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SUB: International Business.
Section A (8 Marks Each Question) ( Attempt any 5 )
- What are basic differences between domestic and international business?
- While some see globalization as the avenue to the development of poor nations, others see it intensifying misery and inequalities. Critically examine the above statement in today’s context?
- Explain – Localisation of global strategy
- Explain – Technology contracting (licensing) as an alternative to FDI or ownership strategy.
- Explain – Major factors contributing to the success of international strategic alliances.
- Explain the role of “Power Distance” in understanding Hofsted’s work on cross-cultural prospective. How does this help in managing international environment?
- Discuss the relationship between an MNE and its subsidiaries in the context of the “make or buy” decision. What are the implications so far as the organization structure/design is concerned?
- Explain the role of bargaining power” in managing negotiations in international business.
- Briefly discuss the direct and indirect impacts of FDI on LDCs
SECTION B (20 Marks Each Case)
- Please read the following case study carefully and answer the questions given at the end.
To the Florid-faced German at Frankfurt Airport’s immigration-counter, he appeared to be just another business traveller. True, but a bit of an understatement. The man under scrutiny was Binoy Sen, whom the Indian media referred to as the Boom-Box king.
At 14, he had assembled, from parts scavenged from the local dump, a spool-recorder that had fitted nicely into a suitcase. By the time he time he was 37, in 1979, Sen & Sen (S&S), a company he had promoted with his elder brother, Sanjoy — who made up for his lack of technical expertise with a razor sharp business brain — was Asia’s largest manufacturer of radios and cassette-recorders. Now, at 56, he presided over India’s largest audio-Products Company. Sen-Schwitz, a joint venture with the Frankfurt-based consumer electronics giant, Schwitz GMBH.
S&S association with Schwitz had actually begun in 1984. Music had become a movement in Europe at that time, with immigrant labour of all colour and teenagers of all sizes constituting market-segments that no company could afford to ignore. But their means were slender, and intensity of output, rather than nuances of pitch and tone, was what they were concerned about. Since assembling was a labour and cost intensive process, at least in Europe, Schwitz could not manufacture low-end boom-boxes cheaply.
So, the company turned to Asia, where it was certain some Chinese or Taiwanese company could meet its requirements. None could. However, on a reach of Taiwan, one of the company’s managers had spotted a couple of S&S products at a retail outlet. While this Indo-German relationship had begun as a vendor-buyer one, Helmut Schwitz, 51, the CEO of Schwitz — no relation of Adolf Schwitz, who had founded the company just after the end of World War II — took an instant liking to the Sen brothers. Two years after S&S started supplying it products, in 1986, the German company acquired a 10 per cent stake in its Indian supplier.
IN 1992, when Schwitz released that he could no longer ignore the Indian market and the Sens accepted the fact that they couldn’t survive the threat from global competition without technology and marketing support from their German Partner, they formed a formal joint venture. The Sens and the German company both held 26 per cent stakes in Sen-Schwitz, with the rest being divided between the financial institutions and the investing.
The joint venture did well right from its inception. The transnational’s superior quality standards and S&S strong distribution network worked wonders. Within 2 years, the company had managed to carve out a 45 per cent share of the Rs. 795-crore market. The Sens were happy and so was Schwitz. By 1998, Sen Schwitz’s share had increased to 65 per cent in a market that had grown to Rs. 1,150 crore, And when Sen reached Frankfurt for the annual review of the joint venture that Schwitz GMBH insisted on — the company had 7 joint ventures across Asia and Latin America — he could not but help feeling that all was well with the world of music and money.
Sen’s feelings were only amplified during the review. After the preliminary greetings, Helmut Schwiz took the oais. The room darkened, and a series of PowerPoint images flashed on the screen behind Schwiz as he spoke. Sen caught only fragments of the German’s heavily accented voice, his attention was focused on the images and the bullets of text they contained. Sen scrawled a few of them on his notepad
* A turnover of $ 100 billion by 2005
* AQ growth – rate of 20 per cent a year.
* 35 per cent of the growth coming from India and China Then. Schwiz started speaking about India and Sen’s attention moved from the screen to the man. What he heard pleased him. “Sen-Schwiz has a marketshare of 65 per cent in a market that is growing at the rate of 30 per cent a year. As far as our targets for 2005 go, we believe that it is our most promising joint venture.”
The blow fell later, during the break for lunch. Sen and Chris Liu who headed the company’s joint venture in Taiwan, were exchanging notes when Schwiz butted in and, in his characteristic overbearing fashion, quickly monoeuvrec Sen to one corner of the room.
“India is, clearly, the market of the future, Binoy,” he said, biting into a roll. “You’re doing a great job, and can expect support from me for all your endeavours. But I’m worried about your margins.” Here it comes, thought Sen, the twist in the tall. “A post tax margin of 8 per cent doesn’t look too good,” continued Schwiz, “especially when seen in the light of rising volumes. We should take a fresh look at our Indian operations, Why don’t you meet with Andrew?”
Suddenly, Sen was on guard. The 55 year old Andrew Fotheringay was Schwiz’s President (International Operations). Sen liked him; they had worked together when the joint venture was being set up, and had been impressed by his eye for detail. But he also knew that Fotheringay was Schwiz’s hatchetman. “What’s on your mind, Helmut ?” he asked point-blank “oh, nothing yet,” replied Schwiz, “but we have to find a way to introduce more products into the Indian market without stretching Sen-Schwitz, Talk to Andrew.”
That wasn’t to be Fotheringay, whose wife was 9 months pregnant, had to suddenly leave for London, but promised to fly down to Calcutta, where Sen-Schwitz was based as soon as the baby was born. Now, Sen was sure that something was up : Fotheringay wasn’t the kind of manager to do something like that for nothing. Sen voiced his fears at a meeting of the Sen-Schwitz board, which had been scheduled on the day of his return. One of the board members, R. Raghavan, 53 a professor of corporate strategy at the Indian Institute of Management, Gauhati, felt that Sen was over reaching I don’t think it is quite what you think, Sanjoy he started although Sen hadn’t put any specifics to his fears. “Sen-Schwitz is, as BUSINESS TODAY keeps reminding us, evidence that there is, indeed, scope for a win-win joint venture even in the Indian context.”
He was wrong. Sure, the joint venture has benefited from the German parent’s technical expertise. In turn Schwitz GMBH had profited substantially from Sen Schwitz’s dividend pay-outs : more than 25 per cent every year. Werner Kohl, 48 Sen Schwitz’s Technical Director, seemed to agree with the professor. Kohl was a Schwitz nominee on the board, and had been a Vice-president (Operations) at the transnational’s Hamburg plant before being seconded to Sen-Schwitz for a 5 year period. But Kohl Sen knew was not likely to know what was happening back home.
The one person who agred with Sen was Rajesh Jain 44, the IDBI nominee on the board, who expressed the opinion that Schwiz GMBH could possiibly, be planning another joint venture with some other company. That sounded far-fetched even to Sen. Sen-Schwitz’s closest per cent. Besides, no company could match Sen-Schwitz;’s distribution network. So, he decided to let his fears abate till Fotneringay could either dispet them — or make them come alive.
True to his word, Fotheringay, now the proud father of his first daughter landed up in Calcutta a week later. He first met the company’s functional heads, and gave them a pep talk: ” Sen-Schwitz’s volumes-thrust should be backed by a profitability focus. Once we ensure margins of 13 to 15 per cent, we will be on our way.”
Alone with Sen, though, Fotheringay quickly laid his cards on the table. Schwitz, he informed Sen, wished to set up a 100 per cent subsidiary in the country. Sen’s mind was, suddenly, clear. He had been a fool not to see it coming. All that talk about restructuring the joint venture, introducing newer models, and the need for higher margins led up to just one thing: a fully-owned Schwiz subsidiary.” So what does this mean for us, Andrew,” he asked, “Is this advance warning about a parting of ways?”
Fotheringay was quick to dispel this notion. “The subsidiary will not compromise the interests of the joint venture. Schwitz has a long-term commitment to the India market, and this subsidiary is just a step in that director.”
All this talk-about commitment, realized Sen, was taking them nowhere. He sounded just a little imitated when he spoke: “I just can’t understand why you people are even considering a subsidiary when the joint venture has been so successful. We have a great brand, good products, the finest distribution network in the business, and an excellent supply chain Together, we have created a matrix that has delivered. Why does Schwitz want to reinvent the wheel?”
Fotheringay’s answers didn’t satisfy him. He made some noises about the subsidiary taking upon itself a large portion of the expenses involved in building the Sen-Schwitz brand, thereby reducing its operational expenses, and improving its margins. Sen was quick to point out that the Government of India did not view proposals for fully-owned marketing subsidiaries favourably. “Besides, does this mean that we transfer our marketing and distribution network to the subsidiary?” he asked incredulously.
Fotheringay side-stepped the issue: “No, no, the subsidiary will only manufacturer products.” Reading the look on Sen’s face, he hastened to enumerate Schwitz’s gameplan: ‘Of course, none of our offerings will complete directly with Sen-Schwitz As you are aware,the audio systems market is fairly segmented, so there is a great deal of potential for new offerings. We want to set up a committee from Sen-Schwitz and Schwitz to decide on the respective roadmaps of the joint venture and the subsidiary so as to avoid any conflict.”
“That apart,” he smiled, here comes the carrot, thought Sen and he wasn’t wrong,”the Sens will have the option to buy upto 49 per cent of the subsidiary’s equity when it goes in for an
IPO.” The subsidiary is not even off the ground, thought Sen and Andrew is already speaking in terms of US and THEM
Fotheringay took Sen’s silence to mean acceptance.”The other reason,” he continued, “is that we cam use the subsidiary to introduce our premium brands into the country. There is evidence that the market for premium audio-systems is all set to boom. Think about it, Binoy. The subsidiary will only strengthen the strategic relationship between the Sens and Schwitz GMBH.”
The Sens aren’t involved, thought Sen; this is an issue that concern Sen-Schwiz andSchqitz. But he didn’t want to split hairs, and promised, instead, to think about it.
Sen-Schwitz’s Executive Committee thought about it for 3 months. And it still didn’t make sense to them. Schwitz GMBH operated through joint ventures in every part of the developing world. Only in the US, UK, and France did it have fully-owned subsidiaries, using the subsidiary as a sink that would absorb the joint venture’s marketing expenses didn’t make sense too.
“It sounds altruistic,” said V.K. Kapur, 44, the company’s head of marketing. “If launching more products is the only behind the subsidiary, there is no reason why the joint venture cannot serve that purpose.” Sen and the rest of the Committee had to agree. “There’s also no reason why we cannot improve our margins by focusing on our operational efficiencies,” argued Ajay Singh, 46, Sen Schwitz Director, operations, and Sen had to agree.
He decided to discuss the matter with Sanjoy, who had retired from the business, and was involved in managing a charity. But Sen didn’t get a chance. News-agency had picked up a report that had appeared in the Financial Times Schwitz’s decision to set up a 100 per cent subsidiary in India. The report created a major stir in the Bombay stock Exchange, with the price of Sen-Schwitz’s stock falling by 30 per cent a day.
It was evident to Sen that no matter what Fotheringay and Schwitz thought, the stock-market perceived the subsidiary as a threat to the joint venture. It was also evident that the stock-market viewed Schwitz as the more valuable brand.”I understand,”Sanjoy told Binoy, when the situation had been explained to him. The technology is Schwitz’s. The brand, at least the more powerful one, is theirs. And they have access to our distribution network. Face it, we don’t have a plank to fight on.”
- Identify the sequence of events that has led to the current problem. (b) Analyse the problem in the context of the process of globalization that has been increasingly witnesses over the past decade or so. (c) Examine the “fairness” of establishing a 100% subsidiary by Schwitz GMBH when the alliance is on. (d) What future course of action would you suggest to S&S? Give reasons for your answer.
- Please read the following case study carefully and answer the questions given at the end.
Starting at the vast expanse of the Arabian Sea from his comer office at Bombay’s Nariman Point, Ramcharan Shukla the 53-year old executive vice-chairman and managing Director of the 500-crore Sunlight Chemicals. (Sunlight felt both adventurous and apprehensive. He knew he had to quicken the global strides Sunlight had made in the last four years if the company was to benefit from its early gains in the world markets. However, he was also shaken by a doubt: would his strategy of prising open international markets by leveraging the talents of a breed of managers with transnational competencies succeed? Globalisation had been an integral part of Sunlight’s business plans ever since Shukla took over as managing director in 1990 with the aim of making it the country’s first international chemicals major Since then Sunlight — the country’s third-largest chemicals maker — had developed export markets in as many as 40 markets, with international revenues contributing 40 per cent of its Rs. 500 crore turnover in 1994-95. The company also set up manufacturing bases in eight countries — most recently in China’s Shenzhen free trade zone — manned by a mix of local and Indian employees.
These efforts at going global first took shape in December 1991 when Shukla, after months of deliberations with his senior management team, outlined Sunlight’s Vision 2001 statement. It read ” “We will achieve a turnover of $ 1 billion by 2001 by tapping global markets and developing new products.” The statement was well-received both within and outside the company. The former CEO of a competitor had said in a newspaper report: “Shukla has nearly sensed the pressures of operating in a new trade with a tough patents regime.”
But Shukla also realised that global expertise could not be developed overnight. Accordingly, to force the company out of an India-centric mindset, he started a process of business restructuring. So, the company’s business earlier divided into domestic and export divisions, was now split into five areas: Are I (India and China), Area 2 (Europe and Russia), Area 3 (Asia Pacific), Area 4 (US) and Area 5 (Africa and South America). Initially managers were incredulous, with one senior manager saying: “This is crazy. It lacks a sense of proportion.”
The Cynicism was not misplaced. After all, the domestic market — which then contributed over 90 per cent of the company’s turnover — had not only been dubbed with the Chinese market, but had also been brought at par with the areas whose collective contributions to the turnover was below 10 per cent Shukla’s explanation, presented in an interview to a business magazine: “Actually, the rationale is quite simple and logical. We took a look at how the market mix would evolve a decade from now and then created a matrix to suit that mix. Of course, we will also set up manufacturing facilities in each of these areas to change the sales-mix altogether.”
He wasn’t wrong. Two years later, even as the first manufacturing facility in Vietnam was about to go on stream, the overseas areas’ contribution to revenues rose to 20 per cent. And the mood of the management changed with the growing conviction that export income would spoon surpass domestic turnover. Almost simultaneously, Shukla told his senior managers that the process of building global markets could materialise only if the organisation became fat flexible, and fleet-footed. Avinash Dwivedi, am management
consultant brought in to oversee Sunlight’s restructuring exercise, told the board of directors: “Hierachies built up over the years have blunted the company’s reflexes, and this is a disadvantage while working in the competitive global markets.”
The selection of vice-president for the newly-constituted regions posed no immediate problem. For Sunlight had several general managers — from both arms of marketing and manufacturing — whose thinking had been shaped by the company’s long exposure to the export markets. For obvicus reasons, the ability to build markets was the primary criterion for selection. The second criterion was a broad business perspective with a multi-functional, multi-market exposure. That was because Shukla felt it did not make good business sense to send a battalion of functional managers to foreign markets when two or three business managers could suffice.
But Specific markets also needed specific competencies. That was how Sunlight chose to appoint a South African national to head Area 5. The logic” only a local CEO could keep track of changes in regulations and gauge the potential of the booming chemicals market in the US. However, the effort was always focused on using in-house talent. Shukla put it to his management team: “We should groom managerial talent — whether local or expatriate — for all our overseas operations from within the company and should rotate this expertise worldwide. In essence, we should develop global managers within the company.”
While doing the personnel planning for each area and fixing the compensation packages for overseas Assignment. Sunlight realised the importance of human resource (HR) initiatives. The HR division headed by vice president Hoseph Negi, had been hobbled for years with industrial relations problems caused by the unionisation of the salesforce, ” You have to move in step with the company’s global strategy.” Shukla had told his HR managers at a training session organised by Dwivedi who was spearheading the task of grooming global managers.
Four years down the line, Shukla felt that Sunlight was still finding its way around the task Sure, a system was in place. Depending on the requirements of each of the four areas, Sunlight had started recruiting between 25 and 30 MBAs every year from the country’s leading management institutes. During the first six months, these young managers were given cross-functional training, including classroom and on-the-job inputs. The training was then followed by a placement dialogue to determine the manager -area fit. If a candidate were to land, for instance, on the Asia-Pacific desk at the head office, he would be assigned a small region, say, Singapore, and would be responsible for the entire gamut of brand-building for a period of one year in coordination with the regional vice-president. The success with which he would complete his task would decide his next job: the first full-time overseas posting. He could be appointed as the area head of, say, Vietnam, which was equivalent to an area sales manager in the home market. After a couple of years, he would return to base for a placement in brand management or finance. A couple of years later, the same manager could well be in charge of a region in a particular area. Over the past four years. Sunlight had developed 30 odd potential global managers in the company spanning various regions using this system.
But, considering that the grooming programme was only three years old, Shukla felt that it would take some time for the company’s homespun managers to handle larger markets like China on their own. The real problem in this programme was in matching the manager to the market. Dwivedi suggested a triangular approach to get the right fit: define the business target for a market in an area. Look at the candidiate’s past Performance in the market, And identify the key individual characteristics for that market. Dwivedi also identified another criterion: a good performance rating at home during the previous two years. Once selected for an overseas posting, the candidate would be given cross-cultural training: a course in foreign languages, interactive programmes with repatriated managers on the nature of the assignment and, often, personality development programmes on the nuances of country business etiquette.
Further, an overseas manager would be appraised on two factors: the degree to which he had met his business plan targets for the market, and the extent to which he had developed his team. After all, he had to cachet the posting within three years to make place for his replacement. Achievements were weighed quarterly and annually against sales targets set at the beginning of the year by the vice-president of the region. The appraisal would then be sent to the corporate headquarters in Bombay for review by the senior management committee. Shukla had often heard his senior managers talk appreciatively of the benefits of transrepatriation. “The first batch of returnees are more patient tolerant and manure than when they left home,” said Manohar Vishwas, vice-president (finance),”and they handle people better.”
But the litmus test for the company, Shukla felt would be in managing a foreign workforce — across diverse cultures — at the manufacturing facilities in six countries outside India. The Shenzhen unit, for instance had 220 employees, out of which only 10 were expatriate Indians. Further, the six-member top management team had only two Indians. Of course, the mix had been dictated by the country’s laws and language considerations.
Some of the African markets had their own peculiarities. The entire team of medical representatives, for example, comprised fully-quilifies, professional doctors. Sharad Saxena, vice-president, Area 5, told Shukla: “As there is heavy unemployment in Africa doctors are attracted to field sales work for higher earnings.” There were other problems too: as both Chinese and Russian had been brought up on a diet of socialism, they were not used to displaying initiative at the workplace. Dwivedi had suggested that regular training was one of the ways of transforming the workforce. So, Shukla hired a training group from Delhi’s Institute of Human Resource Management
training to spend a month at Shenzhen. This was later incorporated as an annual exercise.
Observing that interpersonal conflicts were common in situation where with single-country background were working together, a new organisational structure was introduced. Here, Sunlight positioned local managers was introduced. Here, Sunlight positioned local managers between an Indian boss and subordinate. Similarly, some Indian managers were positioned between a local boss and subordinate. Says Avishek Acharya vice-president, Area 3: “There were some uncomfortable moments, but it led to a better integration or management principles, work practices, and ethics.”
Obviously, reflected Shukla, Dwivedi was doing a great job. As he watched the setting sun, however, he found his thoughts turning to a more fundamental question. However immaculate his HR planning had been, had he made a mistake by not developing his strategies first? Was he mixing up his priorities by putting people management” ahead of issues like marketing, technology, and global trade? Even the HR strategy he had chosen worried Shukla. Should he have opted for more locals in each country? If expatriate managers failed more often than they succeeded in India wasn’t the same true for other countries?
- Is Sunlight on the right track in going global without trying to consolidate its position further in the home market? 2. Can Sunlight realise its global vision with its current mix of strategies? However fine the company’s HR planning had been, had Shukla made a mistake by not developing his strategies first? 3. Are there any gaps in Shukla’s game plan to conquer the globe? 4. What are the learnings that you can derive from the “Sunlight” case so far as the internationalization of business is concerned?
8) Please read the following case study carefully and answer the questions given at the end:
Electrolux is Sweden’s largest manufacturer of electrical household appliances and was one of the world’s pioneers in the marketing of vacuum cleaners. However, not all the products the Electrolux name are controlled by the Swedish firm. Electrolux vacuum cleaner sold and manufacturer in the United States, for example, have not been connected with the Swedish Firm since the U.S subsidiaries were sold in the 1960s. The Swedish Firm reentered the U.S. market in 1974 by purchasing National Union Electric, which manufacturers Eureka vacuum cleaners.
Electrolux pursued its early international expansion largely to gain economies of scale through additional sales. The Swedish market was simply too small to absorb fixed costs as much as the home markets for competitive firms from larger countries. When additional sales were not possible by exporting, Electrolux was still able to gain certain scale economies through the establishment of foreign production. Research and development expenditures and certain administrative costs could thus be spread out over the additional sales made possible by foreign operations. Additionally, Electrolux concentrated on standardized production to achieve further scale economies and rationalization of parts.
Until the late 1960s, Electrolux concentrated primarily on vacuum cleaners and the building of its own facilities in order to effect expansion. Throughout the 1970s, though, the firm expanded largely by acquiring existing firms whose product lines differed from those of Electrolux. The compelling force was to add appliances lines to complement those developed internally. Its recent profits ($220 million in 1983) have enabled Electrolux to go an acquisitions binge. Electrolux acquired two Swedish firms that made home appliances and washing machines. Electrolux management felt that it could use its existing foreign sales networks to increase the sales of those firms in 1973, Electrolux acquired another Swedish firm, Facit, which already had extensive foreign sales and facilities. Vacuum cleaner producers were acquired in the United States and in France; and to gain captive sales for vacuum cleaner. Electrolux acquired commercial cleaning service firms in Sweden and in the United States. A French Kitchen equipment producer, Arthur Martin, was bought, as was a Swiss home appliance firm. Therma, and a U.S. cooking equipment manufacturer, Tappan.
Except the Facit purchase, the above acquisitions all involved firms that produced complementary lines that would enable the new parent to gain certain scale economies, However, not all the products of acquired firms were related, and Electrolux sought to sell off unrelated businesses. In 1978 for example, a Swedish firm, Husgvarna, was bought because of its kitchen equipment lines. Electrolux was able to sell Husqvarna’s motorcycle line but could not get a good price for the chain saw facility. Reconciled to being in the chain saw business. Electrolux then acquired chain saw manufacturers in Canada and Norway, thus becoming one of the world’s largest chain saw producers. The above are merely the most significant. Electrolux acquisitions: the firm made approximately fifty acquisitions in the 1970s.
In 1980, Electrolux announced a takeover that was very different from those of the 1970s. It offered $175 million, the biggest Electrolux acquisition, for Granges Sweden’s leading metal producer and fabrication Granges was itself a multinational firm (1979 sales of $ 1.2 billion) and made about 50 percent of its sales outside of Sweden. The managing Directors of the two firms indicated that the major advantage of the takeover would be the integration of Granges aluminum, copper plastic, and other materials into Electrolux production of appliances. Many analysts felt that the timing of Electrolux’s bid was based on indications that Baijerinvest, a large Swedish conglomerate, wished to acquire a non–ferrous matels mining company. Other analysis felt that Elctrolux would be better off to continue international horizontal expansion as it had in the 1970s. The analysts pointed to large appliance makers such as AEG Telefunken of West Germany that were likely candidates for takeover because of recent poor performance.
- What are Electrlox’s reasons for direct investment? 2. How has Electrolux’s strategy changed over time? How has this affected its direct investment activities? 3. Which of Electrolux’s foreign investments would be horizontal and which would be vertical? What are the advantages of each? 4. What do you see as the main advantages and possible problems of expanding internationally primarily through acquisitions as opposed to building one’s own facilities? 5. Should Electrolux take over Granges?
Principles & Practice of Management
Marks – 80
(Please attempt any 4 of the below mentioned case studies. Each Case study is for 20 marks)
Read the following case and answer the questions given at the end of the case.
LOSING A GOOD MAN
Sundar Steel Limited was a medium-sized steel company manufacturing special steels of various types and grades. It employed 5,000 workers and 450 executives.
Under the General Manager operation, maintenance, and headed by a chief. The Chief of and under him Mukherjee Maintenance Engineer. The total was 500 workers, 25 executives, (Production), there were services groups, each Maintenance was Shukla was working as the strength of Maintenance and 50 supervisors.
Chatterjee was working in Maintenance as a worker for three years. He was efficient. He had initiative and drive. He performed his duties in a near perfect manner. He was a man of proven technical ability with utmost drive and dash. He was promoted as Supervisor. Chattejee, now a Supervisor, was one day passing through the Maintenance Shop on his routine inspection. He found a certain worker sitting idle. He pulled him up for this. The worker retaliated by abusing him with filthy words. With a grim face and utter frustration, Chatterjee reported the matter to Mukherjee. The worker who insulted Chatterjee was a “notorious character” , and no supervisor dared to confront him. Mukherjee took a serious view of the incident and served a strong warning letter to the worker. Nothing very particular about Chatterjee or from him came to the knowledge of Mukherjee. Things were moving smoothly. Chatterjee was getting along well with others But after about three years, another serious incident took place. A worker came drunk to duty, began playing cards, and using very filthy language. When Chatterjee strongly objected to this, the worker got up and slapped Chatterjee. Later, the worker went to his union – and reported that Chatterjee had assaulted him while he was performing his duties.
Chatterjee had no idea that the situation would take such a turn. He, therefore, never bothered to report the matter to his boss or collect evidence in support of his case.
The union took the case to Shukla and prevailed over him to take stern action against Chatterjee. Shukla instructed Mukherjee to demote Chatterjee to the rank of a worker. Mukherjee expressed his apprehension that in such a case Chatterjee will be of no use to the department, and. the demotion would adversely affect the morale of all sincere and efficient supervisors. But Chatterjee was demoted.
Chatterjee continued working in the organisation with all his efficiency, competence, and ability for two months. Then he resigned stating that he had secured better employment elsewhere. Mukherjee was perturbed at this turn of events. While placing Chatterjee’s resignation letter before Shukla, he expressed deep concern at this development.
Shukla called Chief of Personnel for advice on this delicate issue. The Chief of Personnel said, “l think the incident should help us to appreciate the essential qualification required for a successful supervisor. An honest and hardworking man need not necessarily prove to be an effective supervisor. Something more is required for this as he has to get things done rather than do himself.” Mukherjee said, “l have a high opinion of Chatterjee. He proved his technical competence and was sincere at his work. Given some guidance on how to deal, with the type of persons he had to work with, the sad situation could h.ave been avoided.” Shukla said, “l am really sorry to lose Chatterjee, He was very honest and painstaking in his work. But I do not know how I could have helped him; I wonder how he always managed to get into trouble with workers. we know they are illiterates and some of them are tough. But a supervisor must have the ability and presence of mind to deal with such men. I have numerous supervisors, but I never had to teach anybody how to supervise his men.”
(a) Identify the problems in this case.
(b) Do you think the decision taken by shukla is in keeping with the faith, trust and creating developmental climate in the organisation? Critically evaluate
(c) How would you help in improving rough and tough behavior of employees?
Read the following case and answer the questions given at the end.
The ABC Manufacturing Company is a metal working plant under the direction of a plant manager who is known as a strict disciplinarian. One day a foreman noticed Bhola, one of the workers, at the time-clock punching out two cards his own and the card of Nathu, a fellow worker. Since it was the rule of the company that each man must punch out his own card, the foreman asked Bhola to accompany him to the Personnel Director, who interpreted the incident as a direct violation of a rule and gave immediate notice of discharge to both workers. The two workers came to see the Personnel Director on the following day. Nathu claimed innocence on the ground that he had not asked for his card to be punched and did not know at the time that it was being punched. He had been offered a ride by a friend who had already punched out and who could not wait for him to go through the punch-out procedure. Nathu was worried about his wife who was ill at home and was anxious to reach home as quickly as possible. He planned to take his card to the foreman the next morning for reinstatement, a provision sometimes exercised in such cases. These circumstances were verified by Bhola. He claimed that he had punched Nathu’s card the same time he punched his own, not being conscious of any wrongdoing.
The Personnel Director was inclined to believe the story of the two men but did not feel he could reverse the action taken. He recognized that these men were good workers and had good records prior to this incident. Nevertheless, they had violated a rule for which the penalty was immediate discharge. He also reminded them that it was the policy of the company to enforce the rules without exception.
A few days later the Personnel Director, the Plant Manager, and the Sales Manager sat together at lunch. The Sales Manager reported that he was faced with the necessity of notifying one of their best customers that his order must be delayed because of the liability of one department to conform to schedule. The department in question was the one from which the two workers had been discharged. Not only had it been impossible to replace these men to date, but disgruntlement over the incident had led to significant decline in the cooperation of the other workers. The Personnel Director and the Sales Manager took the position that the discha rge of these two valuable men could have been avoided if there had been provision for onsidering the circumstances of the case. They pointed out that the incident was costly to the company in the possible loss of a customer, in the dissatisfaction within the employee group, and in the time and money that would be involved in recruiting and training replacements. The Plant Manager could not agree with this point of view. “We must have rules if we are to have efficiency; and the rules are no god unless we enforce them. Furthermore, if we start considering all these variations in circumstances, we will find ourselves loaded down with everybody thinking he is an exception.” He admitted that the grievances were frequent but countered with the point that they could be of little consequence if the contract agreed to by the union was followed to the letter.
(a) Identify the core issues in the case
(b) Place yourself in the position of the Personnel Director. Which of the following courses of action would you have chosen and why?
(i) Would you have discharged both men?
(ii) Would you have discharged Bhola only?
(iii) Would you have discharged Nathu only?
(iv) Would you have discharged neither of them? Justify your choice of decision.
(c) What policy and procedural changes would you recommend for handling such cases in future?
Read the case and answer the questions given at the end of the case.
PK Mills manufactures woolen clothes. Over the years, it has earned an envious reputation in the market. People associate PK Mills with high quality woolen garments. Most of the existing employees have joined the company long back and are nearing retirement stage. The process of replacing these old employees with younger ones, drawn from the nearby areas, has already begun. Recently, the quality of the garments has deteriorated considerably. Though the company employs the best material that is available, the workmanship has gone down. Consequently, the company has lost its customers in the surrounding areas to a great extent. The company stands, in the eyes of general public, depreciated and devalued. The production manager, in a frantic bid to recover lost ground, held several meetings with his staff but all in vain. The problem, of course, has its roots in the production department itself. The young workers have started resisting the bureaucratic rules and regulations vehemently. The hatred against regimentation and tight control is total. The old workers, on the verge of retirement, say that conditions have changed considerably in recent years. In. The days gone by, they say, they were guided by a process of self-control in place of bureaucratic control. Each worker did his work diligently and honestly under the old set-up. In an attempt to restructure the organizational set-up, the managers who have been appointed afterwards brought about radical changes. Workers under the new contract had very little freedom in the workplace. They are expected to bend their will to rules and regulations. Witnessing the difference between the two ‘cultures’ the young workers, naturally, began to oppose the regulatory mechanism devised by top management. The pent-up feelings of frustration and resentment against management, like a gathering storm, have resulted in volcanic eruptions leading to violent arguments between young workers and foremen on the shop-floor. In the process production has suffered, both quantitatively and qualitatively. The production manager in an attempt to weather out the storm, is seriously thinking of bringing about a radical change in the control process that is prevailing now in the organization.
(a) What are the core issues the case?
(b) Do you agree with the statement “The problem, of course, has its roots in the production department itself”? Reason out your stand.
(c) Critically evaluate the finding that old supervisors complain and new workers to resist any type of control.
(d) What type of control system would you suggest to the company to improve the production?
The AB Steel Plant
The Vice President for Production at the AB Steel Plant was giving the Production Department Manager, Mr. Singh, a hard time for not doing anything about his work group which was perpetually coming late to work and was behind schedule in the performance quotas for several months now. The vice President’s contention was that if the production’ crew was consistently tardy, the production process was delayed by about 15 minutes on an average per member per day, and this was no way for the department to meet the assigned quotas. “They are losing about 6 to 8 hours of production time per member per month, and you don’t seem one bit concerned about it,” he yelled at the manager. He added that he was pretty upset about the ‘lax management style’ of the manager and very clearly stated that unless the manager did something about the tardiness problem, another manager who can manage the crew effectively’ will have to be found.
Mr. Singh knows that he has an able and good group of workers but he also realizes that they are bored with their work and do not have enough incentives to meet the production quotas. Hence, they seem to respond to the situation by taking it easy and coming late to work by a few minutes every day. Mr. Singh has also noticed that they were taking turns leaving the workplace a few minutes early in the evenings. Even though Singh was aware of this, entire he pretended not to notice the irregularities and was satisfied that once the workers started their work, they were pretty good at their jobs and often helped to meet rush orders whenever they knew that Mr. Singh was in a bind.
(a) What do you think is the real, problem in this case?
(b) How do you perceive the stand of Mr. Singh? Analyze critically.
(c) What intervention should Mr. Singh use to rectify the type, of situation he is presently confronted with? Discuss giving the reasons.
(d) Discuss the implications of effecting them with your recommendations.
Dealing with an Employee’s Problem
Ms. Renu had graduated with a degree in foreign languages. As the child of a military family, she had visited many parts of the world and had travelled extensively in Europe. Despite these broadening experiences, she had never given much thought to a career until her recent divorce.
Needing to provide her own income, Ms. Renu began to look for work. After a fairly intense but unsuccessful search for a job related to her foreign language degree, she began to evaluate her other skills. She had become a proficient typist in college and decided to look into secretarial work. Although she still wanted a career utilizing her foreign language skills, she felt that the immediate financial pressures would be eased in a temporary secretarial position.
Within a short period fo time, she was hired as a clerk/typist in a typical pool at Life Insurance Company. Six months later, she became the top typist in the pool and and was assigned as secretary to Mrs. Khan’ manager of marketing research. She was pleased to get out of the pool and to get a job that had more variety in the tasks to perform. Besides, she also got a nice raise in pay.
Everything seemed to proceed well for the next nine months. Mrs. Khan was pleased with Renu’s work, and she seemed happy with her work. Renu applied for a few other more professional jobs in other areas during this time. However, each time her application was rejected for lack of related education and/or experience in the area.
Over the next few months, Khan noticed changes in Renu. She did not always dress as neatly as she had in the past, she was occasionally late for work, some of her lunches extended to two hours, and most of her productive work was done in the morning hours. Khan did not wish to say anything because Renu had been doing an excellent job and her job tasks still were being accomplished on time. However, Renu’s job behavior continued to worsen. She began to be absent frequently on Mondays or Fridays. The two-hour lunch periods became standard, and her work performance began to deteriorate. In addition, Khan began to suspect that Renu was drinking heavily, due to her appearance some mornings and behavior after two-hour lunches.
Khan decided that she must confront Renu with the problem. However, she wanted to find a way to held her without losing a valuable employee. Before she could set up a meeting, Renu burst through her floor after lunch one day and said:
“I want to talk to you Mrs. Khan”
“That’s fine,” Khan replied. “Shall we set a convenient time?”
“No! I want to talk now.”
“OK, why don’t you sit down and let’s talk?”
Khan noticed that Renu was slurring her words slightly and she was not too steady.
“Mrs. Khan, I need some vacation time.”
“I’m sure we can work that out. You’ve been with company for over a year and have two weeks’ vacation coming.”
“No, you don’t understand. I want to start it tomorrow.”
“But, Renu, we need to plan to get a temporary replacement. We can’t just let your job go for two weeks”.
“Why not? Anyway anyone with an IQ above 50 can do my job. Besides, I need the time off. ”
“Renu, are you sure you are all right ?”
“Yes, I just need some time away from the job.”
Khan decided to let Renu have the vacation, which would allow her some time to decide what to do about the situation.
Khan thought about the situation the next couple of days. It was possible that Renu was an alcoholic.
However, she also seemed to have a negative reaction to her job. Maybe Renu was bored with her job. She did not have the experience or job skills to move to a different type of job at present. Khan decided to meet with the Personnel Manager and get some help developing her options to deal with Renu’s problem.
(a) What is the problem in your opinion? Elaborate.
(b) How would you explain the behavior of Renu and Mrs. Khan? Did Mrs. Khan handle the situation timely and properly?
(c) Assume that you are the Personnel Manager. What are the alternatives available with Mrs. Khan?
(d) What do you consider the best alternative? Why?
Total Marks – 80
Section A: 5 Marks Each (Attempt any 3)
- Discuss the nature and scope of operations management in terms of production decisions.
- Explain the product selection and stages involved therein.
- What are the various kinds of production systems? Discuss the nature of Mass Production.
- Discuss in brief how do you organise value engineering function in an electronic industry?
- Define .Purchase Systems. What are the common objectives of the purchasing function?
Section B: 5 Marks Each (Attempt any 3)
- Design an assembly line for a cycle time of 10 minutes for the following 10 work elements:
Elements : 1 2 3 4 5 6 7 8 9 10
Immediate predecessor : 0 1 2 2.3 4 5 6 5 7.9 9
Duration in minutes : 5 10 5 2 10 7 5 2 5 7
- Discuss how a quality-management program can affect productivity.
- Select three service companies or organizations you are familiar with and indicate how
process control charts could be used in each.
- Explain the various factors that are to be taken into account for plant location. Discuss
in connection with setting up an Automobile industry.
- Explain the term ‘Break-even analysis’. Draw imaginary BEP chart and briefly describe
its merits and demerits.
Section C: 10 Marks Each (Attempt any 3)
- (a) Explain what you understand by the term “Total Quality Management”, paying particular attention to the following terms :
quality, supplier-customer interfaces, and process.
(b) Define Productivity. List some factors that can affect productivity and some ways in which productivity can be improved.
- (a) Give two examples (with supporting details) of the impact of technology in product and service design, in the context of service and manufacturing firms.
(b) A firm uses simple exponential smoothing with α = 0.1 to forecast demand. The forecast for the first week of February was 500 units, whereas actual demand turned out to be 450 units.
(i) Forecast the demand for the second week of February.
(ii) Assume that the actual demand during the second week of February turned out to be 505 units. Forecast the demand for the third week of February.
- (a) Bloomsday Outfitters produces T-shirts for road races. They need to acquire some new stamping machines to produce 30,000 good T-shirts per month. Their plant operates 200 hours per month, but the new machines will be used for T-shirts only 60 percent of the time and the output usually includes 5 percent that are “seconds” and unusable. The stamping operation takes 1 minute per T-shirt, and the stamping machines are expected to have 90 percent efficiency considering adjustments, changeover of patterns, and unavoidable downtime. How many stamping machines are required ?
(b) Give an example of a business that would use a push and one that would use a pull operations control system. Explain your choice and briefly describe how the system works.
- (a) What are the various methods of judgemental forecasting ? Comment on possible errors that are associated with judgemental forecasting.
(b) A time study of a restaurant activity yielded a cycle time of 2.00 minutes, and the waitress was rated at PR = 96 percent. The restaurant chain has a 20 percent allowance factor, Find the standard time.
- (a) What are the advantages of having a company-wide data-bank ? Show how different functions e.g. cost accounting, sales, inventory, manufacturing can be integrated with a data-bank.
(b) A contractor has to supply 10,000 bearings per day to an automobile manufacturer. He finds that, when he starts a production run, he can produce 25,000 bearings per day. The cost of holding a bearing in stock for one year is Rs. 2 and the set-up cost of a production run is Rs. 1,800. How frequently should production runs be made ? (Assume 300 working days in a gear)
Section D: 20 Marks
- Write short notes on any five of the following:
(a) Cellular manufacturing
(b) ISO 9000
(c) Fish-bone Diagram
(e) Cross Impact Matrix
(h) Job Enlargement
Xaviers Institute of Business Management Studies
MARKS : 80
SUB: Marketing Management
- B. : 1) Attempt all Four Case studies
2) All questions carry equal marks.
Case study 1
Case Study on Segmentation, Targeting & Positioning
Profiles Group is a leading interior decorator and designer in the country. Mr. Neerav Gupta, one of the partners in the group has invested a good amount of money in the business. The other two partners namely Mr. Pratham Gupta who is a distant cousin of Neerav and Mr. Dev Suri are mainly into managing the firm’s country wide operations. Mr. Stanley Pereira, who is more of a sleeping partner, looks after the administrative and financial aspects of the firm.
Profiles Group has around 44 service centers in the country including state capitals and several developing cities. Since the firm’s inception in 1998, its progress has been unstoppable. The clients include many reputed companies, hotel chains, popular celebrities and even hospitals and commercial banks.
A brief background of the Partners:
Neerav Gupta had a family owned business that was into manufacturing wooden furniture but Neerav‟s interest was more into decorating. So, after completing a Master’s course in interior designing from a reputed college abroad, he decided to start his own interior design services. Meanwhile, the furniture manufacturing business was handed over to Pratham Gupta due to property and family settlement issues. But, Pratham decided to join Neerav and they both started a partnership firm.
Dev Suri, a friend of Neerav who had been living abroad, sold out his real estate business and had decided to settle on the Indian soil itself. He offered help by providing additional capital and his knowledge of real estates did help the firm although in a small way. Stanley Pereira, an experienced teacher and consultant, had worked previously in leading interior designing colleges and was instrumental in making required changes in syllabus structure and interior designing courses. He has also written many books and articles on the topic. He had retired early due to family commitments but landed up in Profiles Group as a Partner through mutual contacts.
All the four partners are comfortably sitting face to face on a peach colored cushioned sofa which is situated near the window corner inside Neerav’s well-structured office.
Pratham Gupta feels that since their firm has invested large funds, they must enter into more market segments especially the smaller ones. And, regarding this issue, a professional conversation takes place among the partners. The talks are as follows:
Pratham: “So, what do you think about expanding our market segments to smaller more ordinary markets?”
Stanley: “What are you exactly trying to say, Pratham? Will you explain it?”
Pratham: “Listen guys, right now, we have 44 centers and competent people to work under us, but when we see our customer base, it looks small and limited. What I mean to say is that we also need to have those individual household customers who are looking for service expertise in this field. Most household customers don’t get the necessary information as to how to go about the interiors or how to decorate their home/offices etc.”
Neerav: “I agree with your points Pratham, but don‟t you think if we have to reach the smaller segments of the market, we need a different approach to cater to their needs. We would have to advertise and communicate to these segments in a customised way. This will increase the promotion budget and our focus on the existing customers may be compromised.” Dev: “I think we need to get a balance here. Pratham‟s points are valid enough and it will make Profiles group more productive. If need be, we may have to take help of a service consultancy in order to penetrate deeper markets.”
Stanley: “Okay… so, even if we allocate these segments, we need to target them in a way where we will know the immediate impact of these segments. We have to position in such manner that we get this customer base to keep moving towards us… however, the problem lies in the demand for our product in these segments!”
Pratham: “What is that problem you are talking about, Stanley?”
Stanley: “I will tell the problem, we know our product… but these individual customer segments will see our product as a one time purchase… Interiors and designing is done by a household customer at one point… very rarely, he will seek for a change or improvement. So, is it acceptable that we cater to their one time need and then let go?”
Neerav: “I do understand that point… But, that’s always the case in our business. Interior decorations and designs are usually considered one-time expenditure by household customers…. and as a matter of fact, that has not affected the way we do our business or on our returns.”
Pratham: “See, even otherwise it should not affect our firm because individual customer segments are willing to pay or spend on interiors. If they need a good, comfortable home along with a neat set of furniture then why don’t we cater to that need, even if it’s a one time demand from a particular customer? This is exactly what I meant earlier when I said, given the expertise we have, why don’t we use it to expand our customer base? Of course, we may have to develop suitable pricing strategies, promotion strategies for these market segments which is according to me, not a big thing to do.”
Dev: “Let’s first consult with our marketing hero and ask their opinion or suggestions as well”
Dev takes out his cell phone to dial Mr. Sunil’s number and he immediately gets the connection. Sunil is the head of the marketing section and he is very efficient in his job. He also has an acceptable humour quotient. Dev asks Sunil to come over to Neerav’s office.
Sunil enters the office:
Sunil: “What’s up, Bosses?”
Dev gives a brief explanation to Sunil about the potential market.
Sunil: “that’s a welcome sign actually… we have the necessary resources and we are available to any customer at any given point… So, I think it‟s a good idea that we update our customer profiles also… Only thing is we have to make sure we are targeting and positioning our customer segment in the way they feel comfortable to approach us…”
Pratham: “Nicely said Sunil… You are our man in this task…. We rely on you to make our markets bigger and customer segments broader…”
Sunil: “Always thinking in the interests of Profiles Group, Mr. Gupta… Not to worry… You tell me the confirmed plans and leave the execution on me…”
Neerav: “Well, what can I say? If we are sure about managing the newer segments which is existing out there, then our work is just to target them and position our product as per the given requirements”
Dev: “There is one important suggestion I would like to present here…. We need to ensure that we properly differentiate our existing customers from the newer ones so that we are not overriding one another or our customers don’t feel compromised at any point.”
Stanley: “That’s a really valuable suggestion, Dev… I completely agree with this point”
Sunil: “Me too… Mr. Suri has stated an absolute theory… But, it’s not that we can’t take the benefits from the two and use it for our purpose… Somewhere, we can link the newer segments with the existing ones and gradually Profiles Group will mean the same to every one. That is however applicable in the long term… For now, we need to attend our customer base on a one-to-one basis… So, we do it slow and steady”
Neerav: “Sunil, I don’t understand, but whenever you speak you visualize the big picture as well… I admire your quality and also that you are very loyal to Profiles Group”
Sunil: “Anytime Mr. Gupta, I am at your service….Just give the command and it will be done”
All of them laugh at that comment and decide to have an official meeting regarding the Segmenting, Targeting and Positioning strategies for the potential market. Within a month, the scheduled meeting is done with the involvement of key people and various points are noted down for implementation.
The marketing team after a brainstorming session also comes up with a collective idea about introducing Re-decorating and re-designing to be offered as a part of Profile’s group’s services. This meant that clients or customers can think about re-designing or re-decorating their homes/offices with the already available possessions and existing furniture. This also meant less cost to the clients. This idea was taken up seriously and plans to implement such services were already underway.
The next six months in the Profiles Group has made everyone busy with different tasks and agendas to be accomplished. Sunil is the busiest person around and he is actively engaged in marketing activities related to the targeting and positioning of their product to the new customer base.
Very soon, the results are noticeable in the Profiles Group. After a considerable amount of planning and hard work, the subsequent months showed positive results as given below:
The markets are segmented based on the income level of the household customers
Their needs, wants and demands are analyzed
These markets are targeted based on their desire, willingness and capabilities to attain the required interiors and furnishings.
Sunil headed a separate section namely Re-designing and Re-decorating Services at the firm’s main office. Sunil was immediately involved in making special centers for Re-designing and re-decorating services in different parts of the country.
Marketing section was taken over by a competent person – Ms. Sneha Agarwal who has over 8 years of experience in interior designing. She was chosen on the recommendation of Stanley Pereira as Sneha had been a merit student previously and Stanley had been her teacher.
Neerav had even managed to get some MNC‟s as the firm’s clients.
Positioning of Profiles Group’s product and services was done in three ways –
For the already existing customer base which include the corporate and business houses, film industry and celebrities and other big units who spend huge amounts on the interior decorations.
For the newer segments also termed as the individual household segments who have limited spending abilities but have a desire for elegant interiors at reasonable rates.
For the collective market – re-design and re-decor services were offered.
The structure of the firm’s web-site was made more user-friendly and included several videos showing how proper layout and interiors increased efficiency, easy movement, allowed more lighting and ventilation and created a feeling of well-being and comfort.
A CD was also launched which included these videos and the necessary information of the Profile’s firm with the contact addresses and numbers. The CD also included interview with certain well-known clients who were highly satisfied with the firm’s services. This established trust and good communication in the market.
Soon enough, the firm launches into environmental friendly interiors and develops „Go Green‟ initiatives that uses more re-cycled and renewable substances.
There was a plan to begin annual contests and games which involved household customer segments to give their ideas or suggestions for a well laid out interiors using eco-friendly materials and “Go-Green‟ initiatives.
The Partners and the interview:
It’s been two years now since Profile’s Group had moved into individual household segments.
All four partners are seated on the sofa inside Neerav‟s office except this time the sofa is of cream shade and a press reporter namely Namitha Goel is sitting on a single sofa across them. Namitha Goel had scheduled this interview and later will be published in the “Living Designs”, a new monthly magazine that deals with interiors. She begins with a direct question to Neerav –
Namitha: “Mr. Neerav Gupta, do you think the reason for the substantial increase in your customer base is due to the Redesign and re-decoration services?
Neerav: “Well, to a considerable extent, I believe it is so. Re-design is not about my taste or your taste. It’s about working with what the client owns and making them happy. Most people are good in re-arranging their stuff but they don’t have time or energy to do it. So, we offer them this assistance.”
Namitha: “How come you got this thought about making these household segments as your customers? I mean, your firm is associated with the influential clientele base and considering that, why did you feel that these household segments would prove to be a lucrative market for you?”
Neerav: “The entire credit for making individual household segments as our customers goes to my business partners here, my workforce and their efforts. Around two and a half years back, we had just got into a conversation in this very same office and Pratham suggested about tapping these markets with our available resources. Let me clarify that we decided to target this segment not for profits but we felt they too would benefit from our expertise in this field.”
Namitha: “According to the market survey, it seems that there is no close competitor for you in this business. So, your firm stands at the top like it’s been from a long time. What do you say in this matter?”
Neerav is about to answer but his cell phone rings and he attends to it quickly.
Neerav: “Excuse me, Ms. Namitha.., I have urgent business call that can’t wait…, Carry on with your questions and my team mates will answer. I have to go now.” He addresses his partners and leaves the office in a hurry.
The interview proceeds and remaining partners contribute their views. The interview takes another 45 minutes and Namitha Goel is satisfied with her work as a press reporter. She leaves the Profile’s Group office with a sense of achievement.
The next month’s issue of “Living Designs” carries the cover story of the Profiles Group with the partners‟ exclusive interview placed in the shaded column of the magazine pages.
Questions: 1 Examine the progress of Profile’s Group as a leading interior designer and decorator.
Questions: 2 What kind of change was observed in the STP strategy of the firm and how was it useful?
Questions: 3 Evaluate the working of Profile’s group with respect to the Segmenting, Targeting and Positioning of markets. Do you have any suggestions for the firm?
Case study 2
Determining the Marketing 4 P’s
Any business organization in order to be successful needs to have a clear picture about the 4 P’s of marketing. This forms the basis on which business functioning takes place. What are these 4 P’s and why are they important? Let’s assume that we are interested to start up a small business enterprise and for that we have the necessary capital, skills and people. And now, since we are in the initial stage of enterprise formation, we need to answer the previous question.
Marketing mix comprises of the four basic elements or components which are termed together as 4 P’s of marketing. They are:
Product: what is it that we have to offer to the market? What can it include? In what ways can it be modified, changed, expanded, diversified etc.? Will our products be accepted in the market? If not, how do we create a market for our products?
Price: at what value should the products be offered in the market? What should be the returns? Will it be worth to the buyers? What variations, differences and strategies can we adopt in order to earn a fair margin and also gain customer satisfaction?
Place: where must be our products available? How soon it’s demanded in the market? How quick we can deliver it to the consumption points? Who do we need to involve in the distribution of our products? How much will they charge for their services?
Promotion: why do we need to promote our products? Will people be aware of our products if we don’t do any promotion? If we need to promote our products, what kind of message we should convey to the market? In what ways and methods we can carry out the promotion?
Unless we know the answers to the above questions, we cannot make our business function. Therefore, after considering the strengths and weakness of our likely enterprise and studying the market opportunities, we decide to manufacture wax crayons.
The main reason behind this decision is –
- We can come up with an effective 4 P’s either by marketing the crayons ourselves and if not, we can take orders by being the suppliers to our clients.
- We know that our market mainly comprises of educational institutions, drawing and painting classes/centers, artistes, even big companies use crayons extensively.
- We realize the potential of wax crayons as we can offer variety in sizes, quality, colors, price ranges, wholesale and retail prices etc. We can even venture into related areas such as wax artic rafts, wax candles, oil colors, paint etc.
- We can have direct contact with our clients and in the long term we can even engage an agency to market the crayons.
- We know that promotion strategies can be based on the type of our customer segment and we could easily do it through advertising on Television, newspapers, children’s comics, notebooks, school notice boards, etc. We can even sponsor or conduct drawing competitions, art exhibitions or we can have contractual agreements with the stationery outlets, art schools etc. However, we are still apprehensive about our marketing mix. We are yet to confirm about our marketing mix and until then we are unable to finalize on our decisions or start with the implementation process.
Question 1.How will you determine the marketing mix for our enterprise?
Question 2.Do you have any ideas to make our enterprise successful particularly by enhancing or improving the marketing mix?
Question 3.What do you think will be the challenges in making an effective marketing mix since our enterprise is a new one?
Case study 3
Good Publicity vs. Bad Publicity
Roger Twain walked as usual with a pleasant aura and at a leisurely pace to his office. Roger is a PR Manager in one of the top FMCG companies of the world. His office along with the PR staff was recently shifted from sixth floor to the second floor of the building. The reason was simple enough. Top management did not want external parties to wander around the whole building in the excuse of meeting PR staff or the PR manager. Roger Twain in fact, welcomed this shift and was glad that he didn’t have to wait for the lift as he could now very well use the staircase. Roger has around 15 years of experience in PR and handling Publicity related issues. He had worked with several companies as well as non-business organisations and institutes.
Roger currently in his 53rd year has achieved lot of success in his career as a professional expert in the field of PR and Publicity handling. Although his plans to start his own PR Consultancy firm didn’t work out the way he wanted, he was actively involved in several worldwide workshops, seminars and presentations. He even wrote articles on PR strategies and published some books on PR. Roger’s ideologies as a PR professional was –
“No News is not good news… You have to be in the news – good or bad. And, the objective should
be to convert bad news into good news.”
“You cannot create bad news about your company. At the same time, you cannot create a good one. You can only communicate it in good or bad way.”
“PR is about being in the news – time and date don’t matter much.”
“It’s not about being right or wrong – it’s about being clear and sticking to the truth and using it positively.”
“Everyone has a right to express… But, a PR person should consider it as a righteous Duty”
“Your Company can show only performance. PR has to talk about it.”
A few of his career achievements in the different organizations that he worked for are as follows:
Problem Situation 1: Some of the cosmetic products of Jasper Ltd. were selling in the market beyond its expiry date. A media report exposed and presented this story to the public that Jasper Ltd. was desperate to increase its sales and did not consider consumers’ interests or their well-being. This led to decrease in sales volume even in the other product categories of the company. Due to incorrect operations of some channel members and retail outlets, old stock was sold to the consumers after the expiry dates. The outcome was Jasper Ltd.’s low profit margins.
Challenge: Roger’s challenge was to make consumers more aware and responsible while purchasing the company’s products without ruining the distribution channel relations and at the same time making the company socially responsible.
Solution: Roger suggested to the advertising department to create a public awareness ad regarding the importance of checking product expiry dates before buying. He advised the management to take back old stock from the retail outlets and distributors by offering a reasonable price and also prescribing the time limit within which those products should reach the company. Roger’s view was that distributors will mostly see their benefit and continue to sell the old stock. If they sell it back to the company itself for a price, they would definitely make an effort to get the new stock and sell those to the consumers. Roger’s logic was “it is better to spend some money on getting back the old stock than let it sell in the market at the risk of company’s reputation.” Meanwhile, consumers will also be aware about expiry dates of cosmetics when they buy it.
Problem situation 2: Acorn Seeds Company’s assistant finance manager was involved in some fraudulent activity and was accused of misappropriation of funds. This news became public and soon enough, company’s investors and stakeholders began to question the integrity and trustworthiness of the company. Company found it difficult to convince people that one person’s immoral intentions does not mean that everyone in the company is beyond trust and moral obligations. Furthermore, company’s products and services got severely affected and consumers started opting for competing products. There was bad publicity all around. Sales declined and situation got worse when finance manager unable to handle pressure resigned. Even though finance manager was not involved with his assistant, he was linked with him and given a bad treatment from outsiders even including some of the employees. Media accelerated this issue and created more hype than was necessary.
Challenge: Roger’s challenges in this situation was handling bad press, dealing with media people with patience and uplift the company’s integrity with good reputation. He also needed to make the financial department integrated with other departments and boost the employee morale. At the same time he had to take care that company’s products do not suffer in the situation.
Solution: Roger suggested to the top management to issue a public message in the newspapers/magazines and also at the end of the Company’s product ads on TV. The message was – “We value your trust in us as you value our commitment towards you.” Roger’s view was that once the fraud was committed and was out in the open, there was nothing much to be done but to move on accepting that such incident occurred and will not happen again. Roger also advised for just one press conference regarding this issue to put an end to this matter. The assistant finance manager had confessed and was told to resign instead of being fired. Soon enough, people forgave and forgot this issue, sales improved and company was on the track once again.
Problem Situation 3: One of the women’s facial creams produced by Jasper Ltd. was severely criticised by media and women. The belief was that the product contained acidic substance causing harmful chemical reactions on the skin. This belief was created when some women claimed that their skin discoloured/scalded after using this facial cream. Media reports provided some facts related to the product that made women who were using this cream more alert. As a result sales dropped drastically.
Challenge: First of all, Roger had to study the product and know its constituents. Secondly, he discussed with product research team as to why such claims could be targeted towards the product. Next, he had to face the media and women consumers addressing the claims and product’s safety.
Solution: Roger collected those facts provided in the media reports and sent them for verification with the skin specialists, research team and for laboratory testing. It was verified and proved that facts provided were immaterial in causing damaged skin. It was also proved that the cream contained no acidic substance or any sort of harmful chemical. Secondly, those women who claimed skin damage were questioned about their application of the skin cream. Two women confessed that they combined several other beauty products along with cream’s application. Others confessed that they were interested in making some quick money if company provided any compensation. Roger arranged a special press meet and provided all the relevant facts and information regarding this issue.
Problem Situation 4: Homely Anchor, a charitable organisation that mainly looked after elderly people in several old age homes was having a problem with its donations. There were anonymous donations coming from several places that it was difficult to track the funds and its allocation. The members of the organisation were themselves confused with the amount collected and amount spent since proper records were not maintained. There were gaps in the accuracy of the information and its updates. Somehow, a magazine columnist/writer got to know about this state of affairs and without much investigation published a small article in the magazine. The article stated how Homely Anchor was unable to manage funds and money received through anonymous donations remained anonymous. Although the article was not accusing of fraud, it hinted the readers in that direction. Within a few months of the article publication, some social activist groups and media started questioning Homely Anchor. There were questions raised on who were the anonymous fund raisers, amount of donations and what and how much was being spent where.
Challenge: Since Roger was working as a part-time Public Relations officer in Homely Anchor, he had to face the social activists and media on behalf of the organisation. He had to protect the privacy of anonymous donation givers and assure them as well as old age homes that funds are raised, managed and used for good intentions.
Solution: He merely gave open statements telling that a proper system will soon be in place that would ensure the accuracy and safety of records related to donations and fund raising. Shortly, he arranged for a small conference consisting of prominent social activists, charitable workers and media representatives to discuss and debate on the implementation of proper systems in charitable organisations. This conference gained lot of popularity and free publicity for Homely Anchor which resulted in more donations. An appropriate system was also implemented to record the transactions.
Problem Situation 5: The research and production team at Sparkly Company had designed a new and innovative technology of purifying water in their product – “Sparkler water purifiers”. This system was tested and proved that it was safe and that it purified water without destroying its minerals. Once it was approved, production plants were ready to manufacture water purifiers in the newly designed way. But, information had leaked to the rival competitor “Visor” Ltd. who immediately took advantage of the opportunity. Visor Ltd. issued statements in the press about this new technology of purifying water and that soon they will be marketing these products. There was a commotion in Sparkly Company due to this. Research and production teams began to accuse each other on the information leakage. Somehow, management was not able to control the situation. News spread about the rivalry issues and information leakage. Media was too interested in finding out which company would come out with the product first.
Challenge: Roger too found this situation difficult to handle. There was definitely an information leakage regarding the new method implemented in water purifiers. Roger’s immediate tasks were to find how information was leaked out and who would have done it. He knew the commitment levels of the company’s employees were not questionable. Second, he had to ensure that Sparkling Company was the first to introduce this technique and at the same time he could not accuse Visor Ltd. openly in public.
Solution: Since acquiring patents (exclusive rights) to the new technique in water purifiers was in process, Roger decided not to talk about it. He then released a statement in the press as “Sparkly Company’s dedicated effort towards manufacturing Sparkler Water purifiers with new technology was a long time process. It involved continuous research and lab experiments by the team. This technology shows our expertise and we will never compromise on our products.” After an internal investigation, Roger found that company’s certain e-mails were hacked and through that, information had leaked to Visor Ltd. So, systems and networks were made more secure. Roger made it clear in his public appearance in the media that crucial information did leak out due to the insecure network and computer systems. But, he was careful not to mention names or make any accusations. Media turned their attention to Visor Ltd. questioning its integrity, ethical and business values.
1) Identify the qualities of Roger as a PR professional and analyse his role in the companies that he worked for.
2) In the above problem situations, was there any other approach that Roger could have adopted? If yes, suggest some approaches. If no, why do you agree with Roger’s approach?
3) List the PR tools and strategies that were adopted by Roger in dealing with the problem situations.
Case study 4
Personal Selling – Professional approach
“Keep Fit” is a medium-sized outlet exclusively dealing in exercising equipments/machines and fitness accessories and sometimes in sports equipments also. It has 27 sales persons employed under it. Owners of the outlet – an active middle-aged couple have several contacts abroad through which they place orders for the necessary and required equipments. Once an order is placed for particular equipment, it takes atleast 2 weeks for the equipment to reach the outlet. Secondly, the sales force is involved in cold calls, constantly checking upon new orders from the existing customers and getting new customers to place orders for these equipments from in and around the city. Sometimes, they travel to other nearby cities seeking orders and new customers.
Some of the equipments that Keep Fit sells are –
Cardio equipments such as Treadmills, Stair climbers, Steppers, Bikes, Ellipticals, Rowers, so on.
Strength equipments such as Weight benches, Power racks and varieties, different kinds of Weight machines which is supplied as per customer’s requirements, lifting accessories, home gym systems, and other machines.
Fitness accessories such as pedometers, ankle and wrist weights, jump ropes, stretch mats, hand grips, exercise balls, pull and push up bars, so on.
Sports accessories such as soccer balls, volleyballs, basketballs, poles, boxing gloves, track pants and such other stuff if at all there is customer demand or they have placed such orders.
The owners have already realized the growth potential of these equipments/machines after analyzing the following:
- a) Since most people are becoming health and fitness conscious, there is lot of demand but supply is comparatively low.
- b) Due to heavy work pressures and IT related jobs that require people to sit in front of their computer systems for long, it has resulted into high demand for creating and maintenance of gyms in the companies and at the workplaces.
- c) The affluent class or groups especially celebrities and sports stars don’t mind purchasing and owning these equipments in their homes, the objective being creation of a personal gym at home.
- d) Fitness centers, gymnasiums and sports clubs are increasing in number and so is the demand for the exercising equipments and machines.
- e) Encouragement given to different sports requires the sports men and women to use such equipments and therefore, they have to be provided with such resources so as to participate in national or international sports events like Olympics.
Two more salespersons were recently recruited and selected by the owners. After the training and several exposures to the sales practices adopted by experienced salespersons, these two salespersons were ready for the actual job.
The first salesperson namely Mr. Jagan Das is hard-working and efficient in his work. It was observed in the training programme that he was alert to the situations and environment around him. But, at the same time he had a weakness of listening a lot to other people’s opinions and not contributing his thoughts or ideas. However, he was enrolled in a short-term communication course to improve his language skills and expressing his thoughts. The second salesperson namely Mr. Tarun Mehra is an enthusiastic and determined chap. He likes to share ideas and given the time, he would talk his way out. In the training programme, he asked lot of questions and after receiving answers would again question about why and how of things. His only weakness was his tendency to get over-enthusiastic about things and situations that he would forget about existing situation or problem.
In the first few months, Jagan and Tarun were getting along fine as they were assigned the same sales territory. Sometimes, they would go together to collect orders and even dispatch orders to the customers. Together, they were able to deal with complicated clients and achieve higher sales targets than what was assigned to them.
Lately, the owners observed small fights happening between Jagan and Tarun. They were not sure as to what caused the disagreements that led to fights but eventually, the couple decided that the salesmen needed to sort it out by themselves. On Jagan’s request, their sales territories were separated and now, Jagan and Tarun had to deal with different customers at different locations.
After Reading the Background Information, analyse the following two situations and answer the questions given at the end:-
Jagan is at the outlet’s veranda listening to how another sales person handled a customer’s complaint. He receives a call from one of the old customers of the outlet. The telephonic conversation goes as follows:
Customer: “From “Shape-up” Gym, I am Raghav speaking… Two months back, I purchased this treadmill from you for our gymnasium located at the city’s east and now it is causing some problem… till now whatever gym equipments we purchased from you had no problems of any kind”
Jagan: “Please tell me your problem Sir…”
Customer: “See, actually I can fix the problem… I know some people who can do it very easily… but that’s not my point… I need to know why the machine caused problem.”
Jagan: “You tell me your problem Sir, and then we will fix it for free…”
Customer: “I am not having a problem; your machine has a problem”
Jagan: “I will come at your place Sir, tell me your exact problem so I can note it down and solve it as soon as possible”
Customer: “I can solve the problem… I need to know whether the treadmill comes with a guarantee period and why a brand new machine is causing this problem”
Jagan: “I will come over there Sir and if it’s possible, I will bring a technical member from my team along with me…”
Customer: “No Thanks for your help… I will speak to your Boss about the treadmill’s inefficiency!”
Jagan: “Wait… let me know what I can do for… …”
The call is dropped and Jagan is unclear as to what he must do next. Should he call back the customer on the same number as appearing on his mobile or should he find out if he can trace the customer information from the sales records of the last two months or should his superior know about this incident? The customer appeared to be in a hurry and didn’t even tell about the problem. Jagan also wondered about how Tarun would react to this kind of call.
Tarun is busy entering some information into the sales records. He is asked to pick up a call from the superior’s office and following conversation takes place:
Customer: “Is this Keep Fit?”
Tarun: “Good evening Sir, yes it is… May I know your name Sir?”
Customer: “Who am I speaking to? … I am Jonathan from Lance Sports Club”
Tarun: “Mr. Jonathan, this is Tarun and I am a sales executive at Keep Fit… you can tell me your concern Sir,”
Customer: “I had placed an order for 7 pairs of weight plates, 6 pairs of dumbbells, and 2 exercising bikes – one upright and also 2 treadmills and volleyball”
Tarun: “I am listening Mr. Jonathan”
Customer: “Yes, good, now according to price-list, it says 3 treadmills, 3 exercising bikes, 6 pairs or weight plates, 6 pairs of dumbbells…. the thing is number of items mentioned in the bill are completely wrong”
Tarun: “Just tell me the Bill Number and I will get back to you Jonathan… But, how many items have you received in actual numbers?”
Jonathan: “Well, that’s the problem… I have received the same numbers as I placed in the order… but, the bill and the list says wrong numbers… and only that volleyball is not received”
Tarun: “Okay…. Just see on the top left of your list… you will find the Bill Number… please tell me that…”
Jonathan: “There is no Bill number in this…”
Tarun: “Please check it once again… there is a bill number mentioned at the top left or top right or somewhere at the top… Okay… tell me the date of the bill and your order placement date atleast”
Jonathan: “No, it’s alright, there must be a mistake… we will sort it out during the payment”
Tarun: “Mr. Jonathan… Please co-operate and tell me the bill number or the date so that I can verify it in the sales records and check the invoices also”
Jonathan: “No, that’s okay… do not bother about it… we will confirm later…”
Tarun: “Listen Mr. Jonathan, I can just…. …” But, before Tarun tells anything more, the customer has cut off the call. Tarun feels uneasy about the conversation. He was being so helpful and wanted to clarify the figures but it looked like the customer was not interested to do so. Should he follow up on the customer after finding out the necessary details or should he just keep quiet till the customer raises the issue once again? Should he tell this to his superior? He tried to imagine Jagan’s way of tackling these types of customers.
In both the situations, the salespersons have not met the customers personally. In Situation 1, Jagan is dealing for the first time with one of the old customers of the outlet. In Situation 2, Tarun had spoken to some other member of the sports club previously.
Question 1:- Identify the approach (plus points and negative points) of the two salespersons in the above situations and make a comparative analysis.
Question 2:- In both the situations, were the customers satisfied with how the salespersons handled their queries? Analyse the sales person’s and customer’s interactions in the above situations.
Question 3:- If you were a salesperson, how would you have handled the above two situations? Do you have any suggestions for Jagan and Tarun?