 1986, relations between management and labor had reached rock bottom. Having recently suffered a pay cut, employees at Cin- Made came to work each day, performed the duties required of their particular positions, and returned home-nothing more. Frey could see that his company was suffering. “To survive we needed to stop being worthy adversaries and start being worthy partners,” he realized. Toward this end, Frey decided to call a meeting with the union. He offered to restore worker pay to its previous level by the end of the year. On top of that, he offered something no one expected: a 15 percent share of Cin-Made’s pre-tax profits. “I do not choose to own a company that has an adversarial relationship with its employees.” Frey proclaimed at the meeting. He therefore proposed a new arrangement that would encourage a collaborative employee-management relationship “Employee participation will play an essential role in management.”
Managers within the company were among the first people to oppose Frey’s new idea of employee involvement. “My three managers felt they were paid to be worthy adversaries of the unions.” Frey recalled. It’s what they’d been trained for. It’s what made them good managers. Moreover, they were not used to participation in any form, certainly not in decision making.” The workers also resisted the idea of extending themselves beyond the written requirements of their jobs. “ (Employees) wanted generous wages and benefits, of course, but they did not want to take responsibility for anything more than doing their own jobs the way they had always done them,” Frey noted. Employees were therefore skeptical of Frey’s overtures toward “employee participation.” “We thought he was trying to rip us off and shaft us,” explained Ocelia Williams, one of many Cin-Made employees who distrusted Frey’s plans.
Frey, however, did not give up, and he eventually convinced the union to agree to his terms. “ I wouldn’t take no for an answer,” he asserted. “Once I had made my two grand pronouncements, I was determined to press ahead and make them come true.” But still ahead lay the considerable challenge of convincing employees to take charge :
I made people meet with me, then instead
Of telling them what to do, I asked them.
They resisted.

“ How can we cut the waste on his run ?” I’d
say, or “How are we going to allocate the
overtime on this order ?”

“That’s not my job,” they’d say.

“But I need your input,” I’d say. “How in the
World can we have participative management
If you won’t participate?

“I don’t know,” they’d say. “Because that’s
not my job either. That’s your job. ?”
Gradually, Frey made progress. Managers began sharing more information with employees. Frey was able slowly to expand the responsibilities workers would carry. Managers who were unable to work with employees left, and union relations began to improve. Empowerment began to happen. By 1993, Cin Made employees were taking responsibility for numerous tasks. Williams, for example, used to operate a tin-slitting machine on the company’s factory floor. She still runs that same machine, but now is also responsible for ordering almost $ 100,000 in supplies.
Williams is just one example of how job roles and duties have been redefined throughout Cin-Made. Joyce Bell, president of the local union, still runs the punch press she always has, but now also serves as Cin- Made’s corporate safety director. The company’s scheduling team, composed of one manager and five lead workers from various plant areas, is charged with setting hours, designating layoffs, and deciding when temporary help is needed. The hiring review team, staffed by three hourly employees and two managers, is responsible for interviewing applicants and deciding whom to hire. An employee committee performs both short – and long – term planning of labor, materials, equipment, production runs, packing, and delivery. Employees even meet daily in order to set their own production schedules. “We empower employees to make decisions, not just have input,” Frey remarked. “I just coach.”
Under Frey’s new management regime, company secrets have virtually disappeared. All Cin-Made employees, from entry-level employees all the way to the top, take part in running the company. In fact, Frey has delegated so much of the company’s operations to its workers that he now feels little in the dark. “I now know very little about what’s going on, on a day-to-day basis,” he confessed.
At Cin-Made, empowerment and delegation are more than mere buzzwords; they are the way of doing business – good business. “We, as workers, have a lot of opportunities,” said Williams. “If we want to take leadership, it’s offered to us.”

Questions:
1. How were principles of delegation and decentralization incorporated into Cine – Made operations?
2. What are the sources and uses of power at Cin – Made?
3. What were some of the barriers to delegation and empowerment at Cin –Made?
4. What lessons about management in a rapidly changing marketplace can be learned from the experience of Cin – Made?

Case VI
HIGH-TECH ANSWERS TO DISTRIBUTION PROBLEMS AT ROLLERBLADE
When a manger finds that demand exceeds inventory, the answer lies in making more goods. When a manager finds that inventory exceeds demand, the answer lies in making fewer goods. But what if a company management finds that they just do not know which situation applies?
This is the situation that recently confronted management at Rollerblade, the popular skate manufacturer based in Minnetonka, Minnesota. Rollerblade has been one of the leading firms in the fast growing high performance roller skate marketplace, it matters a great deal for Rollerblade managers whether demand and inventory are in balance, or not.
Rollerblade was in a bind. The product literally could not be shipped out the door. The managers found that workers were not able to ship products because, as a result of poor storage structures, they could not find the products. Once they were found, overcrowded aisles, in addition to other space constraints, still prevented efficient shipping because the workers could barely manage to get the products out the door. “We were out of control because we didn’t know how to use space and didn’t have enough of it,” said Ian Ellis, director for facilities and safety. “Basically, there was no more useable space left in the warehouse, a severe backlog of customer orders, and picking errors were clearly in the unacceptable range,” added Ram Krishnan, Principal of NRM Systems, based in St. Paul, Minnesota.
The answer for Rollerblade was found in technology. High-tech companies have introduced a collection of computer simulations, ranging in cost roughly from $10,000 to $30,000, that assist managers in generating effective facility designs. With the help of layout Master IV simulation software, developed by NRM, Rollerblade Management was able to implement a new distribution design. As a result of the distribution improvement, Rollerblade was able to increase the number of customer orders processed daily from140 to 410 and eliminate order backlog. “Now we have a different business,” says Ellis. “The new layout has taken us from being in a crunch, to being able to plan.

Questions:
1. With retailers as their primary customers, what customer competitive imperatives could be affected by Rollerblade’s inventory problems?
2. How appropriate might a just – in – time inventory system be for a product such as roller skates?”
3. What opportunities are therefore Rollerblade managers to see FOR themselves as selling services, instead of simply roller skates?


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Consumer behavior:
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 2

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 3

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 4

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.
4. If the respondents were accurate in their ad interpretation, they were asked to express their intentions to purchase.
5. 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

QUESTIONS

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

Ans.

Consumer involvement is defined as a state of mind that motivates consumers to identify with product/service offerings, their consumption patterns and consumption behavior. Involvement creates within consumers an urge to look for and think about the product/service category and the varying options before making decisions on brand preferences and the final act of purchase. It is the amount of physical and mental effort that a consumer puts into a purchase decision. It creates within a person a level of relevance or personal importance to the product/service offering and this leads to an urge within the former to collect and interpret information for present/future decision making and use. Involvement affects the consumer decision process and the sub processes of information search, information processing, and information transmission. As Schiffman has put it “Involvement is a heightened state of awareness that motivates consumers to seek out, attend to, and think about product information prior to purchase”. It is the perceived interest and importance that a consumer attaches to the acquisition and consumption of a product/service offering.
Herbert Krugman, a researcher is credited with his contribution to the concept of consumer involvement. According to him, consumers approach the marketplace and the corresponding product/service offerings with varying levels and intensity of interest and personal importance. This is referred to as consumer involvement.
Involvement of consumers while makes purchase decisions varies across persons, across product/service offerings in question as well as purchase situations and time at hand. Some consumers are more involved in purchase processes than others. For example, a person who has a high level of interest in a product category would expend a lot of time making a decision with regard to the product and the brand. He would compare brands across features, prices etc. Another example is a person who is risk aversive; he would also take a longer time making a decision. Involvement also varies across product/service offerings. Some products are high involvement products; these are products that are high in value and expensive, possess sufficient amount of risk, are purchased infrequently, and once purchased, the action is irrevocable, i.e. they cannot be returned and/or exchanged . On the other hand, there are low involvement products, which are moderately expensive or generally inexpensive, possess little risk and are purchased regularly on a routine basis. Further, such consumer involvement based on their personal traits or on the nature of product/service offering are also impacted by the buying situation and time in hand for making purchase decisions. Very often, due to time constraints or emergency situations, a consumer may expend very little time on the purchase decision and buying activity in spite of the fact that the consumer is highly involved or risk aversive or the product is a high involvement one.

2 Is a level of 75 per cent comprehension realistic among those who become aware of an ad? Why or why not?
Ans.
The goals of comprehension realistic awareness of advertising do not usually involve making money in the short term. Awareness advertising seeks to increase the name recognition of your small business in the minds of consumers across your target market area. These advertising objectives are particularly useful in the early days of your company when you don’t have as many
Awareness advertising is a marketing strategy designed to increase consumer familiarity with your company’s overall message and the services or products it offers. How awareness advertising develops goals and objectives for your small business depends on your target consumer market and the company image you wish to portray. According to the Small Business Notes website, these goals are essential to developing your awareness advertising strategy and determining how much money to spend on your promotional campaigns.
Brand awareness is an overarching objective of your awareness advertising strategy. This marketing phenomenon is the extent to which consumers recognize the brands of your small business and can correctly associate these brands with particular product offerings, according to the Business Dictionary. Increasing brand awareness is a primary aim in the early months of small business life, when your company is attempting to enter the local marketplace and garner consumer attention. Raising brand awareness through advertising keeps your small business in the minds of consumers, which can lead to increased traffic at your place of business.
The message your small business chooses to convey cannot be vague or easily misinterpreted. The more room you give consumers to confuse your company message, the easier it will be for your target market to make false assumptions about your brands and products. Conveying a clear, strong message through your advertising campaigns gives consumers your product messages in ways that are easily understandable and memorable. This allows for greater retention of your message and easier recognition when consumers come across your company’s products or enter your business locations.
Awareness advertising seeks to increase your company’s market share by increasing consumer knowledge of your small business’s products and services. Advertising campaigns saturate the market in an attempt to drown out the voices of your competitors. If your advertising campaigns follow the rules for simplicity and memorability, consumers may begin to frequent your business, giving you the opportunity to steal sales from the competition on a permanent basis.

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

Martineau gives the retail store image first. He thinks that the retail image is “personality of the retail store”. He reckons that the definition given by consumers is very important to affect their patronization the store.

Arons(1961)&Dichter(1985) think retail store image is an individual’s cognitions and emotions that are inferred from perceptions or memory inputs that are attached to a particular store and which represent what that store signifies to an individual[8]. Keaveney& Hunt takes retail store image as an overall impression of a store as perceived by consumers. Store image is the subjective feeling got by the store information, this image is based on the personality of consumers’. This view is accepted by more and more scholars. And, some researchers not only test the subjective of the store image, but also point out the influence store image theory.

Wyckham (1967)emphasizes the consumer’s subjective feeling in his research and tests one of the factors by empirical ways. He connects the consumer’s shopping experience and store image, and reckon “ the feeling and experience have certain relationship”. When consumer has happy experience, and he will have good image; then will have bad image. According to the definition of the retail image, we can get the result that the recognition of the retail store is based on the reaction to the store. And this recognition can be emphasized. So, this research takes the retail information as the result of the emphasize of the store. Retail image is produced by the consumer’s feeling. Different consumers have different recognitions according to their
knowledge, education and life style.

The above segmentation distinguishes the factors which may affect the retail store image from different angles. The definition for service is further more different, which just indicates the complexity of service. Taking James Reardon(1995)’s segmentation for example, convenience could also be treated as service provided to customers, which makes the practical verification more difficult. It is because of the different recognition to service factor .


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Chartered Certified Accountant (CCA)
Cost Accounting

Note :- Solve any 6

Questions:

1. a) Are all fixed costs sunk costs? Explain

b) What are opportunity costs? Are opportunity costs relevant in decision making? Give examples in support of your answer.

c) What are the various methods by which you would split semi-variable costs in its fixed and variable elements?

2. a) What are the characteristics of companies that are like to be using job order cost system? Specify five concrete situations when use of job order cost system is most appropriate.

b) Why is it difficult to identify manufacturing overheads with products manufactured? Also, state the difference between the manufacturing overheads control account and manufacturing overhead applied account.

3. a) What do you understand by integrated accounts? State the advantages of integrated accounts. State in brief the procedure of installing such a system in a newly started manufacturing firm.

b) Why is it necessary to reconcile cost and financial accounts?

4. a) Explain How budgeting and budgetary control operate together in a total management system.

b) Write a note on the advantages and limitations of budgeting.

5. a) What is “standard costing” and how would you distinguish it from “budgetary control?”

b) How do standards and standard costs facilitate managerial planning and control?

6. “Costs may be classified in a variety of ways according to their nature and the information needs of the management.” Explain.
7. The Stock Control Policy of a company is that, each stock is ordered twice a year. The quantum of each order being one-half of the year’s forecast demand
The materials manager, however, wishes to introduce a policy in which for each item of stock, reorder levels and EOQ is calculated
For one of the items X; the following information is available:
Forecast annual demand 3,600 units
Cost / unit Rs. 100
Cost of placing an order Rs.40
Stock holding cost 20% of average stock value
Lead time 1 month

It is estimated by the materials manager that for item X, a buffer stock of additional 100 Units should be provided to cover fluctuations in demand.
If the new policy is adopted, calculate for stock item X:
(i) the reorder level that should be set by the material manager;
(ii) the anticipated reduction in the value of the average stock investment;
(iii) the anticipated reduction in total inventory costs in the first and subsequent years.

8. (a) What is activity based costing?
(b) Explain the concept of cost drivers
Indicate what you will consider as cost drivers for the following business functions:
(i) Research and development;
(ii) Customer service

Master Program in Business Administration (MBA)

Note :- Solve any 4 case study
All case carries equal marks
CASE I

A DIAMOND PERSONALITY

Ask Suraj bhai about the dot-com burst and he may grin at you as if to say, “What burst?’’ Suraj bhai, a 38-year-old entrepreneur, owns an Internet business that sells loose diamonds to various buyers. Business is becoming for Suraj bhai. In 2004, he had sales of INR 3,500 million. Needless to say, Suraj bhai is optimistic about his business venture.
The future wasn’t always to bright for Suraj bhai, however. In 1985, Suraj bhai moved from his native town Suraj, to New Delhi, with little ability to speak English. There, he attended language courses and worked at the local mall to support himself. After graduation, his roommate’s girlfriend suggested that he work at a local jeweler. “I thought she was crazy. I didn’t know anything about jewelry,’’ says Suraj bhai, who took her advice. Though he worked hard and received his Diamonds and Diamonds Grading certification from the Gemological Institute, he wasn’t satisfied with his progress. `I quickly realized that working there, I was just going to get a salary with a raise here and there. I would never become anything. That drove me to explore other business ventures. I also came to really known diamonds – their pricing and their quality.’’
In 1997, tired of working for someone else, Suraj bhai decided to open his own jewelry store. However, business didn’t boom. `Some of my customers were telling me they could find diamonds for less on the Interest. It blew my mind’’ Surajy bhai recognized an opportunity and began contacting well-known diamond dealers to see if they would be interested in selling their gems online. Suraj bhai recalls one conversation with a prominent dealer who told him, `You cannot sell diamonds on the Internet. You will not survive.’’ Discouraged, Suraj bhai then says that he made a mistake. “I stopped working on it. If you have a dream, you have to keep working harder at it.’’
A year later, Suraj bhai did work harder at his dream and found a dealer who agreed to provide him with some diamonds. Says Suray bhai, “Once I had one. I could approach others. Business started to build. The first 3 months I sold INR 20 million worth of diamonds right off the bat. And that was just me. I started to add employees and eventually closed the jewelry store and got out of retail.’’ Although Suraj bhai does have some diamonds in inventory, he primarily acts as a connection point between buyers and suppliers, giving his customers an extraordinary selection from which to choose.
Suraj bhai is now a savvy entrepreneur, and his company, Abhisaz.com, went public in October 2003.
Why is Suraj bhai successful? Just ask two people who have known Suraj bhai over the years. Yogesh bhai, a realtor who helped build Suraj bhai building, says, “Suraj bhai is a very ambitious young man. I am not surprised at all how successful he is. He is an entrepreneur in the truest sense of the world.’’ One of Suraj bhai former real-estate instructors, Arun Jain, concurs. `I am not surprised at all at his success,’’ says Arun. “Suraj bhai has always been an extremely motivated individual with a lot of resources. He has a wonderful personality and pays close attention to detail. He also has an ability to stick to things. You could tell from the beginning that he was going to persevere, and I am proud of him.’’
Suraj bhai is keeping his success in perspective, but he also realizes his business’ potential: “I take a very small salary, and our overhead in INR 25 million a year. I am not in debt, and the business is breaking ever. I care about the company. I want to keep everything even until we take off, and then it may be another ball game.’’

Questions:

1. What factors do you think attributed to Suraj bhai’s success? Was he merely “in the right place at the right time’’, or are there characteristics about him that contribute to his success?
2. How do you believe Suraj bhai would score on the Big Five dimensions of personality (extroversion, agreeableness, conscientiousness, emotional stability, openness to experience)? Which ones would he score high on? Which ones might he score low on?
3. Do you believe that Suraj bhai is high or low on core self-evaluations? On what information did you base your decision?
4. What information about Suraj bhai suggests that he has a proactive personality?


CASE II

BULLYING BOSSES

It got to where I was twitching, literally, on the way into work,’’ states Carrie Clark, a 52-year-old retired teacher and administrator. After enduring 10 months of repeated insults and mistreatment from her supervisor, she finally quit her job. “I had to take care of my health.’’
Though many individuals recall bullies from their elementary school days, some are realizing that bullies can exist in the workplace as well. And these bullies do not just pick on the weakest in the group, rather, any subordinate in their path may fall prey to their torment, according to Dr. Gary Namie, director of the Workplace Bullying and Trauma Institute. Dr. Namie further says workplace bullies are not limited to men-women are at least as likely to be bullies. However, gender discrepancies are found in victims of bullying, as women are more likely to be targets.
What motivates a boss to be a bully? Dr. Harvey Hornstein, a retired professor from Teachers College at Columbia University, suggests that supervisors may use bullying as a means to subdue a subordinate that poses a threat to the supervisor’s status. Additionally, supervisors may bully individuals to vent frustrations. Many times however, the sheer desire to wield power may be the primary reason for bullying.
What is the impact of bullying on employee motivation and behavior? Surprisingly, even though victims of workplace bullies may feel less motivated to go to work every day, it does not appear that they discontinue performing their required job duties. However, it does appear that victims of bullies are less motivated to perform extra-role or citizenship behaviors. Helping others, speaking positively about the organization, and going beyond the call of duty are behaviors that are reduced as a result of bullying. According to Dr. Bennett Tepper of the University of North Carolina, fear may be the reason that many workers continue to perform their job duties. And not all individuals reduce their citizenship behaviors. Some continue to engage in extra-role behaviors to make themselves look better than their colleagues.

What should you do if your boss is bullying you? Don’t necessarily expect help from coworkers. As Emelise Aleandri, an actress and producer from New York who left her job after being bullied, stated, “Some people were afraid to do anything. But others didn’t mind what was happening at all, because they wanted my job.’’ Moreover, according to Dr. Michelle Duffy of the University of Kentucky, coworkers often blame victims of bullying in order to resolve their guilt. “they do this by wondering whether maybe the person deserved the treatment, that he or she has been annoying, or lazy, they did something to earn it,’’ states Dr. Duffy. One example of an employee who observed this phenomenon firsthand is Sherry Hamby, who was frequently verbally abused by her boss and then eventually fired. She stated, “This was a man who insulted me, who insulted by family, who would lay into me while everyone else in the office just sat there and let it happen. The people in my office eventually started blaming me.’’
What can a bullied employee do? Dr. Hornstein suggests that employees try to ignore the insults and respond only to the substance of the bully’s grip. `stick with the substance, not the process, and often it won’t escalate,’’ he states. Of course, that is easier said than done.

Questions:
1) Of the three types of organizational justice, which one does workplace bullying most closely resemble?
2) What aspects of motivation might workplace bullying reduce? For example, are there likely to be effects on an employee’s self-efficacy? If so, what might those effects be?
3) If you were a victim of workplace bullying, what steps would you take to try to reduce its occurrence? What strategies would be most effective? What strategies might be ineffective? What would you do if one of your colleagues was a victim of an abusive supervisor?
4) What factors do you believe contribute to workplace bullying? Are bullies a product of the situation, or are they flawed personalities? What situations and what personality factors might contribute to the presence of bullies?


CASE III

THANKS FOR NOTHING

Thought it may seem fairly obvious that receiving praise and recognition from one’s company is a motivating experience, sadly many companies are failing miserably when it comes to saying “thanks’’ to their employees. According to curt Coffman global practice leader at Gallup, 71 percent of U.S. workers are “disengaged’’, essentially meaning that they could care less about their organization. Coffman states. “We’re operating at one-quarter of the capacity in terms of managing human capital. It’s alarming.’’ Employee recognition programs, which became more popular as the U.S. economy shifted from industrial to knowledge-based, can be an effective way to motivate employees and make them feel valued. In many cases, however, recognition programs are doing “more harm than good’’ according to Coffman.
Take Ko, a 50-year-old former employee of a dot-com in California. Her company proudly instituted a rewards program designed to motivate employees. What were the rewards for a job well-done? Employees would receive a badge which read “U Done Good’’ and, each year, would receive a T-shirt as a means of annual recognition. Once an employee received 10 “U Done Good’’ badges, he or she could trade them in for something bigger and better—a paperweight. Ko states that she would have preferred a raise. “It was patronizing. There wasn’t any deep thought involved in any of this.’’ To make matters worse, she says the badges were handed out arbitrarily and were not tied to performance. And what about those T-shirts? Ko states that the company instilled a strict dress code, so employees couldn’t even wear the shirts if they wanted to. Needless to say, the employee recognition program seemed like an empty gesture rather than a motivation.
Even programs that provide employees with more expensive rewards can backfire, especially if the rewards are given insincerely. Eric Lange, an employee of a trucking company, recalls the time when one of the company’s vice presidents achieved a major financial goal for the company. The vice president, who worked in an office best of Lange, received a Cadillac Seville as his company car and a new Rolex wristwatch that cost the company $10,000. Both were lavish gifts, but the way they were distributed left a sour taste in the vice president’s mouth. He entered his office to find the Rolex in a cheap cardboard box sitting on his desk, along with a brief letter explaining that he would be receiving a 1099 tax form in order to pay taxes on the watch. Lange state of the vice president, “He came into my office, which was right next door, and said, `can you believe this?’’ A mere 2 months later, the vice president pawned the watch. Lange explains. “It had absolutely no meaning for him.
Such experiences resonate with employees who may find more value in a sincere pat on the back than gifts from management that either are meaningless or aren’t conveyed with respect or sincerity. However, sincere pats on the back may be hard to come by. Gallup’s poll found that 61 percent of employees stated that they haven’t received a sincere, “thank you’’ from management in the past year. Finding such as these are troubling, as verbal rewards are not only inexpensive for companies to hand out but also are quick and easy to distribute. Of course, verbal rewards do need to be paired sometimes with tangible benefits that employees value – after all, money talks. In addition, when praising employees for a job well-done, managers need to ensure that the praise is given in conjunction with the specific accomplishment. In this way, employees may not only feel valued by their organization but will also know what actions to take to be rewarded in the future.

Questions
1) If praising employees for doing a good job seems to be a fairly easy and obvious motivational tools, why do you think companies and managers don’t often do it?
2) As a manager, what steps would you take to motivate your employees after observing them perform well?
3) Are there any downsides to giving employees too much verbal praise? What might these downsides be and how could you alleviate them as a manager?
4) As a manager, how would you ensure that recognition given to employees is distributed fairly and justly?


CASE IV

WILL GEORGE W. BUSH BE A GREAT PRESIDENT?

What does it take to be a great U.S. president? A survey of 78 history, political science, and law scholars rated the U.S. presidents from George Washington to Bill Clinton. Here are the presidents who were rated “Great’’ and “Near Great.’’
Great
George Washington
Abraham Lincoln
Franklin D. Roosevelt (FDR)

Near Great
Thomas Jefferson
Andrew Jackson
James Polk
Theodore Roosevelt
Harry Truman
Dwight Eisenhower
Ronald Reagan
Among recent presidents, Presidents Nixon, Ford, and Carter were ranked “Below Average’’ and Presidents G. H. W. Bush (the first President Bush) and Clinton were ranked “Average’’.
So what explains these ratings? The following are some qualities of presidents who have stood the test of time.
1. Great presidents are transformational leaders who engender strong emotions – that is, you either love them or you hate them (it’s hard to hate someone who made little difference). And great presidents enact a vision that may not respond to popular opinion. Lincoln and FDR were beloved, and hated, by millions.
2. Great presidents are bold and take risks, and almost all great presidents emerge successfully from a crisis. A great president is perceived as “being there’’ when a crisis emerges and taking bold action to lead the nation out of the crisis – for example, Lincoln in the Civil War and Roosevelt in WWII.
3. Great presidents are associated with a vision. Most people, for example, are able to associate the great presidents with defining moment where a clear set of principles was articulated – for example, FDR’s speech to Congress after the attacks on Pearl Harbor, and Lincoln’s Gettysburg Address.
4. Great presidents are charismatic. They are engaging, articulate, and expressive, which helps capture the public’s attention and rallies people around a president’s cause. One leadership expert argues that the best presidents create colorful personas with their language by using words with basic emotions – for example, good versus evil or love versus hate.
So what about President George W. Bush (the second President Bush)? Shortly after his second inauguration, President Bush embarked on an ambitious agenda of legal reform, transforming the Social Security system, tax reform, and revising immigration laws. One writer commented, “Bush has always thought big, and always believed you earn political capital by expending it.’’ However, the closeness of the 2004 election (Bush received 51 percent of the vote and Kerry received 48 percent) suggests that Bush may not have overwhelming support.

Questions
1. How would you rate President George W. Bush on the four characteristics outlined at the beginning of the case? How would you contrast his reaction to Hurricane Katrina with his reaction to the terrorist attacks of September 11, 2001? What do you think his handling of these two events says about his leadership?
2. Do you think leaders in other contexts (business’, sports, religious) exhibit the same qualities of great or near-great U.S. presidents?
3. Do you think being in the right place at the right time could influence presidential greatness?

Case V

A UNIQUE TRAINING PROGRAM AT UPS

Mark Colvard, a United Parcel manager in San Ramon, California, recently faced a difficult decision. One of his drivers asked for 2 weeks off to help an ailing family member. But company rules said this driver wasn’t eligible. If Colvard went by the book, the driver would probably take the days off anyway and be fired. On the other hand, Colvard was likely to be criticized by other drivers if he bent the rules. Colvard chose to give the driver the time off. Although he took some heat for the decision, he also kept a valuable employee.
Had Colvard been faced with this decision 6 months earlier, he says he would have gone the other way. What changed his thinking was a month he spent living in McAllen, Texas. It was part of a UPS management training experience called the Community Internship Program (CIP). During his month in McAllen, Colvard built housing for the poor, collected clothing for the Salvation Army, and worked in a drug rehab center. Colvard gives the program credit for helping him empathize with employees facing cries back home. And he says that CIP has made him a better manager. “My goal was to make the numbers, and in some cases that meant not looking at the individual but looking the bottom line. After that 1-month stay, I immediately started reaching out to people in a different way.’’
CIP was established by UPS in the late 1960s to help open the eyes of the company’s predominantly white managers to the poverty and inequality in many cities. Today, the program takes 50 of the company’s most promising executives each summer and brings them to cities around the country. There they deal with a variety of problems- from transportation to housing, education, and health care. The company’s goal is to awaken these managers to the challenges that many of their employees face, bridging the cultural divide that separates a white manager from an African American driver or an upper-income suburbanite from a worker raised in the rural South.

Questions
1. Do you think individuals can learn empathy from something like a 1-month CIP experience? Explain why or why not.
2. How could UPS’s CIP help the organization better manage work-life conflicts?
3. How could UPS’s CIP help the organization improve its response to diversity?
4. What negatives, if any, can you envision resulting from CIP?
5. UPS has 2,400 managers. CIP includes only 50 each year. How can the program make a difference if it includes only 2 percent of all managers? Does this suggest that the program is more public relations than management training?
6. How can UPS justify the cost of a program like CIP if competitors like FedEx, DHL, and the U.S. Postal Service don’t offer such programs? Does the program increase costs or reduce UPS profits?

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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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 non¬flexible.
• 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.
4. If the respondents were accurate in their ad interpretation, they were asked to express their intentions to purchase.
5. 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?
3. Do you think such promotions are likely to influence the quality image of the retail store? Explain.

Master Program in Business Administration (MBA)

Note :- Solve any 4 case study
All case carries equal marks

Case I

PANDIT TO AFAUZI
The case is based on an actual incident which took place in an Army unit operationally deployed in a field area just a few months before the 1971 showdown with Pakistan. The opposing forces of India and Pakistan were taking their respective positions in a pre-war scenario. The clouds of showdown were looming large over the horizons of both the countries. The rumbling of own tanks and guns, the reconnaissance, leaders of different arms and services establishing liaison with one another in the process of formulating plans for both defence and attack, digging of main and contingency positions was in progress, complete war machinery was being mobilized, camouflaged, and concealed. Ammunition and other explosives were being unloaded and dug down. Junior leaders were being briefed and rebriefed, communications were being checked, and troops were being motivated and looked after as most of them were green because of their sudden induction in the Army in post war days of 1965. Such was the scene which convinced all and sundry that war was imminent. Most of the troops looked forward to a showdown mainly because they wanted to get rid of the heavy ammunition as also for the mere thrill of it. Those who had not seen a battle, seemed excited over the prospects of a war and those who had seen the war, took everything in their stride, displaying a perfect cool, calm and confident countenance.

One Ram Bali Mishra (RBM) was a raw and green jawan of about 20 years of age and two years’ service and naturally had not seen a war. He was relatively tall, well built with fair complexion. He had pleasant manners, turned himself out well and spoke well. He was a complete teetotaler, non-smoker, and a vegetarian. He was well educated and well versed in religious affairs, particularly, of the religion to which most of the unit belonged. In the absence of the religious teacher of the unit, he held religious institute (dharamsthal) and gave religious discourses at the dharamsthal to all officers, junior commissioned officers JCOs), non-commissioned officers (NCOs) and jawans. During the pre-war days, he was performing the duties of a Sahayak (assistant, formerly known as orderly) to Gun Position Officer (GPO), a young officer, of the rank of a Second Lieutenant with one year of service.

RBM’s charter of duties included:
(a) attending all the training activities of his trade (telephone operator) which were being organized in the sub-unit;
(b) making arrangements to get the food from the officers’ mess and water from the tube- well for the office; and
(c) attending the telephone and noting down all the messages for the office.
By virtue of the nature and timings of these duties, RBM was excused physical training in the morning and games in the evening which all other jawans of the sub-unit attended. He was generally happy with these duties and working with the officer: After a short span of a week or so, the officer noticed some changes in the behavior of RBM. He also looked pale and worried. He was less talkative, less lively and his interaction with other jawans decreased. He started keeping aloof except where his duties warranted interaction with others. The officer tried to find the reasons from RBM but nothing emerged except a shy and coy smile and “aisi to koi baat Nai, Sahib”. The officer tried to probe further to find out if some guilt conscience was bothering him because of some bad habit which young man of his age is likely to fall prey to, in the absence, of even visual contact of civil life and members of the opposite sex.

This was denied vehemently. After another week or so, it was noticed that RBM had developed constipation, ate very little, felt tired after walking even a few hundred yards and had become weak. He was interviewed by the officer but nothing emerged once again. He was sent to the Regimental Medical Officer (RMO). The RMO inspected him and gave some medicines. On being contacted by the officer, the RMO mentioned that there was nothing wrong medically with RBM except that he was scared of the prospects of war. He even disclosed that after having been medically examined, RBM even started giving a discourse to the RMO on the bad effects of a war on environment, economy, costs, etc. He stated that people would be loaded with sufferings; killed, injured, maimed, and would become homeless. The children would become orphans, women widowed, and the humanity would suffer. He vehemently advised the RMO to make all attempts to stop the war and if he could, at least oppose it. After a brief conversation, the RMO was convinced that all the symptoms pointed to a fear psychosis of war. He gave some medicines to RBM and sent him to the sub-unit.

The RMO told the GPO that because of the worry about the war, RBM had developed problems of digestion and hence, ate less, became inactive and felt tired quickly. He had earlier been feeling shy of expressing his apprehensions about the war to others, lest they consider him a coward. The GPO gave a thought to the whole problem and interviewed RBM, advising him to attend• all physical activities, including physical training, weapon training, games, etc. thence on. The officer also planned to keep RBM among the persons of his trade, specially in the command post which controlled the firing of the guns, where from the officer himself was expected to control the’ fire in case of breakout of war.

A small cadre (class) was organized for all ranks of the sub-unit to apprise them of the organization of all arms and services in the army, starting from the level of a sub-unit. They were explained the tactics in the battlefields, the deployment patterns of different arms, the pattern and modes of support by the Air Force, the capabilities of weapons held by them, the comparative sizes of the countries, India versus Pakistan, and the level of forces held by them. They were also explained the cause for which they were there. They were there to make their contribution towards the liberation of Bangladesh (then East Pakistan), wherefrom about a crore refugees had entered India because of the repression by Pakistan forces. These refugees had become a burden on the Indian economy and social structure which India could not afford. Thus, India, the foremost leader of peace loving nations, had to prepare for war to ensure return of these refugees to liberated Bangladesh. At times, to maintain peace, it becomes necessary to resort to war.

The participants were also told about the strength of their Army and deployment in that area, of course, within the constraints of security requirements. They were also told that none of them would remain alone even during the war and that their sub-unit and the unit would always fight together. They would always have their weapons and ammunitions with them, which they were very good at firing. The process of medical care, the claim of evacuation in case of serious injuries and the enhanced benefits and compensation to families in case of death of a soldier, then announced by the government, were also communicated to them. The reliability of India’s friends on the international scene was also intimated. The tactics, capabilities of aircrafts and weapons, and reliability of Pakistan’s friends were also brought out. The disadvantages and difficulties of supply to the then East Pakistan were explained to the participants. The geographical location of East Pakistan in relation to our country was also described. Everybody was convinced of the great advantages and superiority we had vis-a-vis Pakistan.

Thence on, RBM was a totally changed man. He was noticed to be more active, intermingling with others at the slightest pretext and opportunity, giving discourses about loyalty to the country and martyrdom. He took keen interest in all the training activities, including the digging of a number of contingency gun positions. He volunteered to go with night patrols too, which operated to shoot bursts of rounds with light machine guns in trees and groves close-by, whenever the guns were deployed at a new place. He volunteered to venture out with the line party which was earmarked to lay telephone lines over long distances through sugarcane fields. He started watching the slaughtering of goats in the unit. Above all, he started eating eggs, though he did not touch meat.

This transformation in RBM was a welcome sight and appreciated by all. Everyone heaved a sigh of relief on seeing RBM becoming a brave “Fauzi” from a timid “Pandit”. The RMO was informed of this transformation. He too felt happy. His contribution had been no less in diagnosing the cause of sickness correctly. The cadre was conducted for the whole sub-unit with a view to eradicate any apprehensions from the minds of others too, in case there were any, and to educate all. The cadre proved to be a great success. It motivated the whole lot, made them more confident and ready to face the challenge bravely. This was subsequently apparent when the hostilities started.
QUESTIONS:
1. What was the cause of fear in RBM?
2. What were the symptoms of fear displayed by RBM?
3. How did the RMO come to know of the war phobia of RBM?
4. What actions should be taken to avoid building up of fear among the troops? Which of these steps were taken by the officer?

Case II

HE WHO RIDES A TIGER

In the Year of the Youth, the author took up a research project on young industrial workers. It involved comparing young and old workers. Two industries producing the same machines at similar technological level were selected. One belonged to the private sector and the other to the public sector. While the latter was started a decade later than the former, it had achieved greater expansion. Both were located in the same state.

After we obtained necessary permission to conduct our study, we reached the mofussil town where the private sector industry was located. Before we could launch our study, as a matter of principle, we wanted to meet the General Secretary of the workers’ union. The Personnel Department was not willing for this. On our insistence they called the union official. We talked to him for about half an hour but Personnel Department people were all the time hovering around.

So we fixed a time in the evening to meet him in the union office in the town. We visited the union office in the evening. The union was having problem regarding wage deduction of some workers who did not show up for overtime. The overtime notice was short and they had not consented either, even then the management was threatening wage deduction for one week.

The union could hardly do a thing’ as they in the past had burnt their hands when they had to unilaterally call off the 106 day old strike in which even their Treasurer had committed suicide. They were scared to the extent that they had productivity linked bonus agreement for even 12% bonus. Moreover, a new minuscue union was recently started in the company.

We visited the new union’s office next evening and held a long discussion. They asked for’ our suggestions. The union believed in legal battles more than agitations. After a visit to the industry the author visited the state headquarters of the new union. There every office bearer was surprisingly a lawyer. In the HQ we learnt that after we left, their union took out a procession and held a meeting in the temple. Perhaps this was the result of our discussion. While the older union was a prisoner of its past, the new union was free to write its own history. Workers’ interests were being served perhaps by both.

QUESTIONS FOR DISCUSSION
1. Discuss merits/demerits of the role of strike, agitation and legal approach in union¬management relations.
2. What role does mutual trust play in building union-management relations?

CASE III

COMPETITION AHEAD: VSNL AT CROSS ROADS

The telecom sector had been functioning as a typical government department right from its inception. With the Department of Telephones (DoT) being under the exclusive control of the Ministry of Communications, Government of India (GO!), the system functioned more as a monopoly., With the advent of the LPG process (liberalization, privatization and globalization) in the early nineties, the telecom department went through a phase of modernization. A number of new and sophisticated electronic exchanges were installed which enhanced the capacity and lead to the disappearance of waiting list for telephone connections. In a landmark decision in 1995-96, the Government of India threw open its gates for private players in the area of cellular services. LCG and ACG were the two major players to enter this area in Karnataka region, while DoT decided to remain as an observer and continued as a provider of basic services only. Subsequently the Internet, ISD and other services were also opened to private participation.

The year 1998 saw the entry of Vikas Telenet (VTNL) as a basic service provider in the state of Karnataka. It launched its basic services in Bangalore district, the commercial capital of the state, in January 1998. The impact of this entry was felt by DoT as it resulted in a mass customer churning, challenging the market leadership of DoT in basic services. This growing challenge from VTNL made General Manager DoT Indore, R.L. Rawat realized the need for a comprehensive review of the competitive scenario. The situation faced by the Bangalore district was one of its kind. It was the only city where four companies were providing telephone services. LCG and ACG were providing cellular services while VTNL and DoT were providing basic services. To attract the customers all the providers had attractive tariff plans. DoT’s market share was not affected by the entry of LCG and ACG as – they operated only as cellular service providers and their services carried a premium price. But the entry of VTNL as a basic service provider with attractive tariff plans showed a marked shift in customer base from DoT to VTNL specially in case of heavy users make it necessary for DoT to come up with similar competitive tariff plans.

General Manager Operations DoT Bangalore, S.N. Dutt, felt that improved services, customer care and proper pricing would help in winning back the heavy users who accounted for almost 60 to 65% of the total revenue. Keeping this in mind, a review of VTNL’s tariff plans was done (Annexure I). The review revealed that the customers were getting a distinct price advantage in the rentals and free calls given by VTNL.

Along with this, a discount ranging from 2.5 to 16% was also announced by VTNL. S.N. Dutt formulated a comprehensive plan to guard DoT’s market share. Officers were appointed as account holders and were responsible for rendering personalized customer care to commercially important customers hoping to retain them with better services. He also formulated a proposal of discounts which was forwarded to the Circle Head Office (Annexure-II) and a presentation was made by DGM – Marketing K.K. Sen, highlighting the rate at which customer churning was taking place and the need for implementation of new tariff plan. He pleaded with the senior officers that DoT needed to be at least reactive if not proactive, to sustain itself in the market. The proposal was well received and forwarded to the Ministry of Communications for approval. Responding to the need of the hour, the Ministry decided to offer a comprehensive discount of 2.5 to 16% for its heavy users. The scheme was introduced in Bangalore, which was extended first to the state of Karnataka and later on to the entire nation.

VTNL, which had so far been concentrating only on the heavy users, decided to now expand its network to get a wider customer base. With this view in mind, a number of promotional schemes were introduced e.g., web phone, a facility for internet usage where access to the net was provided at a cost of 60 paise per call only. It also announced free Internet facility for a year on every new connection. Besides this, VTNL went in for heavy promotion of its schemes. The careful wording of the schemes and enhancement of the number of free calls made the customers feel that they were gainers as far as rentals were concerned. These schemes when launched created very difficult times for VTNL during May -August 2001. By then, DoT had been Corporatised (October 1, 2000) and came to be known as VSNL. The Bangalore office was extremely hopeful that the corporatisation would facilitate. the implementation of new innovative schemes. For drafting a proposal of innovative schemes, VSNL first conducted a market research where in -the database of surrendered connections was used as sample and effort were made to identify the cause of disconnections. The survey revealed that of the total number of disconnections 30% were due to economic recession while 40% were due to customer turning in favor of VTNL while the remaining were due to a multitude of factors interplaying with one another.

To redeem the situation, VSNL, Bangalore prepared an innovative plan known as Business Special Plan – Plan 600-800, which offered 800 free calls on a monthly rental of Rs.600 only. The plan was put forward to Chief General Manager at Bangalore for approval. The persistent efforts of K.K. Sen bore fruits and the proposal was approved at the Circle level.

However, at the time of launch K. K. Sen realized that they needed TRAI’s (Telecom Regulatory Authority of India) approval for going ahead. To ensure the unhindered approval of TRAI, modified tariff plans called 500-700 and an economy plan were suggested and sent for approval. While formulating these plans, an attempt was made to segment the market with an intention to target each segment with a customized/specific set of services. Plan 500-700 was targeted at high end users. Here, 700 calls were offered free on a monthly rental of Rs. 500 only. The economy plan carried a rental of just Rs.160 per month with a rate of Rs.l.20 per call. This plan was specially targeted at customers who had more of incoming calls and needed a facility for meeting their specific requirements. The rolling out of these schemes had an immediate impact with nearly 8,000 customers coming over to VSNL Bangalore. Along with these new tariff proposals a number of innovative strategies were introduced by VSNL, Bangalore.

• The initial registration amount was reduced and new subscribers were offered the facility of paying the amount in installments.
• Call centre functioning since February 2001 to deal with customer grievances was made proactive to ensure better customer care.
• Training was given to the front-end-people for updating their skills and changing the mindsets.
• Tele-shopping service was started which provided a one stop shopping facility, giving the customers the option to choose their telephone numbers, instrument and service.. Installation was assured within 48 hours.
• Phone-on-Phone facility was started wherein customers could obtain a connection installed by simply ringing up for it.
• A bill collecting facility was also introduced to further assist the customers.
• VCC Le., prepaid cards were introduced and even delivered at the doorsteps of the customers.
• Bill collection in the rural areas by mobile vans was introduced.
• Linemen were given pagers to facilitate prompt servicing of faulty telephone lines.
• Regular meetings between call centre members and maintenance staff were held to exchange information and solve grievances.
• For motivating and facilitating their employees, free telephone service was provided to all the employees.
• An advertising budget of Rs.30,00,000 (0.2% of the total sales revenue) was outlined for launching a comprehensive promotion programme using both indoor and outdoor media ensuring a good coverage of the market.

VSNL – Tariff Structure
Scheme Rental (Rs.) Free Colis Facilities
Business Plan – 500-700* 500 (Monthly) 700 Without STD
Economy Plan ** 160 (Monthly) Nil With STD
Standard Plan* 500 (Bimonthly) 150 With STD
* 0.80 Per Call ** Rs.1 .20 Per Call

VTNL – Tariff Structure
Scheme Rental (Rs.) Free Calls
Silver 300 349 (Monthly) 300
Golden – 500 499 (Monthly) 500

Questions:

1. What were the strengths and weaknesses of VSNL?
2. Do you think that VSNL should have changed its thrust from basic telephony to cellular services?
3. If you were the Deputy General Manager, what strategies would you have undertaken to deal with the competition?

Case IV
DISNEY’S DESIGN
The Walt Disney Company is heralded as the world’s largest entertainment company. It has earned this astounding reputation through tight control over the entire operation : control over the open – ended brainstorming that takes place 24 hours a day ; control over the engineers who construct the fabulous theme – park rides; control over the animators who create and design beloved characters and adventurous scenarios ; and control over the talent that brings the many concepts and characters to life. Although control pervades the company, it is not too strong a grip. Employees in each department are well aware of their objectives and the parameters established to meet those objectives. But in conjunction with the pre-determined responsibilities, managers at Disney encourage independent and innovative thinking.
People at the company have adopted the phrase “Dream as a Team” as a reminder that whimsical thoughts, adventurous ideas, and all – out dreaming are at the core of the company philosophy. The over all control over each department is tempered by this concept. Disney managers strive to empower their employees by leaving room for their creative juices to flow. In fact, managers at Disney do more than encourage innovation. They demand it. Projects assigned to the staff “ imaginers” seem impossible at first glance. At Disney, doing the seemingly impossible is part of what innovation means. Teams of imaginers gather together in a brainstorming session known as the “Blue Sky” phase. Under the “Blue Sky”, an uninhibited exchange of wild, ludicrous, outrageous ideas, both “ good” and “ bad”, continues until solutions are found and the impossible is done. By demanding so much of their employees, Disney managers effectively drive their employees to be creative.
Current Disney leader Michael Eisner has established the “Dream as a Team” concept. Eisner realized that managers at Disney needed to let their employees brainstorm and create with support. As Disney president Frank Weds says, “If a good idea is there, you know it, you feel it, you do it, no matter where it comes from.”

Questions :
1. What environmental factors influenced management style at Disney?

The company being in the Entertainment Sector
Huge size of the company
Disney’s Reputation
Multi-continental nature of employee diaspora
Out-of-the Box Thinking

2. What kind(s) of organizational structure seem to be consistent with “Dream as a Team” ?
Decentralised Organization
Liberated approach towards employee involvement
Importance given to individual contribution throughout the company hierarchy
Motivation given to natural inclinations of every employees faculties oriented towards the growth of company.
Empowerment of Senior managers and inculcation of an appreciation system in recognition of efforts

3. How and where might the informal organization be a real asset at Disney ?
Reduction of stressful relationship dynamics amongst different levels of management
Conduct of employees within these groups
Identifying key behavioral rules
Smoothening of implementation stage concerning social relations of the company

Case V
“THAT’S NOT MY JOB” – LEARNING DELEGATION AT CIN-MADE
When Robert Frey purchased Cin – Made in 1984, the company was near ruin. The Cincinnati, Ohi-based manufacturer of paper packaging had not altered its product line in 20 years. Labor costs had hit the ceiling, while profits were falling through the floor. A solid quarter of the company’s shipments were late and absenteeism was high. Management and workers were at each other’s throats.
Ten years later, Cin – Made is producing a new assortment of highly differentiated composite cans, and pre-tax profits have increased more than five times. The Cin – Made workforce is both flexible and deeply committed to the success of the company. On-time delivery of products has reached 98 percent, and absenteeism has virtually disappeared. There are even plans to form two spin – off companies to be owned and operated by Cin-Made employees. In fact, at the one day “Future of the American Workforce” conference held in July 1993, Cin-Made was recognized by President Clinton as one of the best – run companies in the United States.
“ How did we achieve this startling turnaround ?” mused Frey. “Employee empowerment is one part of the answer. Profit sharing is another.”
In the late spring of 1986, relations between management and labor had reached rock bottom. Having recently suffered a pay cut, employees at Cin- Made came to work each day, performed the duties required of their particular positions, and returned home-nothing more. Frey could see that his company was suffering. “To survive we needed to stop being worthy adversaries and start being worthy partners,” he realized. Toward this end, Frey decided to call a meeting with the union. He offered to restore worker pay to its previous level by the end of the year. On top of that, he offered something no one expected: a 15 percent share of Cin-Made’s pre-tax profits. “I do not choose to own a company that has an adversarial relationship with its employees.” Frey proclaimed at the meeting. He therefore proposed a new arrangement that would encourage a collaborative employee-management relationship “Employee participation will play an essential role in management.”
Managers within the company were among the first people to oppose Frey’s new idea of employee involvement. “My three managers felt they were paid to be worthy adversaries of the unions.” Frey recalled. It’s what they’d been trained for. It’s what made them good managers. Moreover, they were not used to participation in any form, certainly not in decision making.” The workers also resisted the idea of extending themselves beyond the written requirements of their jobs. “ (Employees) wanted generous wages and benefits, of course, but they did not want to take responsibility for anything more than doing their own jobs the way they had always done them,” Frey noted. Employees were therefore skeptical of Frey’s overtures toward “employee participation.” “We thought he was trying to rip us off and shaft us,” explained Ocelia Williams, one of many Cin-Made employees who distrusted Frey’s plans.
Frey, however, did not give up, and he eventually convinced the union to agree to his terms. “ I wouldn’t take no for an answer,” he asserted. “Once I had made my two grand pronouncements, I was determined to press ahead and make them come true.” But still ahead lay the considerable challenge of convincing employees to take charge :
I made people meet with me, then instead
Of telling them what to do, I asked them.
They resisted.

“ How can we cut the waste on his run ?” I’d
say, or “How are we going to allocate the
overtime on this order ?”

“That’s not my job,” they’d say.

“But I need your input,” I’d say. “How in the
World can we have participative management
If you won’t participate?

“I don’t know,” they’d say. “Because that’s
not my job either. That’s your job. ?”
Gradually, Frey made progress. Managers began sharing more information with employees. Frey was able slowly to expand the responsibilities workers would carry. Managers who were unable to work with employees left, and union relations began to improve. Empowerment began to happen. By 1993, Cin Made employees were taking responsibility for numerous tasks. Williams, for example, used to operate a tin-slitting machine on the company’s factory floor. She still runs that same machine, but now is also responsible for ordering almost $ 100,000 in supplies.
Williams is just one example of how job roles and duties have been redefined throughout Cin-Made. Joyce Bell, president of the local union, still runs the punch press she always has, but now also serves as Cin- Made’s corporate safety director. The company’s scheduling team, composed of one manager and five lead workers from various plant areas, is charged with setting hours, designating layoffs, and deciding when temporary help is needed. The hiring review team, staffed by three hourly employees and two managers, is responsible for interviewing applicants and deciding whom to hire. An employee committee performs both short – and long – term planning of labor, materials, equipment, production runs, packing, and delivery. Employees even meet daily in order to set their own production schedules. “We empower employees to make decisions, not just have input,” Frey remarked. “I just coach.”
Under Frey’s new management regime, company secrets have virtually disappeared. All Cin-Made employees, from entry-level employees all the way to the top, take part in running the company. In fact, Frey has delegated so much of the company’s operations to its workers that he now feels little in the dark. “I now know very little about what’s going on, on a day-to-day basis,” he confessed.
At Cin-Made, empowerment and delegation are more than mere buzzwords; they are the way of doing business – good business. “We, as workers, have a lot of opportunities,” said Williams. “If we want to take leadership, it’s offered to us.”

Questions:
1. How were principles of delegation and decentralization incorporated into Cine – Made operations?
a. The employee participation was made an integral part of the company’s management practices.
b. Establishing Participative Management
c. Centralized hiring process which was independent in itself and managed by designated managers.

2. What are the sources and uses of power at Cin – Made?
Collaboration, Innovation, Participative management
Empowerment through delegation and decentralization
Deriving more output through employees’ sense of ownership for their actions
Improving flexibility of the companies’ employees.
Giving a free hand to their imagination rather than reining it in.

3. What were some of the barriers to delegation and empowerment at Cin –Made?
The workers resisted the idea of extending themselves beyond the written requirements of their jobs
they did not want to take responsibility for anything more than doing their own jobs the way they had always done them
then instead Of telling them what to do, he asked them
“ How can we cut the waste on his run ?” I’d
say, or “How are we going to allocate the
overtime on this order ?”

“That’s not my job,” they’d say.

“But I need your input,” I’d say. “How in the
World can we have participative management
If you won’t participate?

“I don’t know,” they’d say. “Because that’s
not my job either. That’s your job. ?”

4. What lessons about management in a rapidly changing marketplace can be learned from the experience of Cin – Made?
Our perceptions about work and the way we are part of it need to change.
These are the lessons in management that can be learnt from the Cin-Made experience.
a. Transparent management policies are the call of the day
b. Managers must lead by example rather than simply lecturing and ordering the employees.
c. Any status quo achieved or stagnation point reached by way of policies being in place for long term must be challenged and remedied with cautious efforts; that to while taking care of sentimentalities and emotional attachments of old employees of company – all leading to change for the better.

Case VI
HIGH-TECH ANSWERS TO DISTRIBUTION PROBLEMS AT ROLLERBLADE
When a manger finds that demand exceeds inventory, the answer lies in making more goods. When a manager finds that inventory exceeds demand, the answer lies in making fewer goods. But what if a company management finds that they just do not know which situation applies?
This is the situation that recently confronted management at Rollerblade, the popular skate manufacturer based in Minnetonka, Minnesota. Rollerblade has been one of the leading firms in the fast growing high performance roller skate marketplace, it matters a great deal for Rollerblade managers whether demand and inventory are in balance, or not.
Rollerblade was in a bind. The product literally could not be shipped out the door. The managers found that workers were not able to ship products because, as a result of poor storage structures, they could not find the products. Once they were found, overcrowded aisles, in addition to other space constraints, still prevented efficient shipping because the workers could barely manage to get the products out the door. “We were out of control because we didn’t know how to use space and didn’t have enough of it,” said Ian Ellis, director for facilities and safety. “Basically, there was no more useable space left in the warehouse, a severe backlog of customer orders, and picking errors were clearly in the unacceptable range,” added Ram Krishnan, Principal of NRM Systems, based in St. Paul, Minnesota.
The answer for Rollerblade was found in technology. High-tech companies have introduced a collection of computer simulations, ranging in cost roughly from $10,000 to $30,000, that assist managers in generating effective facility designs. With the help of layout Master IV simulation software, developed by NRM, Rollerblade Management was able to implement a new distribution design. As a result of the distribution improvement, Rollerblade was able to increase the number of customer orders processed daily from140 to 410 and eliminate order backlog. “Now we have a different business,” says Ellis. “The new layout has taken us from being in a crunch, to being able to plan.

Questions:
1. With retailers as their primary customers, what customer competitive imperatives could be affected by Rollerblade’s inventory problems?
Rollerblade, the popular skate manufacturer based in Minnetonka, Minnesota. Rollerblade has been one of the leading firms in the fast growing high performance roller skate marketplace
The product literally could not be shipped out the door. … With retailers as their primary customers, the customer competitive imperatives that are being affected by Rollerblade’s inventory problems are mainly of services i.e. delay in deliveries, as stated above they were facing problems in making deliveries
Rollerblade, the popular skate manufacturer based in Minnetonka, Minnesota. Rollerblade has been one of the leading firms in the fast growing high performance roller skate marketplace.

Rollerblade was in a bind. The product literally could not be shipped out the door. The managers found that workers were not able to ship products because, as a result of poor storage structures, they could not find the products. Once they were found, overcrowded aisles, in addition to other space constraints, still prevented efficient shipping because the workers could barely manage to get the products out the door. “We were out of control because we didn’t know how to use space and didn’t have enough of it,” said Ian Ellis, director for facilities and safety. “Basically, there was no more useable space left in the warehouse, a severe backlog of customer orders, and picking errors were clearly in the unacceptable range,” added Ram Krishnan, Principal of NRM Systems, based in St. Paul, Minnesota.

With retailers as their primary customers, the customer competitive imperatives that are being affected by Rollerblade’s inventory problems are mainly of services i.e. delay in deliveries, as stated above they were facing problems in making deliveries on time, no shipment was reaching on time. These delays will effect a lot on their customers as the retailers want to sell them and if the products were delayed the retailers will also have to suffer in loosing their customers which will in deed result in backing off from the Rollerblade’s only. Rollerblades were lacking behind in technology so as to meet their customer demands they need to improve their technology.
2. How appropriate might a just – in – time inventory system be for a product such as roller skates?”
JIT or just in time inventory is an inventory management strategy that is aimed at monitoring the inventory process in such a manner as to associated with inventory control and maintenance. To a great degree a JIT inventory process relies on the efficient monitoring

3. What opportunities are therefore Rollerblade managers to see FOR themselves as selling services, instead of simply roller skates?

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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International business studies

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 2

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 3
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 4

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?

CASE 1

BULLYING BOSSES

It got to where I was twitching, literally, on the way into work,’’ states Carrie Clark, a 52-year-old retired teacher and administrator. After enduring 10 months of repeated insults and mistreatment from her supervisor, she finally quit her job. “I had to take care of my health.’’
Though many individuals recall bullies from their elementary school days, some are realizing that bullies can exist in the workplace as well. And these bullies do not just pick on the weakest in the group, rather, any subordinate in their path may fall prey to their torment, according to Dr. Gary Namie, director of the Workplace Bullying and Trauma Institute. Dr. Namie further says workplace bullies are not limited to men-women are at least as likely to be bullies. However, gender discrepancies are found in victims of bullying, as women are more likely to be targets.
What motivates a boss to be a bully? Dr. Harvey Hornstein, a retired professor from Teachers College at Columbia University, suggests that supervisors may use bullying as a means to subdue a subordinate that poses a threat to the supervisor’s status. Additionally, supervisors may bully individuals to vent frustrations. Many times however, the sheer desire to wield power may be the primary reason for bullying.
What is the impact of bullying on employee motivation and behavior? Surprisingly, even though victims of workplace bullies may feel less motivated to go to work every day, it does not appear that they discontinue performing their required job duties. However, it does appear that victims of bullies are less motivated to perform extra-role or citizenship behaviors. Helping others, speaking positively about the organization, and going beyond the call of duty are behaviors that are reduced as a result of bullying. According to Dr. Bennett Tepper of the University of North Carolina, fear may be the reason that many workers continue to perform their job duties. And not all individuals reduce their citizenship behaviors. Some continue to engage in extra-role behaviors to make themselves look better than their colleagues.

What should you do if your boss is bullying you? Don’t necessarily expect help from coworkers. As Emelise Aleandri, an actress and producer from New York who left her job after being bullied, stated, “Some people were afraid to do anything. But others didn’t mind what was happening at all, because they wanted my job.’’ Moreover, according to Dr. Michelle Duffy of the University of Kentucky, coworkers often blame victims of bullying in order to resolve their guilt. “they do this by wondering whether maybe the person deserved the treatment, that he or she has been annoying, or lazy, they did something to earn it,’’ states Dr. Duffy. One example of an employee who observed this phenomenon firsthand is Sherry Hamby, who was frequently verbally abused by her boss and then eventually fired. She stated, “This was a man who insulted me, who insulted by family, who would lay into me while everyone else in the office just sat there and let it happen. The people in my office eventually started blaming me.’’
What can a bullied employee do? Dr. Hornstein suggests that employees try to ignore the insults and respond only to the substance of the bully’s grip. `stick with the substance, not the process, and often it won’t escalate,’’ he states. Of course, that is easier said than done.

Questions:
1) Of the three types of organizational justice, which one does workplace bullying most closely resemble?
2) What aspects of motivation might workplace bullying reduce? For example, are there likely to be effects on an employee’s self-efficacy? If so, what might those effects be?
3) If you were a victim of workplace bullying, what steps would you take to try to reduce its occurrence? What strategies would be most effective? What strategies might be ineffective? What would you do if one of your colleagues was a victim of an abusive supervisor?
4) What factors do you believe contribute to workplace bullying? Are bullies a product of the situation, or are they flawed personalities? What situations and what personality factors might contribute to the presence of bullies?

CASE 2

THANKS FOR NOTHING

Thought it may seem fairly obvious that receiving praise and recognition from one’s company is a motivating experience, sadly many companies are failing miserably when it comes to saying “thanks’’ to their employees. According to curt Coffman global practice leader at Gallup, 71 percent of U.S. workers are “disengaged’’, essentially meaning that they could care less about their organization. Coffman states. “We’re operating at one-quarter of the capacity in terms of managing human capital. It’s alarming.’’ Employee recognition programs, which became more popular as the U.S. economy shifted from industrial to knowledge-based, can be an effective way to motivate employees and make them feel valued. In many cases, however, recognition programs are doing “more harm than good’’ according to Coffman.
Take Ko, a 50-year-old former employee of a dot-com in California. Her company proudly instituted a rewards program designed to motivate employees. What were the rewards for a job well-done? Employees would receive a badge which read “U Done Good’’ and, each year, would receive a T-shirt as a means of annual recognition. Once an employee received 10 “U Done Good’’ badges, he or she could trade them in for something bigger and better—a paperweight. Ko states that she would have preferred a raise. “It was patronizing. There wasn’t any deep thought involved in any of this.’’ To make matters worse, she says the badges were handed out arbitrarily and were not tied to performance. And what about those T-shirts? Ko states that the company instilled a strict dress code, so employees couldn’t even wear the shirts if they wanted to. Needless to say, the employee recognition program seemed like an empty gesture rather than a motivation.
Even programs that provide employees with more expensive rewards can backfire, especially if the rewards are given insincerely. Eric Lange, an employee of a trucking company, recalls the time when one of the company’s vice presidents achieved a major financial goal for the company. The vice president, who worked in an office best of Lange, received a Cadillac Seville as his company car and a new Rolex wristwatch that cost the company $10,000. Both were lavish gifts, but the way they were distributed left a sour taste in the vice president’s mouth. He entered his office to find the Rolex in a cheap cardboard box sitting on his desk, along with a brief letter explaining that he would be receiving a 1099 tax form in order to pay taxes on the watch. Lange state of the vice president, “He came into my office, which was right next door, and said, `can you believe this?’’ A mere 2 months later, the vice president pawned the watch. Lange explains. “It had absolutely no meaning for him.
Such experiences resonate with employees who may find more value in a sincere pat on the back than gifts from management that either are meaningless or aren’t conveyed with respect or sincerity. However, sincere pats on the back may be hard to come by. Gallup’s poll found that 61 percent of employees stated that they haven’t received a sincere, “thank you’’ from management in the past year. Finding such as these are troubling, as verbal rewards are not only inexpensive for companies to hand out but also are quick and easy to distribute. Of course, verbal rewards do need to be paired sometimes with tangible benefits that employees value – after all, money talks. In addition, when praising employees for a job well-done, managers need to ensure that the praise is given in conjunction with the specific accomplishment. In this way, employees may not only feel valued by their organization but will also know what actions to take to be rewarded in the future.

Questions
1) If praising employees for doing a good job seems to be a fairly easy and obvious motivational tools, why do you think companies and managers don’t often do it?
2) As a manager, what steps would you take to motivate your employees after observing them perform well?
3) Are there any downsides to giving employees too much verbal praise? What might these downsides be and how could you alleviate them as a manager?
4) As a manager, how would you ensure that recognition given to employees is distributed fairly and justly?

CASE 3

WILL GEORGE W. BUSH BE A GREAT PRESIDENT?

What does it take to be a great U.S. president? A survey of 78 history, political science, and law scholars rated the U.S. presidents from George Washington to Bill Clinton. Here are the presidents who were rated “Great’’ and “Near Great.’’
Great
George Washington
Abraham Lincoln
Franklin D. Roosevelt (FDR)

Near Great
Thomas Jefferson
Andrew Jackson
James Polk
Theodore Roosevelt
Harry Truman
Dwight Eisenhower
Ronald Reagan
Among recent presidents, Presidents Nixon, Ford, and Carter were ranked “Below Average’’ and Presidents G. H. W. Bush (the first President Bush) and Clinton were ranked “Average’’.
So what explains these ratings? The following are some qualities of presidents who have stood the test of time.
1. Great presidents are transformational leaders who engender strong emotions – that is, you either love them or you hate them (it’s hard to hate someone who made little difference). And great presidents enact a vision that may not respond to popular opinion. Lincoln and FDR were beloved, and hated, by millions.
2. Great presidents are bold and take risks, and almost all great presidents emerge successfully from a crisis. A great president is perceived as “being there’’ when a crisis emerges and taking bold action to lead the nation out of the crisis – for example, Lincoln in the Civil War and Roosevelt in WWII.
3. Great presidents are associated with a vision. Most people, for example, are able to associate the great presidents with defining moment where a clear set of principles was articulated – for example, FDR’s speech to Congress after the attacks on Pearl Harbor, and Lincoln’s Gettysburg Address.
4. Great presidents are charismatic. They are engaging, articulate, and expressive, which helps capture the public’s attention and rallies people around a president’s cause. One leadership expert argues that the best presidents create colorful personas with their language by using words with basic emotions – for example, good versus evil or love versus hate.
So what about President George W. Bush (the second President Bush)? Shortly after his second inauguration, President Bush embarked on an ambitious agenda of legal reform, transforming the Social Security system, tax reform, and revising immigration laws. One writer commented, “Bush has always thought big, and always believed you earn political capital by expending it.’’ However, the closeness of the 2004 election (Bush received 51 percent of the vote and Kerry received 48 percent) suggests that Bush may not have overwhelming support.

Questions
1. How would you rate President George W. Bush on the four characteristics outlined at the beginning of the case? How would you contrast his reaction to Hurricane Katrina with his reaction to the terrorist attacks of September 11, 2001? What do you think his handling of these two events says about his leadership?
2. Do you think leaders in other contexts (business’, sports, religious) exhibit the same qualities of great or near-great U.S. presidents?
3. Do you think being in the right place at the right time could influence presidential greatness?

Case 4

A UNIQUE TRAINING PROGRAM AT UPS

Mark Colvard, a United Parcel manager in San Ramon, California, recently faced a difficult decision. One of his drivers asked for 2 weeks off to help an ailing family member. But company rules said this driver wasn’t eligible. If Colvard went by the book, the driver would probably take the days off anyway and be fired. On the other hand, Colvard was likely to be criticized by other drivers if he bent the rules. Colvard chose to give the driver the time off. Although he took some heat for the decision, he also kept a valuable employee.
Had Colvard been faced with this decision 6 months earlier, he says he would have gone the other way. What changed his thinking was a month he spent living in McAllen, Texas. It was part of a UPS management training experience called the Community Internship Program (CIP). During his month in McAllen, Colvard built housing for the poor, collected clothing for the Salvation Army, and worked in a drug rehab center. Colvard gives the program credit for helping him empathize with employees facing cries back home. And he says that CIP has made him a better manager. “My goal was to make the numbers, and in some cases that meant not looking at the individual but looking the bottom line. After that 1-month stay, I immediately started reaching out to people in a different way.’’
CIP was established by UPS in the late 1960s to help open the eyes of the company’s predominantly white managers to the poverty and inequality in many cities. Today, the program takes 50 of the company’s most promising executives each summer and brings them to cities around the country. There they deal with a variety of problems- from transportation to housing, education, and health care. The company’s goal is to awaken these managers to the challenges that many of their employees face, bridging the cultural divide that separates a white manager from an African American driver or an upper-income suburbanite from a worker raised in the rural South.

Questions
1. Do you think individuals can learn empathy from something like a 1-month CIP experience? Explain why or why not.
2. How could UPS’s CIP help the organization better manage work-life conflicts?
3. How could UPS’s CIP help the organization improve its response to diversity?
4. What negatives, if any, can you envision resulting from CIP?
5. UPS has 2,400 managers. CIP includes only 50 each year. How can the program make a difference if it includes only 2 percent of all managers? Does this suggest that the program is more public relations than management training?
6. How can UPS justify the cost of a program like CIP if competitors like FedEx, DHL, and the U.S. Postal Service don’t offer such programs? Does the program increase costs or reduce UPS profits?


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General management:
Case I

PANDIT TO AFAUZI
The case is based on an actual incident which took place in an Army unit operationally deployed in a field area just a few months before the 1971 showdown with Pakistan. The opposing forces of India and Pakistan were taking their respective positions in a pre-war scenario. The clouds of showdown were looming large over the horizons of both the countries. The rumbling of own tanks and guns, the reconnaissance, leaders of different arms and services establishing liaison with one another in the process of formulating plans for both defence and attack, digging of main and contingency positions was in progress, complete war machinery was being mobilized, camouflaged, and concealed. Ammunition and other explosives were being unloaded and dug down. Junior leaders were being briefed and rebriefed, communications were being checked, and troops were being motivated and looked after as most of them were green because of their sudden induction in the Army in post war days of 1965. Such was the scene which convinced all and sundry that war was imminent. Most of the troops looked forward to a showdown mainly because they wanted to get rid of the heavy ammunition as also for the mere thrill of it. Those who had not seen a battle, seemed excited over the prospects of a war and those who had seen the war, took everything in their stride, displaying a perfect cool, calm and confident countenance.

One Ram Bali Mishra (RBM) was a raw and green jawan of about 20 years of age and two years’ service and naturally had not seen a war. He was relatively tall, well built with fair complexion. He had pleasant manners, turned himself out well and spoke well. He was a complete teetotaler, non-smoker, and a vegetarian. He was well educated and well versed in religious affairs, particularly, of the religion to which most of the unit belonged. In the absence of the religious teacher of the unit, he held religious institute (dharamsthal) and gave religious discourses at the dharamsthal to all officers, junior commissioned officers JCOs), non-commissioned officers (NCOs) and jawans. During the pre-war days, he was performing the duties of a Sahayak (assistant, formerly known as orderly) to Gun Position Officer (GPO), a young officer, of the rank of a Second Lieutenant with one year of service.

RBM’s charter of duties included:
(a) attending all the training activities of his trade (telephone operator) which were being organized in the sub-unit;
(b) making arrangements to get the food from the officers’ mess and water from the tube- well for the office; and
(c) attending the telephone and noting down all the messages for the office.
By virtue of the nature and timings of these duties, RBM was excused physical training in the morning and games in the evening which all other jawans of the sub-unit attended. He was generally happy with these duties and working with the officer: After a short span of a week or so, the officer noticed some changes in the behavior of RBM. He also looked pale and worried. He was less talkative, less lively and his interaction with other jawans decreased. He started keeping aloof except where his duties warranted interaction with others. The officer tried to find the reasons from RBM but nothing emerged except a shy and coy smile and “aisi to koi baat Nai, Sahib”. The officer tried to probe further to find out if some guilt conscience was bothering him because of some bad habit which young man of his age is likely to fall prey to, in the absence, of even visual contact of civil life and members of the opposite sex.

This was denied vehemently. After another week or so, it was noticed that RBM had developed constipation, ate very little, felt tired after walking even a few hundred yards and had become weak. He was interviewed by the officer but nothing emerged once again. He was sent to the Regimental Medical Officer (RMO). The RMO inspected him and gave some medicines. On being contacted by the officer, the RMO mentioned that there was nothing wrong medically with RBM except that he was scared of the prospects of war. He even disclosed that after having been medically examined, RBM even started giving a discourse to the RMO on the bad effects of a war on environment, economy, costs, etc. He stated that people would be loaded with sufferings; killed, injured, maimed, and would become homeless. The children would become orphans, women widowed, and the humanity would suffer. He vehemently advised the RMO to make all attempts to stop the war and if he could, at least oppose it. After a brief conversation, the RMO was convinced that all the symptoms pointed to a fear psychosis of war. He gave some medicines to RBM and sent him to the sub-unit.

The RMO told the GPO that because of the worry about the war, RBM had developed problems of digestion and hence, ate less, became inactive and felt tired quickly. He had earlier been feeling shy of expressing his apprehensions about the war to others, lest they consider him a coward. The GPO gave a thought to the whole problem and interviewed RBM, advising him to attend• all physical activities, including physical training, weapon training, games, etc. thence on. The officer also planned to keep RBM among the persons of his trade, specially in the command post which controlled the firing of the guns, where from the officer himself was expected to control the’ fire in case of breakout of war.

A small cadre (class) was organized for all ranks of the sub-unit to apprise them of the organization of all arms and services in the army, starting from the level of a sub-unit. They were explained the tactics in the battlefields, the deployment patterns of different arms, the pattern and modes of support by the Air Force, the capabilities of weapons held by them, the comparative sizes of the countries, India versus Pakistan, and the level of forces held by them. They were also explained the cause for which they were there. They were there to make their contribution towards the liberation of Bangladesh (then East Pakistan), wherefrom about a crore refugees had entered India because of the repression by Pakistan forces. These refugees had become a burden on the Indian economy and social structure which India could not afford. Thus, India, the foremost leader of peace loving nations, had to prepare for war to ensure return of these refugees to liberated Bangladesh. At times, to maintain peace, it becomes necessary to resort to war.

The participants were also told about the strength of their Army and deployment in that area, of course, within the constraints of security requirements. They were also told that none of them would remain alone even during the war and that their sub-unit and the unit would always fight together. They would always have their weapons and ammunitions with them, which they were very good at firing. The process of medical care, the claim of evacuation in case of serious injuries and the enhanced benefits and compensation to families in case of death of a soldier, then announced by the government, were also communicated to them. The reliability of India’s friends on the international scene was also intimated. The tactics, capabilities of aircrafts and weapons, and reliability of Pakistan’s friends were also brought out. The disadvantages and difficulties of supply to the then East Pakistan were explained to the participants. The geographical location of East Pakistan in relation to our country was also described. Everybody was convinced of the great advantages and superiority we had vis-a-vis Pakistan.

Thence on, RBM was a totally changed man. He was noticed to be more active, intermingling with others at the slightest pretext and opportunity, giving discourses about loyalty to the country and martyrdom. He took keen interest in all the training activities, including the digging of a number of contingency gun positions. He volunteered to go with night patrols too, which operated to shoot bursts of rounds with light machine guns in trees and groves close-by, whenever the guns were deployed at a new place. He volunteered to venture out with the line party which was earmarked to lay telephone lines over long distances through sugarcane fields. He started watching the slaughtering of goats in the unit. Above all, he started eating eggs, though he did not touch meat.

This transformation in RBM was a welcome sight and appreciated by all. Everyone heaved a sigh of relief on seeing RBM becoming a brave “Fauzi” from a timid “Pandit”. The RMO was informed of this transformation. He too felt happy. His contribution had been no less in diagnosing the cause of sickness correctly. The cadre was conducted for the whole sub-unit with a view to eradicate any apprehensions from the minds of others too, in case there were any, and to educate all. The cadre proved to be a great success. It motivated the whole lot, made them more confident and ready to face the challenge bravely. This was subsequently apparent when the hostilities started.
QUESTIONS:
1. What was the cause of fear in RBM?
2. What were the symptoms of fear displayed by RBM?
3. How did the RMO come to know of the war phobia of RBM?
4. What actions should be taken to avoid building up of fear among the troops? Which of these steps were taken by the officer?

Case 2

HE WHO RIDES A TIGER

In the Year of the Youth, the author took up a research project on young industrial workers. It involved comparing young and old workers. Two industries producing the same machines at similar technological level were selected. One belonged to the private sector and the other to the public sector. While the latter was started a decade later than the former, it had achieved greater expansion. Both were located in the same state.

After we obtained necessary permission to conduct our study, we reached the mofussil town where the private sector industry was located. Before we could launch our study, as a matter of principle, we wanted to meet the General Secretary of the workers’ union. The Personnel Department was not willing for this. On our insistence they called the union official. We talked to him for about half an hour but Personnel Department people were all the time hovering around.

So we fixed a time in the evening to meet him in the union office in the town. We visited the union office in the evening. The union was having problem regarding wage deduction of some workers who did not show up for overtime. The overtime notice was short and they had not consented either, even then the management was threatening wage deduction for one week.

The union could hardly do a thing’ as they in the past had burnt their hands when they had to unilaterally call off the 106 day old strike in which even their Treasurer had committed suicide. They were scared to the extent that they had productivity linked bonus agreement for even 12% bonus. Moreover, a new minuscue union was recently started in the company.

We visited the new union’s office next evening and held a long discussion. They asked for’ our suggestions. The union believed in legal battles more than agitations. After a visit to the industry the author visited the state headquarters of the new union. There every office bearer was surprisingly a lawyer. In the HQ we learnt that after we left, their union took out a procession and held a meeting in the temple. Perhaps this was the result of our discussion. While the older union was a prisoner of its past, the new union was free to write its own history. Workers’ interests were being served perhaps by both.

QUESTIONS FOR DISCUSSION
1. Discuss merits/demerits of the role of strike, agitation and legal approach in union¬management relations.
2. What role does mutual trust play in building union-management relations?

Case 3
DISNEY’S DESIGN
The Walt Disney Company is heralded as the world’s largest entertainment company. It has earned this astounding reputation through tight control over the entire operation : control over the open – ended brainstorming that takes place 24 hours a day ; control over the engineers who construct the fabulous theme – park rides; control over the animators who create and design beloved characters and adventurous scenarios ; and control over the talent that brings the many concepts and characters to life. Although control pervades the company, it is not too strong a grip. Employees in each department are well aware of their objectives and the parameters established to meet those objectives. But in conjunction with the pre-determined responsibilities, managers at Disney encourage independent and innovative thinking.
People at the company have adopted the phrase “Dream as a Team” as a reminder that whimsical thoughts, adventurous ideas, and all – out dreaming are at the core of the company philosophy. The over all control over each department is tempered by this concept. Disney managers strive to empower their employees by leaving room for their creative juices to flow. In fact, managers at Disney do more than encourage innovation. They demand it. Projects assigned to the staff “ imaginers” seem impossible at first glance. At Disney, doing the seemingly impossible is part of what innovation means. Teams of imaginers gather together in a brainstorming session known as the “Blue Sky” phase. Under the “Blue Sky”, an uninhibited exchange of wild, ludicrous, outrageous ideas, both “ good” and “ bad”, continues until solutions are found and the impossible is done. By demanding so much of their employees, Disney managers effectively drive their employees to be creative.
Current Disney leader Michael Eisner has established the “Dream as a Team” concept. Eisner realized that managers at Disney needed to let their employees brainstorm and create with support. As Disney president Frank Weds says, “If a good idea is there, you know it, you feel it, you do it, no matter where it comes from.”

Questions :
1. What environmental factors influenced management style at Disney?
2. What kind(s) of organizational structure seem to be consistent with “Dream as a Team” ?
3. How and where might the informal organization be a real asset at Disney ?

Case 4
HIGH-TECH ANSWERS TO DISTRIBUTION PROBLEMS AT ROLLERBLADE
When a manger finds that demand exceeds inventory, the answer lies in making more goods. When a manager finds that inventory exceeds demand, the answer lies in making fewer goods. But what if a company management finds that they just do not know which situation applies?
This is the situation that recently confronted management at Rollerblade, the popular skate manufacturer based in Minnetonka, Minnesota. Rollerblade has been one of the leading firms in the fast growing high performance roller skate marketplace, it matters a great deal for Rollerblade managers whether demand and inventory are in balance, or not.
Rollerblade was in a bind. The product literally could not be shipped out the door. The managers found that workers were not able to ship products because, as a result of poor storage structures, they could not find the products. Once they were found, overcrowded aisles, in addition to other space constraints, still prevented efficient shipping because the workers could barely manage to get the products out the door. “We were out of control because we didn’t know how to use space and didn’t have enough of it,” said Ian Ellis, director for facilities and safety. “Basically, there was no more useable space left in the warehouse, a severe backlog of customer orders, and picking errors were clearly in the unacceptable range,” added Ram Krishnan, Principal of NRM Systems, based in St. Paul, Minnesota.
The answer for Rollerblade was found in technology. High-tech companies have introduced a collection of computer simulations, ranging in cost roughly from $10,000 to $30,000, that assist managers in generating effective facility designs. With the help of layout Master IV simulation software, developed by NRM, Rollerblade Management was able to implement a new distribution design. As a result of the distribution improvement, Rollerblade was able to increase the number of customer orders processed daily from140 to 410 and eliminate order backlog. “Now we have a different business,” says Ellis. “The new layout has taken us from being in a crunch, to being able to plan.

Questions:
1. With retailers as their primary customers, what customer competitive imperatives could be affected by Rollerblade’s inventory problems?
2. How appropriate might a just – in – time inventory system be for a product such as roller skates?”
3. What opportunities are therefore Rollerblade managers to see FOR themselves as selling services, instead of simply roller skates?

CASE 1

EMPLOYEE MOTIVATION IN A GOVERNMENT ORGANIZATION”

Bhumika Services Ltd., one of the largest public sector companies of India, was serving more than 31 million customers. Along with its vast customer base, BSNL’s financial and asset bases too were vast and strong. Changing regulations, converging markets, competition and ever demanding customers had generated challenges for BSNL. The Indore division of BSNL was the first in the country, which faced competition in basic telecom services from 1998. In spite of being a government department, Indore telephones had to face the competition, and relentless efforts were put in to improve the services and provide world¬class telecom services to its customers. Among the various services offered by Indore Telecom, 197 and 183 were two special services. 197 provided non-metered enquiry services to obtain telephone numbers by simply giving the name of person/name of organization/ name and designation of person, or by giving address. 183 on the other hand, was a non¬metered enquiry service that provided similar services for distant stations. There were a large number of complaints related to these services. Complaints were either directly forwarded to the district office by customers or raised during Telephone Adalats or pointed out by correspondents during press conferences, which were conducted quarterly. Complaints ranged from non-response, long waiting time to rude responses.

S. Baheti took charge as Area Manager (North) on July 25, 2001 In the Indore Division. Immediately after taking charge, he realized that special services like 197 and 183 required urgent attention as they were directly affecting the image of the organization amongst customers. Since most of the complaints during Telephone Adalats and press conferences were related to these services, Baheti wanted to reach the root cause of the problem, to solve it forever. In this process, he looked at the background of the employees involved in the special services and found that most of the employees were office bearers of various unions that were active in the organization. The problem was more complicated than it seemed to during interactions, the employees indicated that they were not to be blamed for poor services since they were facing a number of problems in providing services and senior officials were not paying enough attention to alleviate their problems. Defective handsets, non-operating telephone lines, disturbance in lines, jacks not making proper connections, fans and air conditioners not working properly and non availability of typewriter/computer terminals were some of the problems brought to the notice of Baheti by operators.

Further investigation revealed that in addition to these technical problems, there were some Human Resource Management problems as well, such as frequent short leave, extended breaks, uninformed leave and indifferent attitude of employees towards customers. Baheti identified that despite technical problems, some operators were sincere towards their viork and tried their best to provide better services. To improve these services, Baheti decided to use multipronged strategies. Most of the technical problems were solved immediately, other problems that could not be solved at his level were forwarded to higher authorities and pursued rigorously. As the technical problems were taken care of, efficiency of sincere employees went up. Moreover, Baheti also began regular interaction with the operators, appreciating their good work, listening to their problems and explaining them the;-i. importance of their jobs. The employees were made aware of the facts that B5NL did not enjoy a sole monopolistic position any more and had to compete with private players. So the laidback attitude towards customer complaints was not only detrimental to the image of the organization, but also could lead to a reduced market share.

After gaining the confidence of operators, the next step was to motivate them. Towards this end, Baheti started announcing the best operator of the month and recognition was given to the operator by displaying his name on the board of honor. The criteria for award were minimum 200 calls attended per day and 20 days’ attendance. In addition, based on last six months performance, three best performers were identified. Appreciation letters from Area Manager and General Manager were conferred upon these operators in a public function and prizes of their own choice were given to them. These efforts had a desired result and the performance of all the operators showed a marked improvement. The number of calls attended by some operators increased from 200 to 700 calls per day. Further, quick and polite response had reduced customer complaints. While reviewing the situation, Baheti was quite contended to see a remarkable change in the behavior of operators just four months. He wondered whether this change was a permanent phenomenon or he would have to strategize further.

QUESTIONS

1. Discuss the long-term relevance of motivational techniques used by Baheti in the light of prevailing environment in the organization.
2. Had you been Baheti, what other techniques you would have used to improve the special services provided by the organization?

CASE 2

EMPLOYEE RELATIONS AUDIT

Triveni Foods Pvt. Ltd., a multinational confectionary company, having its branches in more than 50 countries and marketing its products in about 135 countries, established one of its production units in 1988 at Mathura near Delhi. It had a workforce of nearly 320 employees and sales turnover was more than Rs. 150 crores. Being a confectionary unit, hygiene was given the upper most priority to the extent that no one was allowed to enter the production area without taking bath and wearing sterilized clothes provided by the company. The entire process was automatic and required only food specialists and labor. In order to match the required standards, emphasis was given on training and welfare of employees on regular basis. Facilities like transportation were also provided since delay by ten minutes could cause production losses at the time of shift changes.

Over a period of time due to start and workers’ redundancy, it was observed that problems like lethargy, absenteeism, violation of work practices were increasing. Absenteeism rate went up to 18 percent. Employees visited canteen for drinking water and started gossiping during working hours. Buses did not arrive on time due to which production suffered. Operators came late and left shop floor early without waiting for relievers. Employees were found hovering in administration building without any reason. It was also found that employees were violating personal hygiene standards. Malpractices were also reported with attendance process and records. These activities were having a negative impact on managerial effectiveness and performance of the unit. The management tried to take number of initiatives to overcome these problems. However, these initiatives seemed ad hoc solutions and did not serve the purpose in the long run.

In 1996, Alok Trivedi joined the company as Head of the Department H.R. While facing these problems, he realized that the causes of these problems were deep rooted and required a proactive approach. He started with an approach called Employee Relation Audit, developed by him, where everything was to be monitored, regulated and reported on regular intervals. He along with his team prepared an action plan (Appendix 1) and corrective measures were taken accordingly. Facilities of drinking water were arranged at 3 to 4 places in the production area which stopped employees from going to canteen for this purpose. Action was taken against the late arrivals of the buses. A proper time study was done and they were given ten minutes margin so that they could report on time. Operators were frequently questioned and stringent vigilance was kept for amenities. Regular counseling was also arranged. A grievance register was also kept and effective grievance redressal was undertaken. Groups were formed called ‘Pragati’ groups for solving work related problems. Employees were frequently checked for ensuring their strict adherence to personal hygiene standards. For ensuring timely processing and printing of attendance records, training was given to al! line officers and production of records was made mandatory on shift basis.

It was further decided that based on this action plan an audit should be carried out at regular periods so that actual performance could be measured. For quantification, a 5 point. scale 0- poor, 2-below average, 3-average, 4-good, 5-v.good) audit report was prepared featuring practices, criteria for evaluation, standards, observations/comments and rating :Appendix 2). For example, in canteen criteria for evaluation there were food quality, menu, timings and unauthorized presence of the employees in the kitchen. The standards were strict adherence to the rules defined. For transportation, arrival, departure and punching of cards by drivers were the criteria for evaluation. Internal teams of auditors were asked to observe and comment against the set standards and give the rating accordingly. Performance vas evaluated on the basis of percentage, the highest point being 215. For example, if the total points scored on various parameters in a audit report was one hundred and fifty five, hen percentage score would be seventy-two (l55/215xl00 = 72 per cent). The first audit “as carried out in August 1999 and percentage of performance was sixty two.

In the year 2000, the performance rose to sixty-five per cent. Proactive approach of solving le problems was adopted. For example, registers were maintained at different work areas, write down the complaints experienced by employees and action was taken by the concerned person. A complaint of tap leaking in a bathroom was recorded in register by a workman. It was attended by a supervisor in charge and he got it repaired immediately. At times these were reviewed and signed by H.R. department and the higher management. Due to these practices, a lot of improvement was observed. Better working conditions, increased productivity, rise in employees’ commitment towards their goals and better superior -subordinate relationship could be seen. In 2001, the percentage of the performance rose to seventy two. While reviewing the Employee relation audit, Alok Trivedi was quite satisfied to note the steady though slow improvement in the figures of performance.
QUESTIONS

1. Had you been in place of Alok Trivedi, what additional measures would you have taken?
2. Critically analyze the Employee Relations Audit in the light of its contribution to self motivation of employees.

CA S E 3

EMPLOYEE TURNOVER AT XYZ MOON LIFE INSURANCE

In 1950, with the enactment of the Insurance Act, Government of India decided to bring all the insurance companies under one umbrella of the Life Insurance Corporation of India (LIC). Despite the monopoly of LIC, the insurance sector was not doing well. Till 1995, only 12% of the country’s people had insurance cover. The need for exploring the insurance market was felt and consequently the Government of India set up the Malhotra Committee. On the basis of their recommendations, Insurance Development and Regulatory Authority (IRDA) Act was passed in parliament in 2000. This move allowed the private insurers in the market with the stop foreign players with 74:26% stake. XYZ- Moon life was one of the first three private players getting the license to operate in India in the year 2000.

XYZ Moon Life Insurance was a joint venture between the XYZ Group and Moon Inc. of US. XYZ starred off its operations in 1965, providing finance for industrial development and since then it had diversified into housing finance, consumer finance, mutual funds and now its latest venture was Life Insurance. Its foreign partner Moon Inc. was established in 1858 and had grown to be the largest life insurance and mutual fund company in the U.S. Moon Inc. had its presence in Asia since the past 75 years catering to over 1 million customers across 11 Asian countries.

Within a span of two years, twelve private players obtained the license from IRDA. IRDA had provided certain base policies like, Endowment Policies, Money back Policies, Retirement Policies, Term Policies, Whole Life Policies, and Health Policies. They were free to customize their products by adding on the riders. In the year 2003, the company became one of the market leaders amongst the private players. Till 2003, total market share of private insurers was about 4%, but Moon Life was performing well and had the market share of about 30% of the private insurance business.

In June 2002, XYZ Moon Life started its operations at Nagpur with one Sales Manager (SM) and ten Development Officers (DO). The role of a DO was to recruit the agents and sell a career to those who have an inclination towards insurance and could work either on part time or full time basis. They were very specific in recruiting the agents, because their contribution directly reflected their performance. All DOs faced three challenges such as Case Rate (number of policies), Case Size (amount of premium), and Recruitment of advisors by natural market, personal observations, nominators, and centre of influence. Incentives offered by the company to development officers and agents were based on their performance, which resulted into internal competition and finally converted into rivalry.

In August 2002, ,a Branch Manager joined along with one more Sales Manager and ten Development Officers. Initially, the branch was performing well and was able to build their image in the local market. As the industry was dynamic in nature, there were frequent opportunities bubbling in the market. In order to capitalize the outside opportunities, one sales manager left the organization in January 2003. As the sales manager was a real performer, he was able to convince all the good performers at XYZ Moon Life Insurance to join the new company. As a result of this, the organizational structure got disturbed and the development officers, who were earlier reporting to the SM had started reporting directly to the branch manager. Now, nepotism crept in and the branch manager began reallocating good agents to his favorite development officers. The sales team of another sales manager became weak (low performer). Seeing the low performance of the sales manager and his development officers, the company decided to terminate their services. As the employees’ turnover rate of the organization was more than the industry rate, the company had to continuously recruit sales agents as well as development officers to sustain itself in a highly competitive environment. The internal competition among development officers resulted into problems like, high employee turnover and dissatisfaction. Hence the branch was not able to perform as per the benchmarks set by the company. Its performance was not even comparable to that of other branches of the same company.

In April 2004, the company faced a grave problem, when the Branch Manager left the organization for greener pastures. To fill the position, in May 2004, the company appointed a new Branch Manager, Shashank Malik, and a Sales Manager, Rohit Pandey. The Branch Manager in his early thirties had an experience of sales and training of about 12 years and was looking after two branches i.e., Nagpur and Nasik.

Malik was given one Assistant Manager and 25 Development Officers. Out of that, ten were reporting to Assistant Manager and remaining fifteen were directly reporting to him. He was given the responsibility of handling all the operations and the authority to make all the decisions, while informing the Branch Manager. Malik opined that the insurance industry is a sunrise industry where manpower plays an important role as the business is based on relationship. He wanted to encourage one-to-one interaction, transparency and 4iscipline in his organization. While managing his team, he wanted his co-workers to analyze themselves i.e., to understand their own strengths and weaknesses. He wanted them to be result-oriented and was willing to extend his full support. Finally, he wanted to introduce weekly analysis in his game plan along with inflow of new blood in his organization. Using his vast experience, he began informal interactions among .the employees, by organizing outings and parties, to inculcate the feelings of friendliness and belonging. He wanted to increase the commitment level and integrity of his young dynamic team by facilitating proper civilization of their energy. He believed that proper training could give his team a proper understanding of the business and the dynamics of insurance industry.

QUESTIONS:

1. If you were Malik, what strategies would you adopt to solve the problem?
2. With high employee turnover in insurance industry, how can the company retain a person like Malik?


CASE 4

FRAGRANCE COMPANY LIMITED

Petals Company Limited (PCL) was initiated in the year 1919. Since then, it had produced a number of brands which enjoyed customer loyalty. It had adapted well with the changing environment and had entered into a strategic alliance with the S & G Limited, the producer of personal care products. The new company Fragrance Company Limited Was formed as a result in 1993 with equity participation from S& G and Petals Company Limited. This company marketed the products manufactured by the PCL. This alliance had given PCL access to the latest international technology in soaps and detergents. Thus, Fragrance Company Limited was now ideally placed to offer high value, international quality products at competitive prices. It was already an exporter of toilet soaps, detergents and cosmetics. It was a private organisation headed by Dharamchand, with its company’s headquarters at Mumbai and seven units all over the country with one of the units at Faridabad. The turnover of the company was Rs 900 crores. The company marketed the products using the latest international technology in soaps and detergents.

The organization structure was traditionally hierarchical with the senior vice president at the top of the management, the supervisory heads at the middle level and the workers at the shop floor. The company had 450 permanent workers, and 150 contract workers, with an average age of 32 years. The recruitment policy framed was to employ freshers. The various departments in the organization were: purchase, finance, systems, engineering services, excise and dispatch, operations and personnel department. The personnel and administration department were headed by Gyanchand and the functions of the personnel administration department were: recruitment, selection, training, counseling, performance appraisal, internal mobility of employees, negotiation With workers, fixation and implementation of rules and regulations regarding wages, salary, allowances and benefits to the workers. The philosophy of the company was based on Total Quality Management (TQM) and Kaizen. The company was highly environment-friendly and was oriented towards customer’s satisfaction.

Fragrance was facing an acute crisis due to high rate of absenteeism among its permanent workers. The losses were soaring high. There was loss in production, and high expenses and indiscipline were also observed. The personnel administration department conducted a survey in the year 1998. They found that the rate of absenteeism was about 20% on an average. The rules and regulations regarding leave were-12-17 days of leave with pay, 7 days casual leave with pay, 5 day sick leave with pay, extra leave without any pay. The benefits were provided as per the Employees State Insurance Act. The data collected revealed that 36% of the absenteeism was due to transportation problem, 48% was because of the workers staying away from their families, 52% due to festivals, 32% due to farming, 48% on account of alcholism, 80% on account of social occasions/marriages and 76% due to sickness of family members.

The other findings were that approximately 80% of the workers were married and they had children to look after and hence had a greater tendency towards taking leave, 8% of workers possessed dual jobs ,e.g., driving for others, mechanic work etc., so they felt that they could earn more on a particular day by remaining absent; 96% of the workers did not like night shifts and they remained absent from duty; 28% of the workers were not satisfied with the working conditions i.e. canteen facilities, drinking water, social and cultural activities and cleanliness. In 1998, the company tried to reduce absenteeism by introducing conveyance allowance for attendance and night shift allowance. The scheme called Inaam; was launched in which a worker who did not avail leave in three months, received Rs 200 per month. In¬house training was imparted to workers In order to educate them about the consequences of absenteeism. They were also sent for 3-6 months training to the Central Board of Workers Education on rotation.

Counseling sessions were held for the workers in order to increase their awareness. The company also introduced the philosophy of workers participation in the management to increase their involvement and commitment towards the work. The practice of organizing picnics, festival celebration, informal get-togethers, and sports activities were also adopted to increase the commitment. Regularity was made an important component of performance appraisal and promotion. After one year, Gyanchand was highly perplexed to see only a negligible improvement in the report of the survey conducted by the personnel administration department. The rate of absenteeism had dropped by only 3%, i.e. from. 20% to 17% in spite of introducing the aforesaid schemes.

QUESTIONS:

1. What role do the non-financial incentives play in motivating the workers and minimizing the rate of absenteeism?
2. What innovative solutions would you suggest to minimize the rate of absenteeism?


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Consumer behavior:
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 2

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 3

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 4

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.
4. If the respondents were accurate in their ad interpretation, they were asked to express their intentions to purchase.
5. 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

QUESTIONS

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

Ans.

Consumer involvement is defined as a state of mind that motivates consumers to identify with product/service offerings, their consumption patterns and consumption behavior. Involvement creates within consumers an urge to look for and think about the product/service category and the varying options before making decisions on brand preferences and the final act of purchase. It is the amount of physical and mental effort that a consumer puts into a purchase decision. It creates within a person a level of relevance or personal importance to the product/service offering and this leads to an urge within the former to collect and interpret information for present/future decision making and use. Involvement affects the consumer decision process and the sub processes of information search, information processing, and information transmission. As Schiffman has put it “Involvement is a heightened state of awareness that motivates consumers to seek out, attend to, and think about product information prior to purchase”. It is the perceived interest and importance that a consumer attaches to the acquisition and consumption of a product/service offering.
Herbert Krugman, a researcher is credited with his contribution to the concept of consumer involvement. According to him, consumers approach the marketplace and the corresponding product/service offerings with varying levels and intensity of interest and personal importance. This is referred to as consumer involvement.
Involvement of consumers while makes purchase decisions varies across persons, across product/service offerings in question as well as purchase situations and time at hand. Some consumers are more involved in purchase processes than others. For example, a person who has a high level of interest in a product category would expend a lot of time making a decision with regard to the product and the brand. He would compare brands across features, prices etc. Another example is a person who is risk aversive; he would also take a longer time making a decision. Involvement also varies across product/service offerings. Some products are high involvement products; these are products that are high in value and expensive, possess sufficient amount of risk, are purchased infrequently, and once purchased, the action is irrevocable, i.e. they cannot be returned and/or exchanged . On the other hand, there are low involvement products, which are moderately expensive or generally inexpensive, possess little risk and are purchased regularly on a routine basis. Further, such consumer involvement based on their personal traits or on the nature of product/service offering are also impacted by the buying situation and time in hand for making purchase decisions. Very often, due to time constraints or emergency situations, a consumer may expend very little time on the purchase decision and buying activity in spite of the fact that the consumer is highly involved or risk aversive or the product is a high involvement one.

2 Is a level of 75 per cent comprehension realistic among those who become aware of an ad? Why or why not?
Ans.
The goals of comprehension realistic awareness of advertising do not usually involve making money in the short term. Awareness advertising seeks to increase the name recognition of your small business in the minds of consumers across your target market area. These advertising objectives are particularly useful in the early days of your company when you don’t have as many
Awareness advertising is a marketing strategy designed to increase consumer familiarity with your company’s overall message and the services or products it offers. How awareness advertising develops goals and objectives for your small business depends on your target consumer market and the company image you wish to portray. According to the Small Business Notes website, these goals are essential to developing your awareness advertising strategy and determining how much money to spend on your promotional campaigns.
Brand awareness is an overarching objective of your awareness advertising strategy. This marketing phenomenon is the extent to which consumers recognize the brands of your small business and can correctly associate these brands with particular product offerings, according to the Business Dictionary. Increasing brand awareness is a primary aim in the early months of small business life, when your company is attempting to enter the local marketplace and garner consumer attention. Raising brand awareness through advertising keeps your small business in the minds of consumers, which can lead to increased traffic at your place of business.
The message your small business chooses to convey cannot be vague or easily misinterpreted. The more room you give consumers to confuse your company message, the easier it will be for your target market to make false assumptions about your brands and products. Conveying a clear, strong message through your advertising campaigns gives consumers your product messages in ways that are easily understandable and memorable. This allows for greater retention of your message and easier recognition when consumers come across your company’s products or enter your business locations.
Awareness advertising seeks to increase your company’s market share by increasing consumer knowledge of your small business’s products and services. Advertising campaigns saturate the market in an attempt to drown out the voices of your competitors. If your advertising campaigns follow the rules for simplicity and memorability, consumers may begin to frequent your business, giving you the opportunity to steal sales from the competition on a permanent basis.

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

Martineau gives the retail store image first. He thinks that the retail image is “personality of the retail store”. He reckons that the definition given by consumers is very important to affect their patronization the store.

Arons(1961)&Dichter(1985) think retail store image is an individual’s cognitions and emotions that are inferred from perceptions or memory inputs that are attached to a particular store and which represent what that store signifies to an individual[8]. Keaveney& Hunt takes retail store image as an overall impression of a store as perceived by consumers. Store image is the subjective feeling got by the store information, this image is based on the personality of consumers’. This view is accepted by more and more scholars. And, some researchers not only test the subjective of the store image, but also point out the influence store image theory.

Wyckham (1967)emphasizes the consumer’s subjective feeling in his research and tests one of the factors by empirical ways. He connects the consumer’s shopping experience and store image, and reckon “ the feeling and experience have certain relationship”. When consumer has happy experience, and he will have good image; then will have bad image. According to the definition of the retail image, we can get the result that the recognition of the retail store is based on the reaction to the store. And this recognition can be emphasized. So, this research takes the retail information as the result of the emphasize of the store. Retail image is produced by the consumer’s feeling. Different consumers have different recognitions according to their
knowledge, education and life style.

The above segmentation distinguishes the factors which may affect the retail store image from different angles. The definition for service is further more different, which just indicates the complexity of service. Taking James Reardon(1995)’s segmentation for example, convenience could also be treated as service provided to customers, which makes the practical verification more difficult. It is because of the different recognition to service factor .

CORPORATE LAW ISMS ONGOING EXAM ANSWER PROVIDED

Solve:
1. How is the price fixed in a contract of sale? If price is not determined by the parties, what price, if any, is the buyer liable to pay?
2. When a pledger fails to redeem his pledge, what rights does the pledgee have in the pledge?
3. When the cheque shall be considered as dishonoured and what are the consequences of the dishonour of the cheques?
4. “Every shareholder of a company is also known as a member; while every member may not be known as a shareholder.” Comment.
5. Discuss briefly the provisions of the Companies Act in regard to the appointment of and removal directors.
6. “A contract caused by mistake is void.” Discuss fully the statement.
7. Discuss the legal aspects of ‘liability of an agent for acts of sub-agent.’
8. What companies may dispense with the use of the word ‘Limited’ as part of their name, even though they are limited companies?
9. “A company cannot be party to a contract before it has come into existence.” – Discuss.
10. Can a minor be admitted to partnership? If so, what will be the rights and liabilities during his minority and after he has attained majority?

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 ?

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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

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.

2. 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 ?

3. 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 ?

4. 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 ?


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Bachelors Program in Business Management (BBA) Year-II

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?

INFORMATION TECHNOLOGY MANAGEMENT

Bachelors Program in Business Administration (BBA)

Note:
1. All questions are compulsory.
2. Use analytical description where required.
3. Cite references used if any while proposing solution to any question.

Case 1
HOW GENERAL MOTORS IS COLLABORATING ONLINE

The Problem
Designing a car is a complex and lengthy task. Take, for example, General Motors (GM). Each model created needs to go through a frontal crash test. So the company builds prototypes that cost about one million dollars for each car and tests how they react to frontal crash. GM crashes these cars, makes improvements, then makes new prototypes and crashes them again. There are other tests and more crashes. Even as late as the 1990s, GM crashed as many as 70 cars for each new model.
.
The information regarding a new design and its various tests, collected in these crashes and other tests, has to be shared among close to 20,000 designers and engineers in hundreds of divisions and departments at 14 GM design labs, some of which are located in different countries. In addition, communication and collaboration is needed with design engineers of the more than 1,000 key suppliers. All of these necessary communications slowed the design process and increased its cost. It took over four years to get a new model to the market.

The Solution
GM, like its competitors, has been transforming itself into an e-business. This gradual transformation has been going on since the mid-1990s, when Internet band width increased sufficiently to allow Web collaboration. The first task was to examine over 7,000 existing legacy IT systems, reducing them to about 3,000, and making them Web-enabled. The EC system is centered on a computer-aided design (CAD) program from EDS (a large IT company, subsidiary of GM). This system, known as Unigraphics, allows 3-D design documents to be shared online by both the internal and external designers and engineers, all of whom are hooked up with the EDS software. In addition. Collaborative and Web-conferencing software tools, including Microsoft’s NetMeeting and EDS’s eVis, were added to enhance teamwork. These tools have radically changed the vehicle-review process.
To see how GM now collaborates with a supplier, take as an example a needed cost reduction of a new seat frame made by Johnson Control GM electronically sends its specifications for the seat to the vendor’s product data system. Johnson Control’s collaboration systems (eMatrix) is integrated with EDS’s In graphics. This integration allows joint searching, designing. Tooling, and testing of the seat frame in real time, expediting the process and cutting costs by more than 10 percent.
Another area of collaboration is that of crashing cars. Here designers need close collaboration with the test engineers. Using simulation, mathematical modeling, and a Web-based review process. GM is able now to electronically “Crash” cars rather than to do it physically.

The Results
Now it takes less than 18 months to bring a new car to market, compared to 4 or more years before, and at a much lower design cost. For example, 60 cars are now “Crashed” electronically, and only 10 are crashed physically. The shorter cycle time enables more new car models, providing GM with a competitive edge. All this has translated into profit. Despite the economic show down. GM’s revenues increased more than 6 percent in 2002. while its earnings in the second quarter of 2002 doubled that of 2001.

Questions:

1. Why did it take GM over four years to design a new car?
2. Who collaborated with whom to reduce the time-to-market?
3. How has IT helped to cut the time-to-market?

Case 2
Intranets: Invest First, Analyze Later?

The traditional approach to information systems projects is to analyze potential costs and benefits before deciding whether to develop the system. However for moderate investments in promising new technologies that could offer major benefits. Organizations may decide to do the financial analyses after the project is over. A number of companies took this latter approach in regard to intranet projects initiated prior to 1997.

Judd’s

Located in Strasburg. Virginia, Judd’s is a conservative, family-owned printing company that prints Time magazine, among other publications. Richard Warren. VP for IS. Pointed out that Judd’s “usually waits for technology to prove itself…. But with the Internet the benefits seemed so great that our decision proved to be a no-brainer.” Judd’s first implemented internet technology for communications to meet needs expressed by customers. After this it started building intranet of the significance of these applications to the company is the bandwidth that supports them. Judd’s increased the bandwidth by a magnitude of about 900 percent in the 1990s without cost-benefit analysis.

Eli Lilly & Company

A very large pharmaceutical company with headquarters in Indianapolis, Eli Lilly has a proactive attitude toward new technologies. It began exploring the potential of the Internet in 1993. Managers soon realized that, by using intranets, they could reduce many of the problems associated with developing applications on a wide variety of hardware platforms and networking configurations. Because the benefits were so obvious, the regular financial justification process was waived for intranet application development projects. The IS group that helps user departments develop and maintain intranet applications increased its staff from three to ten employees in 15 months.

Needham Interactive

Needham, a Dallas advertising agency, has offices in various parts of the country. Needham discovered that, in developing presentations for bids on new accounts, employees found it helpful to use materials from other employees’ presentations on similar projects. Unfortunately, it was very difficult to locate and then transfer relevant ,materials in different locations and different formats. After doing research on alternatives, the company identified intranet technology as the best potential solution.

Needham hired EDS to help develop the system. It started with one office in 1996 as a pilot site. Now part of DDB Needham, the company has a sophisticated corporate wide intranet and extranet in place. Although the investment was “substantial”, Needham did not do a detailed financial analysis before starting the project. David King, a managing partner explained. “the system will start paying for itself the first time an employee wins a new account because he had easy access to a co-worker’s information.”

Cadence Design Systems

Cadence is a consulting firm located in San Jose, California. It wanted to increase the productivity of its sales personnel by improving internal communications and sales training. It considered Lotus Notes but decided against it because of the costs. With the help of a consultant, it developed an internet system. Because the company reengineered its sales training process to work with the new system, the project took somewhat longer than usual.

International Data Corp., an IT research firm, helped cadence do an after-the-fact financial analysis. Initially the analysis calculated benefits based on employees meeting their full sales quotas. However, IDC later found that a more appropriate indicator was having new scales representatives meet half their quota. Startup costs were $280,000, average annual expenses were estimated at less than $400,000, and annual savings were projected at over $2.5 million. Barry Demak, director of sales, remarked, “we knew the economic justification…would be strong, but we were surprised the actual numbers were as high as they were.”

Questions:

1. Where and under what circumstances is the “invest first, analyze later” approach appropriate? where and when is it inappropriate? Give specific examples of technologies and other circumstances.
2. How long do you think the “invest first , analyze later” approach will be appropriate for intranet projects? When (and why) will the emphasis shift to traditional project justification approaches? (Or has the shift already occurred?)
3. What are the risks of going into projects that have not received a through financial analysis? How can organization reduce these risks?
4. Based on the numbers provided for Cadence Design System’s intranet project, use a spread sheet to calculate the net present value of the project. Assume a 5-year life for the system.

Case 3
Putting IT to Work at Home Depot

Home Depot is the world’s largest home-improvement retailer, a global company that is expanding rapidly (about 200 new stories every year). With over 1500 stories (mostly in the United States and Canada, and now expanding to other countries) and about 50,000 kinds of products in each store, the company is heavily dependent on It, Especially since it started to sell online.

To align its business and IT operations, Home Depot created a business and information service model, known as the Special Projects Support Team (SPST). This team collaborates both with the ISD and business colleagues on new projects, addressing a wide range of strategic occur at the intersection of business process. The team is composed of highly skilled employees. Actually, there are several teams, each with a director and mix of employees, depending on the project. For example, system developers, system administrators, security experts, and project managers can be on a team. The teams exist until the completion of a project; then they are dissolved and the members are assigned to new teams. All teams report to the SPST director, who reports to a VP of technology.
To ensure collaboration among end users, the ISD and the SPST created structured (formal) relationships. The basic idea is to combine organizational structure and process flow, which is designed to do the following:

• Achieve consensus across departmental boundaries with regard to strategic initiatives.
• Prioritize strategic initiatives.
• Bridge the gap between business concept an detailed specifications.
• Result in the lowest possible operational costs.
• Achieve consistently high acceptance levels by the end-user community.
• Comply with evolving legal guidelines.
• Define key financial elements (cost-benefit analysis, ROI, etc.).
• Identify and render key feedback points for project metrics.
• Support very high rates of change.
• Support the creation of multiple, simultaneous threads of work across disparate time lines.
• Promote known, predictable, and manageable work flow events, event sequences, and change management processes.
• Accommodate the highest possible levels of operational stability.
• Leverage the extensive code base, and leverage function and component reuse.
• Leverage Home Depot’s extensive infrastructure and IS resource base.

Online File W 15.11 shows how this kind of organization works for home depot’s e-commerce activites. There is a special EC steering committee which is connected to the CIO (who is a senior VP), to the Vp for marketing and advertising, and to the VP for merchandising (merchandising deals with procurement). The SPST is closely tied to the ISD, to marketing, and to merchandising. The data centre is shared with non-EC activities.

The SPST migrated to an e-commerce team in Aughust 2000 in order to construct a Website supporting a national catalog of products, which was completed in April 2001. (This catalog contains over 400,000 products from 11,000 vendors.) This project requires the collaboration of virtually every department in Home depot (e.g., in the figure). Also contracted services were involved. (the figure in online file W15.11 shows the work flow process.)

Since 2001, SPST has been continuously busy with Ec Intivatives, including improving the growing Home Depot online store. The cross departmental nature of the SPSt explains why it is an ideal structure to support the dyanamic, ever-changing work of the EC-related projects. The structure also consider the skills, strengtyhs, and the weeknesses of the It employees. The company offer both the online and offline training aimed at improving those skills. Home Depot is consistently ranked among the best places to work for IT employees.

Questions:

1. Explain why the team based structure at Home Depot is so successful.
2. The structure means that the SPST reports to both marketing and technology. This is known as a matrix structure. What are the potential advantages and problems?
3. How is collaboration facilitated by IT in this case?
4. Why is the process flow important in this case?

Case 4
Dartmouth College Goes Wireless

Dartmouth College, one of the oldest in United States (founded in 1769), was one of the first to embrace the wireless revolution. Operating and maintain a campuswide information system with wires is very difficult. Since there are 161 buildings with more than 1,000 rooms on campus. In 2000, the college introduced a campuswide wireless network that includes more than 500 Wi-Fi (wireless fidelity: see chapter 6) systems. By the end of 2002, the entire campus became a fully wireless, always connected community – a microcosm that provides a peek at what neighborhood and organizational life may look like for the general population in just a few years.

To transform a wired campus to a wireless one requires lots of money. A computer science professor who initiated the idea at Dartmouth in 1999 decided to solicit the help of alumni working at cisco systems. These alumni arranged for a donation of the initial system, and cisco then provided more equipment at a discount. (Cisco and other companies now make similar donations to many collages and universities, writing off the difference between the retail and the discount prices for an income tax benefit.)

As a pioneer in campuswide wireless, Dartmouth has made many innovative usuages of the system, some of which are the following:

• Students are developing new applications for the Wi-Fi. For eample, one student has applied for a patent on a personal-security device that pinpoints the location of the campus emergency services to one’s mobile device.
• Students no longer have to remember campus phone numbers, as their mobile devices have all the numbers and can be accessed any where on campus.
• Students primarily use laptop computers on the network. However, an increasing number of Internet-enabled PDAs and cell phones are used as well. The use of regular cell phones is on the decline on campus.
• An extensive messaging system is used by the students, who send SMSs (Short Message Services) to each other. Messages reach the recipients in a split second, any time, anywhere, as long as they are sent and received within the network’s coverage area.
• Usage of the Wi-Fi system is not confined just to messages, students can submit their class work by using the network, as well as watch streaming video and listen to Internet radio.
• An analysis of wireless traffic on campus showed how the new network is changing and shaping campus behavior patterns. For example, students log on in short bursts, about 16 minutes at a time, probably checking their messages. They tend to plan themselves in a few favourite spots (dorms, TV room, student centre, and on a shaded bench on the green) where they use their computers, and they rarely connect beyond those places.
• The student invented special complex wireless games that they play online.
• One student has written some code that calculates how far away a networked PDA user is from his or her next appointment, and then automatically adjusts the PDA’s reminder alarm schedule accordingly.
• Professors are using wireless-based teaching methods. For example, students armed with Handspring visor PDA’s equipped with Internet access cards, can evaluate material presented in class and can vote on a multiple-choice questionnaire relating to the presented material. Tabulated results are shown in seconds, promoting discussions. According to faculty, the system “makes students want to give answers,” thus significantly increasing participation.
• Faculty and students developed a special voice-over-IP application for PDAs and iPAQs that uses live two-way voice-over-IP chat.

Questions:

1. In what ways is the Wi-Fi technology changing the Dartmouth students?
2. Some says that the wireless system will become part of the background of everybody’s life – that the mobile devices are just an afterthought. Explain.
3. Is the system contributing to improved learning, or just adding entertainment that may reduce the time available for studying? Debate your point of view with students who hold a different opinion.
4. What are the major benefits of the wireless system over the previous wire line one? Do you think wire line systems will disappear from campus disappear from campus one day? (Do some research on the topic.)


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Bachelors Program in Business Management (BBA) Year-I

Note :- Solve any 4 case study
All case carries equal marks

CASE I

A DIAMOND PERSONALITY

Ask Suraj bhai about the dot-com burst and he may grin at you as if to say, “What burst?’’ Suraj bhai, a 38-year-old entrepreneur, owns an Internet business that sells loose diamonds to various buyers. Business is becoming for Suraj bhai. In 2004, he had sales of INR 3,500 million. Needless to say, Suraj bhai is optimistic about his business venture.
The future wasn’t always to bright for Suraj bhai, however. In 1985, Suraj bhai moved from his native town Suraj, to New Delhi, with little ability to speak English. There, he attended language courses and worked at the local mall to support himself. After graduation, his roommate’s girlfriend suggested that he work at a local jeweler. “I thought she was crazy. I didn’t know anything about jewelry,’’ says Suraj bhai, who took her advice. Though he worked hard and received his Diamonds and Diamonds Grading certification from the Gemological Institute, he wasn’t satisfied with his progress. `I quickly realized that working there, I was just going to get a salary with a raise here and there. I would never become anything. That drove me to explore other business ventures. I also came to really known diamonds – their pricing and their quality.’’
In 1997, tired of working for someone else, Suraj bhai decided to open his own jewelry store. However, business didn’t boom. `Some of my customers were telling me they could find diamonds for less on the Interest. It blew my mind’’ Surajy bhai recognized an opportunity and began contacting well-known diamond dealers to see if they would be interested in selling their gems online. Suraj bhai recalls one conversation with a prominent dealer who told him, `You cannot sell diamonds on the Internet. You will not survive.’’ Discouraged, Suraj bhai then says that he made a mistake. “I stopped working on it. If you have a dream, you have to keep working harder at it.’’
A year later, Suraj bhai did work harder at his dream and found a dealer who agreed to provide him with some diamonds. Says Suray bhai, “Once I had one. I could approach others. Business started to build. The first 3 months I sold INR 20 million worth of diamonds right off the bat. And that was just me. I started to add employees and eventually closed the jewelry store and got out of retail.’’ Although Suraj bhai does have some diamonds in inventory, he primarily acts as a connection point between buyers and suppliers, giving his customers an extraordinary selection from which to choose.
Suraj bhai is now a savvy entrepreneur, and his company, Abhisaz.com, went public in October 2003.
Why is Suraj bhai successful? Just ask two people who have known Suraj bhai over the years. Yogesh bhai, a realtor who helped build Suraj bhai building, says, “Suraj bhai is a very ambitious young man. I am not surprised at all how successful he is. He is an entrepreneur in the truest sense of the world.’’ One of Suraj bhai former real-estate instructors, Arun Jain, concurs. `I am not surprised at all at his success,’’ says Arun. “Suraj bhai has always been an extremely motivated individual with a lot of resources. He has a wonderful personality and pays close attention to detail. He also has an ability to stick to things. You could tell from the beginning that he was going to persevere, and I am proud of him.’’
Suraj bhai is keeping his success in perspective, but he also realizes his business’ potential: “I take a very small salary, and our overhead in INR 25 million a year. I am not in debt, and the business is breaking ever. I care about the company. I want to keep everything even until we take off, and then it may be another ball game.’’

Questions:

1. What factors do you think attributed to Suraj bhai’s success? Was he merely “in the right place at the right time’’, or are there characteristics about him that contribute to his success?
2. How do you believe Suraj bhai would score on the Big Five dimensions of personality (extroversion, agreeableness, conscientiousness, emotional stability, openness to experience)? Which ones would he score high on? Which ones might he score low on?
3. Do you believe that Suraj bhai is high or low on core self-evaluations? On what information did you base your decision?
4. What information about Suraj bhai suggests that he has a proactive personality?

CASE II

BULLYING BOSSES

It got to where I was twitching, literally, on the way into work,’’ states Carrie Clark, a 52-year-old retired teacher and administrator. After enduring 10 months of repeated insults and mistreatment from her supervisor, she finally quit her job. “I had to take care of my health.’’
Though many individuals recall bullies from their elementary school days, some are realizing that bullies can exist in the workplace as well. And these bullies do not just pick on the weakest in the group, rather, any subordinate in their path may fall prey to their torment, according to Dr. Gary Namie, director of the Workplace Bullying and Trauma Institute. Dr. Namie further says workplace bullies are not limited to men-women are at least as likely to be bullies. However, gender discrepancies are found in victims of bullying, as women are more likely to be targets.
What motivates a boss to be a bully? Dr. Harvey Hornstein, a retired professor from Teachers College at Columbia University, suggests that supervisors may use bullying as a means to subdue a subordinate that poses a threat to the supervisor’s status. Additionally, supervisors may bully individuals to vent frustrations. Many times however, the sheer desire to wield power may be the primary reason for bullying.
What is the impact of bullying on employee motivation and behavior? Surprisingly, even though victims of workplace bullies may feel less motivated to go to work every day, it does not appear that they discontinue performing their required job duties. However, it does appear that victims of bullies are less motivated to perform extra-role or citizenship behaviors. Helping others, speaking positively about the organization, and going beyond the call of duty are behaviors that are reduced as a result of bullying. According to Dr. Bennett Tepper of the University of North Carolina, fear may be the reason that many workers continue to perform their job duties. And not all individuals reduce their citizenship behaviors. Some continue to engage in extra-role behaviors to make themselves look better than their colleagues.

What should you do if your boss is bullying you? Don’t necessarily expect help from coworkers. As Emelise Aleandri, an actress and producer from New York who left her job after being bullied, stated, “Some people were afraid to do anything. But others didn’t mind what was happening at all, because they wanted my job.’’ Moreover, according to Dr. Michelle Duffy of the University of Kentucky, coworkers often blame victims of bullying in order to resolve their guilt. “they do this by wondering whether maybe the person deserved the treatment, that he or she has been annoying, or lazy, they did something to earn it,’’ states Dr. Duffy. One example of an employee who observed this phenomenon firsthand is Sherry Hamby, who was frequently verbally abused by her boss and then eventually fired. She stated, “This was a man who insulted me, who insulted by family, who would lay into me while everyone else in the office just sat there and let it happen. The people in my office eventually started blaming me.’’
What can a bullied employee do? Dr. Hornstein suggests that employees try to ignore the insults and respond only to the substance of the bully’s grip. `stick with the substance, not the process, and often it won’t escalate,’’ he states. Of course, that is easier said than done.

Questions:
1) Of the three types of organizational justice, which one does workplace bullying most closely resemble?
2) What aspects of motivation might workplace bullying reduce? For example, are there likely to be effects on an employee’s self-efficacy? If so, what might those effects be?
3) If you were a victim of workplace bullying, what steps would you take to try to reduce its occurrence? What strategies would be most effective? What strategies might be ineffective? What would you do if one of your colleagues was a victim of an abusive supervisor?
4) What factors do you believe contribute to workplace bullying? Are bullies a product of the situation, or are they flawed personalities? What situations and what personality factors might contribute to the presence of bullies?

CASE III

THANKS FOR NOTHING

Thought it may seem fairly obvious that receiving praise and recognition from one’s company is a motivating experience, sadly many companies are failing miserably when it comes to saying “thanks’’ to their employees. According to curt Coffman global practice leader at Gallup, 71 percent of U.S. workers are “disengaged’’, essentially meaning that they could care less about their organization. Coffman states. “We’re operating at one-quarter of the capacity in terms of managing human capital. It’s alarming.’’ Employee recognition programs, which became more popular as the U.S. economy shifted from industrial to knowledge-based, can be an effective way to motivate employees and make them feel valued. In many cases, however, recognition programs are doing “more harm than good’’ according to Coffman.
Take Ko, a 50-year-old former employee of a dot-com in California. Her company proudly instituted a rewards program designed to motivate employees. What were the rewards for a job well-done? Employees would receive a badge which read “U Done Good’’ and, each year, would receive a T-shirt as a means of annual recognition. Once an employee received 10 “U Done Good’’ badges, he or she could trade them in for something bigger and better—a paperweight. Ko states that she would have preferred a raise. “It was patronizing. There wasn’t any deep thought involved in any of this.’’ To make matters worse, she says the badges were handed out arbitrarily and were not tied to performance. And what about those T-shirts? Ko states that the company instilled a strict dress code, so employees couldn’t even wear the shirts if they wanted to. Needless to say, the employee recognition program seemed like an empty gesture rather than a motivation.
Even programs that provide employees with more expensive rewards can backfire, especially if the rewards are given insincerely. Eric Lange, an employee of a trucking company, recalls the time when one of the company’s vice presidents achieved a major financial goal for the company. The vice president, who worked in an office best of Lange, received a Cadillac Seville as his company car and a new Rolex wristwatch that cost the company $10,000. Both were lavish gifts, but the way they were distributed left a sour taste in the vice president’s mouth. He entered his office to find the Rolex in a cheap cardboard box sitting on his desk, along with a brief letter explaining that he would be receiving a 1099 tax form in order to pay taxes on the watch. Lange state of the vice president, “He came into my office, which was right next door, and said, `can you believe this?’’ A mere 2 months later, the vice president pawned the watch. Lange explains. “It had absolutely no meaning for him.
Such experiences resonate with employees who may find more value in a sincere pat on the back than gifts from management that either are meaningless or aren’t conveyed with respect or sincerity. However, sincere pats on the back may be hard to come by. Gallup’s poll found that 61 percent of employees stated that they haven’t received a sincere, “thank you’’ from management in the past year. Finding such as these are troubling, as verbal rewards are not only inexpensive for companies to hand out but also are quick and easy to distribute. Of course, verbal rewards do need to be paired sometimes with tangible benefits that employees value – after all, money talks. In addition, when praising employees for a job well-done, managers need to ensure that the praise is given in conjunction with the specific accomplishment. In this way, employees may not only feel valued by their organization but will also know what actions to take to be rewarded in the future.

Questions
1) If praising employees for doing a good job seems to be a fairly easy and obvious motivational tools, why do you think companies and managers don’t often do it?
2) As a manager, what steps would you take to motivate your employees after observing them perform well?
3) Are there any downsides to giving employees too much verbal praise? What might these downsides be and how could you alleviate them as a manager?
4) As a manager, how would you ensure that recognition given to employees is distributed fairly and justly?

CASE IV

WILL GEORGE W. BUSH BE A GREAT PRESIDENT?

What does it take to be a great U.S. president? A survey of 78 history, political science, and law scholars rated the U.S. presidents from George Washington to Bill Clinton. Here are the presidents who were rated “Great’’ and “Near Great.’’
Great
George Washington
Abraham Lincoln
Franklin D. Roosevelt (FDR)

Near Great
Thomas Jefferson
Andrew Jackson
James Polk
Theodore Roosevelt
Harry Truman
Dwight Eisenhower
Ronald Reagan
Among recent presidents, Presidents Nixon, Ford, and Carter were ranked “Below Average’’ and Presidents G. H. W. Bush (the first President Bush) and Clinton were ranked “Average’’.
So what explains these ratings? The following are some qualities of presidents who have stood the test of time.
1. Great presidents are transformational leaders who engender strong emotions – that is, you either love them or you hate them (it’s hard to hate someone who made little difference). And great presidents enact a vision that may not respond to popular opinion. Lincoln and FDR were beloved, and hated, by millions.
2. Great presidents are bold and take risks, and almost all great presidents emerge successfully from a crisis. A great president is perceived as “being there’’ when a crisis emerges and taking bold action to lead the nation out of the crisis – for example, Lincoln in the Civil War and Roosevelt in WWII.
3. Great presidents are associated with a vision. Most people, for example, are able to associate the great presidents with defining moment where a clear set of principles was articulated – for example, FDR’s speech to Congress after the attacks on Pearl Harbor, and Lincoln’s Gettysburg Address.
4. Great presidents are charismatic. They are engaging, articulate, and expressive, which helps capture the public’s attention and rallies people around a president’s cause. One leadership expert argues that the best presidents create colorful personas with their language by using words with basic emotions – for example, good versus evil or love versus hate.
So what about President George W. Bush (the second President Bush)? Shortly after his second inauguration, President Bush embarked on an ambitious agenda of legal reform, transforming the Social Security system, tax reform, and revising immigration laws. One writer commented, “Bush has always thought big, and always believed you earn political capital by expending it.’’ However, the closeness of the 2004 election (Bush received 51 percent of the vote and Kerry received 48 percent) suggests that Bush may not have overwhelming support.

Questions
1. How would you rate President George W. Bush on the four characteristics outlined at the beginning of the case? How would you contrast his reaction to Hurricane Katrina with his reaction to the terrorist attacks of September 11, 2001? What do you think his handling of these two events says about his leadership?
2. Do you think leaders in other contexts (business’, sports, religious) exhibit the same qualities of great or near-great U.S. presidents?
3. Do you think being in the right place at the right time could influence presidential greatness?

Case V

A UNIQUE TRAINING PROGRAM AT UPS

Mark Colvard, a United Parcel manager in San Ramon, California, recently faced a difficult decision. One of his drivers asked for 2 weeks off to help an ailing family member. But company rules said this driver wasn’t eligible. If Colvard went by the book, the driver would probably take the days off anyway and be fired. On the other hand, Colvard was likely to be criticized by other drivers if he bent the rules. Colvard chose to give the driver the time off. Although he took some heat for the decision, he also kept a valuable employee.
Had Colvard been faced with this decision 6 months earlier, he says he would have gone the other way. What changed his thinking was a month he spent living in McAllen, Texas. It was part of a UPS management training experience called the Community Internship Program (CIP). During his month in McAllen, Colvard built housing for the poor, collected clothing for the Salvation Army, and worked in a drug rehab center. Colvard gives the program credit for helping him empathize with employees facing cries back home. And he says that CIP has made him a better manager. “My goal was to make the numbers, and in some cases that meant not looking at the individual but looking the bottom line. After that 1-month stay, I immediately started reaching out to people in a different way.’’
CIP was established by UPS in the late 1960s to help open the eyes of the company’s predominantly white managers to the poverty and inequality in many cities. Today, the program takes 50 of the company’s most promising executives each summer and brings them to cities around the country. There they deal with a variety of problems- from transportation to housing, education, and health care. The company’s goal is to awaken these managers to the challenges that many of their employees face, bridging the cultural divide that separates a white manager from an African American driver or an upper-income suburbanite from a worker raised in the rural South.

Questions
1. Do you think individuals can learn empathy from something like a 1-month CIP experience? Explain why or why not.
2. How could UPS’s CIP help the organization better manage work-life conflicts?
3. How could UPS’s CIP help the organization improve its response to diversity?
4. What negatives, if any, can you envision resulting from CIP?
5. UPS has 2,400 managers. CIP includes only 50 each year. How can the program make a difference if it includes only 2 percent of all managers? Does this suggest that the program is more public relations than management training?
6. How can UPS justify the cost of a program like CIP if competitors like FedEx, DHL, and the U.S. Postal Service don’t offer such programs? Does the program increase costs or reduce UPS profits?

MARKETING MANAGEMENT

Bachelors Program in Business Management (BBA) Year-II

Note :- Solve any four cases
All cases carry equal marks.

Case No 1 :- MARKETING SPOTLIGHT- NIKE
Nike hit the ground running in 1962. Originally known as Blue Ribbon Sports, the company focused on providing high-quality running shoes designed especially for athletes by athletes. Founder Philip Knight believer that high-tech shoes for runners could be manufactured at competitive prices if imported from abroad. The company’s commitment to designing innovative footwear for serious athletes helped it build a cult following among American consumers. By 1980, Nike had become the number-one athletic shoe company in the United States.
From the start, Nike’s marketing campaigns featured winning athletes as spokespeople. The company signed on its first spokesperson, runner Steve Prefontaine, in 1973. Prefontaine’s irreverent attitude matched Nike’s spirit. Marketing campaigns featuring winning athletes made sense. Nike saw a `pyramid of influence’’ – it saw that product and brand choices are influenced by the preferences and behavior of a small percentage of top athletes. Using professional athletes in its advertising campaigns was both efficient and effective for Nike.
In 1985, Nike signed up then-rookie guard Michael Jordan as a spokesperson. Jordan was still an up-and-comer, but he personified superior performance. Nike’s bet paid off: The Air Jordan line of basketball shoes flew off the shelves, with revenues of over $100 million in the first year alone. Jordan also helped build the psychological image of the Nike brand. Phil Knight said. “Sports are at the heart of American culture, so a lot of emotion already exists around it. Emotions are always hard to explain, but there’s something inspirational about watching athletes push the limits of performance. You can’t explain much in 60 seconds, but when you show Michael Jordan, you don’t have to.’’
In 1988, Nike aired its first ads in the “Just Do It’’ ad campaign. The $20 million month-long blitz-subtly encouraging Americans to participate more actively in sports-featured 12 TV spots in all. The campaign challenged a generation of athletic enthusiasts to chase their goals; it was a natural manifestation of Nike’s attitude of self-empowerment through sports. The campaign featured celebrities and noncelebrities. One noncelebrity and featured Walt Stack, an 80-year-old long-distance nunnery, running across the Golden Gate bridge as part of his morning routine. The “Just Do It’’ trailer appeared on the screen as the shirtless Stack ran on a chilly morning. Talking to the camera as it zoomed in, and while still running. Stack remarked, “People ask me how I keep my teeth from chattering when it’s cold.’’ Pausing, Stack matter-of-factly replied, ‘’I leave them in my locker.’’
As Nike began expanding overseas to Europe, it found that its American style ads were seen as too aggressive. The brand image was perceived as too fashion-oriented. Nike realized that it had to “authenticate’’ its brand in Europe the way it had in America. That meant building credibility and relevance in European sports, especially soccer. Nike became actively involved as a sponsor of soccer youth leagues, local clubs, and national teams. Authenticity required that consumers see the product being used by athletes, especially by athletes who win. The big break came in 1994, when the Brazilian team (the only national team fro which Nike had any real sponsorships) won the World Cup. The victory led Nike to sign other winning teams, and by 2003 overseas revenues surpassed U.S. revenues for the first time. Nike also topped $10 billion in sales for the first time in the year as well.
Today, Nike dominates the athletic footwear market. Nine of the 10 top-selling basketball shoes, for example, are Nikes. Nike introduces hundreds of shoes each year for 30 sports – averaging one new shoe style every day of the year. Swooshes abound on everything from wristwatches to golf clubs to swimming caps.
Discussion Questions
1. What have been the key success factors for Nike?
2. Where is Nike vulnerable? What should it watch out for?
3. What recommendations would you make to senior marketing executives going forward? What should they be sure to do with its marketing?

Case NO. 2
MARKETING SPOTLIGHT- DISNEY
The Walt Disney Company, a $27 billion-a-year global entertainment giant, recognizes what its customers value in the Disney brand: a fun experience and homespun entertainment based on old-fashioned family values. Disney responds to these consumer markets. Say a family goes to see a Disney movie together. They have a great time. They want to continue the experience. Disney Consumer Products, a division of the Walt Disney Company, lets them do just that through product lines aimed at specific age groups.
Take the 2004 Home on the Range movie. In addition to the movie, Disney created an accompanying soundtrack album, a line of toys and kid’s clothing featuring the heroine, a theme park attraction, and a series of books. Similarly, Disney’s 2003 Pirates of the Caribbean had a theme park ride, merchandising program, video game, TV series, and comic books. Disney’s strategy is to build consumer segment around each of its characters, from classics like Mickey Mouse and Snow White to new hits like Kim Possible. Each brand is created for a special age group and distribution channel. Baby Mickey & Co. and Disney Babies both target infants, but the former is sold through department stores and specialty gift stores whereas the latter is a lower-priced option sold through mass-market channels. Disney’s Mickey’s Stuff for Kids targets boys and girls, while Mickey Unlimited targets teens and adults.
On TV, the Disney Channel is the top primetime destination for kids age 6 to 14, and Playhouse Disney is Disney’s preschool programming targeting kids age 2 to 6. Other products, like Disney’s co-branded Visa card, target adults. Cardholders earn one Disney “dollar’’ for every $ 100 charged to the card, up to the card, up to $75,000 annually, then redeem the earnings for Disney merchandise or services, including Disney’s theme parks and resorts, Disney Stores, Walt Disney Studios, and Disney stage productions. Disney is even in Home Depot, with a line of licensed kid’s room paint colors with paint swatches in the signature mouse-and-ears shape.

Disney also has licensed food products with character brand tie-ins. For example, Disney Yo-Pals Yogurt features Winnie the Pooh and Friends. The four-ounce yogurt cups are aimed at preschoolers and have an illustrated short story under each lid that encourages reading and discovery. Keebler Disney Holiday Magic Middles are vanilla sandwich cookies that have an individual image of Mickey, Donald Duck, and Goofy imprinted in each cookie.
The integration of all the consumer product lines can be seen with Disney’s “Kim Possible’’ TV program. The series follows the action-adventures of a typical high school girl who, in her spare time, saves the world from evil villains. The number-one-rated cable program in its time slot has spawned a variety of merchandise offered by the seven Disney Consumer Product divisions. The merchandise includes:
 Disney Hardlines – stationery, lunchboxes, food products, room décor.
 Disney Softlines – sportswear, sleepwear, daywear, accessories.
 Disney Toys – action figures, wigglers, beanbags, plush, fashion dolls, poseables.
 Disney Publishing – diaries, junior novels, comic books.
 Walt Disney Records – Kim Possible soundtrack.
 Buena Vista Home Entertainment – DVD/video.
 Buena Vista Games – Game Boy Advance.
“The success of Kim Possible is driven by action – packed storylines which translate well into merchandise in many categories,’’ said Andy Mooney, chairman, Disney Consumer Products Worldwide. Rich Ross, president of entertainment, Disney Channel, added: “Today’s kids want a deeper experience with their favorite television characters, like Kim Possible. This line of products extends our viewer’s experience with Kim, Rufus, Ron and other show characters, allowing (kids) to touch, see and live the Kim Possible experience.
Walt Disney created Mickey Mouse in 1928 (Walt wanted to call his creation Mortimer until his wife convinced him Mickey Mouse was better). Disney’s first feature-length musical animation, Snow White and the Seven Dwarfs, debuted in 1973. Today, the pervasiveness of Disney product offerings is staggering – all in all, there are over 3 billion entertainment-based impressions of Mickey Mouse received by children every year. But as Walt Disney said. “I only hope that we don’t lose sight of one thing – that it was all started by a mouse.’’

Discussion Questions
1. What have been the key success factors for Disney?
2. Where is Disney vulnerable? What should it watch out for?
3. What recommendations would you make to their senior marketing executives going forward? What should it be sure to do with its marketing?

Case NO. 3
MARKETING SPOTLIGHT- HSBC
HSBC is known as the “world’s local bank.’’ Originally called the Hong Kong and Shanghai Banking Corporation Limited, HSBC was established in 1865 to finance the growing trade between China and the United Kingdom. HSBC is now the second-largest bank in the world, serving 100 million customers through 9,500 branches in 79 countries. The company is organized by business line (personal financial services; consumer finance; commercial banking; corporate investment banking and markets; private banking), as well as by geographic segment (Asia-Pacific, U.K./Eurozone, North America/NAFTA, South America, Middle East).
Despite operating in 79 different countries, the bank works hard to maintain a local feel and local knowledge in each area. HSBC’s fundamental operating strategy is to remain close to its customers. As HSBC chairman Sir John Bond said in November 2003, ‘’Our position as the world’s local bank enables us to approach each country uniquely, blending local knowledge with a world-wise operating platform.’’
For example, consider HSBC’s local marketing efforts in New York City. To prove to jaded New Yorkers that the London-based financial behemoth was ‘’the world’s local bank, “HSBC held a ‘’New York City’s Most Knowledgeable Cabbie’’ contest. The winning cabbie gets paid to drive full-time for HSBC for the year and HSBC customers win, too. Any customer showing an HSBC bankcard, checkbook, or bank statement can get a free ride in the HSBC-branded Bankcab. The campaign demonstrates HSBC’s local knowledge. ‘’In order to make New Yorkers believe you’re local, you have to act local,’’ said Renegade Marketing Group’s CEO Drew Neisser.
Across the world in Hong Kong, HSBC undertook a different campaign. In the region hit hard by the Severe Acute Respiratory Syndrome, (SARS) outbreak, HSBC launched a program to revitalize the local economy. HSBC’’ plowed back interest payments’’ to customers who worked in industries most affected SARS (cinemas, hotels, restaurants, and travel agencies). The program eased its customer’s financial burden. The bank also promoted Hong Kong’s commercial sector by offering discounts and rebates for customers who use an HSBC credit card when shopping and dining out, to help businesses affected by the downturn. More than 1, 5000 local merchants participated in the promotion.
In addition to local marketing, HSBC does niche marketing. For example, it found a little-known product area that was growing at 125 percent a year: pet insurance. In December 2003 it announced that it will distribute nationwide pet insurance through its HSBC Insurance agency, making the insurance available to its depositors.
HSBC also segments demographically. In the United States, the bank will target the immigrant population, particularly Hispanics, now that it has acquired Bital in Mexico, where many migrants to the United States deposit money.
Overall, the bank has been consciously pulling together its worldwide businesses under a single global brand with the ‘’world’s local bank’’ slogan. The aim is to link its international size with close relationships in each of the countries in which it operates. The company spends $600 million annually on global marketing and will likely consolidate and use fewer ad agencies. HSBC will decide who gets the account by giving each agency a ‘’brand-strategy exercise.’’ Agencies will by vying for the account by improving on HSBC’s number 37 global brand ranking.

Discussion Questions
1. What have been the key success factors for HSBC?
2. Where is HSBC vulnerable? What should it watch out for?
3. What recommendations would you make to senior marketing executives going forward? What should they be sure to do with its marketing?

Case NO .4
MARKETING SPOTLIGHT- KRISPY KREME
Krispy Kreme makes 2.7 billion donuts a year. But it took more than fresh, hot donuts to earn Krispy Kreme the title of ‘’hottest brand in America’’ in 2003. Krispy Kreme’s stock price quadrupled in the three years following its IPO in 2000, and the entire chain now generates a billion dollars in annual revenues across more than 300 outlets.
How did Krispy Kreme turn donuts into dollars? Careful brand positioning and local marketing tell the story. ‘’We have a humble brand and product,’’ says Krispy Kreme CEO Scott Livengood. ‘’It’s not flashy.’’ The company is not new – it was founded in 1937- and part of its brand image is an old-fashioned feel. The plain red, green, and white colors and retro graphics evoke the squeaky-clean Happy Days of the 1950s, as do the Formica-filled, kid-friendly shops. ‘’We want every customer experience to be associated with good times and warm memories,’’ Livengood says.
That company’s brand image also rests on its fresh, hot donuts – a freshness that’s measured in hours. In a world of processed, prepackaged food, nothing beats a fresh, hot donut. The company’s marketing is grassroots local. Krispy Kreme has no traditional media advertising budget. Rather, local ‘’community marketing managers’’ enlist the aid of local groups and charities. For example, the company helps charities raise money by selling them donuts at half price which they can re-sell at full price. Local bake sales become a promotional tool for Krispy Kreme.
Another tactic is giving away free donuts to TV, newspapers, and radio stations before entering a market. Krsipy Kreme scored a publicity coup in 1996 when it opened its first store in New York City. The company delivered boxes of donuts to the Today Show, garnering millions of dollars worth of national exposure for the price of a few donuts. Even the day of the IPO relied on the buzz from free Krispy Kreme donuts on the floor of the stock exchange.
Each local outlet is an emissary for the brand, and Krispy Kreme’s signature Doughnut Theater defines the brand image. A multisensory experience, Doughnut Theater occurs several times a day at each shop. When the store flicks on its ‘’Hot Doughnuts Now’’ sign, the performance is about to begin. A large plate glass wall lets customers watch the whole process.
The Doughnut Theater experience works on three levels. On a direct level, the performance entertains customers and draws them into the donut-making experience. On an indirect level, it shows that the products are freshly made in a clean environment. On a subliminal level, as CEO Livengood describes it, ‘’The movement of the products on the conveyor through our proofbox has this relaxing, almost mesmerizing effect. The only other thing like it is standing on the oceanfront and watching the tide come in. it has that same consistent, relaxing motion that is really positive to people.’’ People flock to the store to see wave after wave of donuts emerge hot and deliciously fresh. They happily stand in long lines around newly opened outlets to get the aroma of the donuts being made, the sight of the vanilla glaze waterfall, and the warmth of the hot donut that ‘’just melts in your mouth and tastes so good,’’ Livengood says.
Doughnut Theater is a bit of show business that draws customers into the baking experience and makes them feel like they are a part of the process. Another aspect of show business is product placements on hit shows like. The Sopranos and Will & Grace and movies like Bruce Almighty. Finally, international expansion is fueled by celebrities like Dick Clark, Hank Aaron, and Jimmy Buffet, who clamored for Krispy Kreme franchises of their own. Krispy Kreme doesn’t just grant franchise rights to anyone.
Krispy Kreme makes 65 percent of its revenue selling donuts directly to the public through its 106 company-owned stores. Another 31 percent comes from selling flour mix, donut-making machines, and donut supplies to its 186 franchised stores. The final 4 percent of revenue comes from franchisee licenses and fees.
Krispy Kreme is now expanding and selling donuts through convenience stores. Will this hurt the brand? Stan Parker, Krispy Kreme’s senior vice president of marketing, says it won’t because the company continues to emphasize freshness. It replenishes the packaged donuts daily from the local Krispy kreme store and removes any unsold packages. The donuts’ presence in convenience stores will help remind people of the taste of a fresh, hot Krispy Kreme donut, and that brings them back into a Krispy Kreme shop.
The success of Krispy Kreme has been a wake-up call for competitor Dunkin’ Donuts, which had become complacent. The one-two punch of Krispy Kreme in donuts and Starbucks in coffee led Dunkin’ Donuts to revamp its menu and its stores, neither of which had changed in years. Rather than innovate, Dunkin’ Donuts looked at what customers were already eating elsewhere. It brought in basic products like bagels, low-fat muffins, and breakfast sandwiches. Dunkin Donuts still dwarfs Krispy Kreme in size, with 2003 revenues of $3 billion, but it must work to find new ways of creating excitement that builds customer pride, because one thing is sure: Krispy Kreme refuses to be dull.

Discussion Questions
1. What have been the key success factors for Krispy Kreme?
2. Where is Krispy Kreme vulnerable? What should it watch out for?
3. What recommendations would you make to senior marketing executives going forward? What should they be sure to do with its marketing?

Case NO. 5
MARKETING SPOTLIGHT- SOUTHWEST AIRLINES
Southwest Airlines entered the airline industry in 1971 with little money, but lots of personality. Marketing itself as the LUV airline, the company featured a bright red heart as its first logo. In the 1970s, flight attendants in red-orange hot pants served Love Bites (peanuts) and Love Potions (drinks). With little money for advertising in the early days, Southwest relied on its outrageous antics to generate word-of-mouth advertising.
Later ads showcased Southwest’s low fares, frequent flights, on-time arrivals, and top safety record. Throughout all the advertising, the spirit of fun pervades. For example, one TV spot showed a small bag of peanuts with the words, ‘’This is what our meals look like a Southwest Airlines…. It’s also what our fares look like.’’ Southwest used ads with humor to poke fun at itself and to convey its personality.
Southwest’s fun spirit attracts customers and employees alike. Although Southwest doesn’t take itself seriously, it does take its work seriously. Southwest’s strategy is to be the low-cost carrier. Indeed, the strategy takes on epic proportions. An internal slogan, ‘’It’s not just a job, it’s a crusade,’’ embodies the company mission to open up the skies, to give ordinary people a chance to fly by keeping costs so low that it competes with ground transportation like cars and buses. Employees see themselves as protecting ‘’small businesses and senior citizens who count on us for low fares.’’
Southwest can offer low fares because it streamlines operations. For example, it only flies one type of aircraft, Boeing 737s, which have all been fitted with identical flight instruments. This saves time and money by simplifying training pilots, flight attendants, and mechanics only need to know procedures for a single model of Boeing 737. Management can substitute aircraft, reschedule flight crews, or transfer mechanics quickly. The tactic also saves money through lower spare-parts inventories and better deals when acquiring new planes. Southwest also bucks the traditional hub-and-spoke system and offers only point-to-point service; it chooses to fly to smaller airports that have lower gate fees and less congestion, which speeds aircraft turnaround. Southwest’s 15- to 20- minute turnaround time (from flight landing to departure) is half the industry average, giving it better asset utilization (flying more flights and more passengers per plane per day.) The point is, if the plane and crew aren’t in the air, they aren’t making money.
Southwest grows by entering new markets that are overpriced and underserved by current airlines. The company believes it can bring fares down by one-third to one-half whenever it enters a new market, and it grows the market a every city it serves by making flying affordable to people who previously could not afford to fly.
Even though Southwest is a low-cost airline, it has pioneered many additional services and programs like same-day freight service, senior discounts, Fun Fares, and Fun Packs. Despite Southwest’s reputation for low fares and no-frills service, the company wins the hearts of customers. It has been ranked number one in terms of customer service, per the Department of Transportation’s rankings, for 12 years in a row, yet the average price of a flight is $87. Southwest has been ranked by Fortune magazine as America’s most admired airline since 1997, as America’s third-most-admired corporation in 2004, and as one of the top five best places to work in America. Southwest’s financial results also shine: The company has been profitable for 31 straight years. Following 911, it has been the only airline to report profits every quarter, and one of the few airlines that has had no layoffs amid a travel slump created by slow economy and the threat of terrorism.
Although the hot pants are long gone, the LUVing spirit remains at the heart of Southwest. The company’s stock symbol on the NYSE is LUV and red hearts can be found everywhere across the company. These symbols embody the Southwest spirit of employees ‘’caring about themselves, each other and Southwest’s customers’’, states an employee booklet. ‘’Our fares can be matched; our airplanes and routes can be copied. But we pride ourselves on our customer service,’’ said Sherry Phelps, director of corporate employment. That’s why Southwest look for and hires people who generate enthusiasm. In fact, having a sense of humor is a selection criteria it uses for hiring. As one employee explained, ‘’We can train you to do any job, but we can’t give you the right spirit.’’
Southwest is so confident of its culture and its employees that in 2004 it allowed itself to be the subject of a reality TV show called Airline. It’s not worried about competitors copying the company. ‘’What we do is very simply, but it’s not simplistic,’’ said president and COO Colleen Barrett. ‘’We really do everything with passion.’’

Discussion Questions
1. What are the key success factors for Southwest Airlines?
2. Where is Southwest Airlines vulnerable? What should it watch out for?
3. What recommendations would you make to senior marketing executives moving forward? What should they be sure to do with its marketing?

Case NO. 6
MARKETING SPOTLIGHT- WAL-MART
Wal-Mart Stores, Inc., is the largest retailer in the world, with sales of $259 billion in 2003, 1.5 million employees, and 4,300 facilities. Each week, over 100 million customers visit a Wal-Mart store. Sam Walton founded the company in 1962 with a simple goal: Offer low prices to everyone. His notions of hard work and thrift continue to permeate Wal-Mart today, although he died in 1992. Employees see their jobs as a mission ‘’to lower the world’s cost of living.’’ Wall –Mart’s philosophy is to enable people of average means to buy more of the same products that were previously available only to rich folks. The company works hard at being efficient and using its buying clout to extract lower prices from suppliers, and then passes those savings on to customers.
Wal-Mart succeeds in the competitive American retail market for several reasons. First, its low prices, vast selection, and superior service keep the customers coming in the door. But one of Wal-Mart’s biggest strengths is not even inside the store. Its unrivaled logistics ensure that it can keep prices low while keeping the right goods on the shelves. As the biggest retailer in the United States. Wal-Mart’s logistics demands are considerable. The company must coordinate with more than 85,000 suppliers, manage billions in inventory in its warehouses, and bring that inventory to its retail shelves.
To streamline these tasks, Wal-Mart set up a ‘’hub-and-spoke’’ network of 103 massive distribution centers (DC). Strategically spaced across the country, no store location is more than a day’s drive away from a DC. Wal-Mart is known as ‘’the king of store logistics’’ for its ability to effectively manage such a vast network.
Sam Walton was something of a visionary when it came to logistics. He had the foresight to realize, as early as the 1960s, that his goals for company growth required advanced information systems to manage high volumes of merchandise. The key to low-cost retail is knowing what goods would sell and in what quantities – ensuring that store shelves never have too much or too little of any item. In 1966, Walton hired the top graduate of an IBM school and assigned him the task of computerizing Wal-Mart’s operations. As a result of this forward-looking move, Wal-Mart grew to be the icon of just-in-time inventory control and sophisticated logistics. By 1998, Wal-Mart’s computer database was second only to the Pentagon’s in terms of capacity.
Wal-Mart’s logistics success is astounding considering its size: Over 100 million items per day must get to the right store at the right time. To accomplish this goal, Wal-Mart developed several IT systems that work together. It all begins at the cash register or point-of-sale (POS) terminal. Every time an item is scanned, the information is relayed to headquarters via satellite data links. Using up-to-the-minute sales information, Wal-Mart’s Inventory Management System calculates the rate of sales, factors in seasonal and promotional elements, and automatically places replenishment orders to distribution centers and vendor partners.
Wal-Mart uses its information systems for more than just logistics. Suppliers can use its voluminous POS database to analyze customers’ regional buying habits. For example, Proctor & Gamble learned that liquid Tide sells better in the North and Northeast while Tide powder sells better in the South and Southwest. P & G uses information such as this to tailor its product availability to specific local regions. This means that it delivers different Tide products to different Wal-Mart locations based on local customer preferences. Wal-Mart’s may look the same on the outside, but the company uses its information systems and logistics to customize the offerings inside each store to suit regional demand.
Wal-Mart continues to grow. Despite already having 3,200 stores in the united States, Wal-Mart plans to add another 220-230 Super centers, 50-55 discount stores, 35-40 Sam’s Clubs, and 25-30 Neighborhood Markets in the United States alone, and an additional 130 units internationally. If Wal-Mart maintains the average growth rate of the past 10 years, it could become the world’s first trillion-dollar company.
Discussion Questions
1. What have been the key success factors for Wal-Mart?
2. Where is Wal-Mart vulnerable? What should it watch out for?
3. What recommendations would you make to senior marketing executives going forward? What should the company be sure to do with its marketing?


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CASE I

EMPLOYEE MOTIVATION IN A GOVERNMENT ORGANIZATION”

Bhumika Services Ltd., one of the largest public sector companies of India, was serving more than 31 million customers. Along with its vast customer base, BSNL’s financial and asset bases too were vast and strong. Changing regulations, converging markets, competition and ever demanding customers had generated challenges for BSNL. The Indore division of BSNL was the first in the country, which faced competition in basic telecom services from 1998. In spite of being a government department, Indore telephones had to face the competition, and relentless efforts were put in to improve the services and provide world¬class telecom services to its customers. Among the various services offered by Indore Telecom, 197 and 183 were two special services. 197 provided non-metered enquiry services to obtain telephone numbers by simply giving the name of person/name of organization/ name and designation of person, or by giving address. 183 on the other hand, was a non¬metered enquiry service that provided similar services for distant stations. There were a large number of complaints related to these services. Complaints were either directly forwarded to the district office by customers or raised during Telephone Adalats or pointed out by correspondents during press conferences, which were conducted quarterly. Complaints ranged from non-response, long waiting time to rude responses.

S. Baheti took charge as Area Manager (North) on July 25, 2001 In the Indore Division. Immediately after taking charge, he realized that special services like 197 and 183 required urgent attention as they were directly affecting the image of the organization amongst customers. Since most of the complaints during Telephone Adalats and press conferences were related to these services, Baheti wanted to reach the root cause of the problem, to solve it forever. In this process, he looked at the background of the employees involved in the special services and found that most of the employees were office bearers of various unions that were active in the organization. The problem was more complicated than it seemed to during interactions, the employees indicated that they were not to be blamed for poor services since they were facing a number of problems in providing services and senior officials were not paying enough attention to alleviate their problems. Defective handsets, non-operating telephone lines, disturbance in lines, jacks not making proper connections, fans and air conditioners not working properly and non availability of typewriter/computer terminals were some of the problems brought to the notice of Baheti by operators.

Further investigation revealed that in addition to these technical problems, there were some Human Resource Management problems as well, such as frequent short leave, extended breaks, uninformed leave and indifferent attitude of employees towards customers. Baheti identified that despite technical problems, some operators were sincere towards their viork and tried their best to provide better services. To improve these services, Baheti decided to use multipronged strategies. Most of the technical problems were solved immediately, other problems that could not be solved at his level were forwarded to higher authorities and pursued rigorously. As the technical problems were taken care of, efficiency of sincere employees went up. Moreover, Baheti also began regular interaction with the operators, appreciating their good work, listening to their problems and explaining them the;-i. importance of their jobs. The employees were made aware of the facts that B5NL did not enjoy a sole monopolistic position any more and had to compete with private players. So the laidback attitude towards customer complaints was not only detrimental to the image of the organization, but also could lead to a reduced market share.

After gaining the confidence of operators, the next step was to motivate them. Towards this end, Baheti started announcing the best operator of the month and recognition was given to the operator by displaying his name on the board of honor. The criteria for award were minimum 200 calls attended per day and 20 days’ attendance. In addition, based on last six months performance, three best performers were identified. Appreciation letters from Area Manager and General Manager were conferred upon these operators in a public function and prizes of their own choice were given to them. These efforts had a desired result and the performance of all the operators showed a marked improvement. The number of calls attended by some operators increased from 200 to 700 calls per day. Further, quick and polite response had reduced customer complaints. While reviewing the situation, Baheti was quite contended to see a remarkable change in the behavior of operators just four months. He wondered whether this change was a permanent phenomenon or he would have to strategize further.

QUESTIONS

1. Discuss the long-term relevance of motivational techniques used by Baheti in the light of prevailing environment in the organization.
2. Had you been Baheti, what other techniques you would have used to improve the special services provided by the organization?

CASE II

EMPLOYEE RELATIONS AUDIT

Triveni Foods Pvt. Ltd., a multinational confectionary company, having its branches in more than 50 countries and marketing its products in about 135 countries, established one of its production units in 1988 at Mathura near Delhi. It had a workforce of nearly 320 employees and sales turnover was more than Rs. 150 crores. Being a confectionary unit, hygiene was given the upper most priority to the extent that no one was allowed to enter the production area without taking bath and wearing sterilized clothes provided by the company. The entire process was automatic and required only food specialists and labor. In order to match the required standards, emphasis was given on training and welfare of employees on regular basis. Facilities like transportation were also provided since delay by ten minutes could cause production losses at the time of shift changes.

Over a period of time due to start and workers’ redundancy, it was observed that problems like lethargy, absenteeism, violation of work practices were increasing. Absenteeism rate went up to 18 percent. Employees visited canteen for drinking water and started gossiping during working hours. Buses did not arrive on time due to which production suffered. Operators came late and left shop floor early without waiting for relievers. Employees were found hovering in administration building without any reason. It was also found that employees were violating personal hygiene standards. Malpractices were also reported with attendance process and records. These activities were having a negative impact on managerial effectiveness and performance of the unit. The management tried to take number of initiatives to overcome these problems. However, these initiatives seemed ad hoc solutions and did not serve the purpose in the long run.

In 1996, Alok Trivedi joined the company as Head of the Department H.R. While facing these problems, he realized that the causes of these problems were deep rooted and required a proactive approach. He started with an approach called Employee Relation Audit, developed by him, where everything was to be monitored, regulated and reported on regular intervals. He along with his team prepared an action plan (Appendix 1) and corrective measures were taken accordingly. Facilities of drinking water were arranged at 3 to 4 places in the production area which stopped employees from going to canteen for this purpose. Action was taken against the late arrivals of the buses. A proper time study was done and they were given ten minutes margin so that they could report on time. Operators were frequently questioned and stringent vigilance was kept for amenities. Regular counseling was also arranged. A grievance register was also kept and effective grievance redressal was undertaken. Groups were formed called ‘Pragati’ groups for solving work related problems. Employees were frequently checked for ensuring their strict adherence to personal hygiene standards. For ensuring timely processing and printing of attendance records, training was given to al! line officers and production of records was made mandatory on shift basis.

It was further decided that based on this action plan an audit should be carried out at regular periods so that actual performance could be measured. For quantification, a 5 point. scale 0- poor, 2-below average, 3-average, 4-good, 5-v.good) audit report was prepared featuring practices, criteria for evaluation, standards, observations/comments and rating :Appendix 2). For example, in canteen criteria for evaluation there were food quality, menu, timings and unauthorized presence of the employees in the kitchen. The standards were strict adherence to the rules defined. For transportation, arrival, departure and punching of cards by drivers were the criteria for evaluation. Internal teams of auditors were asked to observe and comment against the set standards and give the rating accordingly. Performance vas evaluated on the basis of percentage, the highest point being 215. For example, if the total points scored on various parameters in a audit report was one hundred and fifty five, hen percentage score would be seventy-two (l55/215xl00 = 72 per cent). The first audit “as carried out in August 1999 and percentage of performance was sixty two.

In the year 2000, the performance rose to sixty-five per cent. Proactive approach of solving le problems was adopted. For example, registers were maintained at different work areas, write down the complaints experienced by employees and action was taken by the concerned person. A complaint of tap leaking in a bathroom was recorded in register by a workman. It was attended by a supervisor in charge and he got it repaired immediately. At times these were reviewed and signed by H.R. department and the higher management. Due to these practices, a lot of improvement was observed. Better working conditions, increased productivity, rise in employees’ commitment towards their goals and better superior -subordinate relationship could be seen. In 2001, the percentage of the performance rose to seventy two. While reviewing the Employee relation audit, Alok Trivedi was quite satisfied to note the steady though slow improvement in the figures of performance.

QUESTIONS

1. Had you been in place of Alok Trivedi, what additional measures would you have taken?
2. Critically analyze the Employee Relations Audit in the light of its contribution to self motivation of employees.

CA S E III

EMPLOYEE TURNOVER AT XYZ MOON LIFE INSURANCE

In 1950, with the enactment of the Insurance Act, Government of India decided to bring all the insurance companies under one umbrella of the Life Insurance Corporation of India (LIC). Despite the monopoly of LIC, the insurance sector was not doing well. Till 1995, only 12% of the country’s people had insurance cover. The need for exploring the insurance market was felt and consequently the Government of India set up the Malhotra Committee. On the basis of their recommendations, Insurance Development and Regulatory Authority (IRDA) Act was passed in parliament in 2000. This move allowed the private insurers in the market with the stop foreign players with 74:26% stake. XYZ- Moon life was one of the first three private players getting the license to operate in India in the year 2000.

XYZ Moon Life Insurance was a joint venture between the XYZ Group and Moon Inc. of US. XYZ starred off its operations in 1965, providing finance for industrial development and since then it had diversified into housing finance, consumer finance, mutual funds and now its latest venture was Life Insurance. Its foreign partner Moon Inc. was established in 1858 and had grown to be the largest life insurance and mutual fund company in the U.S. Moon Inc. had its presence in Asia since the past 75 years catering to over 1 million customers across 11 Asian countries.

Within a span of two years, twelve private players obtained the license from IRDA. IRDA had provided certain base policies like, Endowment Policies, Money back Policies, Retirement Policies, Term Policies, Whole Life Policies, and Health Policies. They were free to customize their products by adding on the riders. In the year 2003, the company became one of the market leaders amongst the private players. Till 2003, total market share of private insurers was about 4%, but Moon Life was performing well and had the market share of about 30% of the private insurance business.

In June 2002, XYZ Moon Life started its operations at Nagpur with one Sales Manager (SM) and ten Development Officers (DO). The role of a DO was to recruit the agents and sell a career to those who have an inclination towards insurance and could work either on part time or full time basis. They were very specific in recruiting the agents, because their contribution directly reflected their performance. All DOs faced three challenges such as Case Rate (number of policies), Case Size (amount of premium), and Recruitment of advisors by natural market, personal observations, nominators, and centre of influence. Incentives offered by the company to development officers and agents were based on their performance, which resulted into internal competition and finally converted into rivalry.

In August 2002, ,a Branch Manager joined along with one more Sales Manager and ten Development Officers. Initially, the branch was performing well and was able to build their image in the local market. As the industry was dynamic in nature, there were frequent opportunities bubbling in the market. In order to capitalize the outside opportunities, one sales manager left the organization in January 2003. As the sales manager was a real performer, he was able to convince all the good performers at XYZ Moon Life Insurance to join the new company. As a result of this, the organizational structure got disturbed and the development officers, who were earlier reporting to the SM had started reporting directly to the branch manager. Now, nepotism crept in and the branch manager began reallocating good agents to his favorite development officers. The sales team of another sales manager became weak (low performer). Seeing the low performance of the sales manager and his development officers, the company decided to terminate their services. As the employees’ turnover rate of the organization was more than the industry rate, the company had to continuously recruit sales agents as well as development officers to sustain itself in a highly competitive environment. The internal competition among development officers resulted into problems like, high employee turnover and dissatisfaction. Hence the branch was not able to perform as per the benchmarks set by the company. Its performance was not even comparable to that of other branches of the same company.

In April 2004, the company faced a grave problem, when the Branch Manager left the organization for greener pastures. To fill the position, in May 2004, the company appointed a new Branch Manager, Shashank Malik, and a Sales Manager, Rohit Pandey. The Branch Manager in his early thirties had an experience of sales and training of about 12 years and was looking after two branches i.e., Nagpur and Nasik.

Malik was given one Assistant Manager and 25 Development Officers. Out of that, ten were reporting to Assistant Manager and remaining fifteen were directly reporting to him. He was given the responsibility of handling all the operations and the authority to make all the decisions, while informing the Branch Manager. Malik opined that the insurance industry is a sunrise industry where manpower plays an important role as the business is based on relationship. He wanted to encourage one-to-one interaction, transparency and 4iscipline in his organization. While managing his team, he wanted his co-workers to analyze themselves i.e., to understand their own strengths and weaknesses. He wanted them to be result-oriented and was willing to extend his full support. Finally, he wanted to introduce weekly analysis in his game plan along with inflow of new blood in his organization. Using his vast experience, he began informal interactions among .the employees, by organizing outings and parties, to inculcate the feelings of friendliness and belonging. He wanted to increase the commitment level and integrity of his young dynamic team by facilitating proper civilization of their energy. He believed that proper training could give his team a proper understanding of the business and the dynamics of insurance industry.

QUESTIONS:

1. If you were Malik, what strategies would you adopt to solve the problem?
2. With high employee turnover in insurance industry, how can the company retain a person like Malik?


CASE IV

FRAGRANCE COMPANY LIMITED

Petals Company Limited (PCL) was initiated in the year 1919. Since then, it had produced a number of brands which enjoyed customer loyalty. It had adapted well with the changing environment and had entered into a strategic alliance with the S & G Limited, the producer of personal care products. The new company Fragrance Company Limited Was formed as a result in 1993 with equity participation from S& G and Petals Company Limited. This company marketed the products manufactured by the PCL. This alliance had given PCL access to the latest international technology in soaps and detergents. Thus, Fragrance Company Limited was now ideally placed to offer high value, international quality products at competitive prices. It was already an exporter of toilet soaps, detergents and cosmetics. It was a private organisation headed by Dharamchand, with its company’s headquarters at Mumbai and seven units all over the country with one of the units at Faridabad. The turnover of the company was Rs 900 crores. The company marketed the products using the latest international technology in soaps and detergents.

The organization structure was traditionally hierarchical with the senior vice president at the top of the management, the supervisory heads at the middle level and the workers at the shop floor. The company had 450 permanent workers, and 150 contract workers, with an average age of 32 years. The recruitment policy framed was to employ freshers. The various departments in the organization were: purchase, finance, systems, engineering services, excise and dispatch, operations and personnel department. The personnel and administration department were headed by Gyanchand and the functions of the personnel administration department were: recruitment, selection, training, counseling, performance appraisal, internal mobility of employees, negotiation With workers, fixation and implementation of rules and regulations regarding wages, salary, allowances and benefits to the workers. The philosophy of the company was based on Total Quality Management (TQM) and Kaizen. The company was highly environment-friendly and was oriented towards customer’s satisfaction.

Fragrance was facing an acute crisis due to high rate of absenteeism among its permanent workers. The losses were soaring high. There was loss in production, and high expenses and indiscipline were also observed. The personnel administration department conducted a survey in the year 1998. They found that the rate of absenteeism was about 20% on an average. The rules and regulations regarding leave were-12-17 days of leave with pay, 7 days casual leave with pay, 5 day sick leave with pay, extra leave without any pay. The benefits were provided as per the Employees State Insurance Act. The data collected revealed that 36% of the absenteeism was due to transportation problem, 48% was because of the workers staying away from their families, 52% due to festivals, 32% due to farming, 48% on account of alcholism, 80% on account of social occasions/marriages and 76% due to sickness of family members.

The other findings were that approximately 80% of the workers were married and they had children to look after and hence had a greater tendency towards taking leave, 8% of workers possessed dual jobs ,e.g., driving for others, mechanic work etc., so they felt that they could earn more on a particular day by remaining absent; 96% of the workers did not like night shifts and they remained absent from duty; 28% of the workers were not satisfied with the working conditions i.e. canteen facilities, drinking water, social and cultural activities and cleanliness. In 1998, the company tried to reduce absenteeism by introducing conveyance allowance for attendance and night shift allowance. The scheme called Inaam; was launched in which a worker who did not avail leave in three months, received Rs 200 per month. In¬house training was imparted to workers In order to educate them about the consequences of absenteeism. They were also sent for 3-6 months training to the Central Board of Workers Education on rotation.

Counseling sessions were held for the workers in order to increase their awareness. The company also introduced the philosophy of workers participation in the management to increase their involvement and commitment towards the work. The practice of organizing picnics, festival celebration, informal get-togethers, and sports activities were also adopted to increase the commitment. Regularity was made an important component of performance appraisal and promotion. After one year, Gyanchand was highly perplexed to see only a negligible improvement in the report of the survey conducted by the personnel administration department. The rate of absenteeism had dropped by only 3%, i.e. from. 20% to 17% in spite of introducing the aforesaid schemes.

QUESTIONS:

1. What role do the non-financial incentives play in motivating the workers and minimizing the rate of absenteeism?
2. What innovative solutions would you suggest to minimize the rate of absenteeism?

C A S E V

Vetements Ltee

Vetements Ltee is a chain of men’s retail clothing stores located throughout the province of Quebec, Canada. Two years ago, the company introduced new incentive systems for both store managers and sales employees. Store managers receive a salary with annual merit increasing based on sales above targeted goals, store appearance, store inventory management, customer complaints, and several other performance measures. Some of this information (e.g., store appearance) is gathered during visits by senior management, while other information is based on company records (e.g., sales volume).

Sales employees are paid a fixed salary plus a commission based on the percentage of sales credited to that employee over the pay period. The commission represents about 30 per cent of a typical paycheck and is intended to encourage employees to actively serve customers and to increase sales volume. Because returned merchandise is discounted from commission, sales staff are discouraged from selling products that customers do not really want.

Soon after the new incentive systems were introduced, senior management began to receive complaints from store managers regarding the performance of their sales staff. They observed that sales employees tended to stand near the store entrance waiting for customers and would occasionally argue over “ownership” of the customer. Managers were concerned that this aggression behavior intimidated some customers. It also tented to leave some parts of the store unattended by staff.
Many managers were also concerned about inventory duties. Previously, sales staff would share responsibility for restocking inventory and completing inventory reorders forms. Under the new compensation system, however, few employees were willing to do these essential tasks. On several occasions, stores experienced stock shortages because merchandise was not stocked or reorder forms were not completed in a timely manner. Potential sales suffered from empty shelves when plenty of merchandise was available in the back storeroom or at the warehouse. The company’s new automatic inventory system could reduce some of these problems, but employees must still stock shelves and assist in other aspects of inventory management.
Store managers tried to correct the inventory problem by assigning employees to inventory duty, but this has created resentment among the employees selected. Other managers threatened sales staff with dismissals if they did not do their share of inventory management. This strategy has been somewhat effective when the manager is in the store, but staff members sneak back onto the floor when the manager is away. It has also hurt staff morale, particularly relations with the store manager.
To reduce the tendency of sales staff to hoard customers at the store entrance, some managers assigned employees to specific areas of the store. This also created some resentment among employees stationed in areas with less traffic or lower-priced merchandise. Some staff openly complained of lower paychecks because they were assigned to a slow area of the store or were given more than their share of inventory duties.

Question

1. What symptom(s) exist in this case to suggest that something has gone wrong?

2. What are the root causes that have led to these symptoms?

3. What actions should the organization take to correct these problems?


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Bachelors Program in Business Management (BBA) Year-I

Note :-

(i) Attempt any four Cases
(ii) All Cases carry 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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Bachelors Program in Business Management (BBA) Year-I

Note.: 1)Attempt any Four Cases.
2)All Cases carry equal marks.

Case NO. 1
ZIP ZAP ZOOM CAR COMPANY
Zip Zap Zoom Company Ltd is into manufacturing cars in the small car (800 cc) segment. It was set up 15 years back and since its establishment it has seen a phenomenal growth in both its market and profitability. Its financial statements are shown in Exhibits 1 and 2 respectively.
The company enjoys the confidence of its shareholders who have been rewarded with growing dividends year after year. Last year, the company had announced 20 per cent dividend, which was the highest in the automobile sector. The company has never defaulted on its loan payments and enjoys a favourable face with its lenders, which include financial institutions, commercial banks and debenture holders.
The competition in the car industry has increased in the past few years and the company foresees further intensification of competition with the entry of several foreign car manufactures many of them being market leaders in their respective countries. The small car segment especially, will witness entry of foreign majors in the near future, with latest technology being offered to the Indian customer. The Zip Zap Zoom’s senior management realizes the need for large scale investment in up gradation of technology and improvement of manufacturing facilities to pre-empt competition.
Whereas on the one hand, the competition in the car industry has been intensifying, on the other hand, there has been a slowdown in the Indian economy, which has not only reduced the demand for cars, but has also led to adoption of price cutting strategies by various car manufactures. The industry indicators predict that the economy is gradually slipping into recession.

Exhibit 1 Balance sheet as at March 31,200 x
(Amount in Rs. Crore)

Source of Funds
Share capital 350
Reserves and surplus 250 600
Loans :
Debentures (@ 14%) 50
Institutional borrowing (@ 10%) 100
Commercial loans (@ 12%) 250
Total debt 400
Current liabilities 200
1,200

Application of Funds
Fixed Assets
Gross block 1,000
Less : Depreciation 250
Net block 750
Capital WIP 190
Total Fixed Assets 940
Current assets :
Inventory 200
Sundry debtors 40
Cash and bank balance 10
Other current assets 10
Total current assets 260
-1200

Exhibit 2 Profit and Loss Account for the year ended March 31, 200x
(Amount in Rs. Crore)
Sales revenue (80,000 units x Rs. 2,50,000) 2,000.0
Operating expenditure :
Variable cost :
Raw material and manufacturing expenses 1,300.0
Variable overheads 100.0
Total 1,400.0
Fixed cost :
R & D 20.0
Marketing and advertising 25.0
Depreciation 250.0
Personnel 70.0
Total 365.0
Total operating expenditure 1,765.0
Operating profits (EBIT) 235.0
Financial expense :
Interest on debentures 7.7
Interest on institutional borrowings 11.0
Interest on commercial loan 33.0 51.7
Earnings before tax (EBT) 183.3
Tax (@ 35%) 64.2
Earnings after tax (EAT) 119.1
Dividends 70.0
Debt redemption (sinking fund obligation)** 40.0
Contribution to reserves and surplus 9.1
* Includes the cost of inventory and work in process (W.P) which is dependent on demand (sales).
** The loans have to be retired in the next ten years and the firm redeems Rs. 40 crore every year.
The company is faced with the problem of deciding how much to invest in up
gradation of its plans and technology. Capital investment up to a maximum of Rs. 100
crore is required. The problem areas are three-fold.
• The company cannot forgo the capital investment as that could lead to reduction in its market share as technological competence in this industry is a must and customers would shift to manufactures providing latest in car technology.
• The company does not want to issue new equity shares and its retained earning are not enough for such a large investment. Thus, the only option is raising debt.
• The company wants to limit its additional debt to a level that it can service without taking undue risks. With the looming recession and uncertain market conditions, the company perceives that additional fixed obligations could become a cause of financial distress, and thus, wants to determine its additional debt capacity to meet the investment requirements.
Mr. Shortsighted, the company’s Finance Manager, is given the task of determining the additional debt that the firm can raise. He thinks that the firm can raise Rs. 100 crore worth debt and service it even in years of recession. The company can raise debt at 15 per cent from a financial institution. While working out the debt capacity. Mr. Shortsighted takes the following assumptions for the recession years.
a) A maximum of 10 percent reduction in sales volume will take place.
b) A maximum of 6 percent reduction in sales price of cars will take place.
Mr. Shorsighted prepares a projected income statement which is representative of the recession years. While doing so, he determines what he thinks are the “irreducible minimum” expenditures under recessionary conditions. For him, risk of insolvency is the main concern while designing the capital structure. To support his view, he presents the income statement as shown in Exhibit 3.
Exhibit 3 projected Profit and Loss account
(Amount in Rs. Crore)
Sales revenue (72,000 units x Rs. 2,35,000) 1,692.0
Operating expenditure
Variable cost :
Raw material and manufacturing expenses 1,170.0
Variable overheads 90.0
Total 1,260.0
Fixed cost :
R & D —
Marketing and advertising 15.0
Depreciation 187.5
Personnel 70.0
Total 272.5
Total operating expenditure 1,532.5
EBIT 159.5
Financial expenses :
Interest on existing Debentures 7.0
Interest on existing institutional borrowings 10.0
Interest on commercial loan 30.0
Interest on additional debt 15.0 62.0
EBT 97.5
Tax (@ 35%) 34.1
EAT 63.4
Dividends —
Debt redemption (sinking fund obligation) 50.0*
Contribution to reserves and surplus 13.4

* Rs. 40 crore (existing debt) + Rs. 10 crore (additional debt)
Assumptions of Mr. Shorsighted
• R & D expenditure can be done away with till the economy picks up.
• Marketing and advertising expenditure can be reduced by 40 per cent.
• Keeping in mind the investor confidence that the company enjoys, he feels that the company can forgo paying dividends in the recession period.
He goes with his worked out statement to the Director Finance, Mr. Arthashatra, and advocates raising Rs. 100 crore of debt to finance the intended capital investment. Mr. Arthashatra does not feel comfortable with the statements and calls for the company’s financial analyst, Mr. Longsighted.
Mr. Longsighted carefully analyses Mr. Shortsighted’s assumptions and points out that insolvency should not be the sole criterion while determining the debt capacity of the firm. He points out the following :
• Apart from debt servicing, there are certain expenditures like those on R & D and marketing that need to be continued to ensure the long-term health of the firm.
• Certain management policies like those relating to dividend payout, send out important signals to the investors. The Zip Zap Zoom’s management has been paying regular dividends and discontinuing this practice (even though just for the recession phase) could raise serious doubts in the investor’s mind about the health of the firm. The firm should pay at least 10 per cent dividend in the recession years.
• Mr. Shortsighted has used the accounting profits to determine the amount available each year for servicing the debt obligations. This does not give the true picture. Net cash inflows should be used to determine the amount available for servicing the debt.
• Net Cash inflows are determined by an interplay of many variables and such a simplistic view should not be taken while determining the cash flows in recession. It is not possible to accurately predict the fall in any of the factors such as sales volume, sales price, marketing expenditure and so on. Probability distribution of variation of each of the factors that affect net cash inflow should be analyzed. From this analysis, the probability distribution of variation in net cash inflow should be analysed (the net cash inflows follow a normal probability distribution). This will give a true picture of how the company’s cash flows will behave in recession conditions.

The management recognizes that the alternative suggested by Mr. Longsighted rests on data, which are complex and require expenditure of time and effort to obtain and interpret. Considering the importance of capital structure design, the Finance Director asks Mr. Longsighted to carry out his analysis. Information on the behaviour of cash flows during the recession periods is taken into account.
The methodology undertaken is as follows :
(a) Important factors that affect cash flows (especially contraction of cash flows), like sales volume, sales price, raw materials expenditure, and so on, are identified and the analysis is carried out in terms of cash receipts and cash expenditures.
(b) Each factor’s behaviour (variation behaviour) in adverse conditions in the past is studied and future expectations are combined with past data, to describe limits (maximum favourable), most probable and maximum adverse) for all the factors.
(c) Once this information is generated for all the factors affecting the cash flows, Mr. Longsighted comes up with a range of estimates of the cash flow in future recession periods based on all possible combinations of the several factors. He also estimates the probability of occurrence of each estimate of cash flow.
Assuming a normal distribution of the expected behaviour, the mean expected
value of net cash inflow in adverse conditions came out to be Rs. 220.27 crore with standard deviation of Rs. 110 crore.
Keeping in mind the looming recession and the uncertainty of the recession behaviour, Mr. Arthashastra feels that the firm should factor a risk of cash inadequacy of around 5 per cent even in the most adverse industry conditions. Thus, the firm should take up only that amount of additional debt that it can service 95 per cent of the times, while maintaining cash adequacy.
To maintain an annual dividend of 10 per cent, an additional Rs. 35 crore has to be kept aside. Hence, the expected available net cash inflow is Rs. 185.27 crore (i.e. Rs. 220.27 – Rs. 35 crore)
Analyse the debt capacity of the company?

Case NO. 2

COOKING LPG LTD
DETERMINATION OF WORKING CAPTIAL

Introduction :-

Cooking LPG Ltd, Gurgaon, is a private sector firm dealing in the bottling and supply of domestic LPG for household consumption since 1995. The firm has a network of distributors in the districts of Gurgaon and Faridabad. The bottling plant of the firm is located on National Highway – 8 (New Delhi – Jaipur), approx. 12 kms from Gurgaon. The firm has been consistently performing we.” and plans to expand its market to include the whole National Capital Region.
The production process of the plant consists of receipt of the bulk LPG through tank trucks, storage in tanks, bottling operations and distribution to dealers. During the bottling process, the cylinders are subjected to pressurized filling of LPG followed by quality control and safety checks such as weight, leakage and other defects. The cylinders passing through this process are sealed and dispatched to dealers through trucks. The supply and distribution section of the plant prepares the invoice which goes along with the truck to the distributor.
Statement of the Problem :
Mr. I. M. Smart, DGM(Finance) of the company, was analyzing the financial performance of the company during the current year. The various profitability ratios and parameters of the company indicated a very satisfactory performance. Still, Mr. Smart was not fully content-specially with the management of the working capital by the company. He could recall that during the past year, in spite of stable demand pattern, they had to, time and again, resort to bank overdrafts due to non-availability of cash for making various payments. He is aware that such aberrations in the finances have a cost and adversely affects the performance of the company. However, he was unable to pinpoint the cause of the problem.
He discussed the problem with Mr. U.R. Keenkumar, the new manager (Finance). After critically examining the details, Mr. Keenkumar realized that the working capital was hitherto estimated only as approximation by some rule of thumb without any proper computation based on sound financial policies and, therefore, suggested a reworking of the working capital (WC) requirement. Mr. Smart assigned the task of determination of WC to him.
Profile of Cooking LPG Ltd.
1) Purchases : The company purchases LPG in bulk from various importers ex-Mumbai and Kandla, @ Rs. 11,000 per MT. This is transported to its Bottling Plant at Gurgaon through 15 MT capacity tank trucks (called bullets), hired on annual contract basis. The average transportation cost per bullet ex-either location is Rs. 30,000. Normally, 2 bullets per day are received at the plant. The company make payments for bulk supplies once in a month, resulting in average time-lag of 15 days.
2) Storage and Bottling : The bulk storage capacity at the plant is 150 MT (2 x 75 MT storage tanks) and the plant is capable of filling 30 MT LPG in cylinders per day. The plant operates for 25 days per month on an average. The desired level of inventory at various stages is as under.
• LPG in bulk (tanks and pipeline quantity in the plant) – three days average production / sales.
• Filled Cylinders – 2 days average sales.
• Work-in Process inventory – zero.
3) Marketing : The LPG is supplied by the company in 12 kg cylinders, invoiced @ Rs. 250 per cylinder. The rate of applicable sales tax on the invoice is 4 per cent. A commission of Rs. 15 per cylinder is paid to the distributor on the invoice itself. The filled cylinders are delivered on company’s expense at the distributor’s godown, in exchange of equal number of empty cylinders. The deliveries are made in truck-loads only, the capacity of each truck being 250 cylinders. The distributors are required to pay for deliveries through bank draft. On receipt of the draft, the cylinders are normally dispatched on the same day. However, for every truck purchased on pre-paid basis, the company extends a credit of 7 days to the distributors on one truck-load.
4) Salaries and Wages : The following payments are made :
• Direct labour – Re. 0.75 per cylinder (Bottling expenses) – paid on last day of the month.
• Security agency – Rs. 30,000 per month paid on 10th of subsequent month.
• Administrative staff and managers – Rs. 3.75 lakh per annum, paid on monthly basis on the last working day.
5) Overheads :
• Administrative (staff, car, communication etc) – Rs. 25,000 per month – paid on the 10th of subsequent month.
• Power (including on DG set) – Rs. 1,00,000 per month paid on the 7th Subsequent month.
• Renewal of various licenses (pollution, factory, labour CCE etc.) – Rs. 15,000 per annum paid at the beginning of the year.
• Insurance – Rs. 5,00,000 per annum to be paid at the beginning of the year.
• Housekeeping etc – Rs. 10,000 per month paid on the 10th of the subsequent month.
• Regular maintenance of plant – Rs. 50,000 per month paid on the 10th of every month to the vendors. This includes expenditure on account of lubricants, spares and other stores.
• Regular maintenance of cylinders (statutory testing) – Rs. 5 lakh per annum – paid on monthly basis on the 15th of the subsequent month.
• All transportation charges as per contracts – paid on the 10th subsequent month.
• Sales tax as per applicable rates is deposited on the 7th of the subsequent month.
6) Sales : Average sales are 2,500 cylinders per day during the year. However, during the winter months (December to February), there is an incremental demand of 20 per cent.
7) Average Inventories : The average stocks maintained by the company as per its policy guidelines :
• Consumables (caps, ceiling material, valves etc) – Rs. 2 lakh. This amounts to 15 days consumption.
• Maintenance spares – Rs. 1 lakh
• Lubricants – Rs. 20,000
• Diesel (for DG sets and fire engines) – Rs. 15,000
• Other stores (stationary, safety items) – Rs. 20,000
8) Minimum cash balance including bank balance required is Rs. 5 lakh.
9) Additional Information for Calculating Incremental Working Capital During Winter.
• No increase in any inventories take place except in the inventory of bulk LPG, which increases in the same proportion as the increase of the demand. The actual requirements of LPG for additional supplies are procured under the same terms and conditions from the suppliers.
• The labour cost for additional production is paid at double the rate during wintes.
• No changes in other administrative overheads.
• The expenditure on power consumption during winter increased by 10 per cent. However, during other months the power consumption remains the same as the decrease owing to reduced production is offset by increased consumption on account of compressors /Acs.
• Additional amount of Rs. 3 lakh is kept as cash balance to meet exigencies during winter.
• No change in time schedules for any payables / receivables.
• The storage of finished goods inventory is restricted to a maximum 5,000 cylinders due to statutory requirements.

Q ) DETERMINE THE WORKING CAPTIAL ?

Case NO. 3
M/S HI-TECH ELECTRONICS
M/s. Hi – tech Electronics, a consumer electronics outlet, was opened two years ago in Dwarka, New Delhi. Hard work and personal attention shown by the proprietor, Mr. Sony, has brought success. However, because of insufficient funds to finance credit sales, the outlet accepted only cash and bank credit cards. Mr. Sony is now considering a new policy of offering installment sales on terms of 25 per cent down payment and 25 per cent per month for three months as well as continuing to accept cash and bank credit cards.
Mr. Sony feels this policy will boost sales by 50 percent. All the increases in sales will be credit sales. But to follow through a new policy, he will need a bank loan at the rate of 12 percent. The sales projections for this year without the new policy are given in Exhibit 1.
Exhibit 1 Sales Projections and Fixed costs
Month Projected sales without instalment option Projected sales with instalment option
January Rs. 6,00,000 Rs. 9,00,000
February 4,00,000 6,00,000
March 3,00,000 4,50,000
April 2,00,000 3,00,000
May 2,00,000 3,00,000
June 1,50,000 2,25,000
July 1,50,000 2,25,000
August 2,00,000 3,00,000
September 3,00,000 4,50,000
October 5,00,000 7,50,000
November 5,00,000 15,00,000
December 8,00,000 12,00,000
Total Sales 48,00,000 72,00,000
Fixed cost 2,40,000 2,40,000

He further expects 26.67 per cent of the sales to be cash, 40 per cent bank credit card sales on which a 2 per cent fee is paid, and 33.33 per cent on instalment sales. Also, for short term seasonal requirements, the film takes loan from chit fund to which Mr. Sony subscribes @ 1.8 per cent per month.
Their success has been due to their policy of selling at discount price. The purchase per unit is 90 per cent of selling price. The fixed costs are Rs. 20,000 per month. The proprietor believes that the new policy will increase miscellaneous cost by Rs. 25,000.
The business being cyclical in nature, the working capital finance is done on trade – off basis. The proprietor feels that the new policy will lead to bad debts of 1 per cent.
(a) As a financial consultant, advise the proprietor whether he should go for the extension of credit facilities.?
(b) Also prepare cash budget for one year of operation of the firm, ignoring interest. The minimum desired cash balance & Rs. 30,000, which is also the amount the firm has on January 1. Borrowings are possible which are made at the beginning of a month and repaid at the end when cash is available. ?

Case NO.4

SMOOTHDRIVE TYRE LTD
Smoothdrive Tyre Ltd manufacturers tyres under the brand name “Super Tread’ for the domestic car market. It is presently using 7 machines acquired 3 years ago at a cost of Rs. 15 lakh each having a useful life of 7 years, with no salvage value.
After extensive research and development, Smoothdrive Tyre Ltd has recently developed a new tyre, the ‘Hyper Tread’ and must decide whether to make the investments necessary to produce and market the Hyper Tread. The Hyper Tread would be ideal for drivers doing a large amount of wet weather and off road driving in addition to normal highway usage. The research and development costs so far total Rs. 1,00,00,000. The Hyper Tread would be put on the market beginning this year and Smoothdrive Tyrs expects it to stay on the market for a total of three years. Test marketing costing Rs. 50,00,000, shows that there is significant market for a Hyper Tread type tyre.
As a financial analyst at Smoothdrive Tyre, Mr. Mani asked by the Chief Financial Officer (CFO), Mr. Tyrewala to evaluate the Hyper-Tread project and to provide a recommendation or whether or not to proceed with the investment. He has been informed that all previous investments in the Hyper Tread project are sunk costs are only future cash flows should be considered. Except for the initial investments, which occur immediately, assume all cash flows occur at the year-end.
Smoothedrive Tyre must initially invest Rs. 72,00,00,000 in production equipments to make the Hyper Tread. They would be depreciated at a rate of 25 per cent as per the written down value (WDV) method for tax purposes. The new production equipments will allow the company to follow flexible manufacturing technique, that is both the brands of tyres can be produced using the same equipments. The equipments is expected to have a 7-year useful life and can be sold for Rs. 10,00,000 during the fourth year. The company does not have any other machines in the block of 25 per cent depreciation. The existing machines can be sold off at Rs. 8 lakh per machine with an estimated removal cost of one machine for Rs. 50,000.
Operating Requirements
The operating requirements of the existing machines and the new equipment are detailed in Exhibits 11.1 and 11.2 respectively.
Exhibit 11.1 Existing Machines
• Labour costs (expected to increase 10 per cent annually to account for inflation) :
(a) 20 unskilled labour @ Rs. 4,000 per month
(b) 20 skilled personnel @ Rs. 6,000 per month.
(c) 2 supervising executives @ Rs. 7,000 per month.
(d) 2 maintenance personnel @ Rs. 5,000 per month.
• Maintenance cost :
Years 1-5 : Rs. 25 lakh
Years 6-7 : Rs. 65 lakh
• Operating expenses : Rs. 50 lakh expected to increase at 5 per cent annually.
• Insurance cost / premium :
Year 1 : 2 per cent of the original cost of machine
After year 1 : Discounted by 10 per cent.

Exhibit 11.2 New production Equipment
• Savings in cost of utilities : Rs. 2.5 lakh
• Maintenance costs :
Year 1 – 2 : Rs. 8 lakh
Year 3 – 4 : Rs. 30 lakh
• Labour costs :
9 skilled personnel @ Rs. 7,000 per month
1 maintenance personnel @ Rs. 7,000 per month.
• Cost of retrenchment of 34 personnel : (20 unskilled, 11 skilled, 2 supervisors and 1 maintenance personnel) : Rs. 9,90,000, that is equivalent to six months salary.
• Insurance premium
Year 1 : 2 per cent of the purchase cost of machine
After year 1 : Discounted by 10 per cent.

The opening expenses do not change to any considerable extent for the new equipment and the difference is negligible compared to the scale of operations.
Smoothdrive Tyre intends to sell Hyper Tread of two distinct markets :
1. The original equipment manufacturer (OEM) market : The OEM market consists primarily of the large automobile companies who buy tyres for new cars. In the OEM market, the Hyper Tread is expected to sell for Rs. 1,200 per tyre. The variable cost to produce each Hyper Tread is Rs. 600.
2. The replacement market : The replacement market consists of all tyres purchased after the automobile has left the factory. This markets allows higher margins and Smoothdrive Tyre expects to sell the Hyper Tread for Rs. 1.500 per tyre. The variable costs are the same as in the OEM market.
Smoothdrive Tyre expects to raise prices by 1 percent above the inflation rate.
The variable costs will also increase by 1 per cent above the inflation rate. In addition, the Hyper Tread project will incur Rs. 2,50,000 in marketing and general administration cost in the first year which are expected to increase at the inflation rate in subsequent years.
Smoothdrive Tyre’s corporate tax rate is 35 per cent. Annual inflation is expected to remain constant at 3.25 per cent. Smoothdrive Tyre uses a 15 per cent discount rate to evaluate new product decisions.
The Tyre Market
Automotive industry analysts expect automobile manufacturers to have a production of 4,00,000 new cars this year and growth in production at 2.5 per year onwards. Each new car needs four new tyres (the spare tyres are undersized and fall in a different category) Smoothdrive Tyre expects the Hyper Tread to capture an 11 per cent share of the OEM market.
The industry analysts estimate that the replacement tyre market size will be one crore this year and that it would grow at 2 per cent annually. Smoothdrive Tyre expects the Hyper Tread to capture an 8 per cent market share.
You also decide to consider net working capital (NWC) requirements in this scenario. The net working capital requirement will be 15 per cent of sales. Assume that the level of working capital is adjusted at the beginning of the year in relation to the expected sales for the year. The working capital is to be liquidated at par, barring an estimated loss of Rs. 1.5 crore on account of bad debt. The bad debt will be a tax-deductible expenses.
As a finance analyst, prepare a report for submission to the CFO and the Board of Directors, explaining to them the feasibility of the new investment?

Case No. 5

COMPUTATION OF COST OF CAPITAL OF PALCO LTD

In October 2003, Neha Kapoor, a recent MBA graduate and newly appointed assistant to the Financial Controller of Palco Ltd, was given a list of six new investment projects proposed for the following year. It was her job to analyse these projects and to present her findings before the Board of Directors at its annual meeting to be held in 10 days. The new project would require an investment of Rs. 2.4 crore.
Palco Ltd was founded in 1965 by Late Shri A. V. Sinha. It gained recognition as a leading producer of high quality aluminum, with the majority of its sales being made to Japan. During the rapid economic expansion of Japan in the 1970s, demand for aluminum boomed, and palco’s sales grew rapidly. As a result of this rapid growth and recognition of new opportunities in the energy market, Palco began to diversify its products line. While retaining its emphasis on aluminum production, it expanded operations to include uranium mining and the production of electric generators, and finally, it went into all phases of energy production. By 2003, Palco’s sales had reached Rs. 14 crore level, with net profit after taxes attaining a record of Rs. 67 lakh.
As Palco expanded its products line in the early 1990s, it also formalized its caital budgeting procedure. Until 1992, capital investment projects were selected primarily on the basis of the average return on investment calculations, with individual departments submitting these calculations for projects falling within their division. In 1996, this procedure was replaced by one using present value as the decision making criterion. This change was made to incorporate cash flows rather than accounting profits into the decision making analysis, in addition to adjusting these flows for the time value of money. At the time, the cost of capital for Palco was determined to be 12 per cent, which has been used as the discount rate for the past 5 years. This rate was determined by taking a weighted average cost Palco had incurred in raising funds from the capital market over the previous 10 years.
It had originally been Neha’s assignment to update this rate over the most recent 10-year period and determine the net present value of all the proposed investment opportunities using this newly calculated figure. However, she objected to this procedure, stating that while this calculation gave a good estimate of “the past cost” of capital, changing interest rates and stock prices made this calculation of little value in the present. Neha suggested that current cost of raising funds in the capital market be weighted by their percentage mark-up of the capital structure. This proposal was received enthusiastically by the Financial Controller of the Palco, and Neha was given the assignment of recalculating Palco’s cost of capital and providing a written report for the Board of Directors explaining and justifying this calculation.
To determine a weighted average cost of capital for Palco, it was necessary for Neha to examine the cost associated with each source of funding used. In the past, the largest sources of funding had been the issuance of new equity shares and internally generated funds. Through conversations with Financial Controller and other members of the Board of Directors, Neha learnt that the firm, in fact, wished to maintain its current financial structure as shown in Exhibit 1.
Exhibit 1 Palco Ltd Balance Sheet for Year Ending March 31, 2003
Assets Liabilities and Equity
Cash
Accounts receivable
Inventories
Total current assets
Net fixed assets
Goodwill
Total assets Rs. 90,00,000
3,10,00,000
1,20,00,000
5,20,00,000
19,30,00,000
70,00,000
25,20,00,000
Accounts payable
Short-term debt
Accrued taxes
Total current liabilities
Long-term debt
Preference shares
Retained earnings
Equity shares
Total liabilities and equity shareholders fund
Rs. 8,50,000
1,00,000
11,50,000
1,20,00,000
7,20,00,000
4,80,00,000
1,00,00,000
11,00,000

25,20,00,000

She further determined that the strong growth patterns that Palco had exhibited over the last ten years were expected to continue indefinitely because of the dwindling supply of US and Japanese domestic oil and the growing importance of other alternative energy resources. Through further investigations, Neha learnt that Palco could issue additional equity share, which had a par value of Rs. 25 pre share and were selling at a current market price of Rs. 45. The expected dividend for the next period would be Rs. 4.4 per share, with expected growth at a rate of 8 percent per year for the foreseeable future. The flotation cost is expected to be on an average Rs. 2 per share.

Preference shares at 11 per cent with 10 years maturity could also be issued with the help of an investment banker with an investment banker with a per value of Rs. 100 per share to be redeemed at par. This issue would involve flotation cost of 5 per cent.
Finally, Neha learnt that it would be possible for Palco to raise an additional Rs. 20 lakh through a 7 – year loan from Punjab National Bank at 12 per cent. Any amount raised over Rs. 20 lakh would cost 14 per cent. Short-term debt has always been usesd by Palco to meet working capital requirements and as Palco grows, it is expected to maintain its proportion in the capital structure to support capital expansion. Also, Rs. 60 lakh could be raised through a bond issue with 10 years maturity with a 11 percent coupon at the face value. If it becomes necessary to raise more funds via long-term debt, Rs. 30 lakh more could be accumulated through the issuance of additional 10-year bonds sold at the face value, with the coupon rate raised to 12 per cent, while any additional funds raised via long-term debt would necessarily have a 10 – year maturity with a 14 per cent coupon yield. The flotation cost of issue is expected to be 5 per cent. The issue price of bond would be Rs. 100 to be redeemed at par.
In the past, Palco had calculated a weighted average of these sources of funds to determine its cost of capital. In discussion with the current Financial Controller, the point was raised that while this served as an appropriate calculation for external funds, it did not take into account the cost of internally generated funds. The Financial Controller agreed that there should be some cost associated with retained earnings and need to be incorporated in the calculations but didn’t have any clue as to what should be the cost.
Palco Ltd is subjected to the corporate tax rate of 40 per cent.
From the facts outlined above, what report would Neha submit to the Board of Directors of palco Ltd ?

Case NO. 6

ARQ LTD

ARQ Ltd is an Indian company based in Greater Noida, which manufactures packaging materials for food items. The company maintains a present fleet of five fiat cars and two Contessa Classic cars for its chairman, general manager and five senior managers. The book value of the seven cars is Rs. 20,00,000 and their market value is estimated at Rs. 15,00,000. All the cars fall under the same block of depreciation @ 25 per cent.
A German multinational company (MNC) BYR Ltd, has acquired ARQ Ltd in all cash deal. The merged company called BYR India Ltd is proposing to expand the manufacturing capacity by four folds and the organization structure is reorganized from top to bottom. The German MNC has the policy of providing transport facility to all senior executives (22) of the company because the manufacturing plant at Greater Noida was more than 10 kms outside Delhi where most of the executives were staying.
Prices of the cars to be provided to the Executives have been as follows :
Manager (10) Santro King Rs. 3,75,000
DGM and GM (5) Honda City 6,75,000
Director (5) Toyota Corolla 9,25,000
Managing Director (1) Sonata Gold 13,50,000
Chairman (1) Mercedes benz 23,50,000
The company is evaluating two options for providing these cars to executives
Option 1 : The company will buy the cars and pay the executives fuel expenses, maintenance expenses, driver allowance and insurance (at the year – end). In such case, the ownership of the car will lie with the company. The details of the proposed allowances and expenditures to be paid are as follows :
a) Fuel expense and maintenance Allowances per month
Particulars Fuel expenses Maintenance allowance
Manager
DGM and GM
Director
Managing Director
Chairman Rs. 2,500
5,000
7,500
12,000
18,000 Rs. 1,000
1,200
1,800
3,000
4,000
b) Driver Allowance : Rs. 4,000 per month (Only Chairman, Managing Director and Directors are eligible for driver allowance.)
c) Insurance cost : 1 per cent of the cost of the car.

The useful life for the cars is assumed to be five years after which they can be sold at 20 per cent salvage value. All the cars fall under the same block of depreciation @ 25 per cent using written down method of depreciation. The company will have to borrow to finance the purchase from a bank with interest at 14 per cent repayable in five annual equal instalments payable at the end of the year.
Option 2 : ORIX, The fleet management company has offered the 22 cars of the same make at lease for the period of five years. The monthly lease rentals for the cars are as follows (assuming that the total of monthly lease rentals for the whole year are paid at the end of each year.
Santro Xing Rs. 9,125
Honda City 16,325
Toyota Corolla 27,175
Sonata Gold 39,250
Mercedes Benz 61,250
Under this lease agreement the leasing company, ORIX will pay for the fuel, maintenance and driver expenses for all the cars. The lessor will claim the depreciation on the cars and the lessee will claim the lease rentals against the taxable income. BYR India Ltd will have to hire fulltime supervisor (at monthly salary of Rs. 15,000 per month) to manage the fleet of cars hired on lease. The company will have to bear additional miscellaneous expense of Rs. 5,000 per month for providing him the PC, mobioe phone and so on.
The company’s effective tax rate is 40 per cent and its cost of capital is 15 per cent.
Analyse the financial viability of the two options. Which option would you recommend ? Why ?


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Bachelors Program in Business Management (BBA) Year-III

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