EASTERN MACHINES COMPANY CASE STUDY SOLUTION

EASTERN MACHINES COMPANY CASE STUDY SOLUTION
Case 5: EASTERN MACHINES COMPANY

Raj, who was in charge production felt that there are many problems to be attended to. But Quality Control was the main problem, he thought, as he found there were more complaints and litigations as compared to last year. With the demand increasing, he does not want to take any chances.

So he went down to assembly line, but was greeted by an unfamiliar face. He introduced himself.

Raj: I am in charge of checking the components, which we use, when we assemble the machines for customers. For most of the components, suppliers are very reliable and we assume that there will not be any problem. When we generally test the end product, we don’t have failures.

Namdeo: I am Namdeo. I was in another dept. and has been transferred recently to this dept.

Raj: Recently we have been having problems, and there has been some complaint or other about the machines we have supplied. I am worried and would like to check the components used. I would like to avoid lot of expensive rework.

Namdeo: But it would be very expensive to test every one of them. It will take at least half an hour for each machine. I neither have the staff nor the time. It will be rather pointless as majority of them will pass the test.

Raj: There has been more demand than supply for these machines in last 2 years. We have been buying many components from many suppliers. We have been producing more with extra shifts. We are trying to capture the market and increase our market share.

Namdeo: We order for components from different places, and sometimes we do not have time to check all. There is a time lag between order and supply of components, and we cannot wait as production will stop. We use whatever comes soon as we want to complete our orders.

Raj: Oh! Obviously we need some kind of checking. Some sampling technique to check the quality of the components. We need to get a sample from each shipment from our component suppliers. But I do not know how many we should test.

Namdeo: We should ask somebody from our statistics dept. to attend to this problem.

As a Statistician, advice what kind of Sampling schemes can we consider, and what factors will influence choice of scheme. What are the questions we should ask Mr. Namdeo, who works in the assembly line?

STAR ENGINEERING COMPANY CASE STUDY SOLUTION

STAR ENGINEERING COMPANY CASE STUDY SOLUTION

CASE – 4 STAR ENGINEERING COMPANY

Star Engineering Company (SEC) produces electrical accessories like meters, transformers, switchgears, and automobile accessories like taximeters and speedometers.
SEC buys the electrical components, but manufactures all mechanical parts within its factory which is divided into four production departments Machining, Fabrication, Assembly, and Painting—and three service departments—Stores, Maintenance, and Works Office.
Though the company prepared annual budgets and monthly financial statements, it had no formal cost accounting system. Prices were fixed on the basis of what the market can bear. Inventory of finished stocks was valued at 90 per cent of the market price assuming a profit margin of 10 per cent.
In March, the company received a trial order from a government department for a sample transformer on a cost-plus-fixed-fee basis. They took up the job (numbered by the company as Job No 879) in early April and completed all manufacturing operations before the end of the month.
Since Job No 879 was very different from the type of transformers they had manufactured in the past, the company did not have a comparable market price for the product. The purchasing officer of the government department asked SEC to submit a detailed cost sheet for the job giving as much details as possible regarding material, labour and overhead costs.
SEC, as part of its routine financial accounting system, had collected the actual expenses for the month of April, by 5th of May. Some of the relevant data are given in Exhibit A.
The company tried to assign directly, as many expenses as possible to the production departments. However, It was not possible in all cases. In many cases, an overhead cost, which was common to all departments had to be allocated to the various departments using some rational basis. Some of the possible bases were collected by SEC’s accountant. These are presented in Exhibit B.
He also designed a format to allocate the overhead to all the production and service departments. It was realized that the expenses of the service departments on some rational basis. The accountant thought of distributing the service departments’ costs on the following basis:
a. Works office costs on the basis of direct labour hours.
b. Maintenance costs on the basis of book value of plant and machinery.
c. Stores department costs on the basis of direct and indirect materials used.
The accountant who had to visit the company’s banker, passed on the papers to you for the required analysis and cost computations.

REQUIRED

Based on the data given in Exhibits A and B, you are required to:

1. Complete the attached “overhead cost distribution sheet” (Exhibit C).
Note: Wherever possible, identify the overhead costs chared directly to the production and service departments. If such direct identification is not possible, distribute the costs on some “rational basis.
2. Calculate the overhead cost (per direct labour hour) for each of the four producing departments. This should include share of the service departments’ costs.
3. Do you agree with:
a. The procedure adopted by the company for the distribution of overhead costs?
b. The choice of the base for overhead absorption, i.e. labour-hour rate?

Exhibit A

STAR ENGINEERING COMPANY
Actual Expenses(Manufacturing Overheads) for April
RS RS
Indirect Labour and Supervisions:
Machining
Fabrication
Assembly
Painting
Stores
Maintenance

Indirect Materials and Supplies
Machining
Fabrication
Assembly
Painting
Maintenance

Others
Factory Rent
Depreciation of Plant and Machinery
Building Rates and Taxes
Welfare Expenses
(At 2 per cent of direct labour wages and Indirect labour and supervision)
Power
(Maintenance—Rs 366; Works Office Rs 2,200, Balance to Producing Departments)
Works Office Salaries and Expenses
Miscellaneous Stores Department Expenses

33,000
22,000
11,000
7,000
44,000
32,700

2,200
1,100
3,300
3,400
2,800

1,68,000
44,000
2,400
19,400

68,586

1,30,260
1,190

1,49,700

12,800

4,33,930

5,96,930

CHOOSING BETWEEN PROJECTS IN ABC COMPANY CASE STUDY SOLUTION

CHOOSING BETWEEN PROJECTS IN ABC COMPANY CASE STUDY SOLUTION

CASE – 3 CHOOSING BETWEEN PROJECTS IN ABC COMPANY

ABC Company, has three projects to choose from. The Finance Manager, the operations manager are discussing and they are not able to come to a proper decision. Then they are meeting a consultant to get proper advice. As a consultant, what advice you will give?

The cash flows are as follows. All amounts are in lakhs of Rupees.

Project 1:
Duration 5 Years
Beginning cash outflow = Rs. 100
Cash inflows (at the end of the year)
Yr. 1 – Rs 30; Yr. 2 – Rs 30; Yr. 3 – Rs 30; Yr.4 – 10; Yr.5 – 10

Project 2:
Duration 5 Years
Beginning Cash outflow Rs. 3763
Cash inflows (at the end of the year)
Yr. 1 – 200; Yr. 2 – 600; Yr. 3 – 1000; Yr. 4 – 1000; Yr. 5 – 2000.

Project 3:
Duration 15 Years
Beginning Cash Outflow – Rs. 100
Cash Inflows (at the end of the year)
Yrs. 1 to 10 – Rs. 20 (for 10 continuous years)
Yrs. 11 to 15 – Rs. 10 (For the next 5 years)

Question:
If the cost of capital is 8%, which of the 3 projects should the ABC Company accept?

GREAVES LIMITED CASE STUDY SOLUTION

GREAVES LIMITED CASE STUDY SOLUTION

CASE – 2 GREAVES LIMITED

Started as trading firm in 1922, Greaves Limited has diversified into manufacturing and marketing of high technology engineering products and systems. The company’s mission is “manufacture and market a wide range of high quality products, services and systems of world class technology to the total satisfaction of customers in domestic and overseas market.”
Over the years Greaves has brought to India state of the art technologies in various engineering fields by setting up manufacturing units and subsidiary and associate companies. The sales of Greaves Limited has increased from Rs 214 crore in 1990 to Rs 801 crore in 1997. The sales of Greaves Limited has increased from Rs 214 crore in 1990 to Rs 801 crore in 1997. Profits before interest and tax (PBIT) of the company increased from Rs 15 crore to Rs 83 crore in 1997. The market price of the company’s share has shown ups and downs during 1990 to 1997. How has the company performed? The following question need answer to fully understand the performance of the company:

Exhibit 1

GREAVES LTD.
Profit and Loss Account ending on 31 March (Rupees in crore)
1990 1991 1992 1993 1994 1995 1996 1997
Sales
Raw Material and Stores
Wages and Salaries
Power and fuel
Other Mfg. Expenses
Other Expenses
Depreciation
Marketing and Distribution
Change in stock 214.38
170.67
13.54
0.52
0.61
11.85
1.85
4.86
1.18 253.10
202.84
15.60
0.70
0.49
15.48
1.72
5.67
3.10 287.81
230.81
18.03
1.11
0.88
16.35
1.52
5.14
4.93 311.14
213.79
37.04
3.80
2.37
25.54
4.62
5.17
0.48 354.25
245.63
37.96
4.43
2.36
31.60
5.99
9.67
– 1.13 521.56
379.83
48.24
6.66
3.57
41.40
8.53
10.81
5.63 728.15
543.56
60.48
7.70
4.84
45.74
9.30
12.44
11.86 801.11
564.35
69.66
9.23
5.49
48.64
11.53
16.98
– 5.87
Total Op Expenses 202.72 239.40 268.91 291.85 338.77 493.41 672.20 731.75

Operating Profit
Other Income
Non-recurring Income
11.61
2.14
1.30
13.70
3.69
2.28
18.90
4.97
0.10
19.29
4.24
10.98
15.48
7.72
16.44
28.15
14.35
0.46
55.95
11.35
0.52
69.36
13.08
1.75
PBIT 15.10 19.67 23.97 34.51 39.64 42.98 65.67 82.64
Interest 5.56 6.77 11.92 19.62 17.17 21.48 28.25 27.54
PBT 9.54 12.90 12.05 14.89 22.47 21.50 37.42 55.10
Tax
PAT
Dividend
Retained Earnings 3.00
6.54
1.80
4.74 3.60
9.30
2.00
7.30 4.90
7.15
2.30
4.85 0.00
14.89
4.06
10.83 4.00
18.47
7.29
11.18 7.00
14.50
8.58
5.92 8.60
28.82
12.85
15.97 15.80
39.30
14.18
25.12

Exhibit 2

GREAVES LTD.
Balance Sheet (Rupees in crore)
1990 1991 1992 1993 1994 1995 1996 1997
ASSETS
Land and Building
Plant and Machinery
Other Fixed Assets
Capital WIP
Gross Fixed Assets
Less: Accu. Depreciation
Net Tangible Fixed Assets
Intangible Fixed Assets
3.88
11.98
3.64
0.09
19.59
12.91
6.68
0.21
4.22
12.68
4.14
0.26
21.30
14.56
6.74
0.19
4.96
12.98
4.38
10.25
23.57
15.79
7.78
0.05
21.70
33.49
5.18
11.27
71.64
19.84
51.80
4.40
30.82
50.78
6.95
34.84
123.39
25.74
97.65
22.03
39.71
75.34
8.53
14.37
137.95
33.90
104.05
22.45
42.34
92.49
8.87
13.92
157.62
42.56
115.06
20.04
43.07
104.45
10.35
14.36
172.23
53.87
118.86
21.11
Net Fixed Assets 6.89 6.93 7.83 56.20 119.68 126.50 135.10 139.97

Raw Materials
Finished Goods
Inventory
Accounts Receivable
Other Receivable
Investments
Cash and Bank Balance
Current Assets
Total Assets
LIABILITIES AND CAPITAL
Equity Capital
Preference Capital
Reserves and Surplus
5.26
29.37
34.63
38.16
32.62
3.55
8.36
117.32
124.21

9.86
0.20
27.60
6.91
33.72
40.63
53.24
40.47
14.95
8.91
158.20
165.13

9.86
0.20
32.57
7.26
38.65
45.91
67.97
49.19
15.15
12.71
190.93
198.76

9.86
0.20
37.42
21.05
53.39
74.44
93.30
24.54
27.58
13.29
233.15
289.35

18.84
0.20
100.35
28.13
52.26
80.39
122.20
59.12
73.50
18.38
353.59
473.27

29.37
0.20
171.03
44.03
58.09
102.12
133.45
64.32
75.01
30.08
404.98
531.48

29.44
0.20
176.88
53.62
69.97
123.59
141.82
76.57
75.07
33.46
450.51
585.61

44.20
0.20
175.41
50.94
64.09
115.03
179.92
107.31
76.45
48.18
526.89
666.86

44.20
0.20
198.79
Net Worth 37.66 42.63 47.48 119.39 200.60 206.52 219.81 243.19
Bank Borrowings
Institutional Borrowings
Debentures
Fixed Deposits
Commercial Paper
Other Borrowings
Current Portion of LT Debt 14.81
4.13
4.77
12.31
0.00
2.33
0.00 19.45
3.43
16.57
14.45
0.00
3.22
0.00 26.51
9.17
19.99
15.03
0.00
3.10
0.08 24.82
38.09
4.56
14.08
0.00
3.18
0.12 55.12
38.76
4.37
15.57
15.00
17.08
15.08 64.97
69.69
4.37
17.75
0.00
1.97
0.02 70.08
89.26
2.92
20.81
0.00
2.36
1.49 118.28
63.60
1.49
19.29
0.00
2.57
1.57
Borrowings 38.35 57.12 73.72 84.61 130.82 158.73 183.94 203.66
Sundry Creditors
Other Liabilities
Provision for tax, etc.
Proposed Dividends
Current Portion of LT Dept 37.52
5.70
3.18
1.80
0.00 49.40
10.16
3.82
2.00
0.00 59.34
10.70
5.14
2.30
0.08 77.27
3.59
0.31
4.06
0.12 113.66
1.42
4.40
7.29
15.08 148.13
1.99
7.70
8.58
0.02 153.63
1.70
12.19
12.85
1.49 179.79
3.04
21.43
14.18
1.57
Current Liabilities 48.20 65.38 77.56 85.35 141.85 166.42 181.86 220.01
TOTAL LIABILITIES
Additional information:
Share premium reserve
Revaluation reserve
Bonus equity capital 124.21

8.51 165.13

8.51 198.76

8.51 289.35

47.69
8.91
8.51 473.27

107.40
8.70
8.51 531.67

107.91
8.50
8.51 585.61

93.35
8.31
23.25 666.86

93.35
8.15
23.25

Exhibit 3

GREAVES LTD.
Share Price Data
1990 1991 1992 1993 1994 1995 1996 1997
Closing share price (Rs)
Yearly high share price (Rs)
Yearly low share price (Rs)
Market capitalization (Rs crore
EPS (Rs)
Book value (Rs) 27.19
29.25
26.78
65.06
4.79
35.64 34.74
45.28
21.61
67.77
6.82
37.22 121.27
121.27
34.36
236.56
9.73
42.54 66.67
126.33
48.34
274.84
1.93
57.75 78.34
90.00
42.67
346.35
2.66
40.61 71.67
100.01
68.34
316.87
7.16
64.98 47.5
90.00
45.00
210.02
5.03
45.35 48.25
85.00
43.75
213.34
9.01
50.73

Questions

1. How profitable are its operations? What are the trends in it? How has growth affected the profitability of the company?
2. What factors have contributed to the operating performance of Greaves Limited? What is the role of profitability margin, asset utilisation, and non-operating income?
3. How has Greaves performed in terms of return on equity? What is the contribution of return on investment, the way of the business has been financed over the period?

ZIP ZAP ZOOM CAR COMPANY CASE STUDY SOLUTION

ZIP ZAP ZOOM CAR COMPANY CASE STUDY SOLUTION

Case 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 favorable 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)
Question:
Analyse the debt capacity of the company.

Human Resource Dynamics CASE STUDY SOLUTION

Human Resource Dynamics CASE STUDY SOLUTION
Caselet 1
Sanjay Nagpal is a new recruit from a reputed management institute. He is recruited as a sales trainee in a sales office of a large computer hardware firm located in Chennai.
Raghvan is the zonal sales manager responsible for overseeing the work of sales officer, field executives and trainee salesmen numbering over 50 of three areas namely Chennai, Bangalore, and Trivandrum.
The sales growth of the products in his area was highly satisfactory owing to the developmental initiatives taken by respective State Governments in spreading computer education.
Raghvan had collected several sales reports, catalogues and pamphlets detailing the types of office equipment sold by the company for Sanjay’s reference.
After short chat with Sanjay, Raghvan assisted him to his assigned desk and provided him with the material collected. Thereafter Raghvan excused himself and did not return. Meanwhile, Sanjay scanned through the material given to him till 5:00pmbefore leaving office.
Questions
1. What do you think about Raghavan’s training program? (10)
2. What method of training would have been best under the circumstances? Would you consider OJT, simulation or experiential methods? (10)
Caselet 2
Preeti was promoted three months ago from reservations supervisor to front-desk manager for Regency Hotel, an independent, 330-room hostelry. She enjoys her new management responsibilities and is pleased that the occupancy rate averaged 94 percent last month, way above the industry average. But at times she feels stressed by the confusion of managing all front-end operations of the hotel, from reservations and cashiering to the bell desk and concierge. She feels most at home handling the reservation function, a task she always enjoyed as a trainee because she likes to help people. About once a week the staff in the reservation function overbooks rooms, usually because of incomplete scans of conference sales files. Customers with reservations w,0110 arrive late are upset when they have to be referred 1, nearby hotels. Whenever overbooking occurs, Ms. eti takes over direct control of the reservations operation herself, often personally handling reservations for two or three days until order seems to return.
But sometimes while Ms. Preeti is off focusing on the reservations task, other problems arise. On five days last month, clerks at the reception desk checked in every “walk-in” who appeared without reservations. They assumed there would be ample no-shows among those holding reservations. On one occasion, Regency ended up oversold by 24 rooms. Mr. Alex, the hotel general manager, is concerned about Ms. Preeti’s development into her new management position. He knows Ms. Preeti is proud of the high occupancy levels (which mean greater profits) and doesn’t want to destroy that pride. However, he sees her as more interested in
Examination Paper of Human Resource Dynamics
IIBM Institute of Business Management
individual staff tasks (such as making reservations) than in the complexities of managing, training, and motivating her staff. He has talked with Ms. Preeti about balancing her activities as a manager. Alex emphasized that she needs to make sure her staff knows the systems and guidelines and be firm with employees who continue to check in guests when the hotel obviously will be overbooked. He plans to meet with her in a three-month performance review to see if he can shift her motivational expectations about the job.
Question:
1. Do Ms. Preeti’s problems seem to be the result of her lack of motivational immaturity or of her lack of motivational attention to her people?

The Indian Audio Market CASE STUDY SOLUTION

The Indian Audio Market CASE STUDY SOLUTION

The Indian Audio Market
The Indian audio market pyramid is featured by the traditional radios forming its lower bulk.
Besides this, there are four other distinct segments: mono recorders (ranking second in the
pyramid), stereo recorders, midi systems (which offer the sound amplification of a big system, but at
a far lower price and expected to grow at 25% per year) and hi-fis (minis and micros, slotted at the
top end of the market).
Today the Indian audio market is abound with energy and action as both national and
international majors are trying to excel themselves and elbow the others, ushering in new concepts,
like CD sound, digital tuners, full logic tape deck, etc. The main players in the Indian audio market are
Philips, BPL and Videocon. Of these, Philips is one of the oldest and is considered at the leading
national brands. In fact it was the first company to introduce a range of international products such
as CD radio cassette recorder, stand alone CD players and CD mini hi-fi systems. With the easing of
the entry barriers, a number of new international players like Panasonic, Akai, Sansui, Sony, Sharp,
Goldstar, Samsung and Aiwa have also entered the arena. This has led to a sea of changes in the
industry and resulted in an expanded market and a happier customer, who has access to the latest
international products at competitive prices. The rise in the disposable income of the average Indian,
especially the upper-income section, has opened up new vistas for premium products and has
provided a boost to companies to launch audio systems priced as high as Rs. 50,000 and beyond.
Pricing across Segments
Super Premium Segment: This segment of the market is largely price-insensitive, as consumers are
willing to pay a premium in order to obtain products of high quality. Sonodyne has positioned itself
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Subject: Managerial Economics Marks: 100
9
in this segment by concentrating on products that are too small for large players to operate in
profitably. It has launched a range of systems priced between Rs. 30,000 to Rs. 60,000. National
Panasonic has launched its super premium range of systems by the name of Technics.
Premium Segment: Much of the price game is taking place in this segment, in which systems are
priced around Rs. 25,000. Even the foreign players ensure that the pricing is competitive. Entry
barriers of yester years compelled the demand by this segment to be partially met by the grey
market. With the opening up of the market, the premium segment is witnessing a rapid growth and is
currently estimated to be worth Rs. 30 crores. Growth of this segment is also being driven by
consumers who want to upgrade their old music systems. Another major stimulating factor is the
plethora of financing options available, bringing more and more consumers to the market.
Philips has understood the Indian listener well enough to dictate the basic principles of
segmentation. It projects its products as high quality at medium price. In fact, Philips had
successfully spotted an opportunity in the wide price gap between portable cassette players and hi-fi
systems and pioneered the concept of a midi system (a three-in-one containing radio, tape deck and
amplifier in one unit). Philips has also realised that there is a section of the rich consumer which
values not just power but also clarity and is willing to pay for it. The pricing strategy of Philips was to
make the most of its image as a technology leader. To this end, it used non-price variables by
launching of a range of state of art machines like the FW series, and CD players. Moreover, it came up
with the punch line in its advertisements as, “We Invent For You”.
BPL stands second only to Philips in the audio market and focuses on technology as its USP. Its
kingpin in the marketing mix is its high technology superior quality product. It is thus at being the
product-quality leader. BPL’s proposition of fidelity is translated in its punchline for its audio
systems as, ‘e-fi your imagination’ (d-fi stands for digital fidelity). The company follows a market
skimming strategy. When a new product was launched, it was placed in the top end of the market,
and priced accordingly. The company offers a range of products in all price segments in the market
without discounting the brand.
Another major player, Videocon, has managed to price its products lower even in the premium
segment. The success of the Powerhouse (a 160 watt midi launched by Philips in 1990) had
prompted Videocon to launch the Select Sound range of midi stereo systems at a slightly lower price.
At the premium end, Videocon is making efforts to upgrade its image to being “quality-driven” by
associating itself with the internationally reputed brand name of Sansui from Japan, and following a
perceived value pricing method.
Sony is another brand which is positioning itself as a premium product and charges a higher price
for the superior quality of sound it offers. Unlike indulging into price wars, Sony’s ad-campaigns
project the message that nothing can beat Sony in the quality and intensity of sound. National
Panasonic is another player that has three products in the top end of the market, priced in the Rs.
21,000 to Rs. 32,000 range.
Monos and Stereos: Videocon has 21% share I the overall audio market, but has been a major
player only in personal stereos and two-in-ones. Its history is written with instances where it has
offered products of similar quality, but at much lower prices than its competitors. In fact, Videocon
launched the Sansui brand of products with a view to transform its image from that of being a
manufacturer of cheap products to that of being a company that primes quality, and also to obtain a
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Subject: Managerial Economics Marks: 100
10
share of the hi-fi segment. Sansui is being positioned as a premium brand, targeting the higher
middle, upper income groups and also the sensitive middle class Indian consumer.
The objective of Philips in this segment is to achieve higher sales volumes and hence its strategy
is to expand its range and have a product in every segment of the market. The pricing method used
by Philips in this segment is providing value for money.
National Panasonic offers products in the lower end of the market, apart from the top of the
range. In fact, it reduced the price of one of its small two-in-ones from Rs. 3,500 to Rs. 2,400, with the
logic that a forte in the lower end of the market would help in building brand reliability across a
wider customer base. The company is also guided by the logic that operating in the price sensitive
region of the market will help it reach optimum levels of efficiency. Panasonic has also entered the
market for midis.
These apart, there also exists a sector in the Indian audio industry, with powerful regional brands
in mono and stereo segments, having a market share of 59% in mono recorders and 36% in stereo
recorders. This sector has a strong influence on price performance.
Questions
1. What major pricing strategies have been discussed in the case? How effective these strategies
have been in ensuring success of the company?
2. Is perceived value pricing the dominant strategy of major players?
3. Which products have reached maturity stage in audio industry? Do you think that product
bundling can be effectively used for promoting sale of these products?

Indian Stock Market: Does it Explain Perfect Competition? CASE STUDY SOLUTION

Indian Stock Market: Does it Explain Perfect Competition? CASE STUDY SOLUTION

Indian Stock Market: Does it Explain Perfect Competition?
The stock market is one of the most important sources for corporates to raise capital. A stock
exchange provides a market place, whether real or virtual, to facilitate the exchange of securities
between buyers and sellers. It provides a real time trading information on the listed securities,
facilitating price discovery.
Participants in the stock market range from small individual investors to large traders, who can
be based anywhere in the world. Their orders usually end up with a professional at a stock exchange,
who executes the order. Some exchanges are physical locations where transactions are carried out
on a trading floor. The other type of exchange is of a virtual kind, composed of a network of
computers and trades are made electronically via traders.
By design a stock exchange resembles perfect competition. Large number of rational profit
maximisers actively competing with each other, trying to predict future market value of individual
securities comprises the main feature of any stock market. Important current information is almost
freely available to all participants. Price of individual security is determined by market forces and
reflects the effect of events that have already occurred and are expected to occur. In the short run it
is not easy for a market player to either exit or enter; one cannot exit and enter for few days in those
stocks which are under no delivery. For example Tata Steel was in no delivery from 29/10/07 to
02/11/07. Similarly one cannot enter or exit on those stocks which are in upper or lower circuit for
few regular trading sessions. Therefore a player has to depend wholly on market price for its profit
maximizing output (in this case stock of securities). In the long run players may exit the market if
they are not able to earn profit, but at the same time new investors are attracted by rise in market
price.
As on 01/11/07 total market capital at Bombay Stock Exchange (BSE) is $1589.43 billion (source:
Business Standard, 1/11/2007); out of this individual investors account for only $100bn. In spite of
the fact that individual investors exist in a very large number, their capital base is less than 7% of
total market capital; rest of capital is owned by foreign institutional investor and domestic
institutional investors (FIIs and DIIs), which are very small in number. Average capital owned by a
single large player is huge in comparison to small investor. This situation seems to have prompted Dr
Dash of BSE to comment ‘The stock market activity is increasingly becoming more centralised,
concentrated and non competitive, serving interest of big players only.” Table 2 shows the impact of
change in FII on National Stock Exchange movement during three different time periods.
Table 2: Impact of FIIs’ Investment on NSE
Wave
Date
Nifty
close
Change in
Nifty
Index
FLLS Net
Investment
(Rs.Cr.)
Change in Market
Capitalisation
(Rs.Cr.)
Wave 1
From
To
17/05/04
26/10/05
1388.75
2408.50
1019.75
59520
5,40,391
Wave 2
From
To
27/10/05
11/05/06
2352.90
3701.05
1348.15
38258
6,20,248
Wave 3
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Subject: Managerial Economics Marks: 100
8
From
To
12/05/06
13/06/06
3650.05
2663.30
-986.75
-9709
-4,60,149
By design, an Indian Stock Market resembles perfect competition, not as a complete description
(for no markets may satisfy all requirements of the model) but as an approximation.
Questions
1. Is stock market a good example of perfect competition? Discuss.
2. Identify the characteristics of perfect competition in the stock market setting.
3. Can you find some basic aspect of perfect competition which is essentially absent in stock
market?

Outsourcing to India: Way to Fast Track CASE STUDY SOLUTION

Outsourcing to India: Way to Fast Track CASE STUDY SOLUTION

Outsourcing to India: Way to Fast Track
By almost any measure, David Galbenski’s company Contract Counsel was a success. It was a
company Galbenski and a law school buddy, Mark Adams, started in 1993; it helps companies find
lawyers on a temporary contract basis. The growth over the past five years had been furious.
Revenue went from less than $200,000 to some $6.5 million at the end of 2003, and the company
was placing thousands of lawyers a year.
At then the revenue growth began to flatten; the company grew just 8% in 2004 despite a
robust market for legal services estimated at about $250 billion in the United States alone.
Frustrated and concerned, Galbenski stepped back and began taking a hard look at his business.
Could he get it back on the fast track? “Most business books say that the hardest threshold to cross
is that $10 million sales mark,” he says. “I knew we couldn’t afford to grow only 10% a year. We
needed to blow right through that number.”
For that to happen, Galbenski knew he had to expand his customer base beyond the Midwest
into large legal supermarkets such as Boston, New York, and Washington, D.C. He also knew that in
doing so, he could run into stiff competition from larger publicly traded rivals. Contract Counsel’s
edge has always been its low price, Clients called when dealing with large-scale litigation or
complicated merger and acquisition deals, either of which can require as many as 100 lawyers to
manage the discovery process and the piles of documents associated with it. Contract Counsel’s
temps cost about $75 an hour, roughly half of what a law firm would charge, which allowed the
company to be competitive despite its relatively small size. Galbenski was counting on using the
same strategy as he expanded into new cities. But would that be enough to spur the hyper growth
that he craved for?
At that time, Galbenski had been reading quite a bit about the growing use of offshore
employees. He knew companies like General Electric, Microsoft and Cisco were saving bundles by
setting up call and data centers in India. Could law firms offshore their work? Galbenski’s mind
raced with possibilities. He imagined tapping into an army of discount-priced legal minds that
would mesh with his existing talent pool in the U.S. The two work forces could collaborate over the
Web and be productive on a 24-7 basis. And the cost could be massive.
Using offshore workers was a risk, but the payoff was potentially huge. Incidentally Galbenski
and his eight-person management team were preparing to meet for their semiannual review
meeting. The purpose of the two-day event was to decide the company’s goals for the coming year.
Driving to the meeting, Galbenski struggled to figure out exactly what he was going to say. He was
still undecided about whether to pursue an incremental and conservative national expansion or
take a big gamble on overseas contractors.
The Decision
The next morning Galbenski kicked off the management meeting. Galbenski laid out the facts as he
saw them. Rather than look at just the next five years of growth, look at the next 20, he said. He
cited a Forrester Research prediction that some 79,000 legal jobs, totaling $5.8 billion in wages,
would be sent offshore by 2015. He challenged his team to be pioneers in creating a new industry,
rather than stragglers racing to catch up. His team applauded. Returning to the office after the
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Subject: Managerial Economics Marks: 100
6
meeting, Galbenski announced the change in strategy to his 20 full-timers.
Then he and his team began plotting a global action plan. The first step was to hire a company
out of Indianapolis, Analysts International, to start compiling a list of the best legal services
providers in countries where people had comparatively strong English skills. The next phase was
vetting the companies in person. In February 2005, just three months after the meeting in Port
Huron, Galbenski found himself jetting off on a three months trip to scout potential contractors in
India, Dubai, and Sri Lanka. Traveling to cities like Bangalore, Chennai and Hyderabad, he
interviewed executives from more than a dozen companies, investigating their day-to-day
operations firsthand.
India seemed like the best bet. With more than 500 law schools and about 200,000 law
students graduating each year, it had no shortage or attorneys. What amazed Galbenski, however,
was that thanks to the Web, lawyers in India had access to the same research tools and case
summaries as any associate in the U.S. Sure, they didn’t speak American English. “But they were
highly motivated, highly intelligent, and extremely process-oriented,” he says. “They were also
eager to tackle the kinds of tasks that most new associated at law firms look down upon” such as
poring over and coding thousands of documents in advance of a trial. In other words, they were
perfect for the kind of document-review work he had in mind.
After a return visit to India in August 2005, Galbenski signed a contract with two legal services
companies: QuisLex, in Hyderabad, and Manthan Services in Bangalore. Using their lawyers and
paralegals, Galbenski figured he could cut his document-review rates to $50 an hour. He also
outsourced the maintenance of the database used to store the contact information for his
thousands of contractors. In all, he spent about 12 months and $250,000 readying his newly global
company. Convincing U.S. based clients to take a chance on the new service hasn’t been easy. In
November, Galbenski lined up pilot programs with four clients (none of which are ready to
publicise their use of offshore resources). To help get the word out, he launched a website
(offshore-legal-services.com), which includes a cache of white papers and case studies to serve as a
resource guide for companies interested in outsourcing.
Questions
1. As money costs will decrease due to decision to outsource human resource, some real costs
and opportunity costs may surface. What could these be?
2. Elaborate the external and internal economies of scale as occurring to Contract Counsel.
3. Can you see some possibility of economies of scope from the information given in the case?
Discuss.

IT Industry: Checkered Growth CASE STUDY SOLUTION

IT Industry: Checkered Growth CASE STUDY SOLUTION
IT Industry: Checkered Growth
IT industry is now considered as vital for the development of any economy. Developing countries
value the importance of this industry due to its capacity to provide much needed export earnings and
support in the development of other industries. Especially in Indian context, this industry has
assumed a significant position in the overall economy, due to its exemplary potentials in creating
high value jobs, enhancing business efficiency and earning export revenues. The IT revolution has
brought unexpected opportunities for India, which is emerging as an increasingly preferred location
for customised software development. Experts are estimating the global IT industry to grow to
US$1.6 million over the coming six years and exports to reach Rs. 2000 billion by 2008. It is
envisaged that Indian IT industry, though a very small portion of the global IT pie, has tremendous
growth prospects.
Stock Taking
The decade of 1970 may be taken as the stage of introduction of the Indian IT industry. The early
years were marked by 75 per cent of software development taking place overseas and the rest 25 per
cent in India. Exports of Indian software until the mid-1970s was mainly Eastern Europe, followed by
US. Tata Consultancy Services (TCS) was among the pioneers in selling its services outside India, by
working for IBM Labs in the US. The hardware segment lagged behind its software counterpart. With
instances of exports worth US$ 4 million in 1980, the software segment of the industry has shown an
uneven profile. It was not until 1980s that vigorous and sustained growth in software exports begun,
as MNCs like Texas Instruments started to take serious interest in India as a centre of software
production. Destinations of export also underwent changes, with US dominating the main export
market with 75 per cent of the exports. The IT Enabled Services (ITeS) segment, however, had not
emerged at this stage.
It was also during the mid to late 1980s that computer firms shifted focus from mainframe
computers (the mainstay of MNCs) to Personal Computers (PCs). In March 1985, Minicomp installed
the first ever PC at CSI, Delhi; this changed the entire industry for good. With the entry of networking
and applications like CAD/CAM, PC sales soared in 1987-88, touching 50,000 units.
From a modest growth in the mid-1980s software exports moved up to Rs. 3.8 billion in 1991-92.
Since then, it grew at an incredible rate, up to 115 per cent in 1993. The hardware could also register
an annual growth of 40 per cent in this period, backed by a surging demand for PCs and networking.
Growth of the industry was also driven by the emergence and rapid growth of the ITeS segment.
IT sector’s share of GDP rose steadily in this period, rate of increase being the highest at 44.91 per
cent in 2000-01. It was in the same year that the size of the total IT market was the biggest in the
decade, at Rs. 56,592 crore. The overall IT market was also found to increase till 2000-01. The overall
IT market was also found to increase till 2000-01, with the only exception of 1998-99. The domestic
market also showed an overall increase till 2000-01, registering a spectacular CAGR of 50.39 per
cent. Aggregate output of software and services also increased in this period, though at an uneven
rate. Of approximately $1 billion worth of sales in 1991-1992, domestic hardware sales constituted
37.2 per cent (13.4 per cent growth over the previous year), exports of hardware 6.6 per cent.
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During 2000-01 the growth in the hardware segment was driven mainly by PCs, which
contributed about 58 per cent of the total hardware market. This period also witnessed the
phenomenon of increasing share of Tier 2 and cities in PC sales, thereby indicating PC penetration
into the hinterland. PC shipments had increased by 35 per cent every year from 1997 till 2000-01
when it reached 1.8 million PCs. The commercial PC market saw a growth of 23.5 per cent mainly
due to slashing of prices by major vendors.
It was in 2001-02 that the industry had a sharp fall in rate of growth of its share of GDP to 5.90
per cent, from 44.91 per cent in the previous year. The total IT market also showed a fall in growth
rate from 56.42 per cent in 2000-01 to a mere 16.24 per cent in the next year, growing further at the
rate of 16.25 per cent in the next year. Software export was also affected, registering a low growth of
28.74 per cent and failed to maintain its growth rate of 65.30 per cent in the previous year. It got
further lowered to 26.30 per cent in 2002-03. CAGR of total output of software and services (in Rs.
crore) came down to 25.61 in 2001-02 and further to 25.11 in 2002-03. The domestic market
showed a steep decline in growth to 3 per cent in 2001-02 from an outstanding 50.39 per cent in
2000-01. It could, however, recover by growing at 4.11 per cent in the next year.
Table 1: Indian IT Industry: 1996-97 to 2002-03
Year A* B* C* D* E*
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
1.22
1.45
1.87
2.71
2.87
3.09
18,641
25,307
36,179
56,592
65,788
76,482
3,900
6,530
10,940
17,150
28,350
36,500
46,100
6,594
10,899
16,879
23,980
37,350
47,532
59,472
9,438
12,055
14,227
18,837
28,330
29,181
30,382
*A: share of GDP of the Indian IT market, B: size of the Indian IT market (in Rs. crore), C: software
and services exports (in Rs. crore), D: size of software and services (in Rs. crore), E: size of the
domestic market (in Rs. crore)
Questions
1. Try to identify various stages of growth of IT industry on basis of information given in the
case and present a scenario for the future.
2. Study the table given. Apply trend projection method on the figures and comment on the
trend.
3. Compute a 3 year moving average forecast for the years 1997-98 through 2003-04.

Dabur India Limited: Growing Big and Global CASE STUDY SOLUTION

Dabur India Limited: Growing Big and Global CASE STUDY SOLUTION

Dabur India Limited: Growing Big and Global
Dabur is among the top five FMCG companies in India and is positioned successfully on the
specialist herbal platform. Dabur has proven its expertise in the fields of health care, personal care,
homecare and foods.
The company was founded by Dr. S. K. Burman in 1884 as small pharmacy in Calcutta (now
Kolkata), India. And is now led by his great grandson Vivek C. Burman, who is the Chairman of Dabur
India Limited and the senior most representative of the Burman family in the company. The company
headquarters are in Ghaziabad, India, near the Indian capital New Delhi, where it is registered. The
company has over 12 manufacturing units in India and abroad. The international facilities are
located in Nepal, Dubai, Bangladesh, Egypt and Nigeria.
S.K. Burman, the founder of Dabur, was trained as a physician. His mission was to provide
effective and affordable cure for ordinary people in far-flung villages. Soon, he started preparing
natural remedies based on Ayurved for diseases such as Cholera, Plague and Malaria. Due to his
cheap and effective remedies, he became to be known as ‘Daktar’ (Indianised version of ‘doctor’).
And that is how his venture Dabur got its name—derived from Daktar Burman.
The company faces stiff competition from many multi national and domestic companies. In the
Branded and Packaged Food and Beverages segment major companies that are active include
Hindustan Lever, Nestle, Cadbury and Dabur. In case of Ayurvedic medicines and products, the major
competitors are Baidyanath, Vicco, Jhandu, Himani and other pharmaceutical companies.
Vision, Mission and Objectives
Vision statement of Dabur says that the company is “dedicated to the health and well being of every
household”. The objective is to “significantly accelerate profitable growth by providing comfort to
others”. For achieving this objective Dabur aims to:
 Focus on growing core brands across categories, reaching out to new geographies, within and
outside India, and improve operational efficiencies by leveraging technology.
 Be the preferred company to meet the health and personal grooming needs of target consumers
with safe, efficacious, natural solutions by synthesising deep knowledge of ayurveda and herbs
with modern science.
 Be a professionally managed employer of choice, attracting, developing and retaining quality
personnel.
 Be responsible citizens with a commitment to environmental protection.
 Provide superior returns, relative to our peer group, to our shareholders.
Chairman of the company
Vivek C. Burman joined Dabur in 1954 after completing his graduation in Business Administration
from the USA. In 1986 he was appointed Managing Director of Dabur and in 1998 he took over as
Chairman of the Company.
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Under Vivek Burman’s leadership, Dabur has grown and evolved as a multi-crore business house
with a diverse product portfolio and a marketing network that traverses the whole of India and more
than 50 countries across the world. As a strong and positive leader, Vivek C. Burman has motivated
employees of Dabur to “do better than their best”—a credo that gives Dabur its status as India’s most
trusted nature-based products company.
Leading brands
More than 300 diverse products in the FMCG, Healthcare and Ayurveda segments are in the product
line of Dabur. List of products of the company include very successful brands like Vatika, Anmol,
Hajmola, Dabur Amla Chyawanprash, Dabur Honey and Lal Dant Manjan with turnover of Rs.100
crores each.
Strategic positioning of Dabur Honey as food product, lead to market leadership with over 40%
market share in branded honey market; Dabur Chyawanprash is the largest selling Ayurvedic
medicine with over 65% market share. Dabur is a leader in herbal digestives with 90% market share.
Hajmola tablets are in command with 75% market share of digestive tablets category. Dabur Lal Tail
tops baby massage oil market with 35% of total share.
CHD (Consumer Health Division), dealing with classical Ayurvedic medicines has more than 250
products sold through prescription as well as over the counter. Proprietary Ayurvedic medicines
developed by Dabur include Nature Care Isabgol, Madhuvaani and Trifgol.
However, some of the subsidiary units of Dabur have proved to be low margin business; like
Dabur Finance Limited. The international units are also operating on low profit margin. The
company also produces several “me – too” products. At the same time the company is very popular in
the rural segment.
Questions
1. What is the objective of Dabur? Is it profit maximisation or growth maximisation? Discuss.
2. Do you think the growth of Dabur from a small pharmacy to a large multinational company is
an indicator of the advantages of joint stock company against proprietorship form?
Elaborate.

Let There be Light CASE STUDY SOLUTION

Let There be Light CASE STUDY SOLUTION
Let There be Light
Traditionally, power plants, being capital-intensive, have been set up by the public sector and state electricity boards (SEBs) in India. Everyone agrees today that the energy sector is the major infrastructure bottleneck holding up economic development. A critical aspect of economic reforms thus is the reform of the energy sector.
The Madhya Pradesh State Electricity Board (MPSEB) is not much different from its counterparts in other states. It faces similar problems and is opting for identical solutions. The common elements in the power sector reforms are: corporatisation by breaking the SEB into generation, transmission, and distribution; financial restructuring including debt and interest payment rescheduling; reduction of manpower; and improvements in operational efficiency.
Public utilities, like SEBS, have to be commercially viable in order to survive. Yet historically, this aspect of SEB as an organisation has been sacrificed at the altar of political expediency. The ruling party, irrespective of whether it is the Congress at present or the Bharatiya Janata Party earlier, have made pre-election promises of supplying free or heavily-subsidised power. Digvijay Singh, the present chief minister of Madhya Pradesh, a populist politician earlier, on longer sees electoral benefit in providing free electricity. “It pays to pay” is his refrain today, whether it is healthcare or electricity.
Bold steps—bold, as they still carry the risk of a political fallout with fiery BJP leader Uma Bharti breathing down Digvijay’s neck or the silent schemers of his own party working overtime behind the scenes—have been initiated to reform the energy sector in Madhya Pradesh. MPSEB is to be divided into generation, transmission, and distribution (T&D), and supply companies. Financial management and cash flow management is to be improved. The retirement age of MPSEB employees has been reduced from 60 to 58 years. Effective operational control is sought to be exercised by metering power supply at division / district level to fix responsibility for T & D losses and power thefts. A sustained drive is on to identify non-paying consumers, install meters, and make them pay their bills regularly.
MPSEB’s annual losses are to the tune of a massive Rs 1,600 crore; total liabilities are estimated to be Rs 20,000 crore. Undeniably, are parameters indicating the rot that has corroded the system.
At one level, the reform of the energy sector is a political action but at another, and perhaps, a more fundamental level, it is a question of managing an organisation strategically through strategic actions designed to turn around a vital public utility.
Question
Analyse the problems of the MPSEB from the strategic management perspective. Do you feel that the actions taken or being contemplated are strategic in nature? Propose what else needs to be done to make the MPSEB a viable organisation.

A Very Intriguing Package CASE STUDY SOLUTION

A Very Intriguing Package CASE STUDY SOLUTION

A Very Intriguing Package
It is not quite often that a positive product feature becomes an albatross around the neck of a company. VIP Industries had held sway for over two decades in the organised Indian luggage market on the basis of the durability of its moulded suitcases. Obviously, the customer perceives value-for-money in the long-lasting, reasonably-priced Alfa brand of VIP suitcases which sells 1.5 lakh pieces a month. But this means that having bought one suitcase the customer can do with it for several years. Market research by the company shows that an average Indian family pulls out the suitcase merely for outstation travel a few times a year. Hence, there is no pressing need for continual replacement of the old luggage.
The VIP products are made of virgin polymer as compared to the recycled grade I and II polymers used by the unorganised sector. They are subjected to stringent stress tests for quality control.
VIP has a presence in a wide range of the market segments within a price spectrum of Rs 295 to Rs 6,000 apiece. It is her that the competition from the unorganised sector hurts the company most. VIP’s economically-priced brand, Alfa is widely imitated and sold at much lower prices. This enables the unorganised sector to typically sell 20 times more than VIP can. The lower price threshold seems to be Rs 225 which in nearly impossible for VIP to achieve given its cost structure. In the Rs 1500 plus premium range, VIP has to contend with Samsonite which is a formidable competitor.
The obvious tactic for VIP has been to cut costs. Distribution and logistics is one area where valiant efforts have been made at cost reduction. VIP has four factories located in heart of India. The average distribution costs come to Rs 7 to Rs 8 apiece. Reduction in cost has been attempted through distributed manufacturing by having vendors making the product at different locations, thereby, avoiding transportation of high-volume suitcases across long distances and reducing inventory build-up in the channel.
Severe pressure on sales has resulted in VIP Industries offering discounts and unwittingly entering into a disastrous price war. Promotion of a high visibility product suffered and advertising expenditure has been ruthlessly curtailed from the earlier Rs 11 crore to Rs 2 crore now. Its lead advertising agency is HTA. Action on the promotion front has seen reorganisation of the brand portfolio. Incidentally, earlier its successful and popular Kal bhi aaj bhi campaign served to reinforce its durability theme.
There are several roadblocks that the company has to negotiate. Increase in population, rising propensity of Indian to travel, and the insatiable thirst of customers for state-of-the-art technological products with newer designs and innovation, all at an affordable price are the opportunities and challenges before the company. Introduction of new brands, Mantra and Skybags, product range of diversification to include children’s bags and ladies’ bags, strategic alliance with Europe’s leading luggage-maker—Delsey—are some of the steps taken by the company.
Yet, caught in its self spun web of past successes, VIP is today faced with an uncertain future.
Question
How should the VIP Industries get out of the bind that it finds itself in? Outline the contours of the marketing plans and policies that VIP needs to formulate and implement?

No Chain, No Gain CASE STUDY SOLUTION

No Chain, No Gain CASE STUDY SOLUTION

No Chain, No Gain
Textile industry is one of the oldest industries in India. Several business houses have their origin in this industry. In the mid-1980s, the powerloom sector in the unorganised sector started hurting badly the interests of the composite textile mills of the sector. Their cost structure, with lower overheads and no duties, was less than half of that of mills for equivalent production. While the powerlooms sold cloth as a commodity, the mills tried to establish their products as brands. The post-liberalisation period has seen a large number of foreign brands enter India. It is in this scenario that the Mayur brand of Rajasthan Spinning and Weaving Mills (RSWM) had to carve out a place for itself.
RSWM is the flagship company of the LNJ Bhilwara group. It has been the largest producer and trader of yarn in the country and caters to the large demands for blended yarns and grey cloth fabric used for children’s school uniform. In 1994, the yarn business faced a severe crunch owing to overcapacity. From 1995 onward, RSWM became a late follower of the industry trend as other competitors already moved up the value chain.
Textile manufacturing is basically constituted of the processes of spinning, weaving, processing, and marketing. More than 50 per cent of the value is concentrated in weaving and processing. Moving up the value chain from spinning involves large investments in machinery and labour. Graduating to marketing requires getting closer to the customers. This is the challenge that a traditional spinning mill like RSWM had to face if it was to sustain itself in a highly competitive market.
At another level, for RSWM, it was a matter of cultural transformation of the organisation long used to a conservative, trader mentality. Imagine a company whose main driving force, Shekhar Agarwal, Vice-Chairman and Managing Director having little interest in watching Hindi movies signing up Sharukh Khan at a considerable price for celebrity advertising. From the market side, it has long been troubled with its commitment to the loyal middle-class customers as it had to simultaneously pay attention to the upwardly mobile upper middle class customers. Then there was the dilemma of being too many things to a wide range of audience. RSWM wanted to have a stake in the export markets as well as keep its share in the rural markets. It perceived itself as an efficient producer and wished to become a flamboyant retailer. It excelled in basic textile processing yet dreamt of attaining sophistication in in-house production of readymade garments. And all this while it has been a late mover, losing out to early movers such as Raymonds. No wonder it virtually landed up on the fringes of the industry, far behind formidable competitors like Reliance, Grasim, and S. Kumar.
Question
Suggest how should RSWM manage its value chain effectively. Should it try to imitate

A Healthy Dose of Success CASE STUDY SOLUTION

A Healthy Dose of Success CASE STUDY SOLUTION
A Healthy Dose of Success
Muhammad Majeed represents a typical Indian who has created success out of sheer hard work and commitment through his education and expertise. At the age of 23 years, Majeed, after graduating in pharmacy from Kerala University, went to pursue higher studies in the US. He completed his masters and PhD in industrial chemistry. Armed with high qualifications, he became a research pharmacist and eventually, as most expatriate Indians do, set up his own company, Sabinsa Corporation. Experiencing difficulties with the long-drawn drug approval process of the US Food and Drug Administration and his own dwindling savings, Majeed focussed on ayurvedic products based on natural extracts. He returned to India in 1991 (incidentally, the year when liberalisation started in India) and set up Sami Chemicals and Extracts Ltd, late renamed as Sami Labs Ltd (SLL), Bangalore.
SLL has over three dozen products, and seven US patents. There are 25 European and other country patents pending approval. SLL has four manufacturing units all based in Karnataka. The sales is Rs 44.5 crore and the profit-after-tax is Rs 5.89 crore. It has pioneered specialised products based on Indian herbal extracts relying on the principles of ayurveda. The major thrust is on remedies for cholesterol control, fat reduction, and weight management. As against several Indian companies exporting raw herbs, SLL specialises in value-addition through extractions. The result is encouraging: SLL’s products typically fetch an export price that is more than double the price of raw herbs.
SLL thinks of its business as “manufacturing and selling traditional standardized extracts and nutritional and pharmaceutical fine chemicals”. Sabinsa, its US-based company, secures contracts from the US companies to manufacture certain chemicals in India. Its business plans are quite ambitious. Setting up a product management team, assisting farmers in cultivation of pharmaceutically useful herbs, and international collaborations for developing research-based intellectual property and its commercialisation are some of the strategic actions on the anvil.
SLL looks forward to being a Rs 500-crore company by 2005 when the World Trade Organisation’s patenting regimes comes into force.
Question:-
How will you define the business of SLL? Comment on the business of SLL and your opinion on the likelihood of its success.

Where Do We Go from Here? CASE STUDY SOLUTION

Where Do We Go from Here? CASE STUDY SOLUTION
Where Do We Go from Here?
As one of the many seminars held to discuss the corporate response of family-owned business to liberalisation and globalisation, the keynote Mr Gurcharan Das concluded his speech by saying, “In the end, I would say that the success of Indian economy would depend on how the Indian industry and business respond to the reform process.”
As the proceedings of the seminar progressed it became clear that there was a difference of opinion in the perception of participants. Those who were supporting the case for letting the family-owned businesses face competition opined that such businesses in India have exhibited financial acumen; its members have generally adopted an austere life style; they have demonstrated an ability to take calculated risks, and an ability to accumulate and manage capital. They have devised unique managerial style and led the creation of the equity cult among Indians. Several of them are low-cost producers.
The participants critical of the role of family business had this is to say: “There has been a tendency to mix up family’s intent with that of businesses managed by them. There is a lack of focus and business strategy. Family businesses have generally adopted a short-term approach to business causing less purposeful investments in specially critical areas such as employee development and product development. Customers and development of marketing skills have been neglected.”
The valedictory session of the Seminar attempted to bring out the issues clearly. It culminated in an agenda for reform by the family businesses. The points highlighted in the agenda are:
1. Indian family-owned business organisations need to professionalise management,
2. they need to curtail the diversified of their business groups and impart a sharper focus to their business activities, and
3. they need to pay greater attention to the development of human capital.
Question
Suppose you were an observer at the seminar. During tea and lunch breaks you had an occasion to meet several people who were skeptical and felt that the reform process was having only a superficial impact on the corporates. Express your opinion that you form about the issues at the seminar.

ELECTROLUX CASE STUDY SOLUTION

ELECTROLUX CASE STUDY SOLUTION
Electrolux
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.
Questions:
1. 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?

SUNLIGHT CHEMICALS CASE STUDY SOLUTION

SUNLIGHT CHEMICALS CASE STUDY SOLUTION
Sunlight Chemicals
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?
Questions:
1. 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?

SEN-SCHWITZ CASE STUDY SOLUTION

SEN-SCHWITZ CASE STUDY SOLUTION

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.”
Questions:
(a) 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.

FINANCIAL MANAGEMENT EXAM ANSWER PROVIDED

FINANCIAL MANAGEMENT EXAM ANSWER PROVIDED
Xaviers Institute of Business Management Studies

Marks 100

FINANCIAL MANAGEMENT

Note: Attempt any five questions. All questions carry equal marks.
1. (A) Explain the Business Entity concept, Accrual concept and Consistency concept of Accounting.
(b) What do you understand by capitalization of earnings? How is the value of a firm ascertained with the help of its earnings? Explain with an example.
2. The following is the Trial Balance of Mr. Keshav Kant on 31st March 2006.
Rs. Rs.
Dr. Cr.
Capital – 8,00,000
Drawings 60,000 –
Opening Stock 75,000 –
Purchases 15,95,000 –
Freight on Purchases 25,000 –
Wages (11 months upto 28-2-2006) 66,000 –
Sales – 23,10,000
Salaries 1,40,000 –
Postage & Telephones 12,000 –
Printing and Stationery 18,000 –
Miscellaneous expenses 30,000 –
Creditors – 3,00,000
Investments 1,00,000 –
Discount received – 15,000
Debtors 2,50,000 –
Bad Debts 15,000 –
Provision for Bad Debts – 8,000
Building 3,00,000 –
Machinery 5,00,000 –
Furniture 40,000 –
Commission on Sales 45,000 –
Interest on Investments – 12,000
Insurance (year upto 31 .7 .2006) 24,000 –
Bank Balance 1,50,000 –
34,45,000 34,45,000
Adjustments:
(i) Closing Stock Rs. 2, 25,000.
(ii) Machinery worth Rs. 45,000 purchased on 1.10.2005 was shown as purchases. Freight paid on the machinery was Rs. 5,000 which is included in the Freight on Purchases.
(iii) Commission is payable at 2% on Sales.
(iv) Investments were sold at 10% profit but the entire sale proceeds have been taken as Sales.
(v) Write off Bad Debts Rs. 10,000 and create .a Provision for Doubtful Debts at 5% of Debtors.
(vi) Depreciate Building by 2% p.a. and Machinery and Furniture @ 10% p.a
Prepare Trading and Profit and Loss A/c for the Year ending 31st March 2006 and a Balance Sheet as on that date
3. Distinguish between Operating Leverage and Financial Leverage. What will be the effect of small change in Sales on Net Income, Return on Equity and Earnings Per Share if both these leverages are considerable? Explain.
4. (a) What is Production Budget ? What factors are taken into consideration while preparing a Production Budget? Why are separate budgets prepared For each of the elements of production costs? Explain.
(b) What is a Rolling Budget? Why is it prepared? Explain the procedure of its preparation.
5. An Engineering Company has received an export order for its sole product that would require the use of half of the factory’s total capacity, which is estimated at 4 lakh units per annum. The condition of the export order is that it has to be accepted in full: acceptance of a part is not allowed
The factory is currently operating at 60% level to meet the demand of its domestic customers. As against the current price of Rs. 6 per unit, the export offer is Rs. 4.70 per unit, which is less than the total cost of current production. The cost break-down is given below:
Direct material: Rs. 2.50 per unit
Direct labour: 1.00 per unit
Variable expenses: 0.50 per unit
Fixed overhead: 1.00 per unit
Total: 5.00 per unit
The company has the following options:
(a) Accept the export order and cut back domestic sales as necessary
(b) Remove the capacity constraint by installing balancing equipment and also by working overtime to meet both domestic and export demand. This will increase fixed overheads by Rs. 15,000 annually and additional cost for overtime work will amount to Rs. 40,000 for the year.
(c) Appoint a sub-contractor to manufacture the additional requirement and meet the domestic and export requirements in full by supplying raw materials, paying a conversion charge @ Rs. 2 per unit and appointing a supervisor at a salary of Rs. 3,000 per month for checking the quality of the product and controlling operations at the manufacturing unit
(d) Refuse the order.
You are required to prepare a statement of costs and profits under each of the options and give your recommendation to the company giving the reasons for the same.
6. Aditya Company’s equity shares are being traded in the market at Rs. 54 per share with a price-earning ratio of 9. The company’s payout is 72%. It has 1,00,000 equity shares of Rs. 10 each and no preference shares. Book value per share is Rs. 42.
You are required to calculate:
(i) Earnings per Share
(ii) Net Income
(iii) Dividend Yield, and
(iv) Return on Equity
7. Comment on the following statements:
(a) The greater the variability of cash flows, the higher should be the minimum cash balance.
(b) As there is no explicit cost of retained earnings, these funds are free of cost.
(c) Dividend, Investment and Financing decisions are inter-dependent.
(d) Profitability Index is more relevant in the evaluation and ranking of projects than Internal Rate of Return.
8. Write short notes on the following:
(a) Performance Budget
(b) Amortization of Intangible Assets
(c) Accounting Standards
(d) Funds from Business Operations

CORPORATE LAW ANSWER SHEET PROVIDED

CORPORATE LAW ANSWER SHEET PROVIDED

Xaviers Institute of Business Management Studies

MARKS: 80

SUB: CORPORATE LAW

N.B.: 1 Attempt any Ten Questions
2) Last two Questions are compulsory
Q.1. In the following statements only one is correct statement. Explain Briefly?
i) An invitation to negotiate is a good offer.
ii) A quasi-contract is not a contract at all.
iii) An agreement to agree is a valid contract.

Q.2. A ship-owner agreed to carry to cargo of sugar belonging to A from Constanza to Busrah. He knew that there was a sugar market in Busrah and that A was a sugar merchant, but did not know that he intended to sell the cargo, immediately on its arrival. Owning to Shipment’s default, the voyage was delayed and sugar fetched a lower price than it would have done had it arrived on time. A claimed compensation for the full loss suffered by him because of the delay. Give your decision. Explain Briefly?

Q.3. The proprietors of a medical preparation called the “Carbolic Smoke Ball” published in several newspapers the following advertisement:-
“£ 1000 reward will be paid by the Carbolic Smoke Ball Co. to any person who contracts the increasing epidemic influenza after having used the Smoke Ball three times daily for two weeks according to printed directions supplied with each ball. £ 1000 is deposited with the Alliance Bank showing our sincerity in the matter.
On the faith in this advertisement, the plaintiff bought a Smoke Ball and used it as directed. She was attacked by influenza. She sued the company for the reward. Will she succeed? Explain Briefly
Q.4. Fazal consigned four cases of Chinese crackers at Kanpur to be carried to Allahabad on the 30th May, 1987. He intended to sell them at the Shabarat festival of 5th June 1987. The railway discovered that the consignment could not be sent by passenger train and asked Fazal either to remove them or authorize their dispatch by goods train. He took no action and the goods arrived at Allahabad a month after they were booked.
Fazal filed a suit against Railways for damages due to late delivery of the goods which deprived him of the special profits at the festival sale. Decide & explain briefly ?

Q.5. ‘Lifeoy’ Soap company advertised that it would give a reward of Rs. 2000 who contracted skin disease after using the ‘Lifeoy’ soap of the company for a certain period according to the printed directions. Mrs. Jacob purchased the advertised ‘Lifeboy’ and contracted skin disease inspite of using this soap according to the printed instructions. She claimed reward of Rs. 2000. The claim is resisted by the company on the ground that offer was not made to her and that in any case she had not communicated her acceptance of the offer. Decide whether Mrs. Jacob can claim the reward or not. Give reasons. Explain briefly?
Q.6. In each set of statements, only one is correct. State the correct statements & Explain briefly?
a) i) A bailee has a general lien on the goods bailed.
ii) The ownership of goods pawned passes to the pawnee.
iii) A gratuitous bailment can be terminated by the bailor even
before the stated time.
b) i) A substituted agent is as good an agent of the agent as a sub-
agent.
ii) An ostensible agency is as effective as an express agency.
iii) A principal can always revoke an agent’s authority.
Q.7. A, an unpaid seller, sends goods to B by railway. B becomes insolvent
And A sends a telegram to Railway authorities not to deliver the goods to B. B. goes to the Parcel office of Railway Yard and by presenting R. R. (Railway Receipt) takes delivery of the goods and starts putting them in the cart. Meanwhile the Station Master comes running with the telegram in hand and takes possession of the goods from B. Discuss the rights of A and B to the goods in possession of Railway authorities.

Q.8. X needs Rs. 10,000 but cannot raise this amount because his credit is not good enough. Y whose credit is good accommodates. X by giving him a pronote made out in favour of X, though Y owes no money to X. X endorses the pronote to Z for value received. Z who is holder in due course demands payment from Y. Can Y refuse and plead the arrangement between him and X Explain briefly?

Q.9. Will C has the right of further negotiation in the following cases: (B signs the endorsements) Explain briefly?
i) ‘Pay C for my use’
ii) ‘Pay C’)

iii) ‘Pay C or order for the account of B’

Q.10. A promissory note was made without mentioning any time for payment. The holder added the words’ on demand on the face of the instrument. State whether it amounted to material alteration and explain the effect of such alteration. Explain briefly?
Q.11. State whether the following instruments are valid promissory notes:
i) I promise to pay Rs. 5000 to B on the dearth of ‘B’s uncle provided that D in his will gives me a legacy sufficient for the promise of payment of the said sum.
ii) I hereby acknowledge that I owe X Rs. 5,000 on account of rent due and I agree that the said sum will be paid be me in regular installments.
iii) I acknowledge myself indebted to B in Rs. 5000 to be paid on demand for value received.

Q.12. A Payee holder of a bill of exchange. He endorses it in blank and delivers it to B. B endorses in full to C or order. C without endorsement transfers the bill to D. State giving reasons whether D as bearer of the bill of exchange is entitled to recover the payment from A or B or C. Explain briefly?
Q.13. Write a short note on the Doctrine of Indoor Management? Explain briefly?

Q.14. The shareholders at an annual general meeting passed a resolution for the payment of dividend at a rate higher than that recommended by the Board of Directors. Examine the validity of the resolution. Explain briefly?

Q.15. In a prospectus issued by a company the Managing Director stated that the company had paid dividend every year during 1921 – 27, which was a fact. However, the company had sustained losses during the relevant period and had paid dividends out of secret reserves accumulated in the past. Examine the consequences of the observation made by the Managing Director. Explain briefly?

Q.16. In a prospectus issued by a company the Managing Director stated that the company had paid dividend every year during 1921-27, which was a fact. However, the company had sustained losses during the relevant period and had dividends out of secret reserves accumulated in the past. Examine the consequences of the observation made by the Managing Director. Explain briefly?
Q.17. A buys from B 400 shares in a company on the faith of a share certificate issued by the company. A tender to the company a transfer deed duly executed together with B’s share certificate. The company discovers that the certificate in the name of B has been fraudulently obtained and refuses to register the transfer. Advise A. Explain briefly?
Q.18. A insured his house against fire. Later while insure, A killed his wife, severely injured his only son, set fire to the house and died in the fire. The son survived and sued the insurer for the fire loss, advice the insurer. Explain briefly?

Q.19. a) Satrang Singh admitted his only infant son in a private nursing home. As a result of strong dose of medicine administered by the nursing attendant, the child has become mentally retarded. Satrang Singh wants to make a complaint to the District Forum under the Consumer Protection Act, 1986 seeking relief by way of compensation on the ground that there was deficiency in service by the nursing home. Does his complaint give rise to a consumer dispute? Who is the consumer in the instant case? Explain briefly?
b) Smart booked a motor vehicle through one of the dealers. He was informed subsequently that the procedure for purchasing the motor vehicle had changed and was called upon to make further payment to continue the booking before delivery. On being aggrieved, Smart filed a complaint with the State Commission under the Consumer Protection Act, 1986. Will he succeed? Explain briefly?
c) Brittle and Company, a small-scale industry, sought nursing and financing facilities from its bankers by means of grant of further advances and adequate margin money in anticipation of good demand for its products. In failing to obtain this and having become sick, it proceeds against its bankers under the Consumer Protection Act, 1986, Will it succeed? Explain briefly?

Q.20. X who was working as a truck driver had taken a general insurance policy to cover the risk of injuries for a period from 1.11.1998 to 30.11.1999. He renewed the policy for a further period of one year on 10.11.1999. On the same day, he met with an accident and suffered multiple injuries including fractures. X submitted the claim along with documents to the insurance company. The insurance company repudiated the claim on the ground that the premium for the renewed policy was received in the office only at 2.30 p.m. on 10.11.1999, while the accident had taken place at 10.00 a.m. on that day and hence there was no policy at the time of accident. Will X succeed if he files a complaint against the insurance company for this claim? Explain briefly?
Q.21. Avinash booked his goods with Superfast Freight Carriers at Delhi for being carried to Ferozabad. The goods receipt note mentioned that all the disputes would be subject to jurisdiction of the Mumbai Court. Avinash lodged a complaint for certain deficiency in service against the transporter in the District Forum at Delhi. Superfast Carriers contested that District Forum at Delhi had no jurisdiction to entertain the complaint as the head office of the transporter was at Mumbai and the jurisdiction has been clearly stated in the goods receipt not. Is the contention of the transporter tenable? Explain briefly?
Q.22. With reference to the provisions of the Consumer Protection Act, 1986, decide the following giving reasons in support of your answer.
i) Sukh Dukh Ltd. dispatched certain consignments of goods by road through Fastrack Roadways Ltd. The goods were unloaded and stored in a godown enroute on the suggestion of consignee. A fire broke out in the neighbouring godown spread to the godown and goods were destroyed. The Fastrack Roadways Ltd. claimed that there was neither negligence nor deficiency in service on their part and goods were being carried at “Owner risk” and since no special premium was paid, they were not responsible for the loss caused by fire. Whether Fastrack Roadways Ltd. is liable to pay damages to consignor?
ii) Life Insurance Corporation (LIC) formulated a scheme called ‘salary saving scheme’ under which employees of an organisation could buy an insurance policy. Premium due on each policy was collected by the employer from the salary of the employees nor did it issue any premium notice. When the widow of the deceased employee made a claim to LIC on the death of her husband, the LIC repudiated the claim on the ground that four installments of premium had not been paid. The widow was approached the consumer forum for redressal. Is the LIC liable for deficiency in service? Explain?
iii) Raman booked a ticket from Delhi to New York by Lufthansa Airlines. The airport authorities in New Delhi did not find any fault in his visa and other documents. However, at Frankfurt airport authorities instituted proceedings of verification because of which Raman missed his flight to New York. After necessary verification, Raman was able to reach New York by the next flight. The airline authorities’ tendered apology to Raman for the inconvenience caused to him and also paid as goodwill gesture a sum of Rs. 5,000. Raman intends to institute proceedings under the Consumer Protection Act, 1986 against Lufthansa Airlines for deficiency in service. Will he succeed?

Q.23. With reference to the provisions of the Consumer Protection Act, 1986, decide the following giving reasons in support of your answer.
i) Sohn sent all relevant documents in an envelope regarding consignment of goods to a buyer in the USA through Fast Service Couriers. The documents did not reach the buyer as a consequence of which the buyer could not take delivery of the goods. By the time the duplicate copies of the document had been received by the buyer, the season of the goods was over. He claimed that he had suffered a loss of US $ 5,000 as a result of the negligence of the courier. The State Commission ordered the payment to be made by the Fast Service Couriers, but the National Commission in appeal reversed the order and ordered payment of US $ 100 only as per the receipt issued by the Fast Service Courier to the consignor at the time of the dispatch of the latter. Advise Sohan.
ii) Mahesh purchased a machine from Astute Ltd. to operate it himself for earning his liverhood. He took the assistance of a person to assist him in operating the machine. The machine developed fault during the warranty period. He filed a claim in the consumer forum against the company for deficiency in service. Astute Ltd. alleged that Mahesh did not operate the machine himself but had appointed a person exclusively to operate the machine. Will Mahesh succeed?
iii) Pillai purchased a car by taking a loan from Kerala cooperative Bank Ltd. and gave post-dated cheques to the bank not only in respect of repayment of loan instalments but also of premium of insurance policy for two succeeding years. On the expiry of the policy. Pillai’s car met with an accident. Will Pillai succeed in getting a claim against the
Bank ?

FINANCIAL MANAGMENT CASE STUDY SOLUTION

FINANCIAL MANAGMENT CASE STUDY SOLUTION

Caselet 1

Your employer, a mid-sized human resources management company, is considering expansion into related fields, including the acquisition of Temp Force Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporary heavy workloads. Your employer is also considering the purchase of a bigger staff & McDonald (B&M), a privately held company owned by two friends, each with 5 million shares of stock. B&M currently has free cash flow of $24 million, which is expected to grow at a constant rate of 5%. B&M’s financial statements report marketable securities of $100 million, debt of $200 million, and preferred stock of $50 million. B&M’s weighted average cost of capital (WACC) is 11%. Answer the following questions

Questions

1. Describe briefly the legal rights and privileges of common stockholders. (20)

Caselet 2

Casino is a large electrical construction company having a turnover of Rs.100 crores per annum. Since a few years the company has not been doing well in terms of profits. In order to find out the reason, a group of independent auditors were deployed to examine the operations of the company. The item they felt that needed closer attention was the budget control of new construction work. The audit showed that most electrical designs for new construction were carried out at the headquarters of the company by a project manager. In preparing a budget for a new project, he checked the expenses for similar jobs in the past, then simply multiplied them by various factors. The auditors found that during the past two years, most budgets were greatly overestimated. Incidentally, it was about two years ago that the project manager was given the primary responsibility for budgeting. In this role, he would submit his budget to the Expenditure Control Committee, consisting of higher-level managers who had only a limited interest in budgeting. It was to this committee that the project manager submitted requests for additional money whenever needed. Most of the requests were approved.

The chief auditor felt that the project team tended to “expand” the time needed to complete the task whenever the members thought the budget made it possible. In other words, they “adjusted” their productivity to match the money allocated to the project.

The auditors noted that other contractors could do similar jobs for 20% less money. They concluded that a new control procedure was needed.

 This section consists of Caselets.

 Answer all the questions.

 Each Caselet carries 20marks.

 Detailed information should form the part of your answer (Word limit 150 to 200 words).

Examination Paper of Financial Management

IIBM Institute of Business Management

Questions

1. What do you think of the budgeting process? (10)

2. What kind of control procedure should the auditors recommend? (10)

Security Analysis and Portfolio Management CASE STUDY SOLUTION

Security Analysis and Portfolio Management CASE STUDY SOLUTION

TOUAX is a French company and is currently Europe‟s no. 1 in shipping containers and river
barges, and no. 2 in modular building and freight railcars. The group provides operating leases to
customers around the world, both on its own account and for third-party investors. On June 24, 2009,
TOUAX announced that its capital increased by waiving preferential subscription rights but with
priority for existing shareholders, launched on 18 June 2009 for a total of E17, 851,519.76 (gross)
through the issue of 936,596 new shares which were subscribed in the entirely. Following partial
application of the extension clause, 952,747 shares were placed or 101.72% of the issue; total
proceeds were E18, 159,357.82.
This rights issue has enabled the Group to strengthen its financial structure, to position itself with
advantage for possible acquisitions of tangible stock, and to grasp opportunities thrown up by the
crisis (purchase of shipping containers, modular buildings, river barges and railcars, for hiring out on
mainly long-term leases). 370,062 new shares allotted under absolute entitlement were subscribed or
39.51% of the total number of new shares issue. Another 555,685 shares were applied for subject to
cutting back in the event of over subscription, and orders for these were all filled. Another 27,000
shares had been applied for by the general public, and following partial application of the extension
clause it proved possible to fill orders for all of these.
All the result of the right issue, TOUAX is well placed to respond to the boom in corporate
outsourcing of non-core assets, and every day provides over 5,000 customers with quick and flexible
leasing solutions. TOUAX is now listed on Euronext in Paris – NYSE Euronext Compartment C
(ISIN Code FR0000033003), and features in the SBF 250 Index.
Questions:
1. After analyzing the case, do you think all the companies that can afford, should opt for right
issue to improve their financial status?
2. What do you analyze as the two main advantages of the right issue?
Case let 2
In mid-February 1994, the British paper, the Sunday times ran on article that alleged that a 1 billion
sterling ($ 750 M) sale of equipment by British companies to Malaysia was secured only after bribes had
been paid to Malaysian government officials and after the British overseas development administration
(ODA) had agreed to approve a 234 million sterling grant to the Malaysian government for a
hydroelectric dam of (according to the Sunday times) dubious economic value. The clear implication was
that UK officials, in their enthusiasm to see British companies win a large defence contract, had yield to
pressures from “corrupt” Malaysian officials for bribes – both personal and in the form of the 234 million
sterling development grants.
What happened next took everyone by surprise. The Malaysian government promptly announced a an on
the impact of all British goods and services into Malaysia and demanded an apology from British
Government. Officially the ban applied only to government orders for British goods and services; the
private sector was free to busy as it chose. However, British companies with experience in the region
were nervous that the private sector would follow the government‟s lead in shunning British products. At
stake was as much as 4 billion sterling in British exports and construction activities in Malaysia and a
presence in one of the world‟s fastest growing developing economies (Malaysia‟s economic growth has
averaged 8% per annum since 1989). In announcing the ban, Malaysia‟s Prime Minister, Dr Mahathir
Mohammad, noted that the British media portrays Malaysians as corrupt because “ They are not British
Examination Paper of Finance Management
8
IIBM Institute of Business Management
and not white”…And “we believe the foreign media must learn the fact that developing countries,
including a country led by brown Moslem, have the ability to manage their own affairs successfully”.
The British government responded by stating, it could not tell the British press what and what not to
publish, to which Dr Mahathir replied there would be “no contracts for British press freedom to tell lies”.
At the same time, the British government came under attack from members of parliament in Britain, who
suspected the government acted unethically and approved the ODA hydroelectric grant to help British
companies win orders in Malaysia.
Questions:
1. If you are the CEO of a British company that now faces the loss of a lucrative contract in
Malaysia because of the dispute. What action should you take?
2. How do you think British government should respond to the Malaysian action?

ABN Amro Bank and Correspondent Banking in India CASE STUDY SOLUTION

ABN Amro Bank and Correspondent Banking in India CASE STUDY SOLUTION

ABN AMRO bank has emerged as a major correspondent bank owing to a large network. In

India, it operates in six major cities, viz. Baroda, Chennai, Kolkata, Mumbai, New Delhi and

Pune. Being a correspondence bank, its product offerings are found primarily in the area of

trade and clearing. It is doing well in these owing to strong tie-up with local Indian banks

reaching 350 centres across the country. As a result, payments are effected speedily and

effectively.

Cash Management

The customized products in the area of cash management include cheques payable at par at all its

branches across the country, apart from traditional collection services, such as collection of

outstation/upcountry cheques drawn on other banks. ABN AMRO is a member of all major clearing

centers in the major financial centers. It has an electronic delivery system and structures multilateral

netting of cash.

Trade Services

Under trade services, the Bank offers a comprehensive range of products, such as:

1. LC reimbursement

2. Indian rupee trade payments

3. Handling documentary bills for collection

4. Bills negotiation

5. Letter of credit advising

6. Letter of credit confirmation

7. Guarantees

Examination Paper of Finance Management

4

IIBM Institute of Business Management

Treasury Services

Treasury services at ABN AMRO Bank (India) are available round-the-clock. Rupee funding at its

treasury desk is provided at competitive rates along with advice on market trends and rates. It

provides also advisory services on the request of financial institutions and corporate in the area of

regulatory, economic and financial matters including depository services.

Questions:

1. Describe the network of ABN AMRO Bank in India.

2. What role does it play for global cash management?

Managing Exchange Rate Risk CASE STUDY ANSWER

Managing Exchange Rate Risk CASE STUDY ANSWER
Mahindra International (India) imported spares of an engine from a US manufacturer for $ 5,000 per
annum at a price of $ 2.5 per piece. The average exchange rate during 2001-02 was Rs. 47.70/$. The
Indian company imported the spares also from a British manufacturer. In fact, it had diversified its
import in view of reducing the risk associated with the supply. The import from the USA was
competitive in view of the fact the same spares imported from the UK was slightly costlier. The
American spares cost Rs. 119.25 per piece, while the British spares cost Rs. 120.00 per piece. In
2002-03, US dollar appreciated to Rs. 48.40 with the result that the cost of American spares turned
higher than the British spares. In the sequel of the appreciation of US dollar, the Indian importer cut
its demand from 2,000 pieces to 500 pieces. The loss to the US exporter was colossal. But at the same
time, the Indian Importer suffered a lot. It had to pay a higher price for the US spares in terms of
rupee. And also, it had to divert its import from the USA to the UK insofar as the pound sterling did
not appreciate during this period. All this happened in the wake of the exchange rate changes.
Questions:
1. Mention the loss borne by the US exporter in the sequel of appreciation of dollar.
2. What strategy the Indian importer needs to follow to hedge the exchange rate risk?

Enterprise Resource Planning CASE STUDY ANSWER

Enterprise Resource Planning CASE STUDY ANSWER

Caselet1
With eight plants globally running from a single ERP instance on a server in Zeeland, Michigan, the IT team faced the challenges of scaling their systems to support the global growth fueling their company’s expansion. Running IQMS’ manufacturing ERP system delivered via Hosted Managed Services (HMS) provides Ventura Manufacturing the most economical system architecture for greater scalability and efficiency as well as to attain disaster recovery goals.
Ventura is an award-winning semi-automated assembly and production company that serves the automotive, office furniture, education seating, and molding and assembly of optical silicone industries globally. Headquartered in Zeeland, Michigan, the company has multiple plants in Zeeland in addition to plants in Budaörs, Hungary, Saltillo, Mexico and Shanghai, China.
As demand for Ventura’s services grew and the company began attracting customers worldwide, it was apparent the dependency on a single ERP system on-premise in Zeeland, Michigan was becoming an impediment to faster growth. “Relying on a single system to manage our global plants was proving to be a huge scale challenge,” said Joel Boyles, IT Team Lead at Ventura Manufacturing.
Ventura’s customer base is globally-based and to serve them as responsively and effectively as possible, Ventura made the decision to open new production plants in Hungary and Shanghai, China.
With eight plants globally running from a single ERP instance on a server in Zeeland, Michigan, the IT team faced the challenges of scaling their systems to support the global growth fueling their company’s expansion. The IT Teams at Ventura prides itself on offering live support to any plant, anywhere in the world that needs help, anytime. “When we just had the plants in Mexico and Hungary, our existing staff could scale to support the calls coming from plants for help with their IT systems and take care of ERP-related tasks,” Joel said. When the Shanghai, China facility went online, Ventura was reaching the limits of scale and speed with their IT teams and the system running on-premise in Zeeland.
As demands increased on the system, so did concerns over Availability and Disaster Recovery Objectives the IT Team had defined. Two metrics that are of specific interest to Ventura’s IT team are the Recovery Time Objective (RTO) and Recovery Point Objective (RPO). IT defined the RTO goal as 8 hours and the RPO as 15 minutes, achievable on a 24/7 basis. To accomplish these goals, Ventura would need to create an entirely new system platform that could scale more efficiently with their growing business. The new platform would also need to increase the speed of system updates, which had been a problematic area in the past for the single system to complete.
Joel Boyles, IT Team Lead, says the challenges of scalability and disaster recovery are what drove the urgency for Ventura to decide that Hosted Managed Services (HMS) from IQMS was the best possible solution. “Plant system updates including MRP were taking at least 2 hours
IIBM Institute of Business Management
Examination Paper of Enterprise Resource Planning
per plant, which translated into our IT teams having 24/7 shifts in our Zeeland-based IT offices,” Joel said. “Clearly we had to redefine our system architecture for greater scalability and speed.”
Ventura chose IQMS’ Enterprise IQ delivered via Hosted Managed Services (HMS) because it was the most economical and fastest option for solving the system performance challenges and attaining the disaster recovery goals the company has. Under the IQMS HMS purchase option, software licenses are owned in perpetuity by Ventura and hardware and platform software is provided by the IQMS data center. IQMS is managing the Ventura systems today in a secure data center environment. Ventura’s IT team can gain access to key system metrics and key performance indicators anytime via any browser-enabled laptop, tablet or smart phone.
Questions
1. How Ventura Defined A Global Roadmap To Greater Speed And Reliability? ( 20)
Caselet 2
Enterprise resource planning (ERP) is business management software—usually a suite of integrated applications—that a company can use to store and manage data from every stage of business, including:
•Product planning, cost and development
•Manufacturing
•Marketing and sales
•Inventory management
•Shipping and payment
Functions of ERP
• ERP provides an integrated real-time view of core business processes, using common databases maintained by a database management system. ERP systems track business resources—
 cash, raw materials, production capacity—and the status of business commitments: orders, purchase orders, and payroll.
• The applications that make up the system share data across the various departments (manufacturing, purchasing, sales, accounting, etc.) that entered the data.
• ERP facilitates information flow between all business functions,
ERP Implementation
Success
Company Background
 Cadbury is a British multinational confectionery company owned by Mondelēz International.
 It is the second largest confectionery brand in the world after Wrigley’s.
 Founder: John Cadbury
 Founded in: 1824, B Currently, Cadbury India operates in four categories viz. Chocolate Confectionery, Milk Food Drinks, Candy and Gum category. In the Chocolate
IIBM Institute of Business Management
Examination Paper of Enterprise Resource Planning
Confectionery business, Cadbury has maintained its undisputed leadership over the years.
ERP Implementation
Cadbury turns out, in recent years, Kraft implemented SAP ERP 6.0 (System Analysis and Program Development) in what SAP called one of its largest global ERP implementations. Kraft credited ERP with reducing operational costs. 11,000 employees were sending data to the company’s SAP solution and it was linked to 1,750 applications by 2008. That same year, Kraft aslo added SAP’s master data management solution, Net Weaver, with an eye toward integrating legacy systems.
• Cadbury was left with a glut of chocolate products at the start of the year, after the installation of a new SAP-based enterprise resource planning (ERP) system led to an excess of chocolate bars building up at the end of 2005.
• The new U.K. computer system is part of a five-year IT transformation project, called “Probe”, aimed at integrating the Cadbury Schweppes’ supply chain, purchasing, manufacturing, distribution, sales and marketing systems on a global, SAP-based
ERP platform
• Cadbury Schweppes is aiming for an ultimate savings from the Probe project, but its implementation has been far from smooth. The project was beset by problems and delays when it was first introduced in Australia in 2002.
Benefits of ERP
• Cadbury was on a fast paced growth and could not continue with the existing systems and the pace was too slow due to added inefficiencies. ERP added efficiency and guided the led all the issues fast paced growth.
• The implementation of ERP brought in a new way of warehouse management system and brought in structure to branch offices and the depots.
• While implementing the ERP systems, the company has built it upon the past strengths of the company thereby not losing out on its competitive
• The initial implementation took time and then the successive implementations took lesser time and cost and there is a huge advantage in saving cost while in the implementation phase itself.
• The reaction from competition does not matter in this because this is not a change that was advertised to the market. This is an internal process restructuring and was a welcome change within the company which badly needed the change.
• The company also has built in a robust regular feedback system to monitor the changes and check if they go according to the initial plan. The entire implementation is cross functional and hence it is important that there is a high increase in the efficiency. The ERP vendor was also selected from among the best in class vendors which helped the process occur in a streamlined fashion and avoided any possible chances of hiccups during the initial
implementation phase.
The system has also been deployed up to the vendors. They have a portal called vendor connect
IIBM Institute of Business Management
Examination Paper of Enterprise Resource Planning
 This section consists of Applied Theory Questions.
 Answer all the questions.
 Each question carries 15marks.
 Detailed information should form the part of your answer (Word limit 200 to 250 words).
END OF SECTION C
END OF SECTION B
where they can see their inventory movement and make plans accordingly. Hence the restructuring happens not only internally but also across to the supplier which will add on to the benefits that are accrued.
It was considered at low cost and high result implementation which by itself highlights the success and the benefits.

MBA CASE STUDY SOLUTIONS PROVIDED

MBA CASE STUDY SOLUTIONS PROVIDED

Subject: Human Resource Management & Analytics

Q.4 Case study
Watson Public Ltd Company is well known for its welfare activities and employee-oriented schemes in the manufacturing industry for more than ten decades. The company employs more than 800 workers and 150 administrative staff and 80 management-level employees. The Top-level management views all the employees at the same level. This can be clearly understood by seeing the uniform of the company which is the Same for all starting from MD to floor level workers. The company has 2 different cafeterias at different places one near the plant for workers and others near the Administration building. Though the place is different the amenities, infrastructure and the food provided are of the same quality. In short, the company stands by the rule of Employee Equality.
The company has one registered trade union. The relationship between the union and the management is very cordial. The company has not lost a single man day due to strike. The company is not a paymaster in that industry. The compensation policy of that company, when compared to other similar companies, is very less still the employees don’t have many grievances due to the other benefits provided by the company. But the company is facing a countable number of problems in supplying the materials in the recent past days. Problems like quality issues, mismatch in packing materials (placing material A in the box of material B) incorrect labelling of material, not dispatching the material on time, etc…
The management views the case as there are loopholes in the system of various departments and hand over the responsibility to the HR department to solve the issue. When the HR manager goes through the issues he realized that the issues are not relating to the system but it relates to the employees. When investigated he come to know that the reason behind the casual approach by employees in work. The company hired new employees for a higher-level post without considering the potential internal candidates. The newly hired employees are placed with higher packages than that of existing employees in the same cadre.
1. Narrate the case with a suitable title for the case. Justify your title.

Assignment
Subject: Human Resource Management & Analytics
Q.5 Case study
Mr. Jerry the Human resource management of Welcon automotive Ltd a well-known automobile multinational company. Mr. Jerry is very friendly, approachable, people-oriented leader. In the other hand he is a strict leader when it comes to work, he doesn’t tolerate mistakes with regards to ethics and values. One of the top management person once said to him that “ Mr. Jerry you are a Task Master”. Jerry replied “Why do you say this”. He said, “Jerry, you know who is good at what and how to get work done from them”. Mr. Jerry said with a smile, “Yes sir I agree with you and that’s why my team always completes tasks on time.”
Majority of the employees in Welcon were very happy to work with Jerry due to his friendly nature. The employees always put extra efforts for anything which benefits the organisation. The things were going well till the organisation witness a transformation. As a part of organisational development there were many structural and policy changes in the organisation.
As a part of structural change, the top management has witnessed a major change. The new top management unlike old management, was very keen in reducing the expenses of the organisation in all terms. Slowly the employees were facing many obstacles in performing their duties due to this cost cutting strategies, as the management fails to suggest any alternatives in those areas where they have implemented the cost cutting strategies.
This has created a negative impact on employees. For many employees for completing some crucial task also they need to wait for sanctioning of amount which took lot of time and energy of the employees. The employees were not aware about the reason behind the cost cutting strategy as the turnover, profit, sales etc. everything was in upward trend. Mr. Jerry was also very disappointed with the ongoing instability in the organisation. Many a times he tried to highlight the issues faced by employees in completing their task. Once in personal meeting Mr. Shah (VP HR) he said ” Mr. Shah, I think it is high time to solve employees issues before it gets out of control. Also We need to bring this issue in front of our MD, CEO etc.” Mr. Shah said, “Jerry It is the decision of top management. You handle the employees at your level. That is what we can do now”.
During the top level meeting his also Mr. Jerry’s words were, most of the time, unnoticed and many a times he was discouraged to discuss those
issues. The employees and the union have tried to discuss the issue with top management but they had failed fatefully. Hence, they have jointly decided to show their disregards by way of stopping oneself from putting their extra efforts for the organisation. They also know that this is not going to stop the basic profit of the organisation but surely this will make the management realize that they have to revisit the cost cutting policy. They successfully started implementing the things.
Mr. Jerry who observed the change in employees’ activities he said to the employees “I have noticed the change in you all. I can’t support this change nor going to tolerate this”. He added, “Our way of working is not this you all have to give up this idea and work as usual and put those extra efforts where ever required.” The employees also tried to make him understand that, “Sir, we never want to do these things but it is the last option with us to meet the management and be able to put up the issue. What else we can do”.
The employees also argued that, “Sir, try to understand us. This is just a way to make the management realize that the employees’ issue is getting worse and that needs to be solved.” They added Sir, Further we are left out with any other options.” Mr. Jerry who was dissatisfied with the reply of employees, he said “those who don’t give-up the idea will have to face the consequences in the upcoming appraisal process”.
1. If you were Mr. Jerry what could be your reaction towards the employees. Which leadership style does Jerry follows.
2. What could Jerry do to solve the issue as a HR Manager? 3. Do you think that the employees are handling the issue properly.
4. Can you suggest any other mode to show their disregards to management?

Subject: Management Principles
Q.3 Case study
Bhatkaav Enterprises is facing huge losses. The owner of the company is an MBA pass out. Even then many things in the organisation are happening which are indicative of lack of proper management in the company. First of all there is no specific sharing of work and any time any employee is asked to do anything. This has lead to wastage of efforts. Further due to negligence in proper work sharing there has been no specialisation development in the nature of the jobs done by the employees. There are no clear and fair agreements between the workers and the management. This has led to a lot of frustration in the workers. Management has quite often been found to be ignorant of not fulfilling promises done by it. There are also no strict rules and regulations binding on the conduct of the workers. The departmental heads who are the middle level managers in the company and hold key positions always favour their relatives. They quite often don’t turn up for job on time. They are always looking for special relaxations from the top management. This has led to feeling of resentment among the employees who are also demanding special favours and threatening strike in the coming days.
Suresh works in a bulb manufacturing company. Each bulb which is manufactured is of standard size and quality. Further if there is any unrequired type of bulb manufactured then its production is stopped. Last month when the company came to know that 10 watt bulbs were no more liked by customers, their production was stopped. He works in the purchase department. His job is to purchase the filaments required to make bulbs. This time when he purchases the filament he gets the instruction from the seller that some special care needs to be taken in the first hour of fixing the filaments inside the bulb. Suresh knows this information should be given immediately to the production department before the assembling process starts. However he finds that his company’s policies only allow him to give the message to his immediate boss who will further pass this message to his boss. The passing of this message will continue till it reaches the desired person in the production department.
Question:
(10 × 2 = 20)
1. Which technique of management is followed here? Also name the principle of management followed here by the company?
2. Which option is now available to Suresh since the company is not allowing him to interact with the concerned worker in the production department?

Subject: Operations Management
Q.1 Case study
Chinese consumer electronics and mobile communications company OPPO featured in the famous SUPERFACTORIES series on National Geographic. With this, OPPO joined the league of companies like Ferrari, Porsche, BMW, Corvette, Apache Helicopters, Caterpillar, Tetrapak, and the precision operations of logistics giants like UPS that had featured in the SUPER
FACTORIES series of National Geographic.
On February 27, 2021, Chinese consumer electronics and mobile communications company OPPO featured in the famous Superfactories series on National Geographic . With this, it joined the league of companies like Ferrari, Porsche, BMW, Corvette , Apache Helicopters , Caterpillar , Tetrapak and logistics giant UPS, which had featured in the series. The show featured OPPO’s manufacturing facility in India, located in Greater
Noida.
Oppo Mobile Telecommunications Corp., Ltd . (OPPO) a smartphone manufacturing company headquartered in Dongguan, Guangdong, China,had a presence in over 50 countries as of 2021. The company was founded in 2001 by Chen Mingyong and was incorporated in 2004 in China as a subsidiary company of BBK Electronics. n 2014, OPPO entered the Indian smartphone market. It launched Oppo N1 – the world’s first smartphone to feature a swivel camera. Tom Lu, CEO, OPPO Mobiles India, said in 2015, “In our global expansion, India is a very key market for us primarily because we feel there is a huge potential to grow in the Indian smartphone market..
In 2015, OPPO announced that it would sell locally assembled mobile phones in India by October 2016. Thus, OPPO was following in the footsteps of other Chinese manufacturers, Xiaomi and Lenovo, which had manufacturing facilities in India. Foxconn, a contract manufacturer from Taiwan, would assemble the devices.. The Superfactory was so diligently designed that it made sure no compromises were made in the speed of production or the quality of the product. The factory was categorized into four segments –Assembly, SMT (Surface Mount Technology).
OPPO was continuously pushing forward for innovations as a tool for its growth. The World Intellectual Property Organization (WIPO) stated that
OPPO was among the top 10 Patent Cooperation Treaty (PCT) filers in 2019 and 2020. By March 31, 2021, OPPO had filed for over 61,000 patents and owned more than 26,000 granted patents globally. Among these, 54,000 were utility patents, accounting for 89% of all OPPO patent applications.
Question:
(10 × 2 = 20)
1. What are the importances of technological innovations for a business?
2. Describe the success of OPPO as SuperFactory.

Global Business Environment CASE STUDY SOLUTION

Global Business Environment CASE STUDY SOLUTION
Assignment
Subject: Global Business Environment
Q.1 Case study
L’Oreal International Marketing Strategy
L’Oreal is the world’s biggest cosmetics and beauty Products Company. Basically it’s a French based company and its headquartered in Paris. It is focus engaged in the field of production and marketing of concentrating on hair colours, skin care, perfumes and fragrances, make up and styling products. L’Oreal products also based on dermatological and pharmaceutical fields. Their products are made for Individual and professional customers. This company operates over 130 countries like Asia, America, East and West
Europe through 25 international brands.
The success of L’Oreal lies in the fact that the company succeeded in reaching out to the customers of different countries of the world, across different income ranges and cultural patterns, giving them the appropriate product they are worthy of. The area of expertise of L’Oreal being that it succeeded almost in every country that it entered. The strategies of L’Oreal was varied enough to help it and stop itself from restricting itself in a single country. L’Oreal sold its product on the basis of customer demand and country want rather than keeping the product identical across the globe. It built ample number of brands or mammoth brands entrenched to the restricted culture and which appealed to a variety of segment of the universal market instead of generalising the brand and edible in innumerable culture. L’Oreal went on to being a local product in every international market. The brand extension of L’Oreal also came in the same sector or the same segment of market. L’Oreal believed in growing its expertise in the segment it is conscious of rather than going into a completely new sector of market.
International marketing strategy is more in-depth and broadened in one sense of the term. It is simply a principle of marketing however on a global scale. Setup of global marketing strategy has a lot to do with understanding the nature of global market itself, and most importantly the environment.
Business environment across the globe has different economic, social and political influence. Thus, it is believed that selecting a global market target for examples when strategizing is a good idea. International marketing strategy of L’Oreal is concentrated on a cross cultural arena spanning four
market destinations. They are namely, 1.) Asian Market, 2.) European Market, 3.) North America Market and 4.) The African, Orient and Pacific Region.
Asia
At present L’Oreal is one of the best company in the whole world in the field of cosmetic products. The cosmetic products of the L’Oreal are widely used and specially the hair colour which was introduced by L’Oreal few years ago. L’Oreal is very famous in Asia and their products in Asia are very cheaper than the other companies and are used by majority of people in china, Thailand, Japan etc. L’Oreal is famous and very successful because of their global marketing strategies which are very helpful and also distinct from the strategies used by other companies in this field. L’Oreal in Asia uses the sustainable strategy that is of growing the company as the demands of cosmetic products in the countries like china, Thailand etc is in great amount. This company uses the strategy of suspicious brand management and they also brought the strategy of more suspicious acquisitions. The main problem that a company like L’Oreal faces in Asia is of competition given by the other companies dealing with the cosmetic products. To overcome this problem in Asia these companies use the strategy of selling good quality products at the cheaper rates than the other companies. One of the best strategies of L’Oreal in Asia is of diversification of the brand and the main reason behind this strategy by L’Oreal is to make them palatable in the local cultures. L’Oreal in Asia aims at the management of the global brands with the local variations and this means that their main aim is of becoming a local and not the foreign company in Asia. For example L’Oreal in Thailand has given local names to their stores and most of the employees present in this company, are local people of Thailand. It is because of all these strategies; L’Oreal is very successful in whole Asia.
European Market
L’Oreal is the only company which uses the strategies which also supports the people in many ways and not only in providing good quality products at cheaper rates. L’Oreal used different strategies of marketing in the European market like they used the strategy of nurturing self-esteem of the people with beauty. In France, L’Oreal created the programs like “Beauty from the heart” for helping the people made helpless by illness or any kind of negative life experiences. In the countries like UK and Germany, many of the women and also the young people regain their confidence and their self-image gradually by using the cosmetics which are provided by L’Oreal.
In European countries L’Oreal also used the marketing strategies like taking calculated amount of risk etc. but most of the strategies are related to the
growth of the people mentally and not only for the beauty or the fashion purpose. Various innovative treatment programs are launched by L’Oreal for the young people of European countries and this company also launches the free skincare and make-up workshops for the women suffering from cancer.
For example in France a programme named as “La Vie, de Plus Belle” offers the free skincare and makeup for the cancer suffering women in all over the France. This helps them to cope with the treatment’s side effects and it also
helps them to retain their self-esteem which is very important for a patient. In the European countries L’Oreal generally uses the strategy of the management of brand by which L’Oreal had made a large amount of brands which are rooted in the local culture and which all appeals to the various segments of the global market. By using these social types of strategies for the people of Europe has helped L’Oreal in expanding their business in the whole Europe.
1. What is L Oreal’s international strategy?
2. What strategies make L Oreal an unbeatable beauty company? 3. How does L Oreal promote their products?
4. Why the crowd go for L Oreal product?
5. What is the unique selling proposition of loreal?

Assignment
Subject: Global Business Environment
Q.2 Case study
Apple Inc is a multinational American company that design and sells
computer software, consumer gadgets and personal computers. It was
cofounded by Steve Jobs, Steve Wozniak and Ronald Wayne. Apple Inc is
wellknown for being innovative as they kept on producing new innovations
from the first Apple computer Macintosh to the more recent iPhone and iPad
series.
Today Apple Inc. is very well known in the world because of their advanced
technology in products such as iPods, iPhone, Macbooks, Apple TV and
other professional software. All the high tech products provide consumers
with a better living standard in many different ways. Moreover, Apple Inc’s
dominant position in the global market has changed the trend of consumer
usage of electronic appliances such as in virtual communication. People will
never need to carry multiple devices where each one only offers a handful of
functions. Furthermore, Apple also created a substantial value in highly
competitive market and industry which help them to achieve competitive
advantages in an industry with stiff competition. In addition, it resolves the
other external factors that present difficulty challenges to Apple Inc.
Therefore, now Apple Inc is known as a strong company and the market
leader in industry. Now, let us discuss about the current expansion strategy
that used by Apple that make the company has greater success in
marketplace.
The first strategy that use by Apple Inc for their current expansion strategy
is creating innovative idea that slightly different from the competitors that
already exists in market and industry. In order to make the company more
innovative, Steve Jobs focused innovation on competitive pressure and value
proposition by stressing his management style on customer center
innovation and customer experience. As CEO in Apple, Steve Jobs carefully
evaluated competitive pressure and opportunity in market place by
continuously pursuit customer experience innovation. He also focused their
business and IT strategy on customer center experience. It means that Apple
will be more focused on looking outwards, market and business drivers
rather than at the products or services that already exist. Steve Jobs
focused on this strategy because the customers can help the company to
understand what customers need and scarcity of the people so that he can
use the feedbacks as inspiration to deeply investigate and then to create
more innovative, creative and highly advanced technological product or

services that can fulfill the needs of the customers. Therefore, Apple
products design is always attractive and elegant compared to those existing
competitors. Apple products like iPods and iPhones are good examples that
show the innovation of Apple Company by creating digital lifestyle.
The second strategy applied by Apple is differentiation. Apple is using
Macintosh as operating software whereas other personal computer’s
producers are using Windows. The differentiation in operating software gives
Apple a competitive advantage in the personal computer industry. Macbook
users are satisfied with Macintosh performance because it is very energy
saving where the processor will automatically “close” those programs which
are not in use when it is in standby mode. On the other hand, Windows
does not have such technology. Thus, Windows’ users might have to charge
the laptop more often due to the battery consumption is higher than
Macintosh.
In terms of design, Apple came out with an ultra-thin Macbook Air which is
extremely thin compared to those existing laptops. To those consumers who
prefer lighter and thinner laptops will definitely be attracted to the Macbook
Air. Apple does not produce laptops in various colors like Dell or Hewlett
Packard to increase the choices for consumers. However, to those
consumers who are concerned about technology and high performance,
Apple is still the preferable choice.
In terms of applications and software, Appstore provides a platform for
customers to download software and applications according to categories. It
is easy to search for any application or software by using Appstore. iTunes
allow consumers to categorize and download songs easily. By using iTunes,
consumers can choose their preferable album cover for their songs. They
can also “synchronize” and update the songs in their iPhone with a laptop.
Besides that, iTunes also allow consumers to transfer photos from iPhones
to PCs.
As for pricing, Apple is using skimming pricing strategy where they set high
selling price for their products. However, there are still a lot of loyal
customers who prefer to spend more money on Apple products. This is due
to the self-esteem where consumers feel good by carrying Apple products
because it somehow shows their status as being up-to-date and their taste
is better than others. Some customers think that Apple products are not
cheap but also not high-priced products because the value of Apple
products bring to them is never disappointing.
Other than that, Apple is using specialization strategy where they
customized customer’s laptop according to their requirements. Customers
are required to add in features into the laptop which can serve them better.

Beside this, Apple also emphasizes customizability on the part of
entertainment that offer computer-build for high performance such as
gaming. Gaming plays important roles to help Apple to customize in features
and specification to make the products more attractiveness and creativity.

made? What choices must be faced?)?
1. What is the summary of Apple case study?
2. How does strategy match the macro environment?
3. How does strategy match the industry environment?
4. What is the company’s major problem (e.g., what decisions must

Assignment
Subject: Global Business Environment
Q.3 Case study
Dell Social Business Strategy
Dell Inc. is one of world’ largest multinational technology corporation that manufactures sells and supports personal computer and other computer related. Dell was founded as PC’s Limited in 1984 by Michael Dell, with a start-up money totaling $1,000, when he was attending the University of Texas. Michael Dell started his business with a simple concept that selling computer systems directly to customer would be the best way to understand their needs and give them the most computing solutions. The first product of the company is a self-designed computer called Turbo PC which had lower prices than major brands. PC’s Limited was not a first company to do this but was the first to succeed, grossing $73 million in its first year trading. The company changed its name to Dell Computer Corporation in 1988. They tried to sell computer through stores in 1990 but was unsuccessful and they returned to sell directly to customers. Dell was included in Fortune Magazine as one of the world’s 500 largest companies in 1992. Four years later, Dell began to sell computer through its website. In 1999, Dell beat Compaq and became the biggest seller PCs in the US with $25 billion in revenue. In 2003, the company’s name was changed to Dell Inc.
In June of 2005, Jeff Jarvis bought a Dell Lemon and paid a premium for four year in home service plan. He started to face problems with the machine immediately and he contacted Dell for fixing the problems, but there was no proper response from Dell. Dell did not provide good service to Jarvis and with no other option he posted his angry bust on poor Dell Service on his blog Buzz Machine titled “Dell lies. dell sucks”. His blog post generated severe criticism of Dell and other unhappy customers joined and the whole blogosphere started a critical discussion of poor quality of products and how bad is Dell Technical Support service. Dell which was already struggling with poor revenues and blogosphere criticism added fuel to the poor financial performance and hurt Dell reputation badly. The problem of poor customer service and quality of products was not new as Dell was not listening to the customer complaints for long and the blogs had just publicized and gave an opportunity for the aggrieved customers to vent their anger. Dell had the first-hand experience how social media can impact the business and how critical it is to listen to customer complaints and fix them fast.
It took one year for Dell to realize the extent of damage caused by the blogs and forced the company to announce a new business plan, called Dell 2.0 in 2006 that included an additional $150m investment in their customer service. The investment included sales channels, both in sales contacts & its online presence, in its website front and back end and expand the scope of Dell Connect, which enables a Dell technician to take control of a customer’s system should they be encountering problems. In March 2006 a community outreach team was formed that included group of technical support experts with good interpersonal skills that listens, monitors and reaches out to bloggers around the world who have questions or may require assistance.
Direct2Dell was launched in July, 2006 and in August Dell expanded blog outreach to include any conversations about Dell. Initially Direct2Dell blog was received with negative skepticism, but chief blogger Lionel Menchaca convinced bloggers that Dell was seriously listening to the bloggers and he
diligently responded and linked to critics. Dell’s team staunched flow of bad buzz and by Dell’s measure negative blog posts about it have dropped from 49% to 22%. Dell even engaged external agency to monitors online conversations about Dell.
In February 2007 Dell launched IdeaStorm that allowed Dell users to provide feedback & valuable insights about the company and its products and vote for those they find most relevant. The Linux community used this platform and suggested Dell brought back XP as an option for customers who wanted it, reduced trialware and listen to customers discuss ideas in real time. StudioDell (January 07) is a place where Dell users could share videos about Dell-related topics and videos and podcasts were used to educate users on various emerging technologies and also offers tips, tricks and support to get the best out of a Dell product. Dell operated blogs and forums for dedicated customer engagement topics, joined Twitter (June 07) with a number of ids. Dell set up a centralized team, appointed a separate leadership and resources were taken from multiple teams (IT, online) to test and launch social engagement tools and websites quickly. This team had developed formal social media strategy and set of social media policies and governance were set in place.
In 2008 Dell social media presence started to yield results in terms of ROI and social media has become part of the business strategy and the various business units were provided specific targets for the social media. Employees were trained and encouraged to actively participate in various social media channels, provide customer support through blogs, twitter, etc and community managers who were responsible for listening and resolution, content planning, technology testing, planning, and measurement were named for various business units. Dell even went further with its social
media initiatives a blog for the channel community was launched, online communities were launched for Dell’s environmental efforts called Regeneration and technophiles called Digital Nomads and social content appeared on Dell.com (homepage navigation, product pages with ratings & reviews). The Dell outlet, small business and home offers available on Twitter had $500,000 in revenues. Dell started a page focusing on SMBs and fan pages on Facebook.
In 2009, due to the recession pressure social media team had to reduce headcount which led to the departure of key people in the social media facing teams within the Dell. The departures had an impact on the Dell social media presence had seen consolidation in number of blogs & twitter accounts, slow down in response and lack of experience had further worsened the situation. But Dell managed to keep up and worldwide community has grown tomore than 3.5 million people across the social web, including places like Twitter, Facebook, Direct2Dell and IdeaStorm. @DellOutlet had close to 1.5 million followers on Twitter with $3 million in revenue and in total Twitter has resulted in more than $6.5 million in revenue.
Dell launched the Dell Tech Center in 2009 to revitalize the brand and increase awareness of Dell’s solutions capabilities as customers valued a trusted advisor relationship. Dell consolidated its social media strategy in 2010 with appointment of new leadership to the social media division and together with the old members of dell social media team Dell tried to regain its focus. Another effort from Dell to maintain its focus on social media was to open up a Social Media Listening Command Center in Austin Texas under the leadership of Chief Listening Officer where real-time data is collected and visualized by Radian6 and displayed across rows of monitors that show a unique dashboard, offering instant insights into things like customer sentiment, share of voice and geography. Dell also started on Customer Advisory Panel events with a goal to bring key customers and key advocates to Dell HQ in June 2010 to understand their delights and frustrations. Other Dell CAP events were held in China in November 2010, in Germany in January 2011 and again in Round Rock in March 2011, focused on Sustainability topics.
Dell continued to improve its social media presence in 2011 and Social Media Listening Command center is playing a critical role in these efforts. Dell is tracking 25,000 online mentions both posts and tweets about Dell every day and understand this information based on topics, sentiment, share of voice, geography, and trends and use it answer customer questions, address their concerns, build better products, and improve the overall Media professionals and turned them into frontline social marketers who
engage in Twitter, Facebook, LinkedIn, blogs, and more on the company’s behalf. Dell views employees’ social media participation as an asset rather than a liability and accordingly doesn’t restrict team members from utilizing mobile devices, apps or social media. Dell is using social media as a platform to support various campaigns and used it in the promotion of its first Customer Event Dell World and launched website,
Techpageone.dell.com (Formerly EnterpriseEfficiency.com) which is a micro site featured daily, topical blogs written by InformationWeek editors and writers as well as Dell executives to gain insights. Social media has provided an opportunity for Dell not only to interact with customers, understand their opinions and needs but also provided a marketing platform where in they can advertise their products, improve the brand image and loyalty and improve their revenues with rise in sales. Dell initially entered into social media not to sell its products but to respond to its customer complaints and feedback but customers wanted to access to special deals from its social feeds that link to products, reviews or discounts. Dell is committed to improving overall level of customer service continuously which is 24×7 “always-on” customer service philosophy through social media and has made it a critical part of business strategy with clearly defined policy and is considered as on of the top companies in the world that is significantly profiting through the use of Social media.
1. How to manage the social media presence and what strategy the companyshould adopt for its social media presence?
2. How to engage employees and other stakeholders in the social media platforms and how to use the information in organizational decision making?
3. How to generate good ROI from the social media marketing initiatives and profit from social media presence?
4. What technologies and platforms are to be used for social media and how to measure ROI?

Assignment
Subject: Global Business Environment
Q.4 Case study
In January 2004, leading global automobile company and Japan’s number one automaker, Toyota Motor Corporation (Toyota), replaced Ford Motors (Ford), as the world’s second largest automobile manufacturer; Ford had
been in that spot for over seven decades. In 2003, Toyota sold 6.78 million vehicles worldwide while Ford’s worldwide sales amounted to 6.72 million vehicles (General Motors, the world’s largest car manufacturer sold 8.60 million vehicles).
According to reports, while Toyota’s market share in the US increased from 10.4% in 2002 to 11.2% in 2003, Ford’s declined from 21.5% to 20.8% during the same period. Reaching the No.2 slot was a major achievement for Toyota, which had begun as a spinning and weaving company in 1918. Ford was reportedly plagued by high labor costs, quality-control problems, lack of new designs and innovations, and a weak economy during the early 21st century, which made it vulnerable to competition. Toyota, aided by its new product offerings and strong financial muscle had successfully used this scenario to surpass Ford and affect a dramatic increase in its sales figures.
In November 2003, Toyota announced its financial results for the half-year ended September 30, 2003. Business Strategy | Case Study in Management, Operations, Strategies,
Business Strategy, Case Studies
The company reported a 23% increase in net income (as compared to the corresponding period of the previous year) to $4.4 billion on revenues of $69.7 billion. This took Toyota way ahead of World’s top three automobile makers (at that time) by sales, General Motors (GM), Ford Motors (Ford) and
Daimler Chrysler. Its market capitalization of $110 billion (on November 05, 2003) was more than the combined market capitalization of these three players. (See Table I).
Given the fact that in 2003, these top three companies were struggling to maintain their sales and profitability targets, Toyota’s performance was termed remarkable by industry observers (See Exhibit I for the company’s financials). Toyota had emerged as a formidable player in almost all the major automobile markets in the world. Interestingly, one of its strongest markets was the US, the world’s largest automobile market and the home

turf of Ford and GM. Toyota had emerged as a strong foreign player in Europe as well, with a 4.4% market share. In China, which the company had identified as a strategic market for growth in the early 21st century, it had a 1.5% market share.
The other major markets in which the company was fast strengthening its presence were South America, Southwest Asia, Southeast Asia and Africa.3 Back home in Japan, it enjoyed a market share of over 43%. Analysts attributed Toyota’s growing sales across the world to its aggressive globalization efforts that began in the mid-1990s.
The company constantly strived to ensure that each of its market segments – Japan, North America, and Europe and other markets – generated onethird of the annual sales (See Exhibits II and III for revenues and revenue growth data in its core markets). This goal was at the heart of Toyota’s three globalization programs – New Global Business Plan (1995-1998), Global
Vision 2005 (1996-2005) and Global Vision 2010 (2002-2010). In the light of Toyota’s intensifying globalization efforts, Toyota’s competitors themselves stated that Toyota could not be taken lightly. GM’s Chairman, John F. Smith Jr., said, “I would not say they will not make it. Toyota is an excellent company. They are very focused on what they do and they do it well, and that is what makes them great.”4
Business Strategy | Case Study in Management, Operations, Strategies, Business Strategy, Case Studies
Background Note
Toyota’s history dates back to 1897, when Japan’s Sakichi Toyoda (Sakichi) diversified from his traditional family business of carpentry into handloom machinery. He founded Toyoda Automatic Loom Works (TALW) in 1926 for manufacturing automatic looms. Sakichi invented a loom that stopped automatically when any of the threads snapped. This concept (designing equipment to stop so that defects could be fixed immediately) formed the basis of the Toyota Production System (TPS) and later became a major factor in the company’s success. In 1933, Sakichi established an automobile department within TALW and the first passenger car prototype was developed in 1935. Sakichi’s son, Kiichiro Toyod (Kiichiro), convinced him to enter the automobile business, and this led to the establishment of Toyota in 1937. During a visit to Ford to study the US automotive industry, Kiichiro saw that an average US worker’s production was nine times that of an average Japanese worker. He realized that to compete globally, the Japanese automobile industry’s productivity had to be increased…
The Second Phase of Globalization
Cho decided to focus more on localization – he believed that by doing so, Toyota would be able to provide its customers with the products they needed, where they needed them. This was expected to help build mutually benefiting, long-term relationships with local suppliers and fulfill Toyota’s commitments to local labor and communities. Cho defined globalization as ‘global localization.’ Therefore, besides focusing on increasing the number of manufacturing centers and expanding the sales networks worldwide, Toyota also focused on localizing design, development and purchasing in every region and country…
The 2010 Global Vision
In April 2002, Toyota announced another corporate strategy to boost its globalization efforts. This initiative, termed the ‘2010 Global Vision’ was aimed at achieving a 15% market share (from the prevailing 10%) of the global automobile market by early 2010, exceeding the 14.2% market share
held by the leader GM.
The theme of the new vision was ‘Innovation into the Future,’ which focused on four key components: Recycling Based Society; Age of Information Technology; Development of Motorization on a Global Sale; and Diverse
Society (See Table III)…
Business Strategy | Case Study in Management, Operations, Strategies, Business Strategy, Case Studies
The Globalization Pay-Off
By mid-2003, Toyota was present in almost all the major segments of the automobile market that included small cars, luxury sedans, full-sized pickup trucks, SUVs, small trucks and crossover vehicles. According to reports, while global vehicle production increased by 3.3 times since the early 1960s, Toyota’s production had increased by 38 times. As a result of its localization initiatives, Toyota had 45 manufacturing plants in 26 countries and regions by this time, and sold vehicles in 160 countries (See
Exhibit IV and V for Toyota’s worldwide manufacturing operations and production details)…
Which Way to Drive From Here?
By the end of 2003, Toyota seemed to be well on its way to achieving its globalization goals – worldwide sales of 6.57 million units in fiscal 2004;
sales of 2.12 million units in North America by 2004; a 5% market share (800,000 units sales) in Europe by 2004; a 15% market share in the global market and a 10% market share in China by 2010.
Analysts felt that the following factors were helping the company in its quest to become a truly global automobile major: strong financial condition, globally efficient production system, unique corporate culture, and the ability to develop a product range that met the unique needs and desires of customers in different regions.
1. What was the end result of Toyota’s crisis management situation?
2. What marketing strategies does Toyota use?
3. What are the problems faced by Toyota?
4. Why Toyota is so successful in the market?

Assignment
Subject: Global Business Environment
Q.5 Case study
The company is involved in the serving of over 179 million people in one year and it also possesses over 2 million associates all over the world. The number of stores possessed by Wal-Mart numbers to over 7, 343 and its Sam’s Clubs are also present in over 14 markets. Hence it is not surprising that it is the biggest retailer in the whole of United States. From the year 2002 the company has been topping the list of fortune 500 list and in the year 2006 it was pushed to the second place, next only to Exxon- Mobil due the rise in the price of oil in that year. In the year 2008, the annual revenue generated by Wal-Mart was over 378 billion dollars. Hence the company continues to be successful in many nations exploiting the human resources as well as the other resources in the nations. Its idea is to capitalise on the strategy set by the company for global expansions and the present targets of Wal-Mart are the big nations with huge human resources like Russia and India.
The strategy used by Wal-Mart at the multinational level is being modified in such a way that it becomes the transnational strategy and the key aspects of this strategy includes response at the national level, operations at the international level and also taking lessons from the operations that are being conducted on a global scale. The aim of the company in following such an approach is that it should become the best choice for goods that are low cost in the United States as well as the whole world. As the company is basically a retail company it stresses on the concept of orientation of the consumers by acquisition as well as distribution of goods at a low cost and at the same time facilitating learning on a global scale by the process of decentralization, tackling competition over the borders and by sharing its acquired knowledge. But still in the global business arena, the company is relatively new and on its way to become a leading player. The stress placed by the company on the concept of national response has to an extent, brought about reductions in the operational efficiency of the company because it was not able to accomplish economy of scale which is enjoyed by the customers when it comes to the products that are standardized.
The company is involved in the formulation of blueprints for the managers when it comes to the strategies which they are supposed to follow. According to the needs as well as the culture of the people there is a high level of adaptation and the company has its location which is proximal to its market. The company also shows a lot of sensitivity when it comes to
individual needs of every nation and also responds in an appropriate manner to these needs. There is also close contact and co-operative working shown by the company with the respective government so that every rule or legislation that has been passed by the government could also be taken into account while designing the strategies. The company is also involved in a lot of community works by provision of sponsors for the student community and contributes its share to the welfare of the people in the nations where it has its operations.
Each of the stores operated by Wal-Mart is from that of the product being stocked by the company which would move towards the equipment at the front end and this would go a long way in helping checkouts in a rapid manner with the philosophy set by the company in place- provision of goods at low prices every day and at the same time providing customer services that are of top quality. Hence the added advantage of the low costs is that the expenses incurred in organisation of promotions for sales could be cut down to a large extent. Moreover the predictability of sales also increases. The company firmly believes in the system of “cross docking inventory system” and hence has invested a lot in the same. The process of cross docking has led the Wal-Mart to attain economies of scale and this has in turn brought about considerable reductions in the costs that are incurred for sales. In the system followed by Wal-Mart, there is a continuous delivery of the goods to the stores in a time of maximum two days and at times there are no requirements even to inventory them. Hence the shelves of Wal-Mart are refilled faster than four times of the existing competition in the market.
This is a particular advantage possessed by the company when it comes to competition. The power of buying of Wal-Mart is leveraged by means of purchasing in bulk quantities and also the company takes care of its own distribution. Hence every day low prices are guaranteed by the company and hence it has become a one stop shop. Hence at present the company owns stores in a variety of companies like Argentina, Mexico, Brazil, Canada, UK, Korea china and also in Germany.
The major reason behind the success of Wal-Mart lies in the fact that the company believes and concentrates on the strategy of single business. This is the strategy that has been providing the company with success over a period of over 30 years. In the three decades the company has never believed in the concept of diversification for the sustenance of its growth and also its advantages at the competitive level. Hence the services provided by the company and the low prices offered are the major reasons behinds its success. The concentration on one particular strategy also poses a threat to the company because it is equivalent to place all the eggs in one single bucket.
1. Explain Wal-Mart’s global expansion strategy.
2. What is single business strategy? Comment your view on the strategy.

Art of Leadership CASE STUDY SOLUTION

Art of Leadership CASE STUDY SOLUTION

Assignment – 1

Subject: Art of Leadership

Q.1 Case study

Laura is the associate director of a non-profit agency that provides assistance to children and families. She is the head of a department that focuses on evaluating the skill-building programs the agency provides to families. She reports directly to the agency leadership. As a whole, the agency has been cautious in hiring this year because of increased competition for federal grant funding. However, they have also suffered high staff turnover. Two directors, three key research staff, and one staff person from the finance department have left. Laura has a demanding schedule that requires frequent travel; however, she supervises two managers who in turn are responsible for five staff members each. Both managers have been appointed within the last six months.
Manager 1: Kelly has a specific background in research. She manages staff who provide research support to another department that delivers behavioral health services to youth. Kelly supports her staff and is very organized; however, she often takes a very black and white view of issues. Upper level leadership values Kelly’s latest research on the therapeutic division’s services. Kelly is very motivated and driven and expects the same from her staff.
Manager 2: Linda has a strong background in social science research and evaluation. She manages staff that work on different projects within the agency. She is known as a problem solver and is extremely supportive of her staff. She is very organized and has a wealth of experience in evaluation of family services. Linda is very capable and can sometimes take on too much. The managers are sensing that staffs are becoming overworked as everyone takes on increased responsibilities due to high staff turnover. Staffs have also mentioned that Laura’s “glass half-empty” conversation style leaves them feeling dejected. In addition, Laura has not shared budgets with her managers, so they are having difficulty appropriately allocating work to staff. Laura said she has not received sufficient information from the finance department to complete the budgets. The finance department said they have sent her all the information they have available. As staff becomes distressed, the managers are becoming frustrated. They feel like they are unable to advocate for their staff or solve problems without key information like the departmental budget.

1.Skills in her role as associate director? What combination of the two do you
think would work best in this setting?
2. What steps could be taken to build staff confidence?
3. What advice would you give Laura on improving her leadership skills and
to the managers on improving their management skills?
4. Which leadership style do you think a leader would need

Assignment – 2

Subject: Art of Leadership

Q.2 Case study

In a small community with a long tradition of art appreciation, a board managed the policies of the local arts council. Over the course of many years, the reputation of the community’s appreciation of the arts grew state- wide. For decades, the arts council thrived and the community benefitted greatly from the business, industry, and education that developed through local pride in the arts. One year a new member of the board became disenfranchised with the director of the arts council because he did not include the board member’s art piece in the annual art exhibit. The director assured the board member t at the artwork was judged to be good by the advisory committee that selected art for the art exhibit, but many other art pieces were superior to that piece of artwork. For decades, the selection of art for the annual exhibits by the advisory committee was sacrosanct. The thought of interference in the selection process by a board member of the arts council was unthinkable. The new board member was selected by his peers primarily because of his financial standing in the community, not because he had a history of supporting the arts. In fact, he had shown very little interest in the community’s arts endeavours and exhibits before joining the board. This was widely known by many others on the board and by the director; yet, he was added to the board. It became obvious soon after his appointment that the board and the director had sacrificed its purpose and commitment to the arts for the status of and possible financial contributions from the new board member. It was also obvious that the new board member was not committed to the arts and he had no respect for the long-standing process of selecting art for the annual exhibit. After the director explained the process of selecting art for the exhibit and the critical role of the advisory committee, the new board member was unmoved. He insisted that his artwork is included in the exhibit. The director informally and formally addressed the issue with the other board members. Rather than maintaining its integrity and focus on the traditional process of artwork selection; instead of standing strong against one board member’s inappropriate demands; instead of appreciating and respecting the authority and responsibility of the director’s position and key role in the council and community; instead of standing on its own principles, all of that was compromised and the questionable artwork was included in the exhibit. This unfortunate and ill-advised decision by the board and director created chaos. Other board members began to question the art show selections by the advisory committee and each one began to name their own favorite art pieces. Over a brief period, the selection process broke down completely; the quality of the art exhibit declined; the trust of the director diminished, and the once broad community support of the arts council started to erode. The director was removed and without a succession plan for the leadership position, a director was selected that was unqualified for the position and who was told by the board that he was not to operate independently of the board. In other words, the board made it clear that they would run the organization.34 Years later that once proud and prestigious arts council became a shell of its former existence, and its decline started with one board member who put himself over the best interests of the organization and was supported by a board and leader that failed to carry out its duties and responsibilities when they abandoned the organization’s purpose and traditions. Once the trust was eroded and the focus of the organization shifted from its mission to individual self-interests, the core of the organization was damaged from the inside out. The purpose of leadership was lost. But more importantly, sustainability of the effectiveness of the organization suffered.

1. How do you manage a conflict situation?
2. Which supporting skills do you think are more important for a leader?
3. Tell me/us about the time you demonstrated leadership skills at work?
4. What is your leadership style?

Assignment 3
Subject: Art of Leadership
Q.3 Case study
ESMT Case Study Leadership styles Konstantin Korotov
Vignette 1: Fire alarm in Bucharest An engineer from the Bucharest office of a global company describes a recently experienced situation. We were sitting at an extraordinary staff meeting in a windowless office in our company’s building in Bucharest. Almost all of the Romanian office people were invited to listen to a big boss from Munich. One could clearly see that our local managers were trying to do everything possible to leave a positive impression with the guest from headquarters. Our local top brass people were smiling and nodding all the time when the visitor spoke, and the Romanian general manager was even taking notes on his tablet computer, something that he never does.
The visitor from Munich was talking about the responsibility each of us had for cutting costs. Suddenly the meeting room went completely dark and a fire alarm sounded. Everyone stayed sitting at their places, waiting for instructions. The visitor from Munich went silent, but our local bosses for some reason were silent too. Finally someone from the audience lost patience and shouted: “For how much longer are we going to sit here? Do you want to burn here? It’s time to get out.” People jumped from their seats and started making their way to the exit. They were stepping on each other’s feet and bumping against the furniture. When we were finally out of the building it became clear that a fire had started in one of office’s electric rooms, and fire-fighters were already handling it.
Luckily, nobody was injured. When the situation cleared, the engineer found himself thinking about the behavior of the managers in this situation: This case study was prepared by Konstantin Korotov of ESMT European School of Management and Technology. Sole responsibility for the content rests with the author. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.
1. Which Goleman Style? Justify
Cont…
2. Since this incident, I have often thought about why our managers remained silent when the fire alarm went off. Usually they have no problemgiving orders or telling us how to do things. This time, however, they were quiet and indecisive. Could it be that the presence of the higher-ranking boss from Munich had an impact on their behavior?

Assignment 4
Subject: Art of Leadership
Case study
Just 2 months out of training you were assigned to the Logistics Readiness Squadron in Minot, North Dakota. After in-processing with the unit, you sit down with your squadron commander, Major Carnage, and relay your lack of experience and uncertainty about the job. “Sir, I was open to anything the Air Force handed me,” you said to the commander, “but logistics in North Dakota wasn’t even close to being on my dream sheet. How am I going to lead if I don’t even have the skills to tell people how and what to do?” The commander replied, “As an officer you should be ready to lead anywhere and anytime you are put into a position, no matter what training you’ve had. Don’t worry about it though–you’re going to be the assistant flight commander for Bravo Flight under the eyes of Captain Vogel, the Bravo Flight Commander.”
After 7 months on the job, Captain Vogel tells you he is leaving in 2 weeks for Columbus AFB MS for Undergraduate Pilot Training (UPT) and will be handing the Bravo Flight reigns over to you permanently. You shudder at the thought but quickly remember what your commander had said about officers leading anytime and anywhere. You take the job head-on, using the same techniques Capt Vogel applied to lead the flight. For some reason, the 15 personnel under your supervision randomly disregard your orders and quickly fall behind on the vehicle maintenance schedule. The commander calls you into his office one day to discuss the decline in flight morale and unit effectiveness. You begin to think about the situation and the variables at hand and say, “I’m a second lieutenant with some job knowledge, I’ve already sat down with the members of Bravo Flight and told them what I expect from them–just to let them know who’s boss. I take care of tasks they should be doing to show I care about them, I give each member as much ‘down time’ as needed; I don’t nag them about accomplishing their jobs because that would be considered micromanagement, and I even give them leeway with mistakes by not reprimanding or correcting them. I thought they would like me for being down to earth and joking around with them. What the heck am I doing wrong?”
1. Given this scenario, what have you been doing wrong as a leader? If you were the commander of this organization, what would you do with the Lt?

Assignment 5
Subject: Art of Leadership
Case study
Being a new leader is quite difficult because organizations often face tough problems and challenges that need quick responses. For a new leader, this is challenging since the atmosphere of crisis provides no time or patience for learning. Secondly, most organizations are rigid and sticks to the old belief that “old is gold”.They do not allow room for raw talent, training, making mistakes and experimentation. Most organizations believe that an effective leader is that who has long years of service.
A leader as defined by some scholars refers to someone with commanding authority and influence. Others define it as a person’s ability to influence people and groups within the organization and hence helping them set up their goals and guide them towards achieving those goals set by the organization (Afsenah, 2012).
Jack Hartnett’s leadership skills encompasses all the above. Though he appears bossy and autocratic, he puts into consideration the welfare of his employees and listens to them. He adopts the no-nonsense attitude and develops it into a culture in the organization. An organization can develop a culture where the employees share common values and beliefs on work- related issues. This is what jack does and it indeed produces results and leads to the success of the company.
He allows his employees to balance their family life with work and when they face problems he acts as their counselor and helps them resolve their issues. His autocratic and intolerance enabled him to succeed. He sets the rules which his employees must follow. He ensures that his employees are happy because he believes that unhappy people do not produce results. As a result, he has managed to create an organization that is dynamic and successful.
In choosing the person to represent them, a leader needs to understand the cultural context of the host country. Discrimination is one of the factors influencing the leader’s choice of the person to go to Saudi Arabia. In countries like Saudi Arabia, defined by Edward Hall’s model as high context countries (Hall, 1976), cultural nuances communicate more and determines the kind of response received and if not handled well, this can lead to the loss of a business deal. It determines whether a business deal will succeed or not.
Women in the country are the most discriminated and disadvantaged and this is not based on their abilities or actions, but based on cultural factors. Women face obstacles and barriers of becoming leaders and men prevent them from moving to the highest levels of organizations. In Saudi Arabia, women experience gender segregation and are barred from participating in public life including work places. Choosing a woman to go on this mission would seem disrespectful for the culture adopted by the Saudi Arabian government and automatically lead to the failure of this enterprise. Thus, leaders are to know the culture of the people in question to enable them to make the necessary decisions.
In an organization, what determines high compensation packages usually is the place that one holds. Top executives in any organization, both public and private, wield large amount of power. The legitimacy of their positions enables them to get high compensation packages. Compared to other employees, they enjoy many privileges because of their power.This is because they are usually the ones responsible for allocation of resources to themselves and to those in lower positions. Furthermore, these executives are usually in high demand and organizations compete with each other to acquire them.
Understanding the impact of culture is important to a leader since leadership is a social and an interpersonal process. The leader needs to research and understand the different cultures so that he can make more informed decisions. As a leader, choosing this man to represent his company would be the most favorable thing to do as it will enable him to attain his set goals and succeed in closing profitable deals. Since the man in question does not have experience, this can offer a perfect opportunity for him to develop his skills and experience hence benefiting the organization.
For the woman who is more experienced and more qualified, the leader can explain to her the cultural obstacles involved hence not hurting her feelings. The leader can send her to go on missions in other countries that are low- contexts and that encourages women taking leadership roles. Training and education can help people be aware of their biases, understand their own
and others’ cultural point of view and accept their differences. By having diverse people in leadership positions, an organization “walks and walk” and

1. What are the challenges you are likely to face as the new leader?
can prove its commitment to diversity.
2. What are some of the actions you would take to help smooth the transition?
3. What cultural factors do you need to consider?
4. What are the implications of your decision for your business and the message you send as a leader?

Strategy Execution CASE STUDY SOLUTION

Strategy Execution CASE STUDY SOLUTIONAssignment
Subject: Strategy Execution
Q.1 Case study
Discourse Analysis
Bill Corwin was employed by a large bank for several years. He started as a messenger, and then was assigned to a branch. He progressed in this branch from a bookkeeping clerk to a platform assistant. In this position he had a variety of duties largely centring on administrative assistance to the officers of the branch
The bank’s many branches were divided regionally, each region having a group of officers responsible for the branches in that region. Bill was transferred from the branch in which he had worked for 12 years to a branch in another region. At the time of his transfer he was told that the branch was completely “run down” as to operational procedures and systems. The branch had a normal complement of 4 officers and 35 staff members. One month prior to Bill’s transfer, one of the four officers had retired, and two weeks after this retirement the branch manager was hospitalized with serious illness. When Bill arrived at his new assignment, he found a rather demoralized situation. Complete lack of interest was shown by two remaining officers and the rest of the staff was not properly trained or disciplined. The two officers did not know Bill, and they were informed by the regional office that he was being assigned to the branch as a platform replacement for only two weeks.
During his first week at the branch Bill discovered that the senior clerks were not qualified to train other staff members, customer complaints were rampant, there was both a record of excessive absenteeism and excessive overtime, and the branch had received very poor audit report by the bank’s internal auditors with the same major exception reported on the previous four audits.
After two weeks Bill was called to the regional office and offered the job of operations officer. He was told that he would receive the official title in two months. He was also told that the present operations officer, who had held the job at this branch for seven years, was to be relieved of all operational responsibilities and that he would be instructed to work with Bill until the branch was functioning effectively. Bill returned to the branch and started on his assignment. He found the former operations officer cooperative for about one week. Bill then decided to go ahead without the help of the former operations officer. Over the next three months he worked almost every night
until 8:00 or 9:00p.m. He tried to correct the problem that had developed over several years. The training of employees involved considerable time, and he found it necessary to release 12 clerks who were causing trouble in various ways. The remaining staff and replacements started to function smoothly. He received his title as promised. Then the branch manager returned to work after his prolonged illness. A week after his returned, he called Bill to his office and questioned his efforts in this branch. He told Bill that the former operations officer had mentioned that he was an upsetting influence in the branch, had fired several good people, did not know his job, and that he left his job early several days a week.
1. If you were Bill, how would you answer the branch manager? 2. Did the regional office handle Bill’s transfer properly? 3. What should be done by the regional office now?
4. Do you believe that Bill can function effectively as a manager in this branch?

Assignment
Subject: Strategy Execution
Q.2 Case study
Successful execution of the strategy for developing markets requires a degree of flexibility, an ability to adapt in often unforeseen ways to local conditions, and a long-term perspective that puts building a sustainable business before short-term profitability. In Nigeria, for example, a crumbling road system, aging trucks, and the danger of violence forced the company to re-think its traditional distribution methods. Instead of operating a central warehouse, as is its preference in most nations, the country. For safety reasons, trucks carrying Nestle goods are allowed to travel only during the day and frequently under-armed guard. Marketing also poses challenges in Nigeria. With little opportunity for typical Western-style advertising on television of billboards, the company hired local singers to go to towns and villages offering a mix of entertainment and product demonstrations.
China provides another interesting example of local adaptation and long term focus. After 13 years of talks, Nestle was formally invited into China in 1987, by the Government of Heilongjiang province. Nestle opened a plant to produce powdered milk and infant formula there in 1990, but quickly realized that the local rail and road infrastructure was inadequate and inhibited the collection of milk and delivery of finished products. Rather than make do with the local infrastructure, Nestle embarked on an ambitious plan to establish its own distribution network, known as milk roads, between 27 villages in the region and factory collection points, called chilling centres. Farmers brought their milk – often on bicycles or carts – to the centres where it was weighed and analysed. Unlike the government, Nestle paid the farmers promptly. Suddenly the farmers had an incentive to produce milk and many bought a second cow, increasing the cow population in the district by 3,000 to 9,000 in 18 months.
Area managers then organized a delivery system that used dedicated vans to deliver the milk to Nestle’s factory. Although at first glance this might seemto be a very costly solution, Nestle calculated that the long-term benefits would be substantial. Nestle’s strategy is similar to that undertaken by many European and American companies during the first waves of industrialization in those countries. Companies often had to invest in infrastructure that we now take for granted to get production off the ground. Once the infrastructure was in place, in China, Nestle’s production took off. In 1990, 316 tons of powdered milk and infant formula were produced. By 1994, output exceeded 10,000 tons and the company decided to triple
capacity. Based on this experience, Nestle decided to build another two powdered milk factories in China and was aiming to generate sales of $700 million by 2000.
Nestle is pursuing a similar long-term bet in the Middle East, an area in which most multinational food companies have little presence. Collectively, the Middle East accounts for only about 2 percent of Nestle’s worldwide sales and the individual markets are very small. However, Nestle’s long-termstrategy is based on the assumption that regional conflicts will subside and intra-regional trade will expand as trade barriers between countries in the region come down. Once that happens, Nestle’s factories in the Middle
East should be able to sell throughout the region, thereby realizing scale economies. In anticipation of this development, Nestle has established a network of factories in five countries, in the hope that each will, someday, supply the entire region with different products. The company currently makes ice-cream in Dubai, soups and cereals in Saudi Arabia, yogurt and bouillon in Egypt, chocolate in Turkey, and ketchup and instant noodles in Syria. For the present, Nestle can survive in these markets by using local materials and focusing on local demand. The Syrian factory, for example, relies on products that use tomatoes, a major local agricultural product. Syria also produces wheat, which is the main ingredient in instant noodles. Even if trade barriers don’t come down soon, Nestle has indicated it will remain committed to the region. By using local inputs and focussing on local consumer needs, it has earned a good rate of return in the region, even though the individual markets are small.
Despite its successes in places such as China and parts of the Middle East, not all of Nestle’s moves have worked out so well. Like several other Western companies, Nestle has had its problems in Japan, where a failure to adapt its coffee brand to local conditions meant the loss of a significant market opportunity to another Western company, Coca Cola. For years, Nestle’s instant coffee brand was the dominant coffee product in Japan.
In the 1960s, cold canned coffee (which can be purchased from soda vending machines) started to gain a following in Japan. Nestle dismissed the product as just a coffee-flavoured drink rather than the real thing and declined to enter the market. Nestle’s local partner at the time, Kirin Beer, was so incensed at Nestle’s refusal to enter the canned coffee market that it broke off its relationship with the company. In contrast, Coca Cola entered the market with Georgia, a product developed specifically for this segment of the Japanese market. By leveraging its existing distribution channel, Coca Cola captured a 40 percent share of the $4 billion a year, market for canned
coffee in Japan. Nestle, which failed to enter the market until the 1980s, has only a 4 percent share.
While Nestle has built businesses from the ground up, in many emerging markets, such as Nigeria and China, in others it will purchase local companies if suitable candidates can be found. The company pursued such a strategy in Poland, which it entered in 1994, by purchasing Goplana, the country’s second largest chocolate manufacturer. With the collapse of communism and the opening of the Polish market, income levels in Poland have started to rise and so has chocolate consumption. Once a scarce item, the market grew by 8 percent a year, throughout the 1990s. To take advantage of this opportunity, Nestle has pursued a strategy of evolution, rather than revolution. It has kept the top management of the company staffed with locals – as it does in most of its operations around the world – and carefully adjusted Goplana’s product line to better match local opportunities. At the same time, it has pumped money into Goplana’s marketing, which has enabled the unit to gain share from several other chocolate makers in the country. Still, competition in the market is intense. Eight companies, including several foreign-owned enterprises, such as the market leader, Wedel, which is owned by PepsiCo, are vying for market share, and this has depressed prices and profit margins, despite the healthy volume growth.
1. Does it make sense for Nestle to focus its growth efforts on emerging markets? Why?
2. What is the company’s strategy with regard to business development in emerging markets? Does this strategy make sense? From an organizational perspective, what is required for this strategy to work effectively?
3. Through your own research on NESTLE, identify appropriate performance indicators. Once you have gathered relevant data on these, undertake a performance analysis of the company over the last five years. What does the analysis tell you about the success or otherwise of the strategy adopted by the company?
4. How would you describe Nestle’s strategic posture at the corporate level; is it pursuing a global strategy, a multidomestic strategy an international strategy or a transnational strategy?
5. Does this overall strategic posture make sense given the markets and countries that Nestle participates in? Why?

Assignment
Subject: Strategy Execution
Q.3 Case study
Starbucks Growth Strategy
In 1971, three academics, English Teacher Jerry Baldwin, History Teacher Zel Siegel and writer Gordon Bowker opened Starbucks Coffee, Tea and Spice in Touristy Pikes Place Market in Seattle. The three were inspired by entrepreneur Alfred Peet (whom they knew personally) to sell high-quality coffee beans and equipment. The store did not offer fresh brewed coffee by the cup, but tasting samples were sometimes available. Siegel will wore a grocers apron, scooped out beans for customers while the other two kept their day jobs but came by at lunch or after work to help out. The store was an immediate success, with sales exceeding expectations, partly because of interest stirred by the favorable article in Seattle Times.
Starbucks ordered its coffee-bean from Alfred Peet but later on the three partners bought their own used roaster setting up roasting operations in a nearby ramshackle building and developed their own blends and flavors. By the year 1980s the company had four Starbucks Stores in Seattle area and had been profitable every year. Later on, Siegel left the company and
Jerry Baldwin took over day-to-day management of the company. Gordon Bowker remained as an owner but devoted most of his time in his Design Firm. In 1981, Howard Schultz, the vice president of U.S operations for Swedish Maker of stylish kitchen equipment and coffeemakers decided to pay Starbucks a visit. He was curious about why Starbucks was selling so many of his company products. He was impressed with the company management and the quality products the make. Schultz asked Baldwin whether there was any way he could fit into Starbucks and it took long time to decide his request. He tried many times till one day he was given a job of heading marketing and overseeing the retail stores.
Howard Schultz spent most of his working hours in the four stores learning the retail aspects of the company business; Schultz was overflowing with ideas for the company. His biggest inspiration and vision for Starbucks future came during 1983 when the company sent him for an international house wares show to Milan, Italy. There he spotted an espresso bar and went to take a coffee. He was impressed with the coffeehouse services and decided to stay at Milan for a week to explore all coffee bars and learned as much as he could about the Italian passion for coffee drinks. He made a decision to serve fresh brewed coffee, espressos, and cappuccinos in its
stores and try to create an American version of Italian coffee bar culture. He shared his idea with Baldwin and it took nearly a year to convince Jerry Baldwin to let him test an espresso bar. In April 1984, the first espresso bar was opened and it was a successful too. Yet Baldwin felt something is wrong. After Schultz failed to convince Baldwin for the expansion of business, he left Starbucks in 1985. Schultz started the “Il Giornale” coffee bar chain in 1985 and the coffeehouse was very successful. In 1987 Starbucks owner Jerry Baldwin and Bowker decide to sell the whole Starbucks chain to Schultz’s Il Giornale, which rebranded the Il Giornale outlets as Starbucks and quickly began to expand. Starbucks opened it’s first locations outside Seattle at Waterfront Station in Vancouver, British Columbia, and Chicago, Illinois, that same year. At the time of its initial public offering on the stock market in 1992, Starbucks had grown to 165 outlets. In 2009 The Company plans to open a net of 900 new stores outside of the United States.
Today, Starbucks coffee shops and Kiosks can be found in a variety of shopping centers, office buildings, bookstores, and other outlets. Starbucks is capitalizing on taste changes that predate the company’s founding. In the early 1960’s, American adults consumed on an average ofthree cups of coffee each day. Today, consumption has declined to less than two cups, with only half of American adults as coffee drinkers. During this time, decaffeinated coffee sales soared. In addition, a new category of intensely loyal coffee drinkers was born. This group of adults consumes “specialty” or “premium” coffees, including regular and decaffeinated versions with a variety of origins and flavors. Sales of specialty coffee have climbed from about $45 million annually to more than $2 billion today, accounting, for about 20 percent of all coffee sales.
Because Starbucks markets whole beans and coffee beverages, its competition comes from two distinct groups of firms. A number of regional coffee manufacturers distribute premium coffees in local markets, while several large national coffee manufacturers such as Nestle, Proctor & Gamble, and Kraft General Foods market and distribution specialty coffees in supermarkets. Coffee beverages are distributes by restaurants, grocery stores, and coffee retailers. Seattle’s Best Coffee is a fierce competitor. Chairman Howard Schultz projects that Starbucks will grow from its present 6,000 stores to more than 20,000, 75 percent of which are in the Unites States. The company added 280 intentional locations in 2001 and is targeting an additional 650 stores in Europe by 2004 and 900 locations in Latin America predominantly Mexico by 2005, Starbucks is also moving into China. Retail stores account for more than 80 percent of revenues, with specialty operations accounting for the remainder.
1. What are some of the challenges associated with Starbucks aggressive growth strategy?
2. Could an unanticipated change in coffee consumption patterns disrupt Starbucks in the same way that it paved the way for the company’s growth in the 1980s?
3. What problems might arise from Starbucks’ efforts to expand rapidly into nations such as India?
4. Comment on the pricing strategies of Starbucks.
5. How would you see the competition of Starbucks in India, with players like Costa Coffee?

Assignment
Subject: Strategy Execution
Q.4 Case study
In July 2013, Yasumori Ihara (Ihara), Executive Vice President of Toyota Motor Corporation was readying plans to bolster Toyota’s position in the emerging markets by expanding operations into Cambodia, Myanmar, and Kenya. According to Ihara, who was in charge of the company’s emerging markets business, “Compared with North America, Europe, or Japan, where buyers are mostly replacement buyers, it’s mostly first-time buyers in emerging markets. It’s where the future growth is.”
The Japan-based Toyota was the world’s largest automaker with a presence in more than 170 countries. In March 2011, Toyota announced its ‘Global Vision’ in which emerging markets were given particular importance as part of its strategy. The company wanted to get 50% of its global sales from the rapidly growing emerging markets by 2015. The company considered China, Southeast Asia, India, and Brazil as its key emerging markets. In 2012, Toyota’s consolidated vehicle sales was 8.7 million units, out of which 3.7 million were sold in emerging countries.
But in the second half of 2013, Toyota was facing intense competition from its rivals both in the developed as well as the emerging markets. The company had invested a huge amount in emerging markets, but key emerging markets were facing a lot of volatility and sluggish growth. There were concerns that these markets were no longer attractive enough. In addition to getting Toyota’s emerging markets strategy right, Ihara’s main responsibility was to reverse the disastrous sales decline in China, where consumers were boycotting Japanese-built cars due to diplomatic tensions over some disputed islands.
The global automotive market was highly competitive and competition was likely to intensify further with continuing globalization. The factors affecting competition included product quality and features, safety, reliability, fuel economy, the amount of time required for innovation and development, pricing, customer service, and financing terms. With growing economies and a low vehicle penetration rate, emerging markets were considered as the key source of growth for the global automobile industry.
According to the International Monetary Fund, between 1988 and 2011, while the developed markets’ of global GDP declined from 61% to 49%. Toyota’s presence in the emerging markets dated back to the 1960s when it used to sell vehicles in markets like Taiwan, Brazil, South Africa, Thailand,
the Philippines, Malaysia, Russia, and China. In the initial years, Toyota was mostly exporting vehicles from Japan to these countries as it only had production facilities in Brazil, South Africa, and Thailand.
During the 1970s, Toyota started producing multipurpose vehicles in the Philippines and Indonesia as families in these two countries tended to be large and therefore vehicles that could be used both for business and family were preferred. In 1976, Toyota launched the Tamaraw in the Philippines followed by the Kijang in Indonesia in 1977. In the 1980s, Toyota started producing vehicles in Taiwan and Malaysia followed by India in the 1990s. By the 2000s, Toyota had production facilities in all these emerging markets. In an effort to increase its presence in the emerging markets, Toyota began strengthening its supply system in the emerging markets and increasing localization. During the 2000s, the company set up a local parts distribution network and a supply chain to provide greater autonomy to affiliates in the emerging markets.
Toyota’s presence in South East Asia dated back to the 1950s. By 2012,
Toyota had 14 production companies in Thailand, Indonesia, the Philippines, Malaysia, and other Southeast Asian countries. Under the Innovative International Multi-purpose Vehicle (IMV) project launched in 2004, Thailand and Indonesia became Toyota’s global production centers. By 2012, Toyota was the market leader in Thailand, Indonesia, the Philippines, Taiwan, Brunei, and Vietnam. The IMV Project was intended to create an efficient production and distribution structure for pick-up trucks and multipurpose vehicles to meet the needs of consumers globally. Toyota applied the ‘genchi genbutsu’ approach to observe and analyze the needs of each region and the types of vehicles used in those regions to develop and introduce IMVs.
The IMV project included manufacturing diesel engines in Thailand, gasoline engines in Indonesia, and manual transmissions in the Philippines and India. The IMV project adopted a leaner development process based on a common platform, and developed five vehicles: three pickup trucks, a minivan, and an SUV, especially developed in 2004 for launch in over 140 countries. Though Toyota was still the #1 automaker in mid-2013, its position was coming under threat from a resurgent GM and Ford in the US market.
Competition was catching up in the hybrid car market too. In its home market, the company was hit hard in late 2012, after government incentives for consumers to buy fuel-efficient models expired. In 2013, the Yen declined more than 12% against the dollar. In emerging markets, Toyota had to contend with intense competition from other Japanese companies such as
Nissan, Honda, and Suzuki, some of which had managed to entrench themselves in key emerging markets. Companies such as GM and Germany- based Volkwagen were also pushing ahead with their own emerging strategies.
In 2008 and 2009, analysts were expecting emerging markets to become a safe haven for investors, considering the recession in the US and Europe post the global financial crisis. But as of 2013, while developed economies seemed to be strengthening, the emerging markets had underperformed in the previous couple of years. Analysts were also concerned about the vulnerability of the emerging markets which reacted strongly to modest changes in the world economy. In mid-2013, many emerging markets were struggling with rapid depreciation of their currencies. Countries such as Brazil, India, South Africa, and Indonesia were among the worst affected.
Between May and September of 2013, while the Indian Rupee fell by 21%, the Brazilian Real fell by 17%, followed by the Indonesian Rupiah (15%), the Thailand Baht (8%), and the Russian Ruble (6%). Central banks in key markets like Brazil and India were working frantically to prop up their currencies.
As of mid-2013, Toyota pursued the emerging market strategy with Asia as its ‘second mother base’. According to Toyota’s Global Vision, the company aimed to implement its IMV Project strategy in the emerging markets by continuing to fortify its core models along with new hybrid models. It would also strengthen its production and supply bases, and enhance its cost competitiveness by 100% localized procurement.
1. Analyze the automobile industry in emerging markets and discuss and debate whether automakers should focus on these markets.
2. Evaluate the strategies adopted by Toyota to increase its presence in emerging markets.
3. Discuss ways in which Toyota could get its emerging markets strategy right and bolster its position further in emerging markets.
4. Give your suggestion for better marketing strategy.

Assignment
Subject: Strategy Execution
Q.5 Case study
On December 14, 2012, French-Dutch airline, Air France KLM SA (Air France-KLM), announced an addition of €500 million (USD654 million) to its savings target for 2013-14, in an effort to match the margins of its competitors. Earlier in 2012, the airline had announced a plan for a €1.4 billion investment in 2013, followed by a further €1.6 billion investment in 2014 as part of its “Transform 2015” plan. However, with the new savings target, investment would be cut by €500 million, out of which Air France would contribute €300 million while the remaining €200 million would be cut from KLM’s budget.
After the changes, Air France-KLM’s capital expenditure would be €1.1 billion in 2013 and €1.4 billion in 2014. “This is a necessary reduction, but given the group’s younger fleet age versus competitors they have the flexibility to do it. The Transform plan is gathering pace and should be well on track to deliver,” said analyst Donal O’Neill at Goodbody Stockbrokers.
Air France-KLM was formed through a merger of French and Dutch carriers in 2004. With sound financials in the initial years, the merged entity became an example of how a cross border merger could prove a success. However, from 2009, the company was struggling to remain competitive in the changing global aviation industry. In 2011, the company’s net debt was at €6.5 billion, €2 billion more than it had been the previous year. The company also incurred a substantial operating loss for the fourth consecutive year in 2011. It attributed its deepening indebtedness to increasing fuel costs, competition from low-cost airlines, and the aftereffects of the financial crisis. “We have been incapable of financing our investments for the past three years, as we don’t generate enough cash flow,” said Alexandre de Juniac (Juniac), CEO of Air France.
The company had announced the “Transform 2015” plan in January 2012. This included reducing unit costs by 10 percent and slashing €2 billion fromits net debt by the end of 2014. The company also planned to cut some 5,000 odd jobs to turn around its short- and medium-haul business.
Aviation experts welcomed the restructuring initiatives of Air France-KLM. However, they were worried about whether the company would be able to achieve the targets mentioned in “Transform 2015”. According to a Bank of America report published in March 2012, “the core structural longer-term issue of value destruction in this business remains unresolved”.
On September 30, 2003, Air France and KLM announced their intention to merge through a public exchange offer. In May 2004, the two merged to formthe largest European airline group, Air France-KLM. On May 5, 2004, Air France-KLM shares were listed for trading on the Euronext Paris and Amsterdam markets as well as on the New York Stock Exchange. Two days later, Air France was privatized following a transfer of the majority of its shares to the private sector, thus diluting the French government shareholding. On September 15, 2004, the group’s organizational structure was finalized with the creation of the Air France-KLM holding company, regrouping the two airline subsidiaries, Air France and KLM. The merger between Air France and KLM was a unique example, not only because it was a cross border merger, but also because two airlines with different cultures formed one company where both companies kept their brands alive by flying their planes under their respective names. In the initial years, the merger was considered a success story, because of early anticipation of the needs of consolidation in the European aviation industry.
In 2007, the company completed its first phase of integration and became the best performing airline globally in terms of profitability. It was a global leader covering 240 destinations in 105 countries with its 900 aircraft. In the financial year 2006-07 ended March 31, 2007, Air France-KLM generated revenues of € 23.1 billion, an increase of 7.6 percent year on year. However, the company started facing problems from 2008. The global financial crisis of 2008-09 affected the airline industry very badly. The industry responded by reducing capacity and cutting costs. In the financial year 2008-09, Air France-KLM reported revenues of €23.97 billion and an operating loss of €129 million. From then onward, the airline started struggling to improve its financials. In the financial year 2009-10, Air France-KLM reported a 15 percent decline in revenues to €21 billion, and an operating loss of €1.28 billion.
In 2012, Air France-KLM continued to counter the effects of downturns in its domestic market as well as in several of its foreign markets: Japan, the Middle East, and North Africa. In France, the company was grappling with high costs due to increasing fuel prices. Moreover, weak economic growth due to Europe’s financial crisis aggravated the problems for the airline. On October 8, 2012, Air France-KLM and Etihad Airways signed an agreement to codeshare on flights across the airlines’ networks. The codeshare agreement would allow both airlines to offer joint codes on destinations in Europe, the Middle East, Asia, and Australia. At the same time, Air France- KLM also announced another codeshare agreement with Air Berlin , in which Etihad Airways held a 29.21 percent stake
1. Analyze the problems faced by Air France-KLM 2. Evaluate the turnaround strategies adopted by the airline
3. Analyze the issues and challenges in transcontinental and cross-cultural alliances.
4. Analyze the future challenges of the airline and how these can be overcome.

MARKETING MANAGEMENT CASE STUDY SOLUTION

MARKETING MANAGEMENT CASE STUDY SOLUTION

Assignment
Subject: Marketing Management
Q.1 Case study
American Tourister re-positioning itself as a hip travel brand leveraging Sports Partnership
American Tourister, Samsonite’s mass market label, is re-positioning itself as a hip international travel brand; targeting the cool, young traveller.
In December 2016, as part of their India campaign, Virat Kohli was brought onboard as a brand ambassador. Kohli is – for India – the ideal face for the brand as he is the personification of American Tourister’s re-positioning.
Following the success in India, American Tourister took things to the next level and in February 2018 appointed football star Cristiano Ronaldo, the most followed male on social media, as their brand ambassador.
Anushree Tainwala, Executive Director, Marketing at Samsonite, said, “There couldn’t be a better time to bring Cristiano on-board. His lively and vivacious personality, on and off the field, resonates perfectly with our
funloving, vibrant brand personality. His presence will help bring American Tourister to a whole new audience, allowing us to stand out from the competition, and enabling us to take the Brand to the next level.”
In Kohli and Ronaldo, it has found two iconic sports personalities who have strong personal brands & massive following in emerging markets. This helps American Tourister win asymmetrically and leave competition in the dust. In addition to transferring the sports stars’ attributes to the brand, the partnerships:
Elevate the brand from Samsonite’s low end product to a contemporary, practical international travel brand; targeting the aspiring, young international traveller. Explode the reach: Getting the reach in India via Kohli (81m social media followers) and globally through Ronaldo (315m followers) -especially with the FIFA World Cup around the corner.
Engage audiences: Kohli with “I’m ready” & “Swagbag”, Ronaldo with “Bring back more” are examples of sharply positioning the brand leveraging the ambassadors to provide differentiated, exciting engagement.
Top of Mind: Standing out in a commoditised travel accessary category, American Tourister is positioning itself as closer to the hearts of young travellers and in their purchase consideration. In February & March this
year it has activated both players – Ronaldo (here) & Kohli (here & here), Let’s see where the brand takes such partnerships as we get closer to the Russia World Cup. It has achieved a strong cut-through even before the world gets gripped by the World Cup fever.
Question:
(10 × 2 = 20)
1. How can your brand differentiate & asymmetrically win in a commoditised category through sports?
2. What other, more effective ways can brands use to reposition themselves?

Assignment
Subject: Marketing Management
Q.2 Case study
In August 2004, a leading business newspaper reported that Hyundai Motors India Limited (HMIL), an Indian subsidiary of the South Koreabased Hyundai Motors Company (HMC)3 was expected to reduce the price of its flagship car – Santro – by as much as Rs 40,000. Industry experts were expecting a reduction in Santro’s price in response to the price war being waged by the market leader in India – Maruti Udyog Limited (MUL),4 which had reduced the price of its largest selling car in the B segment – Alto – by Rs 58,000 in two price cuts starting from September 2003. This move had resulted in Alto replacing Santro as the largest selling car in the B segment in the period January to June 2004 (Refer Exhibit I for the market segmentation of the Indian car industry).
Marketing Management Case Studies | Case Study in Management,
Operations, Strategies, Marketing Management, Case Studies Rebutting the report on price cuts, HMIL’s managing director, BVR Subbu (Subbu) said, “We are not cutting prices on the Santro. We have allowed our competitors the prerogative of cutting prices.”5 Several dealers of HMIL also felt that the company would not reduce Santro’s price as it had not adopted such tactics earlier.
Santro had been the most successful product of HMIL and was also the largest selling car in the B segment till the fiscal year 2003-04. Introduced in late 1998, Santro had emerged as the second largest selling car in India after MUL’s M800 and had retained its position till March 2004
(Refer Exhibit II for the total units and value sales of the top eleven car models in India).
In mid 2004, HMIL with its four models, Santro, Accent, Sonata and Elantra, was the second largest car company in India with 19% market share in the industry. The company was planning to launch another model, ‘Getz’, in September 2004.
Analysts attributed HMIL’s success to its ability to launch technologically superior products and its innovative marketing strategies. However, they expressed concerns that the company relied heavily on Santro and any fall in demand for that model would hit the company.
It was felt that the introduction of new cars by the competitors and pgrading & price reduction of existing cars in the B segment would affect Santro’s sales. This would lead to a loss in Santro’s market share. (Refer Exhibit III for the comparison of features of various models in the B segment).
For a long time after India became independent in 1947, the car market had just two models to offer – the sturdy ‘Ambassador’ from Hindustan Motors (HM) and the sleek ‘Fiat’ from Premier Automobiles (PA). This was the result of Government of India’s (GOI) decision to keep the car industry tightly protected.
For HM and PA, the GOI dictated as to what type of vehicle the two companies should manufacture. No other domestic or foreign car manufacturer was allowed to enter the Indian car industry. The restriction on foreign collaboration led to poor technological improvements in Indian cars. As a result, car prices remained high while quality was inferior. This affected the growth of the industry. The demand for cars in 1960 was 15,714 units and in the next two decades, this rose to 30,989 units, which meant that the Compound Annual Growth Rate (AGR) was just 3.5 per cent.
In the 1980s, the GOI felt the need to introduce an affordable small car, targeting the Indian middle class. As manufacturing a small and affordable car required better technology than was available indigenously, the government tied up with the noted Japanese company, Suzuki. The government formed a joint venture with Suzuki and founded Maruti Udyog Limited (MUL). It held 74% and Suzuki got 26% equity stake in MUL. In 1983, MUL launched the ‘Maruti 800’, priced at Rs 40,000 Hyundai’s Entry in India
One of the major players that entered the Indian car market was HMC through its subsidiary HMIL. Before making its move, the company closely studied the industry for a year. The company’s officials talked to vendors, dealers and customers to get a thorough knowledge of the industry…
Marketing Santro: Santro received an encouraging feedback from customers who appreciated its unique design that gave more headroom and facilitated easy entry and exit… Launch of Accent: By mid 1999, the major players realized that the ‘B’ segment would be the fastest growing in the car industry. To cash in, Telco re-launched its ‘Indica’ by introducing several new features and solving the glitches in the original model…
Marketing Management Case Studies | Case Study in Management,
Operations, Strategies, Marketing Management, Case Studies Repositioning Santro By late 2002, the competition in the B segment had increased
significantly. MUL’s Alto which was launched in October 2000 had received a good response. Although HMIL’s Santro remained the largest selling car in the B segment, MUL commanded the largest market share in this segment due to the combined sale of its three cars – Zen, Wagon R and Alto… Status in 2004: The financial year 2003-04 ended on a positive note for HMIL. The company achieved revenues of Rs 50 bn and profit after tax (PAT) of Rs. 1.90 bn in the financial year 2003-04 compared to Rs 43 bn revenues and PAT of Rs 1.65 bn in the fiscal 2002-03…
Question:
(10 × 2 = 20)
1. Examine and analyze the marketing mix of Hyundai Motors in the Indian passenger car industry.
2. Compare and contrast the marketing strategy of Hyundai with other leading players in the Indian passenger car industry.?

Assignment
Subject: Marketing Management
Q.3 Case study
The British Company, Woolworths is normally categorized as a variety store dealing in retailing of a range of varying products. Historically it was established as a subsidiary of an American Company F.W. Woolworth &Co, in 1879 by Frank Winfield Woolworth It was incorporated in England on 23rd July, 1909 as private limited company with initial capital of 50,250 pound sterling. It, first time floated a new idea of selling all the products at a cost not more than five cents. This idea gained popularity amongst the customers resulting in fast growth of the subsidiary. Its first shop at Liverpool attracted about 60,000 people in first two days because of attractive one penny, three penny and six penny products put at sale. It continued to open new shops at various cities that attracted heavy rush of customers and visitors. It was company’s policy to purchase the products directly from manufacturers, who also were very happy due to momentum in their business as well. Some of the manufacturers started doing business solely with the Woolworths and labeled their products with the company’s name. Company’s business grew day by day and it had 31 shops in United Kingdoms by the year, 1914. Due to inflationary trends after the World War II, the company had to do away with its three pence and six pence price limits. It introduced self service first time in its retail side in the year 1955. Woolworth opened about 190 self-service stores by the year 1970. It created new division in the stores by establishing Woolco departmental stores in the year 1966. These stores had full range of quality products like, clothes, groceries, car service and restaurants etc. available at affordable prices.
The Company continued to flourish very fast because of its stated aim to remain at the customer’s heart and best kid’s retailer till 1966. But thereafter its sales as well as profits started falling because of its competitors, Marks & Spencer who overtook its sales as well as profits. The results of the company were the worst in the year 1969, because it failed to chalk out suitable strategies necessary to take on its competitors in the market. Sales at Woolworth began to decline. Consumers were reportedly not satisfied with the quality of customer services of the company. Many of the business sites were not at prime locations. Its new products could not attract the customers because of lack of well trained staff and availability of ‘A class service’. The company tried to improve its services in the year 1971 by introducing new system of centralized payments besides closing its 23 unprofitable shops, as an attempt to trade up. The profits of the company
increased to some extent as a result of these measures but it failed to boost up its profits at the desired level. The competitors of Woolworth like Wal- Mart, Argos and Next very soon became more prevalent in the market because of low prices, better service and vast range of their products. The Management of the company ultimately decided to sell out the Woolco stores in 1977. In the year 1981 it sold-out some of its valuable prime located properties to cover-up the losses suffered by the shops situated at these locations. Even then its profits went down in the said year and the company was forced to cut the dividends first time since its establishment. In the normal restructuring process during the year 1985, the company decided to abandon the sale of food and adult clothing that was contributing about 30% of its overall sales. The Management of the company sold out its 200 unprofitable shops out of about 990, during the years 1982-1991. During this decade company made a number of acquisitions in order to become more diversified in retail business. It launched Music and Video Club that specialized in CDs, videos and other entertainment products. The company succeeded in boosting its sales and turnover during 1990s and gave impressive results despite the fact that some of major chains like Wilkinson expanded their business in the Woolworth areas.
Woolworth reviewed its entire business in the year 2002. It reconsidered its further expansion and realignment and merger of its overall management structure. It strengthened infrastructure and planned accurate management of its stocks so as to maintain them at their optimum levels. It introduced new till system in order to ensure its stock holding capacity besides provision of improved and efficient services to the customers. The management decided to cut the number of suppliers and enhance the use of their own branded products. These improvements contributed a little in the sales as well as profits. One of main money spinners of the company was its music business that collapsed. The financial results for the year 2004 showed just 4.5% increase in the profits of the company. It had to compete strongly with Argos in the sales of toys and gifts. In the year 2006, the company introduced an in-store collection service for items ordered through website. Company continued its business mainly in entertainment and electronics till the year 2008. It expanded its chains and set up out of town stores that were known as ‘Big W’. It announced considerable loss in its half yearly statement of affairs as on 2nd August, 2008.
The management, therefore decide to sell out about 120 stores, cut jobs and reduce web operations. At this stage reportedly the company rejected an offer to buy its 815 stores. From September onwards the entire World entered into worst ever economic and financial crises that resulted in decrease in availability of necessary credit from the banks and financial
institutions besides decrease in consumer spending. The lending banks of the company not only refused to give further credits, they also demanded repayment of their existing loans towards the company. As a result of this crisis the retail business badly suffered. Media also reported possible price crashes, increased personal debts, unemployment, pension shortfalls, stock market crashes and decrease in availability of disposable income.
Under these circumstances as well as in wake of market saturations, coupled with economic downturn, it was highly difficult for the Woolworth to maintain competitive pricing. Woolworth’s financial results for the first half of the year 2008 showed 99.7 million pounds pretax loss. Decreased credit availability, decreased public spending and pressure of creditors to pay off debts of about 385 million pounds, forced the company to sell out its 120 shops that were going in loss besides reducing the web operations, cutting the products and axing the employees. These measures could not help the company to survive and ultimately it suspended trading of its shares on the 26th 0f November, 2009 and at last decided to close down its all 819 stores and axe its 27000 highly dedicated employees. The parent company of Woolworth also announced its intention to go into administration on the 19th of January, 2009.
Question:
(4 × 5 = 20)
1. Why Woolworths Failed as a Business?
2. What is the main focus or purpose of Woolworths?
3. What challenges are Woolworths facing now a day?
4. What are the advantages of Global Expansion in Retailing?

Assignment
Subject: Marketing Management
Q.4 Case study
Its Global Marketing Plans In the 1940’s itself PepsiCo started branching out into the international arena. At first it was into Latin America, the Middle East and the Philippines. Here too Coke had the early bird advantage. Yet the product soon gained popularity. With the Arab countries boycotting Coke, Pepsi enjoyed a monopoly for many years in the Middle East. In the 1950’s Pepsi went to Europe and this included Russia, with whom there existed a Cold War by USA. Though there were initial difficulties, getting into Russia was a major breakthrough which the company exploited. The company posted pictures of the then leaders of the United States and Russia sipping the drink. Its arch rival, Coca Cola, was able to enter the Russian markets only after more than 25 years after Pepsi’s entry.
In many of the countries that Pepsi ventured into comparative advertising was prohibited and in many countries it was not an accepted concept. For example, Pepsi tried its “Pepsi challenge” promotional gimmick in Japan. However, the country and its people were not aware of comparative advertising and as such the campaign did more harm than good. Hence in Japan they had to break their tradition of running with the global campaign and come up with a campaign that the Japanese would identify with and was more Japanese. The “Pepsiman” was a superhero like figure that was devised by a Japanese person for the Japanese market. The commercial was an instant hit and helped improve Pepsi’s share in the Japanese market by as much as 14%. From Japan Pepsi learned a valuable lesson – the same ad will not have the same effect everywhere. When it comes to cross national advertising, there is always the inherent risk of alienating the people.
Question:
(20 × 1 = 20)
1. What challenges Pepsi had to face, If Pepsi would not follow the cultural factors in international marketing environment? What is the good marketing way for pepsi?

Assignment
Subject: Marketing Management
Q.5 Case study
In 1980, Peter A, Horekens, marketing director for Kellog company, was faced with the problem of developing a market for ready-to-eat cereals in the Latin American region. Although Kellog had no competition in the ready-to eat cereal market in this region, they also had no market. Latin Americans did not eat breakfast as the Americans did. The problem was especially prominent in Brazil. To create a market and increase sales in this region, Horekens had to create a nutritious breakfast habit.
Kellog Company, which headquartered in Battlecreek, Michigan, was founded in 1906 by W.K. Kellog. The company continued to operate successfully with sales in 1980 amounting to 2,150.9 million U.S. Dollars. The Kellog Company manufactured and marketed a wide variety of convenience foods with ready-to-eat cereals topping the list. The company’s products were manufactured in 18 countries and distributed in 130 countries. The ready-to-eat cereals sales made up the majority of international sales.
In 1980, Kellog International operations accounted for 38 percent of Kellog Company’s sales of more than $ 2.0 billion. The United Kingdom was by far Kellog’s largest market. Internationally, sales in the ready-to-eat cereal market continued to increase, although in the past few years the competition also had increased. But in Latin America, consumption of ready-to-eat cereals was negligible.
The Latin American Market
The Latin American Market, mainly Mexico and Brazil, showed great potential as a Kellog’s ready-to-eat cereal market. The demographics fit the ready-to-eat market, the only problem was that Latin Americans did not eat the traditional American-style breakfast.
The Latin American market included a growing number of families with children. The population mix was becoming younger. The developing economy enabled consumers to spend more of their income on food. Kellog wanted to increase sales in this Latin American region, especially Brazil, but consumers had turned their backs on the American style breakfast. How was Kellog to create a nutritious breakfast habit among the Brazilians?
The company asked J. Walter Thompson, Kellog’s advertising agency, to help instill the breakfast habit in Brazil. According to Horekens, “In general, Brazilians do what people in novellas do”. Novellas are Brazilian soap operas. J. Walters Thompsons tried to advertise Kellog ready-to-eat cereal and instill the breakfast habit by advertising within a soap opera. The first experience of advertising within a soap opera failed; the advertisement portrayed a boy eating the cereal out of a package. Kellog wanted to teach the Brazilians how to eat a complete, nutritious breakfast, not just Kelloy’s cereal. The commercial did not work, because it made Kellog ready-to-eat cereal seem more like a snack than a major part of a complete breakfast. Kellog wanted to portray ready-to-eat cereal as a part of a complete, well- balanced nutritious breakfast. Thus, they needed the cereal to be eaten in a bowl with milk alongwith other foods to make a complete breakfast.
The company believed that the growing population in this region would reinforce the importance of grains as a basic food source. The 1980 population in Brazil was 119 million, which made it the sixth most populated country in the world and the population was expected to grow to 165 million in the next few years. Within this population growth was an increase in the number of women of childbearing age, which further supported Kellog’s potential for a successful cereal market. The structure of the population in Brazil in 1980 was:
∙ Thirty seven percent of population under age 15.
∙ Forty-eight percent of population under age 20.
∙ Twelve percent population over age 50.
∙ Six percent of population over age 60.
∙ These figures showed that the population of Brazil better fit the market for a ready-to-eat cereal, with the increasing number of children and elderly people as the two largest cereal consuming segments.
The “cult of the family” continued to be the most important institution in the formation of the Brazilian society. This culture ideal was reflected in the ways they conceptualized and evaluated the range of personal and social relations. This seemed to be the way Kellog would have to demonstrate the importance of a nutritional breakfast – by playing up the family and its importance. Through the use of the novellas, Kellog made a second attempt to teach the Brazilians the importance of breakfast. Most Brazilian families watched these soap operas, composed mostly of family scenes. In their commercials, Kellog opted for scenes that showed the family at the breakfast table. One member of the family, usually the father, took the cereal box, poured the cereal, and then added milk. This scene represented a complete
“Kellog” breakfast in a way that Brazilians could relate to. The advertisement focused first on nutrition, then on flavor, and finally on ease of preparation.
As a result of this campaign, sales in Brazil increased. Kellog controlled 99.5 percent of the ready-to-eat cereal market in Brazil; however, per capita cereal consumption was less than one ounce or several spoonfuls per Brazilian annually, even after advertising. Although Kellog controlled the market, there was not much of a market to control. Brazilians had begun to eat breakfast, but Horekens was not sure whether sales would continue to increase. His problem was – how could Kellog further convince the Brazilians of the importance of eating a nutritional breakfast in order to establish a long-term market?
Question:
(10 × 2 = 20)
1. Analyse the case to enable you to prepare a report about the given situation.
2. What would be your advice – to continue or quit – to the board of Directors of Kellog? Explain with reasons the factors which you would consider essential in framing your report?

BEHAVIOURAL SCIENCE CASE STUDY SOLUTION

BEHAVIOURAL SCIENCE CASE STUDY SOLUTION

Assignment
Subject: Behavioural Science
Q.1 Case study
Four years ago, the Texas Office of the Attorney General (OAG), which is the state’s child support enforcement agency, began mailing letters to a small number of incarcerated noncustodial parents (NCPs) with information on how to apply for a modification of their child support order. NCPs often become unable to make their monthly child support payments when they are incarcerated, and, if they do not request and obtain a downward order modification, they may leave prison with significant child support arrearages that follow them for years. Despite the clear benefits of this pilot program for NCPs, only a small percentage of incarcerated NCPs who were contacted by OAG applied for a modification. The BIAS team has partnered with OAG to determine whether the tools of behavioral economics can be used to increase the overall response rate of incarcerated NCPs, as well as the accuracy and timeliness of their application materials.
BIAS and OAG analyzed every step in the modification request process fromthe wording of the outreach letter and application to the actions the NCP must take within the prison to get an application notarized by a law librarian and returned to OAG by mail. The team identified several potential “bottleneck” points at which NCPs may not follow through with the process, a few of which are discussed below:
The NCP may receive the letter but decide not to open it. Because the NCP likely associates OAG with child support enforcement, seeing a letter from this agency may stimulate a negative affective response and the ostrich effect1 (the tendency to “put one’s head in the sand” and avoid undesirable information). Or, the NCP may perceive the deliberation costs in time and mental effort to be too high to fully examine the letter.
The NCP may not decide to act on the letter. The letter mentions the NCP’s incarceration several times, identifying him as a prisoner rather than a parent. This increases the saliency of their prisoner identity,2 which may reduce their motivation to act.
The NCP may not follow through. Even if the NCP is interested in applying for a modification, he may procrastinate3 in completing the application or forget to request an appointment with the law librarian because this is not part of his everyday routine.
The NCP may not successfully submit the application. After the NCP attends the appointment, the law librarian may find that the application is incomplete and the NCP will need to complete the application and return it at another time. The NCP may forget to request notarization or even forget to drop the completed application in the mail.
The NCP may see the future when they are released from prison as too distant to plan for. NCPs may exhibit some degree of present bias — overweighing the present with respect to the future. When the projected release date is psychologically distant, the NCP may think about it abstractly, and neglect to consider the negative effects of accrued arrears. The team has redesigned the materials that are sent to incarcerated NCPs to address these bottlenecks in ways that are informed by behavioral economics.

1. What are the changes according to you that should be include in itinclude
2. How should an email to be managed?

Assignment
Subject: Behavioural Science
Q.2 Case study
A new report released by AIM Research and Hansa Cequity studies how and to what extent organisations in India leverage behavioural science and data science to analyse consumer behaviour across different industries and functions.
The report titled “Impact of Behavioural Science and Data Science on Consumer Behaviour” also dives into the connection between behavioural and data science in comprehending consumer behaviour and makes a case for their use in collaboration.
Data science has seen increasing popularity in the last couple of years and is used extensively by most organisations to identify growth drivers. While data is a critical input to improve customer satisfaction and increase revenues, Behavioural Science plays a crucial role in studying and analysing customer experiences, brand loyalty, and overall consumer journey.
According to the study, there is limited use of Behavioural Science techniques by Indian organisations to study buying behaviour. Around one in five respondents said they had none or rare utilisation, indicating a significant scope for improvements across certain industries and functions, some more than others. This includes studying consumers’ implicit attitudes towards the brand or analysing the impact of celebrity endorsements, ethnocentrism, the social image of inclusion or exclusivity, etc.
The report provides detailed insights through a comprehensive analysis of the survey. The study highlights cases where the utilisation of Behavioural Science could see improved outcomes if two functions within the same
company worked together. Along with this, the study identifies areas in which Behavioural Science and Data Science can be used in conjunction.
The study can be used by leaders or decision-makers to get insight into where their companies stand in utilising Behavioural Sciences compared to others and realise areas where they are falling behind. The study also helps its readers identify future roadmaps in terms of using Behavioural Science along with Data Science to their advantage.
Overall, almost every Behavioural Science technique (surveyed) had more than two in five respondents (40%) agreeing to its high/very high utilisation.
Although, almost every technique also had more than 20% who said they had none or rare utilisation. Respondents in the marketing function had higher utilisation of most Behavioural Science techniques surveyed than all the other functions. Almost every technique had more than/around two in three (66%) Marketing respondents, saying that they have a high/very high utilisation.
In terms of industry, different sectors had the highest share of respondents claiming they have a high/very high utilisation of different Behavioural Science techniques. However, Telecom & Media consistently performed well—almost every technique had more than 50% of Telecom & Media respondents saying yes to utilising it to a high/very high extent.
1. Write the factors that influence the behavior of an individual.
2. Discuss about the situation how behaviour science deals with consumer behavior.

Assignment
Subject: Behavioural Science
Q.3 Case study
Organizational behavior in this coca cola case study refers to the study of activities or behavior of the employees inside a commercial enterprise. The reflective case study has been made depending on the issues faced the famous soft drink company Coca Cola. The aim of this coca cola case study is to figure out the strategies with which the company can utilize it human capital in order to make the organization a better place to work. At the same time, I have described the opportunities through which the company can continue its growth in the local market.
Coco Cola has been serving the world for more than 130 years however, the organization is facing extreme problem in the market of the island country like Sri Lanka. The company is facing a downtrend regarding its brand value. In the year 2014 the brand value of Coca Cola a around 34 billion dollar whereas it has decreased to nearly 32billion dollar in the year 2018. It means the company has faced an acute loss of around 5.4 percent. In this coca cola case study discovered certain factors that have caused such an acute downfall of the branded organization. One of the factors is the mismanagement inside the organization. In the following coca cola case study, I have highlighted how the improper workforce management of Coca Cola has leaded the company to such an adverse situation.
Reasons of the downfall of Coca Cola Company
Communication: In order to identify problem lied behind the downfall of the Coca Cola Company discussed in this coca cola case study, I found certain issues and communication is one of such issues. The entire set up of the organization is so much corporate like that the employees hardly get time as well as scope to share their opinion or thought with other. It has affected the growth of the company in two different ways. First of all the staffs has could not get chance to share their problem with their leader. As a result, they could not develop their skill in order to improve their performance. On th contrary, the company lost the opportunities of utilizing the innovative ideas of the workers that could have been fruitful for the Coca Cola Company.
Feedback sharing: The HR of the team leader did not pay proper attention on sharing the feedback with the staffs of the. As a result, the employees did not get the chance to improve their skill. Sometimes, they lacked of the proper knowledge of using the latest technology while producing the various
products. This situation had a negative repercussion on the company’s growth as a lot of employee left the firm out of lack of dissatisfaction. As an irreversible effect, the company had to face an acute shortage of labour that has hindered the production rate. In my opinion the shortage of the human capital is one of the most important factors that has affect the growth of
Coca Cola Company in a profound way.
Motivation: I think motivation is one of the factors that are responsible for the shortage of the staffs inside the organization. It is true that Sri Lanka is one of the densely populated area in South Asia. As per the recent report held on 8th May, in the year 2019, which is refered in this coca cola case study the entire population of the country is 21,008,582 (Chandrajith et al., 2019, pp-12, pp-37) which is approximately 0.27 percent of the entire population of the world (Wijesuriya et al., 2019). As a result of such huge population the country enjoys the facility of plenty human capital. May be that is the reason that the company treated its staff as a factor that caneasily be replaced by some other employ. The management of the company did not pay attention in order to motivate the employees. For instance in this coca cola case study, they did not arrange proper compensation or increment which was quite demotivating for the staffs. As a result, theemployee showed less interest in order to enhance their performance.
Absence of proper training: I found in this coca cola case study that one of the reasons of the downfall of Coca Cola Company is the lack of training the needed to be provided to the employee in order to enhance their performance. Like other country like Australia, UK and many more the company did not have proper training facility for their employees. I think, that is the reason why the staffs that were unable to perform well were easily demotivated. In addition, the management did not take any measure in order to increase the efficiency of their workers. This situation had a adverse effect on their work performance which consequently followed by the decrease in products’ quality.
Improper human resource management: Before writing this coca cola case study, I had gone through certain researches, which illustrate the error of the human resource management of Coca Cola Company. For instance, the company has collaborated with four bottling firms that created a big issue as the organization brought around ten thousand workers (Chiu, Fischer and Friedman, 2019, pp-109). It was actually double of the entire work force. As a result of such collaboration the company had to encounter with the problem of complexity of the unnecessary staffs as well as resignation of termination of employees (Chiu, Fischer and Friedman, 2019, pp-98). It
created an unstable situation inside the organization that had a negative impact on the reputation of the company. In addition, the human resource managers did not show proper interest in order to attract or retain the quality employee who could play significant role in betterment of the company.
Attitude of team leader: The team leader failed to motivate their team members. Most of the time they could not encourage their subordinate staffs and thus they could take proper initiative in order to achieve the company’s target. In addition, the team leader r the supervisors did not perform the proper monitoring of the tasks of their subordinate team members. Even they showed reluctant to share proper feedback which could improve the quality of the performance of their team members. The irresponsibility of the team member or the management of the Coca Cola Company has increased the uncertainty among the subordinate staffs of the organization. In my opinion this kind of attitude of the higher authority was quite responsible for the loss of status of the world famous Coca Cola Company.
Relation between the management and the staffs: I discovered that the company management was failed to build a lateral relation between the employees as well as the team leader inside the company premises. I have discussed earlier in this report that the workers hardly got chance to talk about their problems whatever they faced at the time of performing their task. The management of Coca Cola Company hardly arranged meetings in order to discuss the problems of their staffs as well as the possible remedies to resolve those problems.
Proper working environment: The management failed to create the proper working environment that can encourage or motivate the employees to give their best performance (Jones and Comfort, 2018, pp-43). As I have earlier mentioned that Coca Cola Company provided a strict corporate environment to its employees. This situation created obstruction in building an emotional attachment between the workers as well as the management of the organization. As a result, the employees failed to understand that their improvement was closely related to the success of the company (Jones and Comfort, 2018). That was the reason in this coca cola case study why the workers of the Coca Cola Company did not take enough enthusiasm in order to provide their best performance for the organization’s upliftment.
1. What are the factors that 1. What are the factors that are responsible for the downfall of the Coca Cola Company in Sri Lanka?
2. Suggest some possible remedies through which the company can overcome such situation?
3. Justify’ Coca Cola targets middle class people in rural areas”. 4. Discuss the attitude and related beliefs towards Coca-Cola of intensely brand-loyal consumers.
5. What are the key success factors for Coca-Cola?

Assignment
Subject: Behavioural Science
Q.4 Case study
Pepsi Next was launched by PepsiCo into the US market in February 2012, and has since been rolled out to various international markets (for instance, it was launched in Australia in September 2012).
The new product is described as a mid-calorie cola beverage, having a mix of sugar and artificial sweeteners, designed to deliver a full cola taste with reduced calories. While filling the market gap between full sugar and diet soft drinks, PepsiCo has indicated that its prime target market is lapsed cola drinkers (giving them a reason to return to the product category). PepsiCo, which owns range of high profile beverage brands in addition to its flagship brand Pepsi, appear to be highly committed to Pepsi Next providing it with strong launch and management support. In fact, according to PepsiCo themselves, this is their most significant product launch for several years.
PepsiCo is the second largest food and beverage company in the world, with revenues now in excess of $60 billion. The corporation has 22 brands that achieve retail sales in excess of $1 billion each. As a result of their brand diversification, around half of PepsiCo’s revenue is generated from their food lines, such as Frito-Lay (snack food) and Quaker Oats.
In addition, they have progressively expanded internationally and now access over 80% of the world’s population. Their international (non-US) markets account for almost 50% of their total revenues and they still see significant growth potential from these markets, on the basis that per capita consumption of snacks and beverages in other countries is well below US market levels.
As a result, PepsiCo has achieved solid growth is many international markets. While their US beverage sales fell by 2% in 2011, this has beenmore than offset by double-digit sales increases in Europe, Asia, the Middle
East and Africa.
In terms of their overall strategic approach, PepsiCo (as highlighted on their website) see themselves as innovative and adaptive, as stated in the following website quote: “Pepsi is constantly on the lookout for ways to ensure their consumers get the products they want, when they want them and where they want them.”
“Pepsi is constantly on the lookout for ways to ensure their consumers get the products they want, when they want them and where they want them.”
In their Annual Report, PepsiCo has structured their brands around three related themes, as highlighted in the following table. This brand structure gives some insight into the role of their brands and how they see their brand portfolio developing in the future.
Emphasis of Brand Key Brands
Fun-for-you Pepsi, Mountain Dew, 7-Up, Lays, Doritos, Cheetos,Red Rock
Better-for-you Pepsi Max, Diet Pepsi, Lays (oven baked), Quakerbars
Good-for-you Tropicana, Quaker Oats, Gatorade, Nut Harvest

As you can see from PepsiCo’s classification of their brands, it appears that the firm has the dual goals of supporting and leveraging its existing ‘fun’ brands, while moving towards a broader range of healthier offerings. While this second goal may appear to be mainly related to improving their corporate image, it does have commercial intent, as explained on the PepsiCo website: “Because a healthier future for all people and our planet means a more successful future for PepsiCo.”
To help implement this corporate goal, across their various brands, PepsiCo has focused on providing a wider range of healthier choices, introducing more natural ingredients, reducing fat content, reducing the environmental impact of their packaging, and so on.
Recent Product Innovations
PepsiCo has a history of developing and launching a number of mid-calorie beverages and Pepsi Next is by no means their first attempt with this style of product. In addition to various Pepsi variations (described in the ‘Before Pepsi Next’ section below), they have had some recent success with reduced calorie versions within their Tropicana and Gatorade brands.
One very successful mid-calorie product initiate is Trop50, which was launched in 2010. Trop50, as implied by its name, is a version of Tropicana with 50% less sugar and calories. This new product was ranked as the 6th most successful new food/beverage product in its launch year with retail sales in excess of $70 million. Its initial success has continued over the last two years, with the Trop50 product line now generating over $150 million in sales. And even more successful was Pepsi’s launch of Gatorade G2 in 2007. (Note: Pepsi acquired the Gatorade brand with their purchase of the Quaker Company in 2001.) This low-calorie version of Gatorade was identified as the most successful new food/beverage product in 2008 in the US market, achieving sales over $150 million in its first year.
Clearly, these fairly recent product successes with reduced calorie offerings under strong brands would have had the effect of buoying Pepsi’s confidence regarding the viability of this style of product. Hence, they believed that it was the right time to revisit a reduced calorie Pepsi variation.
However, as some commentators have pointed out, it should be noted that their success (with Trop50 and G2) has occurred in their ‘good-for-you’ brand range, where consumers are already quite health-conscious and probably more responsive to healthier options. Therefore, whether this perceived benefit (of less sugar) will carry to ‘fun-for-you’ brands, like Pepsi, is less certain for the firm.
Before Pepsi Next
Perhaps surprisingly, Pepsi Next is PepsiCo’s fifth attempt at a mid-calorie beverage. In the 1970’s they introduced Pepsi Light, which was lemon flavored and contained 70 calories (as opposed to a normal Pepsi can at 150 calories). (Not to be confused with the current Pepsi Light brand marketed in various countries, which is a version of Diet Pepsi.)
Then in the late 1980’s the firm introduced Jake’s Diet Cola, which came in at a mere 15 calories, but did not leverage the Pepsi brand name. At the time, Pepsi stated that the beverage had the potential to “revolutionize” the diet segment of the cola market. Prior to launch, Jake’s was extensively taste-tested against Diet Coke and the firm had strong hopes for its success.
According to one of their vice presidents at the time (Edward E. Jenkins), “Jake’s represents a new taste concept in diet beverages and will provide consumers in the booming diet soft drink category with a better-tasting, lowcalorie cola”.
In the mid-1990’s, they then introduced Pepsi XL, another 70 calorie formula. In their promotions, they indicated that X stood for ‘excellent taste’
and the L stood for ‘less sugar’. According to reports at the time, Pepsi XL was a year in development at a cost of $1.5 million and was supported by an $8 million advertising budget.
More recently, in 2004, PepsiCo released a 70-calorie beverage branded as Pepsi Edge. Around the same time, Coca-Cola brought out a similar product under the brand Coca-Cola C2. Coke supported C2 quite aggressively, with an estimated launch promotional budget of somewhere around $40 million, making it their most significant launch since Diet Coke. Both of these brands only lasted around 18 months or so in the market before being withdrawn.
About the Soft Drink (Soda) Market
The US soft drink market generates over $70 billion in sales. Volumes (units) have weakened slightly since 2005, indicating that the market is in late maturity-early decline stage of the product life cycle. Retail dollar sales have been supported somewhat by price increases.
One of the biggest impacts on soft drink consumption has come from bottled water, which now accounts for over 10% of beverage consumption. This is up from just 2% in 2000. And the soft drink market has also been slightly challenged by sports drinks and energy drinks that have seen a minor increase in market share.
The trend towards diet soft drinks continues, with these offerings now representing 30% of the carbonated soft drink (CSD) market, up from 25% just 10 years ago. Overall, these movements indicate changing tastes of consumers as a result of a stronger health focus. One of the brands most impacted by these market changes has been the flagship Pepsi brand. In the most recent market share figures available,
Pepsi now has less than 10% share of the US CSD market (which ranks the brand 3rd behind Coke and Diet Coke). While still well positioned, keep in mind that they were sitting at over 13% market share ahead of Diet Coke 10 years ago, at a time when the CSD market was still growing at 3% per year.
Their Diet Pepsi product enjoys a solid 5% market share. That product, along with Pepsi’s other soft drink offerings (Mountain Dew in particular), gives Pepsi an almost 30% share of the US CSD market, behind Coca-Cola at 42% (with Coke at 17% and Diet Coke at 10%) and ahead of Dr Pepper Snapple at 17%.
Competitor Offerings
Pepsi isn’t the only player seeking to tap into the perceived demand for reduced sugar beverages. Dr Pepper Snapple (who has two products in the top 10 in the US CSD market) has also introduced a low-sugar offering.
Their new product, Dr Pepper Ten (with 10 calories), is squeezed between their normal Dr Pepper and their Diet Dr Pepper, much in the same way the Pepsi Next product. Reportedly, Dr Pepper Snapple is pleased with the performance of this new product to date. Independent to the Pepsi Next offering, Coca-Cola is currently (mid-late 2012) in the process of test marketing (in four American cities) mid-calorie versions of their Fanta and Sprite brands. Carrying the sub-brand ‘Select’ (to make Fanta Select) the concept is quite similar to Pepsi Next in that it uses a mix of sugar and artificial sweeteners to cut the calorie count by half.
Obviously if these tests are successful and these products are fully rolledout to the market as a standard product, it appears that there could be a third sub-category of soft drinks; traditional, diet, and now mid-calorie beverages. It would then be interesting to see how and if this sub-category develops, particularly with more offerings and overall promotional support. But on the other hand, it might be possible that Coke might be test marketing the mid- calorie Sprite and Fanta options as a form of market research only.
1. As per the above situation what would be the impact of substituteproducts.
2. What will be benefit if Pepsi compromise to the competitor offerings?
3. How do companies protect themselves against the nonstop allegation of special interest group that have made them a target?
4. Identify the ongoing issues in this case with respect to issue management crisis management, global business ethics, and stakeholder management.

Assignment
Subject: Behavioural Science
Q.5 Case study
Amway’s Relationship with Stakeholders
Amway is one of the largest direct sales companies in the world. It continues to be a family owned business which was founded in 1959. Today, it employs 14,000 people worldwide and markets over 450 product lines. Its vision is to help people lead better lifes. Its success islargely due to its three million ABOS Amway Business Owners) spread across 80 countries. Thanks to Amway, these people have a business of their own. The only shareholders of Amway are the families that own Amway. The communication channels used by Amway to communicate regularly with its internal and external stakeholders are websites, email, events, publications and membership of trade bodies.
Amway sells directly to consumers, without the presence of retail outlets. It has its own supply chain through the ABOs. Amway seeks regular feedback from ABOs and customers to find out how well it is doing and to improve services. The ABOs are independent small businesses, but depend on Amway suppliers to produce quality products.
Amway’s involvement with communities is a part of its vision to help people lead better lives’. It promotes its corporates social responsibilities (CSR) all over the world. Corporate social responsibilities at Amway involve supporting social causes, acting in an ethical manner by making good product and supporting its stakeholders in a number of ways. For example, Amway has partnered with the children’s charity UNICEF. It helps provide vaccination to fight the world’s six most deadly diseases. It has chosen this charity because of its ABOs’ concern about families.
Ethical businesses get actively involved in improving the communities where they work. Amway’s business ethics not only provides a clear framework within which to work, but also gives it a positive business advantage. Its ‘One by One’ program is good for both the environment and for business.
This program supports organic farming, seeks to reduce waste but this can be balanced against the benefits derived by both the business and the community. Amway has to balance the needs of its many different stakeholders. It sets high standards of ethics and codes of conduct, in order to make sure that these are upheld. Its CRS program helps the environment, its own employees and underprivileged children all around the world.
1. Who are the external stakeholders that Amway communicates with?
2. What communication channels would you recommend to Amway, a partfrom what is mentioned in the case and why?
3. Stakeholders are the consumer of Amway. Comment. 4. Who are the external stakeholders that Amway communicates with?

Current Legal Issues for E business CASE STUDY SOLUTION

Current Legal Issues for E business
Legislation to support the development and implementation of new Information and Communication Technology (ICT) and reduce barriers to the adoption of E Business is an important indicator for economic success. While the EU’s legal and regulatory framework in this regard has only been gradually developed over the last years, there are valuable lessons learnt which can be leveraged in the implementation of a legislative environment to support the adoption of E Business in African States.
Reflecting research carried out under the Legal-IST project, which was funded under the European Commission IST Programme, this case study addresses four recently studied issues determined to be of high importance for eBusiness adoption in Europe. The objectives was to identify, address and study legal research areas to define research and development needs for short, medium and long-term focus (with regard to technology, methods, organizational and human issues, business relationship and working groups, national legal entities and codes) as well as to initiate and co-ordinate the analysis of specific issues of relevance for ICT- businesses and to provide recommendations on each research area studied, suitable for being used and adopted by policy-makers at EC level in order to evolve current legal framework. This research was based on questionnaire-based feedback received from legal experts, SMEs, policy makers and NGOs across Europe.
The four key legal issues for E Business in Europe identified are:
• Legal issues related to RFID
• Liability of information society service provider
• Self-regulation on B2B internet trading platforms
• Business registry.
1.1.1 RFID
Radio Frequency Identification (RFID) Technology uses radio waves to identify objects or people wearing RFID tags automatically and wirelessly. RFID has two parts: a tag containing an identification number and reader that triggers the tag to broadcast its identification number. RFID is of considerable interest in retail, consumer packaged goods and manufacturing supply chains in terms of potential efficiency.
Hospitals also plan to deploy RFID to identify patients, call up records, reduce medical errors and improve overall productivity. For instance, a pilot project has started in July 2005 in the clinical centre of Saarbrücken in cooperation with companies such as Intel, Siemens Business Services and Fujitsu-Siemens. The study also points out other fields of application including the use of RFID in passports (in November 2005 Germany introduced the first European e-passport, equipped with biometric data stored on a RFID tag) and banknotes, use in libraries and even in the tracking of people (like for example in prisons).
The key legal implications are related to RFID tags that directly store personal data such as name, age, nationality etc. The most prominent current legal issue is the one related with the protection of privacy and data protection. The study examines which European directives apply in relation to different categories
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of RFID tags, some of which only include product reference numbers, while others can provide access to personal data only in conjunction with a backend database. Issues related to obligations of the data controller are also considered.
1.1.2 Liability of Information Society Service Providers
The background to this issue goes back to the adoption of the EU E-Commerce Directive, and whether there should be stronger protection for the fundamental rights and freedoms of all internet users, or whether the directive should facilitate hunting down individual internet users who broke the law by for example, sharing files and breaching copyright in music. The original intention was facilitate the establishment of Internet Service Providers (ISPs) as a business model and not hamper its establishment through liability risks.
The study aims to provide a diagnosis of current liability problems as there is a general lack of regulation at the European Community level of a specific system of liability. The study points out four fields of interest: The question of the liability of providers of Hyperlinks and Location Tools (where there is a general lack of European case law); liability for the provision of Ad Words; claims for information; and problems concerning injunctions.
The main problems detected to date in relation to Hyperlinks and Location Tools are that linking may give rise to a range of unlawful acts such as libel, intrusion of privacy, IPR infringements, trademark infringements, misleading advertising, unfair competition and breach of contract. A large number of the complaints are brought for practical reasons: economic precariousness or lack of knowledge of the identity of the infringing party.
In light of applicable legislation and available case law, the potential problems concerning Ad words (where suppliers pay a premium for their goods or services to be highlighted if certain words are used in a search engine for example) are related to the legal definition of the concepts “keyword” and “metatag” and the legal nature of the “Ad words System”.
The potential problems in relation to issue of claims for information are the lack of harmonized legislation on the obligation for the ISP to retain traffic data and the lack of harmonized legislation related to claims for information.
With regard to injunctions the study considers problems related to intellectual property infringements, and specifically some specific responsibilities of the intermediary.
1.1.3 Self-Regulation on B2B Internet Trading Platforms
While across Europe there is E-Commerce related legislation at both a national and European Directive level, self-regulation is still an important facet of Internet regulation. The development of codes of conduct is actually encouraged by the Directive on Electronic Commerce (2000/31/EC – Article 16). Legal issues related to self-regulation are analyzed from the perspective of legal validity and enforcement, including different types of self-regulation such as codes of practice / codes of conduct, the use of trust marks and labeling, and best practice guidelines and their legal implications. There are
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valuable lessons to be learnt that can be considered for adoption in other jurisdictions outside Europe.
Because of rapid technical developments and the trans-national nature of Internet trading platforms, self-regulation was proposed as a solution to increase the willingness of businesses to join a B2B trading platform. Part of the focus of this study is to develop a template for such a voluntary code of conduct, identifying the main features of self-regulatory mechanisms and discussing the opportunity to address the identified barriers of entry on the B2B Internet trading platforms through self-regulation rather than state intervention. It also outlines future research required into how efficient a tool self-regulation can be for those considering joining a B2B trading platform.
1.1.4 Business Registry
An electronic business registry (E-Business registry) is a software system and infrastructure that enhances information channeling and interactions, required by eBusiness. It enables organizations to store information, select business partners and provide content for customers. However, information supplied by such a registry may raise issues related to data protection and liability issues, depending on the quality and standards of its service.
Using data warehousing techniques, allows analysis of data in a registry easy. However, depending on the methods used, information of varying quality can be produced. The study on business registry gives a clear overview over what business registries are as well as of legal issues regarding this sector. It ends with a summary of legislative recommendations.
Barriers to E-Business
The B2B Expert Group identified a series of factors that might explain the reluctance of businesses (and especially SMEs) to fully engage in electronic trade. These include:
o lack of awareness regarding the risks and benefits of joining a trading platform,
o difficulties in identifying the most suitable platforms for them to join,
o incompatibilities between technical standards,
o insufficient information about the rules applicable to the marketplace
Transactions,
o financial barriers (costs of implementing a secured transaction protocol and maintaining IT systems and websites).
The study recommends:
a. The formulation of Guidelines on the procedures to be followed in drafting a code of conduct and in the involvement of relevant stakeholders
b. Studying the true effectiveness of the codes of conduct in modifying the behavior of market players, or marketplace operators. Such a research should include concrete examples of market changes brought by the implementation of self-regulatory measures
c. Carrying out legal research on the enforceability of the provisions of codes of conduct by business partners or by third parties and available dispute resolution mechanisms.
d. Carrying out legal research regarding Trustmark, what rules govern their activity and the extent of their certification obligations
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Key Conclusions
For RFID, it is essential there is good coordination between technologists, regulators, legislators, and consumers to ensure that RFID can realize benefits to businesses and the wider society. Use of RFID requires serious consideration of data protection and data security implications, which in turn requires re-examination of the traditional legal principles and instruments.
For Liability of ISPs, it is essential to review the liability regime, taking into account the special role of ISPs in the Information Society. Greater legal certainty can be achieved by providing a legal definition of the appropriate court and out-of-court action and procedures.
Technical rules for business registries should be standardized in order to protect privacy of communication and to assure integrity and security of communications.
Self-regulation including use of codes of conduct is essential for B2B Trading Platforms. The creation of guidelines to help in the drafting of codes of conducts would be very beneficial. However, research into the enforceability of codes of conduct is recommended.
Questions:
1. Are similar legal issues currently being faced in your country or region?
2. What relevance do you believe such legal related issues have for your region or country?
3. What cultural, legislative or other barriers exist to successful adoption of e Business in your country?

GATORADE: THIRSTING FOR COMPETITIVE POSITIONING CASE STUDY SOLUTION

CASE: II GATORADE: THIRSTING FOR COMPETITIVE POSITIONING
According to Larry Dykstra, manager of marketing research for Quaker Oats, the development of a focused positioning for Gatorade has allowed the company to target core users and identify secondary markets. Before Quaker acquired the beverage in 1983, Gatorade’s previous owner had promoted it by portraying users as competitive athletes, adult men, teens, and caricatures of athletes. “When we acquired Gatorade,” recalls Dykstra, “it was a poorly positioned brand, with a lack of consistent focus.” This position stood in contrast with the way current users were defined. “There was no message on the uses of this product or under which circumstances and occasions it was supposed to be used.” When Quaker looked at marketing research, Dykstra says the company found that Gatorade’s main users were men aged 19 – 44, that they understood the product, had a good perception of what it did, and knew when to drink it and how to use it. Since Gatorade had been developed and marketed primarily in the South, Quaker wanted to find out if there was an opportunity to market the drink in other areas. A study of attitudes determined that the target could be expanded geographically. “We felt, based on research, that could take a narrow, solid positioning of the product that is consistent with southern users and market the product in the North,” Dykstra says. Gatorade was positioned for physical activity enthusiasts as a drink to quench their thirst and replenish minerals lost during exercise better than other beverages did. Subsequent advertising in 1984 centered on these attributes. In 1985, the company moved away from this core positioning by trying to joke about the product’s competitive heritage – a strategy that failed. [TV ads showed people in different activity situations trying to make sports jokes.]
A decision was made to go back to narrow positioning in 1986. “In 1987, we focused in our primary target, but there have been refinements,” Dykstra explains. “We’ve tried to portray users as accomplished but not professional athletes.” Although the drink is perceived as a “serious beverage, the ads have added a fun component by showing people enjoying it together. We tried to show people who didn’t alienate customers, but also people they could aspire to be like.” 2 An effort also was made to portray people’s motivations for using the product. A computer graphic that portrays thirst quenching was introduced—one which, according to Dykstra, came “across so strong we’ve started to change the language.” But being well-focused and consistent in developing the product over time can create other problems. “Because Gatorade is narrowly positioned in terms of users and user occasions,” explains Dykstra, growth opportunities are probably limited. So how can we go about identifying new opportunities?” The answer was to look for opportunities consistent with the product’s imagery: “About two years ago,” says Dykstra, “we conducted a large study that included a sample of current users and other possible targets, such as older men and mothers with young children.” Quaker also looked in terms of vertical target: Should it target Gatorade toward runners or basketball players? “We built a large enough attitudinal study so we could look at people who considered themselves basketball players separate from those who considered themselves to be aerobic athletes. In the user section, we asked people, “The next 10 times you’re in this specific situation, are you going to use Gatorade?” Dykstra also felt Quaker could target mothers with active children and found this group a large market that could be targeted separately.
Additionally, the company is attempting to market the product year-round. We found we were promoting our own seasonality, so we wanted to develop some continuity,” says Dykstra. Quaker has most recently started marketing the product to Hispanics. “We felt we could position Gatorade to them,” explains Dykstra, “because they are a large growing segment, a sport is important to them, and their populations are centred in areas where its presence is already well developed.” An ad has been developed for this purpose and is
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currently being tested. “We made an effort to do it right and not offend this group,” Dykstra adds. Based on qualitative findings, the TV spot’s approach is conservative and narrow, focuses on sports, and includes family members. “We showed it to several focus groups and made sure the benefits translated.” At the same time, efforts were made to ensure that the changes and refinements would not alienate the core users and secondary targets.
QUESTIONS
1) What are the major variables that might be used to segment Gatorade’s consumer market?
2) Define the core and secondary targets for Gatorade.
3) Propose a marketing strategy for penetrating the pre-teen market.

Trap-Ease: The Big Cheese of Mousetraps CASE STUDY SOLUTION

Trap-Ease: The Big Cheese of Mousetraps
One April morning, Martha House, president of Trap-Ease, entered her office in Moncton, New Brunswick. She paused for a moment to contemplate the Ralph Waldo Emerson quotation that she had framed and hung near her desk: “If a man [can] make a better mousetrap than his neighbor … the world will make a beaten path to his door.” Perhaps, she mused, Emerson knew something that she didn’t. She had the better mousetrap—Trap-Ease—but the world didn’t seem all that excited about it. Martha had just returned from the National Hardware Show in Toronto. 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. Each year, National Hardware Show officials hold a contest to select the best new product introduced at the show. Of the more than 300 new products introduced at that year’s show, her mousetrap had won first place. Such notoriety was not new for the Trap-Ease mousetrap. Canadian Business magazine had written an article about the mousetrap, and the television show Market Place and trade publications had featured it. Despite all this attention, however, the expected demand for the trap had not materialized. Martha hoped that this award might stimulate increased interest and sales. A group of investors who had obtained worldwide rights to market the innovative mousetrap had formed Trap-Ease in January. In return for marketing rights, the group agreed to pay the inventor and patent holder, a retired rancher, a royalty fee for each trap sold. The group then hired Martha to serve as president and to develop and manage the Trap-Ease organization. The Trap-Ease, a simple yet clever device, is manufactured by a plastics firm under contract with Trap-Ease. The trap consists of a square, plastic tube measuring about 15 cm long and 4 cm 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 (cheese, dog food, or some other tidbit). A hinged door is attached to the front end of the tube. When the trap is “open,” this door rests on two narrow “stilts” 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 walks 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 the stilts 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. Martha believed that the trap had many advantages for the consumer when compared with traditional spring-loaded traps or poisons. It appeals to consumers who want a humane alternative to spring traps. Furthermore, with Trap Ease, consumers can avoid the unpleasant mess they encounter with the violent spring-loaded traps—there are no clean-up problems. Finally, the consumer can reuse the trap or simply throw it away. Martha’s early research suggested that women were the best target market for the Trap-Ease. Men, it seems, were more willing to buy and use the traditional spring-loaded trap. The targeted women, however, did not like the traditional trap. They often stay at home and take care of their children. Thus, they want a means of dealing with the mouse problem that avoids the unpleasantness and risks that the standard trap creates in the home. To reach this target market, Martha decided to distribute Trap-Ease through national grocery, hardware, and drug chains such as Safeway, Zellers, Canadian Tire, and Shoppers Drug Mart. She sold the trap directly to these large retailers, avoiding any wholesalers or other intermediaries. The traps sold in packages of two, with a suggested retail price of $2.99. Although this price made the Trap-Ease about five times more expensive than smaller, standard traps, consumers appeared to offer little initial price resistance. The manufacturing cost for the Trap-Ease, including freight and packaging
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costs, was about 31 cents per unit. The company paid an additional 8.2 cents per unit in royalty fees. Martha priced the traps to retailers at $1.49 per unit and estimated that, after sales and volume discounts, Trap-Ease would realize net revenues from retailers of $1.29 per unit. To promote the product, Martha had budgeted approximately $60,000 for the first year. She planned to use $50,000 of this amount for travel costs to visit trade shows and to make sales calls on retailers. She would use the remaining $10,000 for advertising. Because the mousetrap had generated so much publicity, however, she had not felt the need to do much advertising. Still, she had placed advertising in Chatelaine and in other home magazines. Martha was the company’s only salesperson, but she intended to hire more salespeople soon. Martha had initially forecast Trap-Ease’s first-year sales at 500,000 units. By the end of April, however, the company had sold only a few thousand units. Martha wondered whether most new products got off to such a slow start, or whether she was doing something wrong. She had detected some problems, although none seemed overly serious. For one, there had not been enough repeat buying. For another, she had noted that many of the retailers kept their sample mousetraps on their desks as conversation pieces—she wanted to traps to be used and demonstrated. Martha wondered whether consumers were buying the traps as novelties rather than as a solution to their mouse problems. Martha knew that the investor group believed that Trap-Ease had a once-in-a-lifetime chance with its innovative mousetrap. She sensed the group’s impatience. She had budgeted approximately $150,000 in administrative and fixed costs for the first year (not including marketing costs). To keep the investors happy, the company needed to sell enough traps to cover those costs and make a reasonable profit. In the first few months, Martha had learned that marketing a new product is not an easy task. For example, one national retailer had placed a large order with instructions that he order was to be delivered to the loading dock at one of its warehouses between 1:00 and 3:00 p.m. on a specified day. When the truck delivering the order had arrived late, the retailer had refused to accept the shipment. The retailer had told Martha it would be a year before she got another chance. Perhaps, Martha thought, she should send the retailer and other customers a copy of Emerson’s famous quotation.
Questions:
1. Martha and the Trap-Ease investors believe they face a once-in-a-lifetime opportunity. What information do they need to evaluate this opportunity? How do you think the group would write its mission statement? How would you write it?
2. Has Martha identified the best target market for Trap-Ease? What other market segments might the firm target?
3. How has the company positioned the Trap-Ease relative to the chosen target market? Could it position the product in other ways?
4. Describe the current marketing mix for Trap-Ease. Do you see any problems with this mix?
5. Who is Trap-Ease’s direct competition? Who are indirect competitors?
6. How would you change Trap-Ease’s marketing strategy? What kinds of control procedures would you establish for this strategy?

Behavioural Science Case Study Answer

Behavioural Science Case Study Answer
Behavioural Science Case Study Answer

Q.1 Case study
In ten years, Plant World had grown from a one-person venture into the
largest nursery and landscaping business in its area. Its founder, Myta Ong,
combined a lifelong interest in plants with a botany degree to provide a
unique customer service. Ong had managed the company’s growth so that
even with twenty full-time employees working in six to eight crews, the
organization culture was still as open, friendly, and personal as it had been
when her only “employees” were friends who would volunteer to help her
move a heavy tree.
To maintain that atmosphere, Ong involved herself increasingly with people
and less with plants as the company grew. With hundreds of customers and
scores of jobs at any one time, she could no longer say without hesitation
whether she had a dozen arborvitae bushes in stock or when Mrs. Carnack’s
estate would need a new load of bark mulch. But she knew when Rose had
been up all night with her baby, when Gary was likely to be late because he
had driven to see his sick father over the weekend, and how to deal with
Ellen when she was depressed because of her boyfriend’s behavior. She kept
track of the birthdays of every employee and even those of their children.
She was up every morning by five-thirty arranging schedules so that John
could get his son out of day care at four o’clock and Martina could be back
in town for her afternoon high school equivalency classes.
Paying all this attention to employees may have led Ong to make a single
bad business decision that almost destroyed the company. She provided
extensive landscaping to a new mall on credit, and when the mall never
opened and its owners went bankrupt, Plant World found itself in deep
trouble. The company had virtually no cash and had to pay off the bills for
the mall plants, most of which were not even salvageable.
One Friday, Ong called a meeting with her employees and levelled with
them: either they would not get paid for a month or Plant World would fold.
The news hit the employees hard. Many counted on the Friday pay check to
buy groceries for the week. The local unemployment rate was low, however,
and they knew they could find other jobs.
But as they looked around, they wondered whether they could ever find this
kind of job. Sure, the pay was not the greatest, but the tears in the eyes of
some workers were not over pay or personal hardship; they were for Ong,
her dream, and her difficulties. They never thought of her as the boss or
called her anything but “Myta.” And leaving the group would not be just a
matter of saying good-bye to fellow employees. If Bernice left, the company
softball team would lose its best pitcher, and the Sunday game was the
height of everyone’s week. Where else would they find people who spent
much of the weekend working on the best puns with which to assail one
another on Monday morning? At how many offices would everyone show up
twenty minutes before starting time just to catch up with friends on other
crews? What other boss would really understand when you simply said, “I
don’t have a doctor’s appointment, and I just need the afternoon off”?
Ong gave her employees the weekend to think over their decision: whether to
take their pay and look for another job or to dig into their savings and go on
working. Knowing it would be hard for them to quit, she told them they did
not have to face her on Monday; if they did not show up, and she would
send them their checks. But when she arrived at seven-forty Monday
morning, she found the entire group already there; ready to work even
harder to pull the company through. They were even trying to top one
another with puns about being “malcontents.”
Questions:
(2 × 10 = 20)
1. How would you describe the organization culture at Plant World?
2. How large can such a company get before it needs to change its
culture and structure?

Q.2 Case study
The New England Arts Project had its headquarters above an Italian
restaurant in Portsmouth, New Hampshire. The project had five full-time
employees, and during busy times of the year, particularly the month before
Christmas, it hired as many as six part-time workers to type, address
envelopes, and send out mailings. Although each of the five full-timers had a
title and a formal job description, an observer would have had trouble telling
their positions apart. Suzanne Clammer, for instance, was the executive
director, the head of the office, but she could be found typing or licking
envelopes just as often as Martin Welk, who had been working for less than
a year as office coordinator, the lowest position in the project’s hierarchy.
Despite a constant sense of being a month behind, the office ran relatively
smoothly. No outsider would have had a prayer of finding a mailing list or a
budget in the office, but project employees knew where almost everything
was, and after a quiet fall they did not mind having their small space packed
with workers in November. But a number of the federal funding agencies on
which the project relied began to grumble about the cost of the part-time
workers, the amount of time the project spent handling routine paperwork,
and the chaotic condition of its financial records. The pressure to make a
radical change was on. Finally Martin Welk said it: “Maybe we should get a
computer.”
To Welk, fresh out of college, where he had written his papers on a word
processor, computers were just another tool to make a job easier. But his
belief was not shared by the others in the office, the youngest of whom had
fifteen years more seniority than he. A computer would eat the project’s
mailing list, they said, destroying any chance of raising funds for the year. It
would send the wrong things to the wrong people, insulting them and
convincing them that the project had become another faceless organization
that did not care. They swapped horror stories about computers that had
charged them thousands of dollars for purchases they had never made or
had assigned the same airplane seat to five people.
“We’ll lose all control,” Suzanne Clammer complained. She saw some kind of
office automation as inevitable, yet she kept thinking she would probably
quit before it came about. She liked hand-addressing mailings to arts
patrons whom she had met, and she felt sure that the recipients contributed
more because they recognized her neat blue printing. She remembered the
agonies of typing class in high school and believed she was too old to take
on something new and bound to be much more confusing. Two other
employees, with whom she had worked for a decade, called her after work to
ask if the prospect of a computer in the office meant they should be looking
for other jobs. “I have enough trouble with English grammar,” one of them
wailed. “I’ll never be able to learn computer language.”
One morning Clammer called Martin Welk into her office, shut the door, and
asked him if he could recommend any computer consultants. She had read
an article that explained how a company could waste thousands of dollars
by adopting integrated office automation in the wrong way, and she figured
the project would have to hire somebody for at least six months to get the
new machines working and to teach the staff how to use them. Welk was
pleased because Clammer evidently had accepted the idea of a computer in
the office. But he also realized that as the resident authority on computers,
he had a lot of work to do before they went shopping for machines.
Questions:
(5 + 5 + 10 = 20)
1. Is organization development appropriate in this situation? Why or
why not? (10)
2. What kinds of resistance to change have the employees of the
project displayed? (5)
3. What can Martin Welk do to overcome the resistance? (

Q.3 Case study
A public sector consultancy organisation recruited Mr. Alok an expert in a
particular field of technical specialisation with Ph.D. and other high
qualifications at a senior level, one level below that of a director of the board.
The company had a managing director and three functional directors on its
board apart from government directors. Mr. Alok at the time of recruitment
to the company was working as No.2 in a Central Government research
organisation.
Since he failed to get selected to the No.1 slot in that organisation for
‘political reasons’, according to him. He chose to join the public sector
company at one grade higher than that held by him in the government. After
joining the company, Mr. Alok represented to the Management that he
should be granted at least three advance increments since in the
government research organisation where he had worked, he used to get
extra honorarium to the extent of Rs. 50,000 per anum for undertaking
outside consultancy work. The management of the company refused to grant
the advance increment to him since they felt that Mr. Alok’s request cannot
be dealt with in violation and it will lead to similar requests from other
senior managers in the company. After waiting for a few months, Mr. Alok
submitted his resignation from the company. His superior, viz., the
functional director concerned (Mr. Rajeev), advised the managing director
that Mr. Alok was resigning because his request for higher salary has not
been agreed to and that the matter needs review because it would be
difficult to recruit another expert of the same caliber as Mr. Alok. The
Managing Director however, accepted the resignation of Mr. Alok and
ordered that the post be advertised for fresh recruitment.
As the recruitment process was on, Mr. Alok on his own chose to withdraw
his resignation and re-joined the company apparently on a tacit undertaking
given by Mr. Rajeev that his request for higher salary would be reconsidered.
The managing director reconsidered the request and approved the grant of
three advance increments to Mr. Alok provided he would serve the company
at least till the date of his superannuating, which was two years away. The
decision was communicated to Mr. Alok. Mr. Alok once again felt insulted by
being asked to agree to an unacceptable condition, viz., undertaking to
continue in the company for two more years for the grant of additional
increments to his salary, he thought he was fully justified in his case. He did
not agree to the condition and after two months again submitted his
resignation. Mr. Rajeev discussed the matter with the managing director.
The managing director stated that in return for the additional salary being
granted to Mr. Alok which was not being given to any other senior manager
of his status, he should display some commitment, to serve the company.
Without such a commitment Mr. Alok might wait for an opportunity to look
for greener pastures and leave the company after gaining a higher salary,
vis-a-vis his other senior colleagues in the organisation. The other
employees would feel that Management can be blackmailed by the so-called
experts into granting more benefits with the threat of resignation and the
management would lose its credibility. The managing director, therefore,
decided to accept the resignation of Mr. Alok. But Mr. Rajeev and other
functional directors of the company were not happy with the decision as
they felt that competitors of the company would gain by Mr. Alok’s
departure and, therefore, allowing Mr. Alok to quit would jeopardize the
company’s business interests.
Questions: (Any Two)
(2 × 10 = 20)
1. Do you agree with the Managing Director’s approach to the problem?
2. Do you think that Mr. Alok had reasons to be aggrieved or was he trying
to exploit his expertise?
3. What would be your solution to this case?

Q.4 Case study
Betty Kesmer was continuously on top of things. In school, she had
always been at the top of her class. When she went to work for her uncle’s
shoe business, Fancy Footwear, she had been singled out as the most
productive employee and the one with the best attendance. The company
was so impressed with her that it sent her to get an M.B.A. to groom her for
a top management position. In school again, and with three years of
practical experience to draw on, Kesmer had gobbled up every idea put in
front of her, relating many of them to her work at Fancy Footwear. When
Kesmer graduated at the top of her class, she returned to Fancy Footwear.
To no one’s surprise, when the head of the company’s largest division took
advantage of the firm’s early retirement plan, Kesmer was given his position.
Kesmer knew the pitfalls of being suddenly catapulted to a leadership
position, and she was determined to avoid them. In business school, she
had read cases about family businesses that fell apart when a young family
member took over with an iron fist, barking out orders, cutting personnel,
and destroying morale. Kesmer knew a lot about participative management,
and she was not going to be labelled an arrogant know-it-all.
Kesmer’s predecessor, Max Worthy, had run the division from an
office at the top of the building, far above the factory floor. Two or three
times a day, Worthy would summon a messenger or a secretary from the
offices on the second floor and send a memo out to one or another group of
workers. But as Kesmer saw it, Worthy was mostly an absentee autocrat,
making all the decisions from above and spending most of his time at
extended lunches with his friends from the Elks Club.
Kesmer’s first move was to change all that. She set up her office on
the second floor. From her always-open doorway she could see down onto
the factory floor, and as she sat behindher desk she could spot anyone
walking by in the hall. She never ate lunch herself but spent the time from
11 to 2 down on the floor, walking around, talking, and organizing groups.
The workers, many of whom had twenty years of seniority at the plant,
seemed surprised by this new policy and reluctant to volunteer for any
groups. But in fairly short order, Kesmer established a worker productivity
group, a “Suggestion of the Week” committee, an environmental group, a
worker award group, and a management relations group. Each group held
two meetings a week, one without and one with Kesmer. She encouraged
each group to set up goals in its particular focus area and develop plans for
reaching those goals. She promised any support that was within her power
to give.
The group work was agonizingly slow at first. But Kesmer had been
well trained as a facilitator, and she soon took on that role in their meetings,
writing down ideas on a big board, organizing them, and later
communicating them in notices to other employees. She got everyone to call
her “Betty” and set herself the task of learning all their names. By the end of
the first month, Fancy Footwear was stirred up.
But as it turned out, that was the last thing most employees wanted.
The truth finally hit Kesmer when the entire management relations
committee resigned at the start of their fourth meeting. “I’m sorry, Ms.
Kesmer,” one of them said. “We’re good at making shoes, but not at this
management stuff. A lot of us are heading toward retirement. We don’t want
to be supervisors.”
Astonished, Kesmer went to talk to the workers with whom she
believed she had built good relations. Yes, they reluctantly told her, all these
changes did make them uneasy. They liked her, and they didn’t want to
complain. But given the choice, they would rather go back to the way Mr.
Worthy had run things. They never saw Mr. Worthy much, but he never got
in their hair. He did his work, whatever that was, and they did theirs. “After
you’ve been in a place doing one thing for so long,” one worker concluded,
“the last thing you want to do is learn a new way of doing it.”
Questions:
(12 + 8 = 20)
1. What factors should have alerted Kesmer to the problems that eventually
came up at Fancy Footwear? (8)
2. Could Kesmer have instituted her changes without eliciting a negative
reaction from the workers? If so, how?

Q.5 Case study
A vice president’s position is about to open up at Ramsey Electronics, maker
of components for audio and visual equipment and computers. Whoever fills
the position will be one of the four most powerful people in the company and
may one day become its CEO. So the whole company has been watching the
political skirmishes among the three leading candidates: Arnie Sander,
Laura Prove, and Billy Evans.
Arnie Sander, currently head of the research and development division,
worked his way up through the engineering ranks. Of the three candidates,
he alone has a Ph.D. (in electrical engineering from MIT), and he is the
acknowledged genius behind the company’s most innovative products. One
of the current vice presidents—Harley Learner, himself an engineer — has
been pushing hard for Sander’s case.
Laura Prove spent five years on the road, earning a reputation as an
outstanding salesperson of Ramsey products before coming to company
headquarters and working her way up through the sales division. She
knows only enough about what she calls the “guts” of Ramsey’s electronic
parts to get by, but she is very good at selling them and at motivating the
people who work for her. Frank Barnwood, another current vice president,
has been filling the Chief’s ear with praise for Prove.
Of the three candidates, Billy Evans is the youngest and has the least
experience at Ramsey. Like the Chief, he has an M.B.A. from Harvard
Business School and a very sharp mind for finances. The Chief has credited
him with turning the company’s financial situation around, although others
in the company believe Sander’s products or Prove’s selling ability really
deserves the credit. Evans has no particular champion among Ramsey’s top
executives, but he is the only other handball player the Chief has located in
the company, and the two play every Tuesday and Thursday after work.
Learner and Barnwood have noticed that the company’s financial decisions
often get made during the cooling-off period following a handball game.
In the month preceding the Chief’s decision, the two vice presidents have
been busy. Learner, head of a national engineering association, worked to
have Sander win an achievement award from the association, and two weeks
before the naming of the new vice president, he threw the most lavish
banquet in the company’s history to announce the award. When introducing
Sander, Learner made a long, impassioned speech detailing Sander’s
accomplishments and heralding him as “the future of Ramsey Electronics.”
Frank Barnwood has moved more slowly and subtly. The Chief had asked
Barnwood years before to keep him updated on “all these gripes by women
and minorities and such,” and Barnwood did so by giving the Chief articles
of particular interest. Recently he gave the Chief one from a psychology
magazine about the cloning effect—the tendency of powerful executives to
choose successors who are most like themselves. He also passed on to the
Chief a Fortune article arguing that many American corporations are
floundering because they are being run by financial people rather than by
people who really know the company’s business. He also flooded bulletin
boards and the Chief’s desk with news clippings about the value of having
women and minorities at the top levels of a company.
Billy Evans has seemed indifferent to the promotion. He spends his days on
the phone and in front of the computer screen, reporting to the Chief every
other week on the company’s latest financial successes—and never missing
a handball game.
Questions:
(12 + 4 + 4 = 20)
1. Whom do you think the Chief will pick as the new vice president? Why?
(12)
2. Whom do you think should get the job? Why? (4)
3. What role might impression management play in the decision?

ART OF LEADERSHIP CASE STUDY ANSWER PROVIDED

ART OF LEADERSHIP CASE STUDY ANSWER PROVIDED

Q.1 Case study
Peter Weaver doesn’t like to follow the crowd. He thinks groupthink is a
common problem in many organizations. This former director of marketing
for a consumer products company believes differences of opinion should
be heard and appreciated. As Weaver states, “I have always believed I
should speak for what I believe to be true.”
He demonstrated his belief in being direct and candid throughout his
career. On one occasion, he was assigned to market Paul’s spaghetti-sauce
products. During the brand review, the company president said, “Our
spaghetti sauce is losing out to price-cutting competitors. We need to cut
our prices!”
Peter found the courage to say he disagreed with the president. He then
explained the product line needed more variety and a larger advertising
budget. Prices should not be cut. The president accepted Weaver’s
reasoning. Later, his supervisor approached him and said, “I wanted to say
that, but I just didn’t have the courage to challenge the president.”
On another occasion, the president sent Weaver and 16 other executives to
a weeklong seminar on strategic planning. Weaver soon concluded the
consultants were off base and going down the wrong path. Between
sessions, most of the other executives indicated they didn’t think the
consultants were on the right path. The consultants heard about the
dissent and dramatically asked participants whether they were in or out.
Those who said “Out” had to leave immediately.
As the consultants went around the room, every executive who privately
grumbled about the session said “In.” Weaver was fourth from last. When
it was his turn, he said “Out” and left the room.
All leaders spend time in reflection and self-examination to identify what
they truly believe and value. Their beliefs are tested and fine-tuned over
time. True leaders can tell you, without hesitation, what they believe and
why. They don’t need a teleprompter to remind them of their core beliefs.
And, they find the courage to speak up even when they know others will
disagree.
Questions:
(4 × 5 = 20)
1. What leadership traits did Weaver exhibit?
2. If you were in Weaver’s shoes, what would you have done?
3. Where does courage come from?
4. List your three most important values.

Q.2 Case study
Assume you are the VP of Sales and Marketing for a large insurance company.
Once a year your company rewards and recognizes the top 100 sales agents by
taking them to a luxury resort for a four-day conference. Business presentation
meetings are held during the morning. Afternoons are free time. Agents and
spouses can choose from an assortment of activities including golf, tennis, boating,
fishing, shopping, swimming, etc.
On day 2 at 3:00 p.m., you are at the gym working out on the treadmill, when you
see Sue your administrative assistant rushing towards you. She says, “I need to talk
to you immediately.”
You get off the treadmill and say, “What’s up?” Sue states, “We’ve had a tragedy.
Several agents went boating and swimming at the lake. Randy, our agent from
California died while swimming.”
(Background information – Randy is 28 years old. His wife did not come on the
trip. She is home in California with their three children).
Questions:
(4 × 5 = 20)
1. Explain what you would communicate to the following people.
 Your boss
 Your Human Resources Department
 The local police
 The attendees at the conference (Would you continue the
conference?)
2. How will you notify Randy’s wife?
3. If Randy’s wife and a few family members want to visit the location of
Randy’s death, what would you do?
4. What are some “guiding principles” that leaders need to follow in a crisis
situation?
Q.3 Case study
Leadership is an action of leading a group or individual to understand and
influence in facilitating them about what should be done and how it should be done
to accomplish focused objectives. Leadership case study with questions and
answers are being provided by world’s number one assignment help company
called-No1Assignmenthelp.Com. The practical part of theoretical knowledge is
applied while writing a case study paper. A case study on leadership explains the
principles of leadership that were used for the success of companies and how those
principles can be utilised.
There are five main essential qualities that a leader should possess: Motivation,
problem-solving ability, Vision, empowerment and influence.
The first, foremost quality of leadership should be motivation. A leader should
motivate others and help them understand their role in business growth. A great
leader should always have a positive attitude that can drive and help others
knowing the importance of the work to be done and give confidence that it can be
done. The ability to solve a problem is a great quality leader, which lets them
challenge the consequences and find all the possible and the best solution. Great
leaders should have a real vision that is big enough to inspire the team members.A
good leader empowers team members or subordinates by assigning appropriate
tasks and guidance. Leaders who can influence this subordinates and team
members produce excellent results in the excellence of the organization.
To write a leadership case study answers in-depth analysis of the topic is vital by
gathering an enormous amount of information. Listed below are Few essential
questions before writing case studies on leadership.
When a leader does not have a resilient quality or nature, and if a leader does not
direct the subordinate or team members appropriately towards the organization’s
goals, these can lead to possible failure.
Motivating and influencing the team members or subordinates to work towards
achieving goal and organization’s success ultimately is leadership. A leader
ensures to accomplish an organization’s success by appropriating the team
members in the right direction, vision and goals.
Achieving defined objectives by utilizing and coordinating the resources
effectively with maximum efficiency is management. A manager must ensure the
appropriate budget planning, allocation of resources and solves the problem
effectively.
A leader is someone who should inspire his team members to have a great vision
and on whom the team members can rely on for any work-related issues. Leaders
should show quality work to become an example for their subordinates.
To achieve the goals of an organization one should know how to lead the team
with confidence during adverse circumstances. A leader should understand that
high power comes high responsibility. Hence they should be responsible enough to
take up their own or their team’s mistakes and failures.).
Questions:
(4 × 5 = 20)
1. What essential qualities should a leader possess?
2. What are the factors could lead leaders to failure?
3. What is the significant difference between leadership and management?
4. How does a leader achieve the goals of an organization?

Q.4 Case study
The Art of Leadership is an optional component of Talent Futures London-based
leadership team events. In cooperation with consultant art historian, Charlotte de
Mille, Talent Futures offers bespoke lunchtime visits to an art museum to further
the agile thinking of leadership teams. The theme of each visit is suggested by the
facilitator, based on the team’s organisational context, and is agreed with the team
in advance. Charlotte de Mille then designs a personalised tour for 90 minutes at a
museum close to the event venue.
Prior to these events, a team may consider the museum visit as “down time” during
the workshop. However, the works chosen and the discussion about those works
give the team opportunity to experience and discuss art that, while unrelated to
their work, is directly related to their learning objectives. Themes from previous
clients include: Cultural norms, Compliance and regulation and Housing and
modern living
When attention is devoted to an object of art, we are stimulated to reflect on our
different values and perspectives, as informed by our personality, our past
experiences, and our present circumstances. This “self-challenging” act is critical
to developing new responses. Back at the venue, after the tour, the facilitator poses
questions about the experience and ties the responses from participants to the
learning objectives of the workshop. For example: A video installation about blind
people making visual art resulted in some of the team feeling discomfort at others
being taken advantage of, until they saw how much participants enjoyed what they
were doing. This underscored how matters of ethics can be divisive, and reminded
them of an ongoing disagreement with another team. They resolved to seek the
individual views of the other team and collaborate on a solution. In response to a
work that challenged the roles of gender, race, and religion in modern society, the
team were able to discuss the assumptions they made about diversity in the
workplace and their team in particular.
Outcomes
In post-workshop review discussions, the following outcomes of The Art of
Leadership events have been noted: Discussing art with colleagues means each
person takes a risk in sharing thoughts that are purely opinion and observation; no
logic is involved. This shared vulnerability brings people together and tensions
subside. The way to influence people with opinions different from ours is
through listening, not logic. The importance of validating others’ opinions
and understanding others’ perceptions increases in significance. Once
assumptions are broken, the door to more creativity and a better strategy
opens. Black-and-white thinking is spotted quickly, and the experience
stretches the thinking of participants. It becomes possible to consider other
ways of looking at things without risking reputation. Discussing “What is
and isn’t art,” leads to “what is and isn’t leadership,” and “what is and isn’t
the way to get things done in the organisation.”
Questions:
(4 × 5 = 20)
1. Why and how does Art of Leadership work?
2. Give example of working of Art of leader ship.
3. Write some outcomes of Art of leader ship.
4. Write your views on Art of leader ship.

Q.5 Case study
A school district in Georgia, United States of America, lost its accreditation
because of the behavior of board members and not because of low student
academic performance, mediocre teacher or administrator performance, nor
was it due to financial issues. The school district lost accreditation because
of the outrageous behavior and actions of the board members. The board
members tried to force the superintendent to make personnel decisions that
favored friends and relatives; they were frequently disrespectful to each
other and to the superintendent in public sessions, and they went into
schools and intimidated principals and teachers.
The Southern Association of Colleges and Schools (SACS – also referred to
as Advanced), an accrediting agency approved by the United States
Department of Education, previously warned the school district’s board
members about their unprofessional behavior. In fact, the school district
was put on probation by SACS several years before losing accreditation for
the same type of misbehaviour. After a few years on probation, the school
district was removed from probation status. New board members were
elected (with a 10 percent voter turnout); however, within just a few years
the same problems were cited again by SACS.
Citizens and the professional community began to question the power and
influence of SACS because the behavior of the board did not change; in fact,
the board became even more dysfunctional, even after SACS issued
warnings and provided governance training and other interventions. At the
same time, SACS officials began to question how seriously the citizens and
community leaders wanted the board to improve because the same members
were re-elected. When SACS finally pulled the school district’s accreditation
due to the behavior of the board members, the community was incredulous.
The loss of accreditation had a profoundly negative impact on students
graduating from a non-accredited school district, which impaired the
students’ chances for college acceptance and college scholarships. Also, the
loss of accreditation negatively impacted local businesses and property
values. However, during the decade of poor board governance, local business
leaders made no effort to improve the conditions or influence the board nor
did they become involved in the election of board members.
Business boards, non-profit boards, and other institution boards often make
the same mistakes, with the most common getting entangled with personnel
issues. Ellis Carter writes about non-profit board members that interfere
with the day-to-day operations of organizations, which causes disruptions
and confusion with functions and employees. For a non-profit organization
with paid staff, once board members demand keys to the organization’s
offices and start making direct demands on staff members that report to the
chief executive, the board has crossed the line. The board’s key duties are to
provide oversight and strategic direction, not to meddle in the organization’s
day to day affairs. Board members who cross this line are undermining the
authority of the chief executive to their own detriment and should be
prepared to quit their day jobs. Similarly, staff should not invite
micromanagement by asking the board to take on day-to-day
Questions:
(4 × 5 = 20)
1. What is the role of SACS on this issue?
2. Explain the role of board.
3. How loss of accreditation impacted local businesses.
4. How United States of America, lost its accreditation on school?

MARKETING MANAGEMENT CASE STUDY ANSWER

MARKETING MANAGEMENT CASE STUDY ANSWER

SUB: Marketing Management

N. B.: 1) Attempt all four case studies
2) All questions carry equal marks.

CASE 1 : TRUST TOOTHPASTE

Study the Case entitled “Positioning ‘Trust’ Toothpaste” and give your specific recommendations regarding the action to be taken by the company. Your decision must be based on a careful analysis of the situation given in the case and your answer should be precise and up to the point.

Positioning Trust’ Toothpaste

In September 1990, Mr. Sarin, the Marketing Manager of Deepa Products (P) Limited was wondering what marketing and product positioning strategy the company should follow for launching their two new brands of toothpaste. Trust Night and Trust Regular in a market which was becoming highly competitive.
Deepa Products (P) Ltd. was one of the successful manufacturers of various types of packaging materials for both industrial and consumer products. Established in 1960, the company has shown substantial growth over the years. Much of the company’s growth was attributed to the high quality of its products and also the systematic manner in which its marketing decisions were made.
In 1990, keeping in view the growing market for consumer goods, the top management of the company decided to diversify into new consumer products areas. In the first instance the company thought of entering into the toothpaste market. Depending upon their success in the market, the company would decide their expansion plans into other areas of consumer goods sector.
The company chose to enter toothpaste market simply because the market for toothpaste was growing fast almost by 15 to 20% in India and it provided enough profit opportunities. The market was dominated only by a very few players. Further Mr. Sarin felt that there was scope for capturing a significant market share in the growing toothpaste market, since the company’s products had some unique features to meet the emerging new market segments.
Questions
1. What marketing strategy should be designed by Mr. Sarin to be able to achieve the targeted 5% market share?

2. How should Deepa Products (P) Ltd. position Trust Regular and Trust Night to induce customers to buy it? What should be the key benefits of their toothpastes?

3. Should the company price its products economically, or should it aim for premium pricing?

CASE 2: THE CATERPILLAR TRACTOR COMPANY

Caterpillar Tractor Company (CTC) is a large manufacturing firm headquartered in Illinois, USA. Its familiar ‘CAT” logo and yellow paint are known throughout the world. Indeed in its business, CTC has an estimated 37% of world market. Its closest rival, Japan’s Komatsu has an estimated 15%. A multinational company CTC has manufacturing and dealer representatives throughout the world. The products, which the firm designs, manufactures and markets, can be classified into two basic segments:
Earth moving, construction and materials handling equipment-track type tractors, bulldozers, rippers, track and wheel type loaders, pipe layers, wheel dozers, compactors, wheel scrapers off highway trucks and tractors, motor graders, hydraulic excavators, long skidders, lift trucks and related parts and equipment.
Engines– for earth moving and construction machines on highways trucks, marine, petroleum, agricultural, industrial and electric power generation systems. Engines either, diesel or natural gas, have power ranges from 85 to 1600 horsepower or in generator set versions from 55 to 1200 kilowatts. Turbines range from 10 to 7,900 kilowatts.
CTC’s market success is based to a great extent on its four-point product strategy. First, advances technology is incorporated into machines so that users derive optimal productivity and efficiency. To maintain the flow of product application the organization commits hundreds of millions of dollars each year to research and development. A second product guideline is quality. Within the last ten years several billion dollars have been spent on plant and equipment to ensure reliability in the hostile environments the machines endure. The third aspect of product strategy is to offer a full line of products. This implies machines capable of performing on job sites as small as a residential plot or as large as the Alaskan product line offers over 100 different machines within nearly infinite option/modifications. The fourth and final principle of the product strategy is to design and build only machines that can be produced on an assembly line, to take advantage of manufacturing expertise and efficiency of Caterpillar plant and to provide significant economies of scale.
Questions to be answered
1. How important is new product development to Caterpillar?

2. What sources of new product ideas might a company like caterpillar use?

3. Evaluate CAT as a brand name.

4. Evaluate each of the four points of CTC’s strategy.

CASE 3: ABC HANDLOOMS Ltd.

ABC Handlooms Ltd. (ABC) was established in the year 1991 to manufacture and market handloom furnishings throughout the country. Over the years, it has developed a wide network of handloom units in and around Delhi. ABC manufactures a wide range of furnishings catering to the needs of different strata of society. The pattern of sales of the company during the last three years was as under:
State Percentage Sale
Punjab
Haryana
U.P.
M.P.
Rajasthan
Other states and Union territories

total 65
5
10
10
5
5
100
The market for furnishings was highly competitive. ABC had not only to face competition from well established houses but it had also to face competition from various state government corporations. Besides, the product had to face competition with the imported material, which was freely available. Prices of different types of furnishings differed widely. Private and cooperative channels marketed different brands. The Coops accounted for more than 60 per cent of material sold. Though there was no brand loyalty yet a large manufacturer in Western India was able to market similar products at a marginal premium in Rajasthan and Madhya Pradesh.
Questions:
1. How do you explain the present situation faced by the company?

2. Was it a good idea to enter into a three-year contract with the Cooperative Society? Why?

3. Is it possible to renew the contract with the Cooperative Society? If so, how? Suggest a detailed programme on a crash basis with the budget constraint of Rs. 50, 00, 000.

CASE 4: APEX ELECTRICAL COMPANY LTD.

Mr. Nathan, Sales Manager of Apex Electrical Co. Ltd. had just received a proposal from his Regional Manager at Bangalore for opening a sub-office in Madras and was considering what would be the best decision in the company’s short run as well as long run interest.
The company was in the business of manufacturing and marketing electric motors of a wide range of horse power that could be used as a prime mover in numerous applications. The company’s factory and head office were situated in Bombay and it had its branch offices at New Delhi, Calcutta and Bangalore, each headed by a Regional Manager.
The Regional Office at Bangalore was responsible for sales in Kar¬nataka, Tamil Nadu and Kerala. The company also maintained a godown at Bangalore which was used as the stocking centre for feeding sales in the complete region. The company’s distribution network had grown over several years and as such there was no one rule by which the arrangements could be explained. In Karnataka, due to the proximity of the Regional Headquarters, the distribution, network was closely controlled by the Regional Office. Company had several dealers covering the State and they all purchased goods directly from the Regional Office. All the dealers got a fixed percentage of discounts. The ultimate prices to the consumers were fixed by the company. Each dealer covered a specific area which was generally one to several districts and the company discouraged one dealer interfering in other’s territory. However, in main cities of Bangalore and Mysore, there was more than one dealer who collectively covered the sales in the city. The company salesmen regularly contacted the dealers and the office maintained good marketing information.

Questions:
1. What decision would you take if you were in place of Mr. Nathan?

2. Do you feel the proposal of a new sub-office is economically justified against the stated policy of the company? If yes, why? If no, then how could it be made justifiable?

MARKETING MANAGEMENT CASE STUDY ANSWER SHEET

MARKETING MANAGEMENT CASE STUDY ANSWER SHEET

SUB: Marketing Management

N. B.: 1) Attempt all four case studies
2) All questions carry equal marks.

CASE 1 : TRUST TOOTHPASTE

Study the Case entitled “Positioning ‘Trust’ Toothpaste” and give your specific recommendations regarding the action to be taken by the company. Your decision must be based on a careful analysis of the situation given in the case and your answer should be precise and up to the point.

Positioning Trust’ Toothpaste

In September 1990, Mr. Sarin, the Marketing Manager of Deepa Products (P) Limited was wondering what marketing and product positioning strategy the company should follow for launching their two new brands of toothpaste. Trust Night and Trust Regular in a market which was becoming highly competitive.
Deepa Products (P) Ltd. was one of the successful manufacturers of various types of packaging materials for both industrial and consumer products. Established in 1960, the company has shown substantial growth over the years. Much of the company’s growth was attributed to the high quality of its products and also the systematic manner in which its marketing decisions were made.
In 1990, keeping in view the growing market for consumer goods, the top management of the company decided to diversify into new consumer products areas. In the first instance the company thought of entering into the toothpaste market. Depending upon their success in the market, the company would decide their expansion plans into other areas of consumer goods sector.
The company chose to enter toothpaste market simply because the market for toothpaste was growing fast almost by 15 to 20% in India and it provided enough profit opportunities. The market was dominated only by a very few players. Further Mr. Sarin felt that there was scope for capturing a significant market share in the growing toothpaste market, since the company’s products had some unique features to meet the emerging new market segments.
Questions
1. What marketing strategy should be designed by Mr. Sarin to be able to achieve the targeted 5% market share?

2. How should Deepa Products (P) Ltd. position Trust Regular and Trust Night to induce customers to buy it? What should be the key benefits of their toothpastes?

3. Should the company price its products economically, or should it aim for premium pricing?

CASE 2: THE CATERPILLAR TRACTOR COMPANY

Caterpillar Tractor Company (CTC) is a large manufacturing firm headquartered in Illinois, USA. Its familiar ‘CAT” logo and yellow paint are known throughout the world. Indeed in its business, CTC has an estimated 37% of world market. Its closest rival, Japan’s Komatsu has an estimated 15%. A multinational company CTC has manufacturing and dealer representatives throughout the world. The products, which the firm designs, manufactures and markets, can be classified into two basic segments:
Earth moving, construction and materials handling equipment-track type tractors, bulldozers, rippers, track and wheel type loaders, pipe layers, wheel dozers, compactors, wheel scrapers off highway trucks and tractors, motor graders, hydraulic excavators, long skidders, lift trucks and related parts and equipment.
Engines– for earth moving and construction machines on highways trucks, marine, petroleum, agricultural, industrial and electric power generation systems. Engines either, diesel or natural gas, have power ranges from 85 to 1600 horsepower or in generator set versions from 55 to 1200 kilowatts. Turbines range from 10 to 7,900 kilowatts.
CTC’s market success is based to a great extent on its four-point product strategy. First, advances technology is incorporated into machines so that users derive optimal productivity and efficiency. To maintain the flow of product application the organization commits hundreds of millions of dollars each year to research and development. A second product guideline is quality. Within the last ten years several billion dollars have been spent on plant and equipment to ensure reliability in the hostile environments the machines endure. The third aspect of product strategy is to offer a full line of products. This implies machines capable of performing on job sites as small as a residential plot or as large as the Alaskan product line offers over 100 different machines within nearly infinite option/modifications. The fourth and final principle of the product strategy is to design and build only machines that can be produced on an assembly line, to take advantage of manufacturing expertise and efficiency of Caterpillar plant and to provide significant economies of scale.
Questions to be answered
1. How important is new product development to Caterpillar?

2. What sources of new product ideas might a company like caterpillar use?

3. Evaluate CAT as a brand name.

4. Evaluate each of the four points of CTC’s strategy.

CASE 3: ABC HANDLOOMS Ltd.

ABC Handlooms Ltd. (ABC) was established in the year 1991 to manufacture and market handloom furnishings throughout the country. Over the years, it has developed a wide network of handloom units in and around Delhi. ABC manufactures a wide range of furnishings catering to the needs of different strata of society. The pattern of sales of the company during the last three years was as under:
State Percentage Sale
Punjab
Haryana
U.P.
M.P.
Rajasthan
Other states and Union territories

total 65
5
10
10
5
5
100
The market for furnishings was highly competitive. ABC had not only to face competition from well established houses but it had also to face competition from various state government corporations. Besides, the product had to face competition with the imported material, which was freely available. Prices of different types of furnishings differed widely. Private and cooperative channels marketed different brands. The Coops accounted for more than 60 per cent of material sold. Though there was no brand loyalty yet a large manufacturer in Western India was able to market similar products at a marginal premium in Rajasthan and Madhya Pradesh.
Questions:
1. How do you explain the present situation faced by the company?

2. Was it a good idea to enter into a three-year contract with the Cooperative Society? Why?

3. Is it possible to renew the contract with the Cooperative Society? If so, how? Suggest a detailed programme on a crash basis with the budget constraint of Rs. 50, 00, 000.

CASE 4: APEX ELECTRICAL COMPANY LTD.

Mr. Nathan, Sales Manager of Apex Electrical Co. Ltd. had just received a proposal from his Regional Manager at Bangalore for opening a sub-office in Madras and was considering what would be the best decision in the company’s short run as well as long run interest.
The company was in the business of manufacturing and marketing electric motors of a wide range of horse power that could be used as a prime mover in numerous applications. The company’s factory and head office were situated in Bombay and it had its branch offices at New Delhi, Calcutta and Bangalore, each headed by a Regional Manager.
The Regional Office at Bangalore was responsible for sales in Kar¬nataka, Tamil Nadu and Kerala. The company also maintained a godown at Bangalore which was used as the stocking centre for feeding sales in the complete region. The company’s distribution network had grown over several years and as such there was no one rule by which the arrangements could be explained. In Karnataka, due to the proximity of the Regional Headquarters, the distribution, network was closely controlled by the Regional Office. Company had several dealers covering the State and they all purchased goods directly from the Regional Office. All the dealers got a fixed percentage of discounts. The ultimate prices to the consumers were fixed by the company. Each dealer covered a specific area which was generally one to several districts and the company discouraged one dealer interfering in other’s territory. However, in main cities of Bangalore and Mysore, there was more than one dealer who collectively covered the sales in the city. The company salesmen regularly contacted the dealers and the office maintained good marketing information.

Questions:
1. What decision would you take if you were in place of Mr. Nathan?

2. Do you feel the proposal of a new sub-office is economically justified against the stated policy of the company? If yes, why? If no, then how could it be made justifiable?

BRAND MANAGEMENT CASE STUDY ANSWER SHEET

BRAND MANAGEMENT CASE STUDY ANSWER SHEET
Brand Management

N. B.: 1) Attempt all Four case studies
2) All questions carry equal marks.

CASE-1.

DAIKIN AIRCONDITIONER

Circia 2001: A flashback to the US$ 4 million air-conditioner industry in India.

The new leaders in the Indian cooling market were the charismatic and international LG, Samsung and the all-American Carrier. The homegrown warriors (Voltas and Blue Star), with more than thirty years of local expertise, were attempting a spirited comeback. Not to forget the villains of the drama were the unorganized and unbranded sector with nearly 25% of the market.

The Government of India, with its adverse taxation policies (an excise duty of 32% and an import duty of 35%) nearly doubled the cost of any branded air-conditioner. And the ubiquitous Rain Gods that lashed the country, naturally mitigating the summer heat, ate away the potential sales.

In this action packed drama entered the Japanese novice, Daikin a premium split air conditioner. It was internationally known as a flawless, well-engineered product but it was unheard of, unproved and untried in India.

An additional factor that had to be kept in mind was the considerable price premium at which Daikin was pegged (more than 25%); this too in a market traditionally known for its frugality, and where for the most part, an air conditioner itself was a luxury. And here was a brand, which was not only marketing a “luxury” product but had the temerity to price it even higher than other brands, making the task of rationalizing the purchase so much more difficult for the consumer.

The challenge, therefore, was not only to create the consumer’s preference for this 12th brand of air-conditioner in the country, but also to actually cajole as much as 25% premium (over the rest of the category) out of him.

QUESTION: To address this challenge, should it flash the “I am International” tag and hope that this had enough appeal to lure him? A number of big global brands like Ray-Ban, Kellogg’s and KFC had tried this route without much success! Or, should it follow the International Daikin doctrine of endorsement and say, “Daikin cools the Sony Headquarters” or “Daikin cools the G8 summit”—a proposition that cued in the superiority of the product drawback in both the routes was that the Indian consumer might just turn around and say—“So what’s in it for me?”
So what should this first time campaign for a new product launch do?

CASE STUDY-2

A SLIPPERY PROBLEM.

Let us return to the premium toilet soap market in India. Suppose research has discovered an emerging cluster of consumers—young, modern, well-to-do—who believe that a bath soap should have good-for-skin qualities, who even think well of traditional herbs like Neem, but would accept it only with much more pronounced cosmetic benefits in terms of perfume, lather, colour, shape, and packaging. Recall our discussion on Margo in the previous chapter.

Is it possible for a ‘dressed-up’ Margo to aim for the new position?
Can Margo make the jump from where it is (that is, the way it is perceived now) so as to occupy the preferred position of this new cluster? Would the present physical characteristics of Margo—dark-green colour, strong Neem perfume, squat shape—permit the brand to match the ideal point of this new cluster merely on the basis of some superficial feature-changes like new packaging and brilliant advertising?

QUESTION: If the brand manager were to make the gamble of trying to position Margo—with some physical changes—both for his present target segment and the new one, how successful would he be? On the other hand, suppose he decided to make radical changes to Margo, so as to greatly enhancing its cosmetic values, how would that affect his present loyal segment of users? Should he pause and recall that old saying—“Beware of greed and grow fat”? Would it be better to consider a new product altogether? A product whose physical features are specifically designed to fit the new position, and whose concept can be stated as:

A highly emollient soap. Floral perfume with topnote of Neem:
‘The creamy Neem’. The benefit of pure, age-old neem goodness without the drab looks of average neem soaps.

CASE STUDY-3

MOTORCYCLES

Another group os students set out to assess the fit between the images of motorcycles and the sled-concepts of their owners.

First, the student researchers made a fairly extensive study of the literature. They decided to replicate ( on a modest scale) the methodology developed by Naresh Malhotra to measure self-concepts, product-concepts and person-concepts. Since Malhotra’s study(in the USA) involved automobiles, his scaling method seemed to them to be appropriate.

Using, with minor modifications, the 15 scale items developed by Malhotra, the IIMC students administered a questionnaire to 40 owners of 100 cc motorcycles: 15 were owners of Hero-Honda; 15 of Escorts-Yamaha; and the remaining 10 of TVS-Suzuki. All the respondents were within 18-40 years of age, well-educated, urban and middle class males.

There were questions also on the perceived physical attributes and functional benefits of the three machines.

When the findings were put on graphs, it appeared that Escorts-Yamaha showed the closest fit between brand image and self-concept ot the owners. The students were conscious of the limitations of their survey, including the small sample size and other problems of methodology. But even if their findings are regarded as a pilot study and merely indicative, they may provoke the search for more data. We have reported here in summary, this is what they found regarding the brands, the brand personalities and self-concepts of the owners.

The TVS Suzuki advertisements has positioned itself by attributes which are similar to those claimed by Hero-Honda and it has positioned itself directly against the latter. Thus, TVS-Suzuki is apparently talking to a segment whose self-concept has moved it towards Hero-Honda. The battle is one of degree—‘more’ economical, ‘greater’ cost-saving.

QUESTION: Would it be better for TVS-Suzuki to position itself on the strength of a unique personality—one that is distinct from the somewhat flamboyant, vain personality of Escorts-Yamaha and also distinct from the thrifty, almost parsimonious character of Hero-Honda?

CASE-4

HIGH RISK GAME

But beware!

According to an Ernst and Young survey in 1998, fully 72% of brand extensions flop. The explanation seems to be that the extension did not add anything new or better to attract consumers. As the Harvard Business Review had pointed out, extensions are more a sign of the marketer’s desperation than inventiveness.
QUESTION: If you have a promising product idea should it carry the mother brand’s name or a new one?

THE REGINA COMPANY CASE STUDY ANSWER

THE REGINA COMPANY CASE STUDY ANSWER
THE REGINA COMPANY CASE STUDY ANSWER
THE REGINA COMPANY CASE STUDY ANSWER

The Regina Company„ one of the largest inakets of vacuum cleaners recent’) had scv cfc ptollkins
with the quality of its products. The market responsc to this 1ak of quality caused financial
problems for Ow company. in late 1995. Regina began having return rates as high as 30 to 50
percent on some of its Housekeeper and Housekeeper Plus models. These models were sold
primarily through discount stores. Further, Regina’s Spectrum vacuum cleaner, an upgraded
version sold in specialty stores, was introduced in 1995 with many quality problems. ef The specific
problems identified for the Housekeeper and Housekeeper Plus models were associated with faulty
belts and weak suction. In the Spectrum model, the agitator was melting; and making a loud noise,
the foot pedals were breaking, and the steel-encased motor (which had been advertised as the
IIBM Institute of Business Management

Examination Paper of Managerial Economics
power source for the vacuum cleaner) had been replaced with a less desirable. less reliable motor.
As a result of these problems, Target stores discontinued Regina’s Housekeeper Plus model after
reporting that “at least half of those sold were returned.” At Starmart, which accounts for about a
quarter of the Housekeeper sales, I. out of every 5 machines sold was returned. To help service
customer complaints, Regina set up an 800 telephone number for customers to contact the firm.
directly. The sales returns caused Regina’s shareholders to question the 1995 fiscal earnings report.
Furthermore, both inventories and accounts receivable doubled during the 1995 fiscal year. At the
end of that period, Regina’s chairman and 40 percent stockholders
Resigned. The chairman’s resignation was closely followed by a company announcement stating
that the financial results reported for the 1995 fiscal year were materially incorrect and had been
withdrawn. This announcement brought a suit from shareholders who had bought Reoina stock on
the basis of the 1995 camings report. It also prompted an audit of the 1995 results and a request to
another accounting organization to work on Regina’s business and accounting controls. A few
months later, Regina ‘agreed to be acquired by a unit of Magnum, a vacuum cleaner and Waterpurification Company. Under Magnum, Regina shut down production while engineers worked to
solve the problems inherent in the Housekeeper and Housekeeper Plus vacuums, particularly the
suction difficulties. In September 1998, Magnum and Regina decided to separate the two companies
again. Since then, Regina has been regaining market share with its Housekeeper models. The
‘vacuums are popular because they carry on-board tools.
Questions:
1. What type of controls would you have established to preclude the major returns
experienced by Regina? (10)
2. How would you have controlled the finished-goods -inventory to avoid its growing to twice
the size that it was in the previous year. (10

SWASTIKA COMPUTER SYSTEM CASE STUDY SOLUTION

SWASTIKA COMPUTER SYSTEM CASE STUDY SOLUTION
SWASTIKA COMPUTER SYSTEM CASE STUDY SOLUTION
SWASTIKA COMPUTER SYSTEM CASE STUDY SOLUTION

Caselet 1
Examination Paper of Marketing Management
IIBM Institute of Business Management 7
Swastika Computer System was established in 1981 at Delhi to provide computer training. In 1980s
computer education was relatively new in India. Personal computers 286 existed and MS DOS was the
operating system. Languages like Basic, Pascal, COBOL, FORTRAN were used in programming.
Swastika Computer Systems was established with their support departments namely computer
assembly, faculty training and computer servicing department. In the first financial year, it recorded a
turnover of Rs 11.5 lakhs. Within a few years of its existence, Swastik Computer System opened its
branches in eight major cities of India and had a gross annual turnover of Rs 86 lakhs. The organization
was highly centralized. The head office at Delhi handled all accounts, recruitment, and placement of
students and servicing of computers. The Bhopal branch of Swastik Computer Systems was set up in
May 1987. The branch was headed by a dynamic branch manager Hemant Gupta. He was a BSc in
computers and had previously worked in the data processing department of a manufacturing concern.
To establish the Bhopal branch, Hemant Gupta realized the need for making Swastik Computer
Systems, Bhopal known to the younger generation. With this in mind he introduced some innovative
promotional schemes like offering scholarships to students doing well in the intelligence tests
administered by the branch, giving personal computers to students to deposit term fees at their
convenience. Hemant Gupta also ensured that teaching standards were high and computers at the
branch were well maintained, so a student once enrolled felt that he had made the right decision by
joining Swastik Computer Systems. He also made himself available from 8.00 am to 7.00 p.m at the
branch. Students were free to go to him with their problems, which he took pains to solve. Soon
Swastik Computer Systems was one of the leading computer training centres in Bhopal. As the Bhopal
branch prospered, the head office at Delhi started taking an active interest in the running of this branch.
The Regional Manager who visited Bhopal once a month started making frequent visits. During one of
his visits, his attention was drawn to rumors that branch funds were being misappropriated. When the
Regional Manager informed the Delhi office about the rumor, a team was sent to the Bhopal Branch to
look into the matter. On investigation, the term was convinced that the rumors had some truth in them.
It was found that a larger number of students attended the classes than were enrolled. It was felt that this
fraud was not possible without the consent of Hemant Gupta, and without any further inquiry a decision
was taken to remove him forthwith. Amit Verma who was a senior faculty at Swastik Computer
Systems, Delhi was asked to take over the Bhopal branch as Manager. He was an MCA and had been
associated with the organization since its inception. Amit Verma‟s appointment at Bhopal was
welcomed at the Bhopal branch by both, staff and faculty as he had the reputation of being an easy
going person. After he joined the Bhopal, it was observed that Amit Verma, although academically
sound, was not an effective administrator. His approach towards staff and faculty was lenient. He was
not particular about punctuality and was not available during office hours. This had an adverse effect on
faculty in general and classes in particular. Not only did classes suffer but even administrative work
was affected. Monthly reports to the head office were not sent on time, as a result requisitions for
computer servicing, reading material and funds were unduly delayed. Due to lack of maintenance,
computer breakdowns became common, students did not receive their reading material on time and
payment of building rent, and telephone bills etc were unnecessarily delayed. The symptoms of
deterioration at the Bhopal branch were obvious. The branch which had an annual turnover of Rs 30.7
lakhs fell to Rs. 4 lakhs. As enrollments decreased the head office at Delhi started feeling the pinch. It
started delaying transfer of funds to the Bhopal branch. As a result faculty salaries were unduly delayed.
The faculty started leaving for greener pastures.
Examination Paper of Marketing Management
IIBM Institute of Business Management 8
Worried by the number of faculty turnover, the head office started a practice of recruiting only
those faculties willing to sign a bond of 3 years. The organization started a practice of taking a deposit
of Rupees 5000 from the joining faculty, which would be refunded after 3 years. In case the faculty left
before this duration, the deposit stood forfeited. This policy further reduced the quality of faculty
joining Swastik Computer Systems, Bhopal.
Questions:
1. What according to you went wrong at the Bhopal branch?
2. What can be done to revive the Bhopal branch?
Caselet 2
Mind tree which was founded in 1999 in India by a group of IT professionals who wanted to chart a
somewhat distinctive path. Today, it has a top line of $269 million and is rated as one of the most
promising mid-sized IT services companies. Creditable as that is, Mind Tree does not want to be just
that. There is an element of serendipity about what it has been doing over the last year. In 2008, it
designated one of its founders Subroto Bagchi „Gardener‟, a gimmicky signal, intended to declare that
he was moving out of the day-to-day running of the company to nurture talent which would run the
company in the future. He has now a report card ready on a year as gardener. During this one year, he
has also spent around 45 days travelling round the world talking to clients and prospective ones which
has yield remarkable insights into what firms are doing in these traumatic times. Lastly, Mind Tree as
a whole has spent the last year going through the exercise of redefining its mission statement and
vision for the next five years. Quite fortuitously these processes have come together with a unifying
thread, presenting a coherent big picture. Mind Tree wants to seed the future while still young, and
executive chairman Ashok Soota has declared that by 2020, it will be led by a non-founder. So a year
ago the gardener Bagchi set out to “touch” 100 top people in the organization, with a goal of doing 50
in a year so as to eventually identify the top 20 by 2015. From among them will emerge not just the
leader but a team of ten who would eventually, as group heads, deliver $200 million of turnover each.
That will give a turnover of $2 billion. To put it in perspective, one one VC-funded company, which
has not closed or been bought over, has been able to get to $2 billion and that is Google. But to get
there it has to periodically redefine its mission (why we exist) and its vision – measurable goals for the
next five years. Its redefined mission is built around “successful customers, happy people, and
innovative solution”. Its new vision targets a turnover of $1 billion by 2014. It wants to be among the
globally 20 most profitable IT services companies and also among the 20 globally most admired ones.
Admired in terms of customer satisfaction (pay for the course), people practices (creditable),
knowledge management (exciting) and corporate governance (the Enron-Satyam effect). The really
interesting bit about Mind Tree in the last one year is what Bagchi has been up to. He has been
embedding himself in the 50 lives, working in a personal private continuum, making it a rich learning
process “which has helped connect so many dots.” Of the hundred who will be engaged, may be 50
will leave, of them 25 may better themselves only marginally, and from the remaining 25 ten will
emerge who will carry the company forward.
Questions:
Examination Paper of Marketing Management
IIBM Institute of Business Management 9
1. What do you analyses as the main reason behind the success of Mind tree?
2. Do you think that redefining the mission statement shows the lacunae on the part of the founder
members of an organization? Why?
END OF SECTION B
Section C: Applied Theory (30 marks)
 This section consists of Applied Theory.
 Answer all the questions.
 Each question carries 15 marks.
 Detailed information should form the part of your answer (Word limit 200 to 250 words).
1. What are the various methods of collecting statistical data? Explain in brief their merits and
demerits.
2. What do mean by Research design. What are basic types of research design

CREATING WORLD CLASS QUALITY STANDARDS CASE STUDY SOLUTION

CREATING WORLD CLASS QUALITY STANDARDS CASE STUDY SOLUTION
CREATING WORLD CLASS QUALITY STANDARDS CASE STUDY SOLUTION
CREATING WORLD CLASS QUALITY STANDARDS CASE STUDY SOLUTION

: International Business.
N.B.: 1) Attempt any Four Case studies.
2 All questions carry equal marks.

CASE 1
Creating world class quality standards
Introduction
Customers expect to be able to buy products that meet certain standards. Standards can be written down and published for use by manufacturers and service providers. They can be used as guidance. BSI stands for British Standards Institution. It was the world’s first Standards body, and is the National Standards Body for the UK. BSI works in three main fields:
. Setting British and international standards
. Product testing
. Quality management systems (QMS)
Standards are based on agreed best practice. Businesses are keen to use standards to show they have a place in global markets. There are thousands of standards covering all manner of goods and services.
Quality
A quality product or service does what the customer wants it to do. This may differ from market to market. For instance, a cheap football provides enough `quality’ for a village match. For a league match, a better ball would be needed. Many organizations try to build quality into everything they do. They do this by using a QMS. This provides a framework that helps the business to improve in all areas. BSI helps organizations to identify best practice and translates this into standards. BSI publishes almost 20,000 standards and each year adds 2,000 new or revised standards to this list.
The importance of standards
Standards exist at a number of levels. These include:
* International Standards, (ISO). These need to be agreed between countries, so are the most complex
* European Standards (EN)
* British Standards (BS).
BSI contributes to all three.
Standards help protect consumers’ safety. They also promote research. They promote the sharing of knowledge. They help businesses to compete. In markets where it is hard to compete on price, businesses can use standards to help them compete on quality.
The Kitemark
BSI is independent. It works with both the private and public sector. It makes sure that safety and quality standards in the UK and around the world are built into products. BSI also owns the famous Kitemark symbol which you see on many products. It shows that a business has had a product tested to the relevant standard. Schemes cover various products and services. Examples include lighting, 13 amp plugs, motor cycle helmets and car repair garages. The Kitemark shows that the business sees safety and quality as vital. It shows the customer that the product or service has been tested and has reached the relevant Standard. Other symbols are required by law, for instance, CE marking. This shows that a product conforms to certain European Union regulations.
Processes
ISO 9001 is a key international standard. It shows that the business uses a QMS. It shows that quality is built into all aspects of operations. This must include all systems, whether inside or outside of the business. It therefore includes suppliers. There are eight quality measures that must be met to gain certification to ISO 9001.
Conclusion
Products include both goods and services. These can be made, operated and sold on a global basis. International standards for them are therefore vita. BSI helps to create these standards. Standards help businesses to build good reputations based on quality, safety and reliability.
Issues for Discussion
1. What do you understand by the term `quality’ in relation to a product you buy?
2. What is the BSI Kitemark? How might this help you to choose a product to purchase?
3. How might meeting the Standard ISO 9001 help a business to gain a competitive advantage over a rival?
4. Assume that you have developed a new manufacturing process – how might the BSI help you to develop this process?

Case 2
Sustainable business at Corus
Introduction
Corus is the UK’s biggest steel manufacturer. Even so, it still has to compete. In 2004 it launched a programme to make itself more efficient. Part of the program, called ‘Restoring Success’, focuses on recycling steel. The world economy is growing. The demand for steel has increased as more nations such as India and China have grown. Recycling as part of sustainable development has thus become vital. It has become a main concern for Corus.
What is sustainable?
Sustainable development is linked to resources. It means leaving at least as much for the future as we had to start with. This shows respect for the environment. It also shows thought the future. Everyone should try to aim for sustainability. This includes governments, businesses and people.
Recycling
Steel can be recycled over and over again with no loss of quality. This makes it stand out in terms of sustainability. It is easy to extract steel from waste because of its unique magnetic properties and recycle it from scrap. By recycling steel Corus helps to:
* preserve natural resources
* protect the environment
* meet targets for reducing waste.
Corus is working hard to make the public aware of what can and should be recycled. Steel can be recycled from drink and food cans, lids, paint cans and aerosols. Not everyone knows what can be recycled. For instance, 57% of consumers recycle drinks cans but only 7% recycle aerosols. Corus is working to develop a ‘closed loop’ for steel.
The steel would go from consumers to recycling plants, then into production and back to consumers.
Stakeholders
Corus sees that there are two sides to recycling. There are gains, but there can also be extra costs. To keep all of its stakeholders happy, it must balance these. There are effects on :
the planet. Fewer resources are used but energy is needed to recycle
* consumers. They have a smaller carbon footprint but more time is needed to recycle
* employees. More are involved in recycling
*communities. Less waste is stored in landfill but there may be noise from recycling plants.
Gains include lower production costs, governments hitting recycling targets and all of us having a better planet to live on.
Costs and benefits
It is possible to weigh up costs and benefits. A monetary value can be put on them. Businesses want gains to outweigh costs. Corus gains from recycling. Socially. Corus gains a good reputation. There is reduced impact on the environment, lower energy use and less waste. There are also costs. These include the cost of recycling and of collecting and sorting waste steel. Corus has created a number of targets to help measure its success. These are called Key Performance Indicators. They include
• Corus’ UK energy use being reduced to less than 1997 levels
• an increase in the steel recycling rate to 55%.

Conclusion
Corus works to recycle as much as it can. This helps towards greater sustainability. It shows concern for all its stakeholders. Consumers can also help by recycling as much as they can.
Issues for Discussion
1. What is sustainability and whose responsibility is it?
2. Describe three actions that an individual can take to support sustainability and two actions that a business can take?
3. Steel lends itself to recycling. What actions could be taken to increase public awareness of steel recycling?
4. Recommend actions that individuals and businesses can take to enhance the closed loop ‘steel to steel’ recycling process.
5. Recommend ways in which the benefits of steel recycling can be increased compared to the costs of recycling steel.

Case 3

International trade
For centuries Britain has been a country that relies on international trade. We purchase goods and services from other countries and in return we sell them goods and services produced here. An import is a purchase by UK citizens from overseas. An export is a sale by UK citizens to a member of another country.
Visible and invisible trade items
For the purpose of classification we call the tangible goods that we trade visible items. We call the services that we trade invisible items. Exports bring currency into the UK whereas imports lead to an outflows of currency.
The UK has always done well on her invisible account. This is because we developed a world-wide reputation for commercial services. Some of our major invisible earnings come from the following:
* Selling insurance policies through Lloyd’s.
* Bank services to foreigners,
* Tourists spending money in the UK.
On the news every month we hear that the UK has made a surplus on invisible trade showing that we have sold more invisible services than we have bought. The accounts for a particular month might show:
* Invisible exports ?100 billion
* Invisible imports ?80 billion
* Invisible surplus f20 billion
At the same time the UK frequently makes a loss on her visible trade.
A typical current account showing the UK’s trading with the rest of the world in a given period, may therefore look like the following:
Visible exports 500 Invisible exports 400 Total exports 900
Visible imports 650 Invisible imports 200 Total imports 850
Visible balance -150 Invisible balance 200 Current balance 50
The current account of the UK balance of payments gives a good guide to current trading in visible and invisibles with the rest of the world.
Issues for Discussion
1. Analyze the case at length

Case 4

Embracing and pursuing change
Introduction
AEGON UK is part of one of the world’s largest pension and insurance groups. The AEGON Group has over 27,000 employees. It has over 25 million customers worldwide. In the UK it has grown its customer base. It has also bought other businesses. Its aim is to become ‘the best lone;-term savings and protection business within the UK’. To achieve this, it is keen to change in order to improve. AEGON also needed to raise its profile in the UK. The companies which it bought, such as Scottish Equitable, tended to keep their own brand image. AEGON therefore needed to build on the global strength of the Group.
External factors
External factors are those outside the control of the business. It is vital for businesses to be aware of these changes. Changes that have affected AEGON include:
* people are living longer so need better pensions
* the insurance industry has had a poor reputation. In some cases the wrong products for people’s needs were sold. This is called miss-selling. As a result, the Financial Services Authority (FSA) made regulation tighter.
* financial products can be hard for people to grasp
Investment returns have been less than predicted. Many people have therefore not ended up with the sums that they had hoped for
There is a lot of competition in the industry.
Why change?
Government imposed price controls reduced profitability. Also. AEGON was not a well-known brand. It needed to be better known before consumers would see it as a good place for long-term investment. AEGON went through a ‘discovery’ phase. This was to find out what it needed to do to reach its aim. It set out to find out:
* what the brand stood for in the UK

• what they wanted it to stand for
• how they were going to reach this.

A brand audit was used. This looked at AEGON both from within and outside. This information could then be used to plan change.
Creating a culture

The culture of an organization refers to the way that it works. AEGON created a culture of change. AEGON needed to do well financially. This was linked to raising awareness of the brand and building on AEGON’s global strength. This meant:
* financial services in simpler forms that customers could grasp
* a workforce improved through training and development. This would b•, better able to manage change
* a more distinct market presence.
AEGON developed a framework to help all its staff support its brand values.

Implementing change
AEGON used a number of methods to achieve the
* external promotional campaigns
* the new Chief Executive (C1 O) talked to the media about the need for change
* new and innovative products were launched,
AEGON’s success can be seen through the record results, increased new business and growth in earnings.
Conclusion
AEGON recognized a need to give itself a greater market presence. The change has made the organization much more customer focused. As a result it is more effective.
Issues for discussion.
1. What are the external factors influencing the change. Discuss
2. Identify the reasons for change
3. Creating a new culture is a key part of the change process
4. Carry out the implementation of the above.

TRUST TOOTHPASTE CASE STUDY SOLUTION

TRUST TOOTHPASTE CASE STUDY SOLUTION
TRUST TOOTHPASTE CASE STUDY SOLUTION
TRUST TOOTHPASTE CASE STUDY SOLUTION

CASE 1 : TRUST TOOTHPASTE

Study the Case entitled “Positioning ‘Trust’ Toothpaste” and give your specific recommendations regarding the action to be taken by the company. Your decision must be based on a careful analysis of the situation given in the case and your answer should be precise and up to the point.

Positioning Trust’ Toothpaste

In September 1990, Mr. Sarin, the Marketing Manager of Deepa Products (P) Limited was wondering what marketing and product positioning strategy the company should follow for launching their two new brands of toothpaste. Trust Night and Trust Regular in a market which was becoming highly competitive.
Deepa Products (P) Ltd. was one of the successful manufacturers of various types of packaging materials for both industrial and consumer products. Established in 1960, the company has shown substantial growth over the years. Much of the company’s growth was attributed to the high quality of its products and also the systematic manner in which its marketing decisions were made.
In 1990, keeping in view the growing market for consumer goods, the top management of the company decided to diversify into new consumer products areas. In the first instance the company thought of entering into the toothpaste market. Depending upon their success in the market, the company would decide their expansion plans into other areas of consumer goods sector.
The company chose to enter toothpaste market simply because the market for toothpaste was growing fast almost by 15 to 20% in India and it provided enough profit opportunities. The market was dominated only by a very few players. Further Mr. Sarin felt that there was scope for capturing a significant market share in the growing toothpaste market, since the company’s products had some unique features to meet the emerging new market segments.
Questions
1. What marketing strategy should be designed by Mr. Sarin to be able to achieve the targeted 5% market share?

2. How should Deepa Products (P) Ltd. position Trust Regular and Trust Night to induce customers to buy it? What should be the key benefits of their toothpastes?

3. Should the company price its products economically, or should it aim for premium pricing?

CASE 2: THE CATERPILLAR TRACTOR COMPANY

Caterpillar Tractor Company (CTC) is a large manufacturing firm headquartered in Illinois, USA. Its familiar ‘CAT” logo and yellow paint are known throughout the world. Indeed in its business, CTC has an estimated 37% of world market. Its closest rival, Japan’s Komatsu has an estimated 15%. A multinational company CTC has manufacturing and dealer representatives throughout the world. The products, which the firm designs, manufactures and markets, can be classified into two basic segments:
Earth moving, construction and materials handling equipment-track type tractors, bulldozers, rippers, track and wheel type loaders, pipe layers, wheel dozers, compactors, wheel scrapers off highway trucks and tractors, motor graders, hydraulic excavators, long skidders, lift trucks and related parts and equipment.
Engines– for earth moving and construction machines on highways trucks, marine, petroleum, agricultural, industrial and electric power generation systems. Engines either, diesel or natural gas, have power ranges from 85 to 1600 horsepower or in generator set versions from 55 to 1200 kilowatts. Turbines range from 10 to 7,900 kilowatts.
CTC’s market success is based to a great extent on its four-point product strategy. First, advances technology is incorporated into machines so that users derive optimal productivity and efficiency. To maintain the flow of product application the organization commits hundreds of millions of dollars each year to research and development. A second product guideline is quality. Within the last ten years several billion dollars have been spent on plant and equipment to ensure reliability in the hostile environments the machines endure. The third aspect of product strategy is to offer a full line of products. This implies machines capable of performing on job sites as small as a residential plot or as large as the Alaskan product line offers over 100 different machines within nearly infinite option/modifications. The fourth and final principle of the product strategy is to design and build only machines that can be produced on an assembly line, to take advantage of manufacturing expertise and efficiency of Caterpillar plant and to provide significant economies of scale.
Questions to be answered
1. How important is new product development to Caterpillar?

2. What sources of new product ideas might a company like caterpillar use?

3. Evaluate CAT as a brand name.

4. Evaluate each of the four points of CTC’s strategy.

CASE 3: ABC HANDLOOMS Ltd.

ABC Handlooms Ltd. (ABC) was established in the year 1991 to manufacture and market handloom furnishings throughout the country. Over the years, it has developed a wide network of handloom units in and around Delhi. ABC manufactures a wide range of furnishings catering to the needs of different strata of society. The pattern of sales of the company during the last three years was as under:
State Percentage Sale
Punjab
Haryana
U.P.
M.P.
Rajasthan
Other states and Union territories

total 65
5
10
10
5
5
100
The market for furnishings was highly competitive. ABC had not only to face competition from well established houses but it had also to face competition from various state government corporations. Besides, the product had to face competition with the imported material, which was freely available. Prices of different types of furnishings differed widely. Private and cooperative channels marketed different brands. The Coops accounted for more than 60 per cent of material sold. Though there was no brand loyalty yet a large manufacturer in Western India was able to market similar products at a marginal premium in Rajasthan and Madhya Pradesh.
Questions:
1. How do you explain the present situation faced by the company?

2. Was it a good idea to enter into a three-year contract with the Cooperative Society? Why?

3. Is it possible to renew the contract with the Cooperative Society? If so, how? Suggest a detailed programme on a crash basis with the budget constraint of Rs. 50, 00, 000.

CASE 4: APEX ELECTRICAL COMPANY LTD.

Mr. Nathan, Sales Manager of Apex Electrical Co. Ltd. had just received a proposal from his Regional Manager at Bangalore for opening a sub-office in Madras and was considering what would be the best decision in the company’s short run as well as long run interest.
The company was in the business of manufacturing and marketing electric motors of a wide range of horse power that could be used as a prime mover in numerous applications. The company’s factory and head office were situated in Bombay and it had its branch offices at New Delhi, Calcutta and Bangalore, each headed by a Regional Manager.
The Regional Office at Bangalore was responsible for sales in Kar¬nataka, Tamil Nadu and Kerala. The company also maintained a godown at Bangalore which was used as the stocking centre for feeding sales in the complete region. The company’s distribution network had grown over several years and as such there was no one rule by which the arrangements could be explained. In Karnataka, due to the proximity of the Regional Headquarters, the distribution, network was closely controlled by the Regional Office. Company had several dealers covering the State and they all purchased goods directly from the Regional Office. All the dealers got a fixed percentage of discounts. The ultimate prices to the consumers were fixed by the company. Each dealer covered a specific area which was generally one to several districts and the company discouraged one dealer interfering in other’s territory. However, in main cities of Bangalore and Mysore, there was more than one dealer who collectively covered the sales in the city. The company salesmen regularly contacted the dealers and the office maintained good marketing information.

Questions:
1. What decision would you take if you were in place of Mr. Nathan?

2. Do you feel the proposal of a new sub-office is economically justified against the stated policy of the company? If yes, why? If no, then how could it be made justifiable?

INDIAN STEELS LIMITED CASE STUDY ANSWER

INDIAN STEELS LIMITED CASE STUDY ANSWER
INDIAN STEELS LIMITED CASE STUDY ANSWER
INDIAN STEELS LIMITED CASE STUDY ANSWER
Caselet 1
Examination Paper of Operations Management
IIBM Institute of Business Management 6
Company Profile
Indian Steels Limited (ISL) is a Rs 6000 crore company established in the year 1986. The company
envisaged being a continuously growing top class company to deliver superior quality and cost effective
products for infrastructure development. The company performed with a mission to attain 7 million ton
liquid steel capacity through technological up-gradation, operational efficiency and expansion; to produce
steel with the international standards of cost and quality; to meet the aspirations of the stakeholders. The
production started in the year 1988 and initially, it manufactured Angles, Pig Irons, Beams and Wire Rods
that were mainly used for constructing roads, dams and bridge. The products were mainly supplied to
Public Sector Undertaking such as Railway ,Public Work Department (PWD), Central Public Work
Department (CPWD), Rashtriya Setu Nigam, Audyogik Kendrya Vikas Nigam Ltd.and various foundry
units. The company had its headquarters at Raipur with three stockyards
The company has establish itself well and is said to be considering its expansion plan and proposed
merger with another steel making giant in the country. The company was awarded ISO 9001, ISO 14001
and ISO 18001 certifications. The temperature in the plant premises is reportedly about 6 degrees Celsius
lesser than that of the township, thanks to the greenery being maintained therein.
Logistics Outsourcing
Outbound logistics, which basically connects the source of the supply with the sources of demand with an
objective of bridging the gap between the market demand and capabilities of the supply sources, was
always a problem for companies operating in this industry. Consisting of components like warehousing
network, transportation network, inventory control system and supporting information systems, outbound
logistics was always playing a key role in making the right product available at the right place, at the right
time at the least possible cost. In 1996, owing to the cut throat competition in the emerging dynamic
global markets, ISL emphasized on both effectiveness and efficiency. The company strongly believed in
focusing on its core competency and outsourcing the rest to its reliable partners. Outsourcing of its
outbound logistics was one such move in the direction.
Recognizing the growing demand for its products from the big, diversified and geographically dispersed
customers, the company started expanding the number of warehousing stockyards. From a humble
beginning, the company today has 26 stock yards; most of them is outsourced. Each of the outsourced
stockyards was managed by the third party, which the company referred to sa Consignment Agent in the
area. The CA was selected on the annual basis through competitive bidding process. The performance of
CA was closely monitored by a company representative. The CA was responsible for the entire
distribution of the products within the geographical limits of the allotted market segments and was paid
by the company according to the loads of transaction dealt by him. Based on the sales turnover, CAs were
trifurcated into A, B, and C categories. The CAs with a monthly turnover of Rs 150-200 crore fell under
A category, whereas those with Rs 100-150 crore were B and less than Rs 100 crore were C category.
In addition to the company representative, a team of marketing division operated in the town where the
site of CA was located. This department was responsible for estimating the-future demand, translating it
into orders and sending to the manufacturing plant. Material dispatch was done using either one or a
combination of the two modes: rail, road. While rail as the mode of transportation, the company had a
choice to book a Normal Rake or a Jumbo Rake. At times, the company was engaging the services of the
CONCOR (Container Cooperation of India) where a train of 62 to 70 wagons, each wagon with about
26tonnes capacity was used for transportation. Instead, if the company decided to send the material by
road, the company had a choice between Trailer (25 to 30 tones) and Truck (52 to 20 tones). The choice
of transportation mode was majorly based on the quantity of dispatch.
Examination Paper of Operations Management
IIBM Institute of Business Management 7
As soon as the material was dispatched from the manufacturing plant, the respective CA used to get a
Stock Transfer Chalaan electronically through Virtual Private Network, which was develop by a
professional software service provider. In-transit, monitoring was generally done with the help of Indian
railways, if the mode was Rail. Otherwise, truck/trailer drivers were contact through mobile phones.
Transit generally took 5-6 days, providing time for CA took plan for receiving material. The CA use to
utilize this time for arranging material handling devices like: Heavy cranes and required labour. The
material thus unloaded was reaching the warehousing stock yard where CA was responsible for arranging
the material as per the warehousing norms of ISL.
The company broadly classified materials into Long Products and Rounds. Products following into each
category were further classified by their size, shape and utility and the company used a distinct colour
code for this purpose. Each sub category of material had a specific place for down loading. The company
used Bin System for this purpose. While downloading the material in stockyard, the company norms
insisted that CA arrange for providing Dunnage Material. This unable the CA to store material without a
direct contact with land surface and thus reduced the probability of material deterioration. Material was
stored in the stockyard until an authorized representative of the customer used to come and collect it.
While dispatching material to the customer, a Loading Slip was generated against the Delivery Order. The
company also belived in maintaining long-term relationships with the suppliers as well as the buyers. It
always prioritized the needs of its regular and important customers over others and this worked out to be a
win-win strategy.
Operational problems were majorly because of uncertainties in transportation, fluctuations in supply of
electricity and the load bearing capacity of the soil in the stockyard. Some more problems were
encountered whenever there was a change in CA and these were overcome by training the employees of
the new CA and keeping the old CA responsible for the material in his stockyard for six months after the
contract as well. Observations reveal that, at times there were situations wherin CAs had to do those
things which they were not legally supposed to do because of the pressures mounted by political leaders
with selfish interests.
Conclusions
Despite these problems, this model of outsourcing logistics was working out very well for the company.
The practices, which were started in the year 1996 have sustained major changes in the environment and
are being practiced even in 2006. It has enhanced the supply chain competency of the company by
enabling it leverage more on its core competency, which leads to increased productivity.
1. Analyze the case in view of the logistics outsourcing practices of the ISL?
2. Discuss the importance of logistics outsourcing with reference to supply chain management?
Caselet 2
Introduction
S.K Das established ABC Pharma in 1961 in New Delhi, marketed antibiotics and became brand leaders
in Amphicilin and Cephalexin orals. The company went public in the year 1973. In 1983, ABC
established a plant in Mandideep (MP, India) with various dosage form facilities. In 2004, it became
India’s largest pharmaceutical company, manufacturing and marketing world-class generics, branded
generic pharmaceuticals and active pharmaceutical ingredients. It was ranked amongst the top 10 generic
companies worldwide. The company’s product were sold in over 100 countries with manufacturing
operations in 7 countries and ground presence in 44. The company had an expanding international
Examination Paper of Operations Management
IIBM Institute of Business Management 8
portfolio of affiliates, joint ventures and representative offices across the globe with joint venture/
subsidiaries in US, UK, Germany, France, Spain, Ireland, Netherlands, India, China, Brazil, South Africa,
etc.While ABC aggressively pursued the internationalization of its business, the growth strategy equally
foucoused on enhancing market share n India. The company had a strong brand marketing team and
distribution network in India.
Milestones
By the end of December 31, 2004, global sales had reached US $ 1178 million and registered a growth of
21%. Overseas market accounted for 78% of the global sales. US accounted for 36%, while Europe and
BRIC (Brazil, Russia, India and China) countries contributed 16% and 26% to global sales, with a
combined turnover of US $924 million. The company’s vision was to achieve significant business in
proprietary prescription products with a strong presence in developed markets. It also aspired to be
amongst the top 5 generic players with a US $5 billion sale by next decade. To translate these objectives
into reality and to optimize value creation, the Company had adopted a multi-pronged strategy. The major
thrust areas for future were acquisition of brands overseas, emphasis on brand marketing in the US and
Europe and entering high potential new marets with value added product offerings.
The company had established state-of-the-art multi-disciplinary R&D facilities at Gurgaon, India. ABC
was one of the largest investor on R&D in the Indian pharmaceutical industry, with 7% of its sales during
2004. The company’s major research focus was in the areas of Urology, Anti-invectives, Respiratory,
Anti-inflammatory and Metabolic disorders segments. ABC’s continued focus on R&D had resulted in
several approvals in developed markets and significant progress in New Drug Delivery Response
(NDDR).
Fourth Party Logistics (4PL)
The company believes in building strong and long term relationships with limited number of logistics
service providers. They also focoused on outsourcing the activities like warehouse management, packing
and custom clearance through Freight Forwarders. They always believed in their core competencies. The
logistics service providers took care of storage and inventory management and ensured the availability of
the right product at the right place and at right time. Through outsourcing, they achieved focus on the core
competencies, cost saving, effective supply chain management, cross-pollination of better available
practices and wider and effective geographical coverage. The company practiced Fourth Party Logistics
(4PL) services by providing ERP as a backbone system for the third party logistics service providers. The
palette packing services were outsourced from a local company including the packing material. The
responsibility of complete documentation and custom clearance for import and export of goods had also
been outsourced through Custom House Agents (CHA) and Freights Forwarders (FF) under the
supervision of GM – Global Supply Chain.
The warehouse management was done with the help of Bar-code Technology, which facilitied in tracing
of materials on a single click of a mouse resulting into smooth inward and outward flow of materials. In
future, ABC was planning to have Radio Frequency Identification (RFID) Technology to manage the
warehouse activities in a more effective and efficient manner. The company had divided its global
operations into four regions viz., R1-Middle East with headquarter at India; R2-CIS, Africa and Europe
with headquarter at London; R3-Far East ad Latin America with headquarter at Singapore; R4-US with
headquarters at New York on the basis of convenience, market potential and market share.
Collaborative Relationship
The company established its global supply chain hub at Mandideep (near Bhopal, India). They managed
their operations with one GM-Supply Chain, one Senior Manager Commercial and four Shipment
Officers. Each Shipment Officer had four support employees outsourced through freight forwarders.
These people were responsible for the day-to-day activities under the administrative control of ABC. GM-
Examination Paper of Operations Management
IIBM Institute of Business Management 9
Supply Chain was responsible for managing the relations with Supply Chain Partners, Freight forwarders
and Custom House Agents (CHA). The company had been a pioneer in launching the genetic versions of
products on the same day at which the product to get off patent, which helped them in getting an edge
over competitors. They managed to maintain the dignity, discipline and business ethics without violating
the laws of patent. This was possible because of the strong and long term relationship with logistic service
providers. There was a strong level of belonging, faith and trust amongst the supply chain partners. To
maintain the good relations, the company practiced making timely payments to the service providers.
They also opened the account in the same bank in which the service providers had their account so that
prompt money transfer could take place. As a result of this, service providers were so concerned about the
shipments of the company that they dedicated 25 refrigerated cargos each equipped with location tracking
facility to track the status of the shipments.
The relationship and commitments of service providers was endorsed on January 10, 2003 when Ramipril
was going off patents in Europe. ABC having strong presence n Germany wanted to encash the
oppournity by making its Rampril available in Germany right on January 11, 2003, so as to take lead in
available generic market. However, ABC did not know the number and size of competition they would be
facing. The underlying fear of getting the shipment late and therby losing the advantage of being first was
very clear on the faces of ABCs top managers. The task was urgent and important; any delay in
availability was to cost heavily. The D-day was January 10, 2003 and the shipment was to be airlifted
from Mumbai so as to reach Germany after midnight of January 10, 2003 but before dawn of January 11,
2003. Two Boeing were chartered to lift the goods from Mumbai Airport, but the task was not simple, as
the goods were to be surface transported from Mandideep to Mumbai in a carvan of 70 cargos. To worsen
the things, the transporters had announced strike during that period.
The urgency was briefed to freight forwarder, who was caught between relationship with ABC and
membership of the Transporters’ Association. He had the option of pleasing any one of them.
The long association and the relationship with ABC got priority and the freight forwarder assured ABC’s
Senior Commercial Manager to carry out the assigned responsibility. Going against the directives of
association, the freight forwarder contacted the police authorities and obtained a security cover
throughout Maharastra. The freight owner consider himself as one of the responsible members of ABC
and was personally receiving the cargo and getting it loaded at Mumbai airport. The scheduled departure
had a lead-time of two days. However, he freight forwarder insisted and stayed at Mumbai at his own cost
to see the goods leaving India successfully. It was a mission for ABC and the freight forwarder in which
collaborative relationship surpassed all limitations and the goods landed in Germany-just-in-time.
1. What modification would you suggest in enhancing the existing logistics system?
2. Critically analyze the efforts of ABC in launching generic versions of products going off
patents?
END OF SECTION B
Section C: Applied Theory (30 marks)
 This section consists of Long Questions.
 Answer all the questions.
 Each question carries 15 marks.
 Detailed information should form the part of your answer (Word limit 150 to 200 words).
1. Define Logistic support in the context of the production /construction phase. What are
Examination Paper of Operations Management
IIBM Institute of Business Management 10
the elements of Logistic support?
2. Define reliability & maintainability. What are their major characteristics?

ORION IS A GLOBAL COMPANY CASE STUDY SOLUTION

ORION IS A GLOBAL COMPANY CASE STUDY SOLUTION
ORION IS A GLOBAL COMPANY CASE STUDY SOLUTION
ORION IS A GLOBAL COMPANY CASE STUDY SOLUTION

Caselet 1
Orion is a global co. That sells copiers. Orion currently sells 10 variants of a copier, with all inventory
kept in finished-goods form. The primary component that differentiates the copiers is the printing
subassembly. An idea being discussed is to introduce commonality in the printing subassembly so
that final assembly can be postponed and inventories kept in component form. Currently, each copier
costs $1,000 in terms of components. Introducing commonality in the print subassembly will increase
component cost to$1.025.One of the 10 variants represents 80 percent of the total demand. Weekly
demand for this variant is normally distributed ,with a mean of 1,000 and a standard deviation of
200.Each of the remaining nine variants has a weekly demand of 28 with a standard deviation of
20.Orion aims to provide a 95per level of services .Replacement lead time for components is four
weeks. Copier assembly can be implemented in a matter of hours. Orion manages all inventories
using a continuous review policy and uses a holding cost of 20 percent.
1. How much safety inventory of each variant must Orion keep without component commonality?
What are the annual holding costs?
2. How much safety inventory must be kept in component form if Orion uses common components
for all variants? What is the annual holding cost? What is the increase in component cost using
commonality? Is commonality justified across all variants?
3. At what cost of commonality will complete commonality be justified?
4. At what cost of commonality will commonality across the low-volume variants be justified?
Caselet 2
An electronic manufacturer has outsourced production of its latest MP3 player to a contract
manufacturer in Asia. Demand for the players has exceeded all expectations whereas the contract
manufacturers sell three types of players- a 40-GB player, a 20-GB player, 6-GB player. For the
upcoming holiday season, the demand forecast for the 40-GB player is normally distributed, with a
mean of 20,000and a standard deviation Dard deviation of 11,000, and the demand forecast for the 6-
sGB player has a mean of 80,000 and a standard deviation of 16,000. The 40-GB player has a sale
price of $200, a production cost of $100, and a salvage value of $80 .The 20-GB player has a price of
$150, a production cost of $70, and a salvage value of $50.
1. How many units of each type of player should the electronics manufacturer order if there are no
capacity constraints?
2. How many times of each type of player should the electronics manufacturer order if the available
is 140,000? What is the expected profit?
END OF SECTION B
Examination Paper of Supply Chain Management
4
IIBM Institute of Business Management
Section C: Applied Theory (30 marks)
 This section consists of Long Questions.
 Answer all the questions.
 Each question carries 15 marks.
 Detailed information should form the part of your answer (Word limit 150 to 200 words).
1. Consider two products with the same margin carried by a retail store. Any leftover units of one
product are worthless. Leftover units of the other product can be sold to outlet stores. Which
product should have a higher level of availability? Why?
2. McMaster-Carr sells maintenance, repair, and operations equipment from five warehouses in the
United States. W.W. Grainger sells products from more than 350 retail locations, supported by
several warehouses. In both cases, customers place orders using the Web or on the phone. Discuss
the pros and cons of the two strategies.

ADAPTABILITY IN ACTION A CASE OF RSL SOLUTION

ADAPTABILITY IN ACTION A CASE OF RSL SOLUTION
ADAPTABILITY IN ACTION A CASE OF RSL SOLUTION
ADAPTABILITY IN ACTION A CASE OF RSL SOLUTION

Caselet 1
ADAPTABILITY IN ACTION: A CASE OF RSL
Rajasthan Synthetics Ltd. (RSL) was established in the year 1994 at Bhilwara, Rajasthan to
manufacture synthetic yarn with a licensed capacity of 29,000 spindles. Manish Kumar, a Harvard
Business School graduate, established RSL with 8% equity participation from Itochu Corporation
Japan to manufacture synthetic yarn for shirting, a promising business at that time. The demise of the
NTC textile mills was fresh in the minds of the promoters and therefore, state of the art technology
imported from U.K., Germany, Japan and France was used in the manufacturing facility. By the time
the company started manufacturing yarn the competition in shirting yarn had become fierce and the
returns had diminished. The company incurred losses in the first four years of its operations and the
management was looking for opportunities to turn things around. The manufacturing plant started
functioning with an installed capacity of 26,000 spindles, a small unit considering yarnmanufacturing industry, in the year 1996 to manufacture synthetic yarn for shirting only. Initially, the
major fabric manufactures of India such as Raymonds, Donear, Grasim, Amartex, Siyaram, Pantaloon
and Arviva were the main customers of the company and the total produce of the company was sold
within the domestic market. These fabric manufactures used to import the premium quality yarn
before RSL started supplying the yarn to them. The company in the first year of its operations
realized that shirting yarn was one of the fiercely competitive products and the company with its high
interest liability was unlikely to earn the desired profits. Also, the company had a narrow product mix
limited to only two more blow room lines were installed in the first quarter of 1997. The addition of
two blow room lines helped RSL to manufacture four different types of yarns at the same time.
Utilizing this added flexibility, RSL began manufacturing yarn for suitings.Since the suiting yarn was
providing better returns, the company was keen to increase manufacturing of suiting yarn but was
hampered by the two for one doubling (TFO) facility, which was limited to only 40% of the total
produce. To remove this bottleneck, 12 more TFO machines were added to the existing 8 TFO
machines. The addition of these machines increased the doubling capacity to 70% of the production
providing additional product mix flexibility to the company. This enabled the company to
manufacture yarn to cater to the requirements of suiting, industrial fabric and carpet manufacturers. In
the initial years of its operations, RSL realized that the promises made by the Government of
Rajasthan to provide uninterrupted power supply of the required quality (stable voltage and
frequency) and ample quantity of water were unlikely to be met through the public distribution
system. The voltage and frequency of electric power provided through the public distribution system
were erratic and frequent announced and unannounced power cuts stopped production on a regular
basis. In these circumstances, meeting quality requirements of the customers and adhering to delivery
schedules was a herculean task. To ensure smooth and uninterrupted operations RSL installed inhouse power generation facility of 4 megawatts capacity and dug 10 tube-wells.RSL faced stiff
competition in the domestic market from Gujarat Spinning and Weaving Mills, Surat, Rajasthan
Textile Mills, Bhawani Mandi, Charan Spinning Mills, Salem and Indorama Synthetics Ltd.,
Pithampur in all their product categories and the returns were low. In order to combat stiff
competition in the domestic market and improve returns the company started developing export
markets for their products in the year 1998. Initially, RSL started exporting carpet yarn to Belgium
and till 2001; carpet yarn formed the major component of their exports. A trade agreement was signed
with Fibratex Corporation, Switzerland to share profits equally for expanding their overseas
operations. During the same period, RSL continued to scout for new export markets and was
successful in entering top-of-the-line fancy for premium fashion fabric manufactures of international
repute like Mango and Zara. Rajasthan Synthetics Ltd. also exported fancy yarn to a number of fabric
manufacturers located in Italy, France, England, Spain and Portugal. Yarn manufacturers from
Indonesia, Korea and Taiwan gave stiff competition to RSL when it entered the international market.
The companies from South Asian countries had a major cost advantage over RSL because of cheap,
uninterrupted availability of power and high labour productivity. Currencies had been sharply
devalued during the South Asian financial crisis, which rendered the products manufactured by these
Examination Paper of Supply Chain Management
8
IIBM Institute of Business Management
companies still cheaper in international markets. Despite all these disadvantages, RSL was able to
gain a foothold through constant adaption of their products according to the customer requirements in
the highly quality conscious international yarn market and was exporting 95% of its total produce by
the beginning of the year 2002.
Rajasthan Synthetics Ltd. had fine-tuned its distribution channels according to the type of markets
and size of orders from the customers. In line with this policy the export to Middle East, Far East and
Turkey was carried out through agents. Similarly, low volume export of fancy yarn requirements was
also catered through agents. While dealing with importers directly, RSL strictly followed the policy
of exports against confirmed Letter of Credits only. The company directly exported to important
clients in Belgium, England and France. The domestic market was also served through an agency
system. Rajasthan Synthetics Ltd. considered inventories as an unnecessary waste and kept minimum
possible inventories while ensuring required level of service. To ensure that the inventories were held
to a minimum, the manufacturing plan consisted of 60 to 70% against customer orders, 30 to 40%
against anticipated sales and 2% capacity was reserved for new product development. A Strategic
Management Committee (SMC) consisting of MD, CEO, GM (marketing) and GM (technical)
reviewed the production plan of the manufacturing plant on quarterly basis. The SMC also developed
the plans for profitability, product mix and cost minimization. Delivering high-quality products and
meeting delivery commitments for every shipment were essential pre-requisites to be successful in the
global market place. The company had understood this very early and to ensure that the products
manufactured by RSL met the stringent quality requirements of its international customers, the
company had developed a full-fledged testing laboratory equipped with ultra modern testing
machines like User Tester-3 and Classifault. The company had stringent quality testing checks at
every stage of tarn production right from mixing of fiber to packing of finished cones. Its in-house
Research and Development and Statistical Quality Control (SQC) divisions ensured consistent
technical specifications with the help of sophisticated state-of-the-art machines. A team of
professionally qualified and experienced personnel to ensure that the yarn manufactured by the
company was in line with international standards backed the company. The company continuously
upgraded its product mix and at the same time, new products developed by in-house research and
development department were added to the product mix form time to time. RSL‟s management was
quick to analyze the potential of these in-house developments and followed a flexible approach in
determining the level of value addition. The company had developed a new yarn recently and was
selling it under the Rajtang brand name. This new yarn was stretchable in three dimensions, absorbed
moisture quickly, was soft and silky and fitted the body. This yarn was extracted from natural
products and being body-friendly, was in great demand in international markets. Looking at the
higher value addition possibilities RSL decided to forward integrate and started manufacturing fabric,
using Rajtang and provided ready-made garments like swimming suit, tracksuit, undergarments, tops,
slacks and kids dresses. The ready-made dresses from the fabric were being manufactured on the
specifications and designs of RSL. The management decided to market these products under the
brand name “Wear-it” through Wearwell Garments Pvt. Ltd., an associate company of RSL, to ensure
that RSL did not lose its focus. The Managing Director of RSL felt that continuous adaptability to
market requirements through a flexible approach, cost cutting in every sphere of operations and team
approach to management had taken them ahead. However, RSL had become highly dependent on the
volatile export market and if it was not able to retain the international market it would have to reestablish itself in the domestic market, which was not an easy task.
1. What marketing strategy should RSL adopt to remain competitive in the international market?
2. Has the company taken the right decision to forward integrate and enter into the highly volatile
garment market?
Caselet 2
Examination Paper of Supply Chain Management
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IIBM Institute of Business Management
Popular mythology in the United States likes to refer to pre-World War II Japan as a somewhat
backward industrial power that produced and exported mostly trinkets and small items of dubious
quality bought by Americans impoverished by the Great Depression. Few bring up the fact that, prior
to the Pearl Harbor attack, Japan had conquered what are now Korea, Manchuria, Taiwan, and a large
portion of China, Vietnam, and Thailand; and by the end of 1942 Japan had extended its empire to
include Burma, the Philippines, Indonesia, Malaysia, Thailand, Cambodia, New Guinea, plus many
strings of islands in the eastern Pacific Ocean. Its navy had moved a large armada of worships 4,000
miles across the Pacific Ocean, in secret and in silence, to attack Pearl Harbor and then returned
safely home. Manufacturers capable of producing only low-grade goods don‟t accomplish such feats.
High-quality standards for military hardware, however, did not extend to civilian and export goods,
which received very low priority during the war years. Thus the perception in the United States for a
long time before and then immediately after the war had nothing to do with some inherent character
flaw in Japanese culture or industrial capability. It had everything to do with Japan‟s national
priorities and the availability of funds and material. Following Japan‟s surrender in 1945, General
MacArthur was given the task of rebuilding the Japanese economy on a peaceful footing. As part of
that effort an assessment of damage was to be conducted and a national census was planned for 1950.
Deming was asked in 1947 to go to Japan and assist in that effort. As a result of his association with
Shewhart and quality training, he was contacted by representatives from the Union of Japanese
Scientists and Engineers (JUSE), and in 1950, Deming delivered his now famous series of lectures on
quality control. His message to top industry leaders, whom he demanded to attend, and to JUSE was
that Japan had to change its image in the United States and throughout the world. He declared that it
could not succeed as an exporter of poor quality and argued that the tools of statistical quality control
could help solve many quality problems. Having seen their country devastated by the war, industry
and government leaders were eager to learn the new methods and to speed economic recovery.
Experience was to prove to Deming and others that, without the understanding, respect, and support
of management, no group of tools alone could sustain a long-term quality improvement effort.
1. How could have the SQC approach, been useful in solving the immediate problems of Japan?
2. If you were among one of the management members, what would have been your first insight?
END OF SECTION B
Section C: Practical Problems (30 marks)
 This section consists of Long Questions.
 Answer all the questions.
 Each question carries 15 marks.
1. A sample of 30 is to be selected from a lot of 200 articles. How many different samples are
possible?
2. In Dodge‟s CSP-1, it is desired to apply sampling inspection to 1 piece out of every 15 and to
maintain an AOQL of 2%. What should be the value of i?

THE REGINA COMPANY CASE STUDY SOLUTION

THE REGINA COMPANY CASE STUDY SOLUTION
THE REGINA COMPANY CASE STUDY SOLUTION
THE REGINA COMPANY CASE STUDY SOLUTION

The Regina Company„ one of the largest inakets of vacuum cleaners recent’) had scv cfc ptollkins
with the quality of its products. The market responsc to this 1ak of quality caused financial
problems for Ow company. in late 1995. Regina began having return rates as high as 30 to 50
percent on some of its Housekeeper and Housekeeper Plus models. These models were sold
primarily through discount stores. Further, Regina’s Spectrum vacuum cleaner, an upgraded
version sold in specialty stores, was introduced in 1995 with many quality problems. ef The specific
problems identified for the Housekeeper and Housekeeper Plus models were associated with faulty
belts and weak suction. In the Spectrum model, the agitator was melting; and making a loud noise,
the foot pedals were breaking, and the steel-encased motor (which had been advertised as the
IIBM Institute of Business Management

Examination Paper of Managerial Economics
power source for the vacuum cleaner) had been replaced with a less desirable. less reliable motor.
As a result of these problems, Target stores discontinued Regina’s Housekeeper Plus model after
reporting that “at least half of those sold were returned.” At Starmart, which accounts for about a
quarter of the Housekeeper sales, I. out of every 5 machines sold was returned. To help service
customer complaints, Regina set up an 800 telephone number for customers to contact the firm.
directly. The sales returns caused Regina’s shareholders to question the 1995 fiscal earnings report.
Furthermore, both inventories and accounts receivable doubled during the 1995 fiscal year. At the
end of that period, Regina’s chairman and 40 percent stockholders
Resigned. The chairman’s resignation was closely followed by a company announcement stating
that the financial results reported for the 1995 fiscal year were materially incorrect and had been
withdrawn. This announcement brought a suit from shareholders who had bought Reoina stock on
the basis of the 1995 camings report. It also prompted an audit of the 1995 results and a request to
another accounting organization to work on Regina’s business and accounting controls. A few
months later, Regina ‘agreed to be acquired by a unit of Magnum, a vacuum cleaner and Waterpurification Company. Under Magnum, Regina shut down production while engineers worked to
solve the problems inherent in the Housekeeper and Housekeeper Plus vacuums, particularly the
suction difficulties. In September 1998, Magnum and Regina decided to separate the two companies
again. Since then, Regina has been regaining market share with its Housekeeper models. The
‘vacuums are popular because they carry on-board tools.
Questions:
1. What type of controls would you have established to preclude the major returns
experienced by Regina? (10)
2. How would you have controlled the finished-goods -inventory to avoid its growing to twice
the size that it was in the previous year.

DABUR CASE STUDY ANSWER

DABUR CASE STUDY ANSWER
DABUR CASE STUDY ANSWER
DABUR CASE STUDY ANSWER

Dabur is among the top five FMCG companies in India and is positioned successfully on the
specialist herbal platform. Dabur has proven its expertise in the fields of health care, personal care,
home care and foods. The company was founded by Dr. S. K. Burman in 1884 as small pharmacy in
Calcutta (now Kolkata), India. And is now led by his great grandson Vivek C. Burman, who is the
Chairman of Dabur India Limited and the senior most representative of the Burman family in the
company. The company headquarter is in Ghaziabad, India, near the Indian capital New Delhi,
where it is registered. The company has over 12 manufacturing units in India and abroad. The
international facilities are located in Nepal, Dubai, Bangladesh, Egypt and Nigeria. S.K. Burman, the
founder of Dabur, was trained as a physician. His mission was to provide effective and affordable
cure for ordinary people in far-flung villages. Soon, he started preparing natural remedies based on
Ayurveda for diseases such as Cholera, Plague and Malaria. Due to his cheap and effective remedies,
he became to be known as ‘Daktar’ (Indian izedversion of ‘doctor’). And that is how his venture
Dabur got its name—derived from Daktar Burman. The company faces stiff competition from many
multinational and domestic companies. In the Branded and Packaged Food and Beverages segment
major companies that are active include Hindustan Lever, Nestle, Cadbury and Dabur. In case of
Ayurvedic medicines and products, the major competitors are Baidyanath, Vicco, Jhandu, Himani
and other pharmaceutical companies.
Vision statement of Dabur says that the company is “dedicated to the health and wellbeing of every
household”. The objective is to “significantly accelerate profitable growth by providing comfort to
others”. For achieving this objective Dabur aims to:
 Focus on growing core brands across categories, reaching out to new geographies, within
and outside India, and improve operational efficiencies by leveraging technology.
 Be the preferred company to meet the health and personal grooming needs of target
consumers with safe, efficacious, natural solutions by synthesizing deep knowledge of
Ayurveda and herbs with modern science.
 Be a professionally managed employer of choice, attracting, developing and retaining
quality personnel.
 Be responsible citizen with a commitment to environmental protection.
 Provide superior returns, relative to our peer group, to our shareholders.
Chairman of the company
Vivek C. Burman joined Dabur in 1954 after completing his graduation in Business Administration
from the USA. In 1986 he was appointed as the Managing Director of Dabur and in 1998 he took
over as Chairman of the Company.
IIBM Institute of Business Management

Examination Paper of Managerial Economics
Under Vivek Burman’s leadership, Dabur has grown and evolved as a multi-crore business house
with a diverse product portfolio and a marketing network that traverses the whole of India and
more than 50 countries across the world. As a strong and positive leader, Vivek C. Burman had
motivated employees of Dabur to “do better than their best”—a credo that gives Dabur its status as
India’s most trusted nature-based products company.
Leading brands
More than 300 diverse products in the FMCG, Healthcare and Ayurveda segments are in the product
line of Dabur. List of products of the company include very successful brands like Vatika, Anmol,
Hajmola, Dabur Amla Chyawanprash, Dabur Honey and Lal Dant Manjan with turnover of Rs.100
crores each.
Strategic positioning of Dabur Honey as food product, lead to market leadership with over 40%
market share in branded honey market; Dabur Chyawanprash is the largest selling Ayurvedic
medicine with over 65% market share. Dabur is a leader in herbal digestives with 90% market
share. Hajmola tablets are in command with 75% market share of digestive tablets category. Dabur
Lal Tail tops baby massage oil market with 35% of total share.
CHD (Consumer Health Division), dealing with classical Ayurvedic medicines, has more than 250
products sold through prescription as well as over the counter. Proprietary Ayurvedic medicines
developed by Dabur include Nature Care Isabgol, Madhuvaani and Trifgol.
However, some of the subsidiary units of Dabur have proved to be low margin business; like Dabur
Finance Limited. The international units are also operating on low profit margin. The company also
produces several “me – too” products. At the same time the company is very popular in the rural
segment.
Questions
1. What is the objective of Dabur? Is it profit maximisation of growth maximisation? (10)
2. Do you think the growth of Dabur from a small pharmacy to a large multinational company is an
indicator of the advantages of joint stock company against the proprietorship form? Elaborate.

Export Marketing CASE STUDY SOLUTION

Export Marketing CASE STUDY SOLUTION
Export Marketing CASE STUDY SOLUTION
Export Marketing CASE STUDY SOLUTION

Export Marketing:
The trade in black pepper is unhappy that exports may not show a sign of revival in prices in the
immediate future. World prices have been showing a downward trend for eighteen months and this has
resulted in much lower earnings for exporters. The UK, West Germany and the Netherlands have cut
their import requirement though the American demand has shown some growth. Brazil has been
resorting to aggressive selling at lower prices and the expectations are that its exports will reach an alltime peak of 32,000 tones in the 1981-82 season. The 1981-82 Indian season is only about six weeks
away. The Brazilian offensive has forced India to withdraw so to any from the US and West European
markets and increase its reliance on communist buyers. As many as 1980-81.the Soviet Union alone
accounting for 12,647 tones. But exporters are concerned at the diversion on such a scale of this trade.
Questions:
1. Had you been the pepper exporter, what would be your short term and medium-term export
marketing strategy in the above environment?
2. Could you examine the weak points in this case study?

SMART KIDS SELLING EDUCATIONAL GAMES AND RESOURCES TO THE WORLD CASE STUDY SOLUTION

SMART KIDS SELLING EDUCATIONAL GAMES AND RESOURCES TO THE WORLD CASE STUDY SOLUTION
SMART KIDS SELLING EDUCATIONAL GAMES AND RESOURCES TO THE WORLD CASE STUDY SOLUTION
SMART KIDS SELLING EDUCATIONAL GAMES AND RESOURCES TO THE WORLD CASE STUDY SOLUTION

SMART KIDS – SELLING EDUCATIONAL GAMES AND
RESOURCES TO THE WORLD
Smart Kids Ltd. An Auckland company that makes educational games and resources to read and
understand math‟s has won a Trade New Zealand Export Award for its success in international markets
in 2003.Established eight years ago in the family home basement, Smart Kids is led by husband and
wife team, joint chief executives David and Sun Milne and their sons Duncan and Frase. She Milne, an
ex-teacher, says from just 30 products when it started, the company produces more than 200 produces
catering for student‟s activities, grammar concepts and numeracy. She says the international appeal of
Smart Kids products was highlighted recently, when company‟s SMART PHONICS was listed amongst
the top five products out of almost 100 in the education trade show in the United Kingdom. The key
requirement for every new Smart Kids products is that it stimulates student‟s minds in the classroom,
teaches them a specific concept easily, enjoyably and permanently and enables problem solving. David
Milne says Smart Kids started selling its educational games and resources to New Zealand schools in
1995, drawings an immediate and strong response. It quickly became apartment that the New Zealand
market was not large enough to sustain considerable investment in product development, and secondly,
that their products have done so well that they deserved wider exposure.”Our export research came
down to two options. Find educational distributors in other countries or set-up our own operations. The
first option was less risky and easy to manage but it meant that Smart Kids products were lost in a wide
range of materials. So we went for the second option and over the next few years established offices in
Australia, in UK and Canada”. This has successfully branded Smart Kids as a leading supplier of
educational resources in these countries. Mr. Milne says the Smart Kids product catalogue is now sent
regularly to teachers in more than 50,000 schools across the UK, Ireland, Canada and Australia. “We
also sell to schools in the US. In that market we elected to work through a distributor, we didn‟t have
Examination Paper of Marketing Management
IIBM Institute of Business Management 4
the financial resources to set-up an operation that could cover almost 70,000 schools and compete with
every established educational publisher”. He says annual exports now exceed $2.2 million and account
for more than 90% of turnover. In order to grow the business, surplus profits are reinvested back into
product development, infrastructure – the company recently moved its Auckland operation into new
20,000 square feet premises in Ellerslie. Mr. Milne says the Smart Kids brand is now well established
internationally with the company enjoying many competitive advantages, including its New Zealand
origin. New Zealand education is highly regarded overseas and we find that international teachers to get
hold of educational products made in this country.
Questions:
1. What are the major considerations for a firm in order to while deciding its markets entry
strategy?
2. To what extent direct control and ownership are critical for Smart kids export distribution
strategy?

APEX ELECTRICAL COMPANY LTD CASE STUDY SOLUTION

APEX ELECTRICAL COMPANY LTD CASE STUDY SOLUTION
APEX ELECTRICAL COMPANY LTD CASE STUDY SOLUTION
APEX ELECTRICAL COMPANY LTD CASE STUDY SOLUTION

APEX ELECTRICAL COMPANY LTD.

Mr. Nathan, Sales Manager of Apex Electrical Co. Ltd. had just received a proposal from his Regional Manager at Bangalore for opening a sub-office in Madras and was considering what would be the best decision in the company’s short run as well as long run interest.
The company was in the business of manufacturing and marketing electric motors of a wide range of horse power that could be used as a prime mover in numerous applications. The company’s factory and head office were situated in Bombay and it had its branch offices at New Delhi, Calcutta and Bangalore, each headed by a Regional Manager.
The Regional Office at Bangalore was responsible for sales in Kar¬nataka, Tamil Nadu and Kerala. The company also maintained a godown at Bangalore which was used as the stocking centre for feeding sales in the complete region. The company’s distribution network had grown over several years and as such there was no one rule by which the arrangements could be explained. In Karnataka, due to the proximity of the Regional Headquarters, the distribution, network was closely controlled by the Regional Office. Company had several dealers covering the State and they all purchased goods directly from the Regional Office. All the dealers got a fixed percentage of discounts. The ultimate prices to the consumers were fixed by the company. Each dealer covered a specific area which was generally one to several districts and the company discouraged one dealer interfering in other’s territory. However, in main cities of Bangalore and Mysore, there was more than one dealer who collectively covered the sales in the city. The company salesmen regularly contacted the dealers and the office maintained good marketing information.

Questions:
1. What decision would you take if you were in place of Mr. Nathan?

2. Do you feel the proposal of a new sub-office is economically justified against the stated policy of the company? If yes, why? If no, then how could it be made justifiable?

ABC HANDLOOMS Ltd CASE STUDY SOLUTION

ABC HANDLOOMS Ltd CASE STUDY SOLUTION
ABC HANDLOOMS Ltd CASE STUDY SOLUTION
ABC HANDLOOMS Ltd CASE STUDY SOLUTION

ABC HANDLOOMS Ltd.

ABC Handlooms Ltd. (ABC) was established in the year 1991 to manufacture and market handloom furnishings throughout the country. Over the years, it has developed a wide network of handloom units in and around Delhi. ABC manufactures a wide range of furnishings catering to the needs of different strata of society. The pattern of sales of the company during the last three years was as under:
State Percentage Sale
Punjab
Haryana
U.P.
M.P.
Rajasthan
Other states and Union territories

total 65
5
10
10
5
5
100
The market for furnishings was highly competitive. ABC had not only to face competition from well established houses but it had also to face competition from various state government corporations. Besides, the product had to face competition with the imported material, which was freely available. Prices of different types of furnishings differed widely. Private and cooperative channels marketed different brands. The Coops accounted for more than 60 per cent of material sold. Though there was no brand loyalty yet a large manufacturer in Western India was able to market similar products at a marginal premium in Rajasthan and Madhya Pradesh.
Questions:
1. How do you explain the present situation faced by the company?

2. Was it a good idea to enter into a three-year contract with the Cooperative Society? Why?

3. Is it possible to renew the contract with the Cooperative Society? If so, how? Suggest a detailed programme on a crash basis with the budget constraint of Rs. 50, 00, 000.

THE CATERPILLAR TRACTOR COMPANY CASE STUDY ANSWER

THE CATERPILLAR TRACTOR COMPANY CASE STUDY ANSWER
THE CATERPILLAR TRACTOR COMPANY CASE STUDY ANSWER
THE CATERPILLAR TRACTOR COMPANY CASE STUDY ANSWER

THE CATERPILLAR TRACTOR COMPANY

Caterpillar Tractor Company (CTC) is a large manufacturing firm headquartered in Illinois, USA. Its familiar ‘CAT” logo and yellow paint are known throughout the world. Indeed in its business, CTC has an estimated 37% of world market. Its closest rival, Japan’s Komatsu has an estimated 15%. A multinational company CTC has manufacturing and dealer representatives throughout the world. The products, which the firm designs, manufactures and markets, can be classified into two basic segments:
Earth moving, construction and materials handling equipment-track type tractors, bulldozers, rippers, track and wheel type loaders, pipe layers, wheel dozers, compactors, wheel scrapers off highway trucks and tractors, motor graders, hydraulic excavators, long skidders, lift trucks and related parts and equipment.
Engines– for earth moving and construction machines on highways trucks, marine, petroleum, agricultural, industrial and electric power generation systems. Engines either, diesel or natural gas, have power ranges from 85 to 1600 horsepower or in generator set versions from 55 to 1200 kilowatts. Turbines range from 10 to 7,900 kilowatts.
CTC’s market success is based to a great extent on its four-point product strategy. First, advances technology is incorporated into machines so that users derive optimal productivity and efficiency. To maintain the flow of product application the organization commits hundreds of millions of dollars each year to research and development. A second product guideline is quality. Within the last ten years several billion dollars have been spent on plant and equipment to ensure reliability in the hostile environments the machines endure. The third aspect of product strategy is to offer a full line of products. This implies machines capable of performing on job sites as small as a residential plot or as large as the Alaskan product line offers over 100 different machines within nearly infinite option/modifications. The fourth and final principle of the product strategy is to design and build only machines that can be produced on an assembly line, to take advantage of manufacturing expertise and efficiency of Caterpillar plant and to provide significant economies of scale.
Questions to be answered
1. How important is new product development to Caterpillar?

2. What sources of new product ideas might a company like caterpillar use?

3. Evaluate CAT as a brand name.

4. Evaluate each of the four points of CTC’s strategy.

TRUST TOOTHPASTE CASE STUDY SOLUTION

TRUST TOOTHPASTE CASE STUDY SOLUTION
TRUST TOOTHPASTE CASE STUDY SOLUTION
TRUST TOOTHPASTE CASE STUDY SOLUTION

CASE 1 : TRUST TOOTHPASTE

Study the Case entitled “Positioning ‘Trust’ Toothpaste” and give your specific recommendations regarding the action to be taken by the company. Your decision must be based on a careful analysis of the situation given in the case and your answer should be precise and up to the point.

Positioning Trust’ Toothpaste

In September 1990, Mr. Sarin, the Marketing Manager of Deepa Products (P) Limited was wondering what marketing and product positioning strategy the company should follow for launching their two new brands of toothpaste. Trust Night and Trust Regular in a market which was becoming highly competitive.
Deepa Products (P) Ltd. was one of the successful manufacturers of various types of packaging materials for both industrial and consumer products. Established in 1960, the company has shown substantial growth over the years. Much of the company’s growth was attributed to the high quality of its products and also the systematic manner in which its marketing decisions were made.
In 1990, keeping in view the growing market for consumer goods, the top management of the company decided to diversify into new consumer products areas. In the first instance the company thought of entering into the toothpaste market. Depending upon their success in the market, the company would decide their expansion plans into other areas of consumer goods sector.
The company chose to enter toothpaste market simply because the market for toothpaste was growing fast almost by 15 to 20% in India and it provided enough profit opportunities. The market was dominated only by a very few players. Further Mr. Sarin felt that there was scope for capturing a significant market share in the growing toothpaste market, since the company’s products had some unique features to meet the emerging new market segments.
Questions
1. What marketing strategy should be designed by Mr. Sarin to be able to achieve the targeted 5% market share?

2. How should Deepa Products (P) Ltd. position Trust Regular and Trust Night to induce customers to buy it? What should be the key benefits of their toothpastes?

3. Should the company price its products economically, or should it aim for premium pricing?

IIBM MBA SUPPLY CHAIN MANAGEMENT EXAM ANSWER

IIBM MBA SUPPLY CHAIN MANAGEMENT EXAM ANSWER
IIBM MBA SUPPLY CHAIN MANAGEMENT EXAM ANSWER
IIBM MBA SUPPLY CHAIN MANAGEMENT EXAM ANSWER

Supply Chain Management
Section A: Objective Type & Short Questions (30 Marks)
 This section consists of Multiple Choice & Short Notes type questions.
 Answer all the questions.
 Part One carries 1 mark each & Part Two carries 2 marks each.
Part One:
Multiple Choices:
1. When demand is steady, the cycle inventory for a given lot size (Q) is given by_____
a. Q/4
b. Q/8
c. Q/6
d. Q/2
2. There are two firms „x‟ and „y‟ located on a line of distance demand(0-1) at „a‟ and „b‟
respectively, the customers are uniformly located on the line, on keeping the fact of splitting of
market, the demand of firm „x‟ will be given by,
a. (a+b)/2
b. a+(1-b-a)/2
c. (1+b-a)/2
d. a+(a-b)/2
3. Push process in supply chain analysis is also called_______
a. Speculative process
b. Manufacturing process
c. Supplying process
d. Demand process
4. If the Throughput be „d‟ and the flow time be „t‟ then the Inventory „I‟ is given by______
a. I *d=t
b. I=t+d
c. d=I*t
d. I =d*t
5. Forecasting method is_______
a. Time series
b. causal
c. Qualitative
d. All the above
6. Component of order cost include:
a. Handling cost
Examination Paper of Supply Chain Management
2
IIBM Institute of Business Management
b. Occupancy cost
c. Receiving costs
d. Miscellaneous costs
7. How many distinct types of MRO inventory are there:
a. One
b. Four
c. Three
d. Two
8. Supply chain driver is________
a. Inventory
b. Return ability
c. Fulfillment
d. All of above
9. SRM stands for________
a. Strategic Relationship Management
b. Supply Return ability Management
c. Supplier Relationship Management
d. None of the above
10. Discount factor equals to, where k is the rate of return.
a. 1/1+k
b. 2/1+k
c. 1/1-k
d. 1/2+k
Part Two:
1. Explain “zone of strategic fit”.
2. Explain “scope of strategic fit”.
3. What do you understand by “stimulation forecasting method”?
4. Write a note on “obsolescence (or spoilage) cost”.
5. Define “square law” in safety inventory of supply chain management.
6. What does the word “postponement” signifies in supply chain?
7. What do you understand by the term “tailored sourcing”?
8. Explain the term “outsourcing”.
9. Write a note on “threshold contracts” for increasing agent efforts.
10. What is “dynamic pricing”?
END OF SECTION A
Examination Paper of Supply Chain Management
3
IIBM Institute of Business Management
Section B: Caselets (40 marks)
 This section consists of Caselets.
 Answer all the questions.
 Each caselet carries 20 marks.
 Detailed information should form the part of your answer (Word limit 200 to 250 words).
Caselet 1
Orion is a global co. That sells copiers. Orion currently sells 10 variants of a copier, with all inventory
kept in finished-goods form. The primary component that differentiates the copiers is the printing
subassembly. An idea being discussed is to introduce commonality in the printing subassembly so
that final assembly can be postponed and inventories kept in component form. Currently, each copier
costs $1,000 in terms of components. Introducing commonality in the print subassembly will increase
component cost to$1.025.One of the 10 variants represents 80 percent of the total demand. Weekly
demand for this variant is normally distributed ,with a mean of 1,000 and a standard deviation of
200.Each of the remaining nine variants has a weekly demand of 28 with a standard deviation of
20.Orion aims to provide a 95per level of services .Replacement lead time for components is four
weeks. Copier assembly can be implemented in a matter of hours. Orion manages all inventories
using a continuous review policy and uses a holding cost of 20 percent.
1. How much safety inventory of each variant must Orion keep without component commonality?
What are the annual holding costs?
2. How much safety inventory must be kept in component form if Orion uses common components
for all variants? What is the annual holding cost? What is the increase in component cost using
commonality? Is commonality justified across all variants?
3. At what cost of commonality will complete commonality be justified?
4. At what cost of commonality will commonality across the low-volume variants be justified?
Caselet 2
An electronic manufacturer has outsourced production of its latest MP3 player to a contract
manufacturer in Asia. Demand for the players has exceeded all expectations whereas the contract
manufacturers sell three types of players- a 40-GB player, a 20-GB player, 6-GB player. For the
upcoming holiday season, the demand forecast for the 40-GB player is normally distributed, with a
mean of 20,000and a standard deviation Dard deviation of 11,000, and the demand forecast for the 6-
sGB player has a mean of 80,000 and a standard deviation of 16,000. The 40-GB player has a sale
price of $200, a production cost of $100, and a salvage value of $80 .The 20-GB player has a price of
$150, a production cost of $70, and a salvage value of $50.
1. How many units of each type of player should the electronics manufacturer order if there are no
capacity constraints?
2. How many times of each type of player should the electronics manufacturer order if the available
is 140,000? What is the expected profit?
END OF SECTION B
Examination Paper of Supply Chain Management
4
IIBM Institute of Business Management
Section C: Applied Theory (30 marks)
 This section consists of Long Questions.
 Answer all the questions.
 Each question carries 15 marks.
 Detailed information should form the part of your answer (Word limit 150 to 200 words).
1. Consider two products with the same margin carried by a retail store. Any leftover units of one
product are worthless. Leftover units of the other product can be sold to outlet stores. Which
product should have a higher level of availability? Why?
2. McMaster-Carr sells maintenance, repair, and operations equipment from five warehouses in the
United States. W.W. Grainger sells products from more than 350 retail locations, supported by
several warehouses. In both cases, customers place orders using the Web or on the phone. Discuss
the pros and cons of the two strategies.

IIBM MBA LOGISTICS MANAGEMENT EXAM ANSWER

IIBM MBA LOGISTICS MANAGEMENT EXAM ANSWER
IIBM MBA LOGISTICS MANAGEMENT EXAM ANSWER
IIBM MBA LOGISTICS MANAGEMENT EXAM ANSWER

Logistics Management
Section A: Objective Type & Short Questions (30 Marks)
 This section consists of Multiple Choice & Short Note type questions.
 Answer all the questions.
 Part One carries 1 mark each & Part Two carries 5 marks each.
Part One:
Multiple Choices:
1. Analysis method in which evaluation of alternative design configuration using multiple
criteria is_________
a. Level of repair analysis
b. Maintenance task analysis
c. Evaluation of design alternatives
d. None of the above
2. Orientation of Logistic are________________
a. Product among organization
b. Total benefits among organization
c. Towards managing of labour
d. Towards managing the physical flow of material & product among organization
3. LMI stands for_______________
a. Logistics Management Information
b. Legal Management Information
c. Logistics Managerial Information
d. None of the above
4. Technical performance measures (TPMs) is applied for_____________
a. Evaluation of prime mission related system & elements for expenses
b. Evaluation of prime mission related system & elements for labour
c. Evaluation of prime mission related system & elements for support
d. None of the above
5. System structure should facilitate:
a. Design on an evolutionary basis
b. Design a system with in a minimum cost
c. Design on an evolutionary basis & with minimum cost
d. Both (a) & (b)
6. Conceptual design is initiated in response of_________
a. Identification of customer need
b. Identification of consumer demand
Examination Paper of Operations Management
IIBM Institute of Business Management 5
c. Identification of Industry demand
d. None of the above
7. Industrial engineering refers to_______________
a. Design & development of a product
b. Design & development of industrial tools
c. Design & development of expenses
d. Design & development of production capability
8. Contractor logistic support (CLS) refers to_______________
a. System maintenance activities
b. System evaluation activities
c. Both (a) & (b)
d. None of the above
9. Discounting refers to______________
a. Application of selected rate of interest
b. Application of selected difference measure
c. Application of selected of interest & measure differences
d. None of the above
10. A plan which is directed towards covering of logistic support for a system is_______
a. System Retirement Plan
b. Post production Support plan
c. Facilities plan
d. Computer Resource plan
Part Two:
1. Personal training requirement are based on what factor?
2. What is meant by Design criteria? Provide some examples?
3. Briefly describe evaluation of logistic’s elements?
4. What are the advantages & disadvantages of functional organization?
END OF SECTION A
Section B: Caselets (40 marks)
 This section consists of Caselets.
 Answer all the questions.
 Each caselet carries 20 marks.
 Detailed information should form the part of your answer (Word limit 200 to 250 words).
Caselet 1
Examination Paper of Operations Management
IIBM Institute of Business Management 6
Company Profile
Indian Steels Limited (ISL) is a Rs 6000 crore company established in the year 1986. The company
envisaged being a continuously growing top class company to deliver superior quality and cost effective
products for infrastructure development. The company performed with a mission to attain 7 million ton
liquid steel capacity through technological up-gradation, operational efficiency and expansion; to produce
steel with the international standards of cost and quality; to meet the aspirations of the stakeholders. The
production started in the year 1988 and initially, it manufactured Angles, Pig Irons, Beams and Wire Rods
that were mainly used for constructing roads, dams and bridge. The products were mainly supplied to
Public Sector Undertaking such as Railway ,Public Work Department (PWD), Central Public Work
Department (CPWD), Rashtriya Setu Nigam, Audyogik Kendrya Vikas Nigam Ltd.and various foundry
units. The company had its headquarters at Raipur with three stockyards
The company has establish itself well and is said to be considering its expansion plan and proposed
merger with another steel making giant in the country. The company was awarded ISO 9001, ISO 14001
and ISO 18001 certifications. The temperature in the plant premises is reportedly about 6 degrees Celsius
lesser than that of the township, thanks to the greenery being maintained therein.
Logistics Outsourcing
Outbound logistics, which basically connects the source of the supply with the sources of demand with an
objective of bridging the gap between the market demand and capabilities of the supply sources, was
always a problem for companies operating in this industry. Consisting of components like warehousing
network, transportation network, inventory control system and supporting information systems, outbound
logistics was always playing a key role in making the right product available at the right place, at the right
time at the least possible cost. In 1996, owing to the cut throat competition in the emerging dynamic
global markets, ISL emphasized on both effectiveness and efficiency. The company strongly believed in
focusing on its core competency and outsourcing the rest to its reliable partners. Outsourcing of its
outbound logistics was one such move in the direction.
Recognizing the growing demand for its products from the big, diversified and geographically dispersed
customers, the company started expanding the number of warehousing stockyards. From a humble
beginning, the company today has 26 stock yards; most of them is outsourced. Each of the outsourced
stockyards was managed by the third party, which the company referred to sa Consignment Agent in the
area. The CA was selected on the annual basis through competitive bidding process. The performance of
CA was closely monitored by a company representative. The CA was responsible for the entire
distribution of the products within the geographical limits of the allotted market segments and was paid
by the company according to the loads of transaction dealt by him. Based on the sales turnover, CAs were
trifurcated into A, B, and C categories. The CAs with a monthly turnover of Rs 150-200 crore fell under
A category, whereas those with Rs 100-150 crore were B and less than Rs 100 crore were C category.
In addition to the company representative, a team of marketing division operated in the town where the
site of CA was located. This department was responsible for estimating the-future demand, translating it
into orders and sending to the manufacturing plant. Material dispatch was done using either one or a
combination of the two modes: rail, road. While rail as the mode of transportation, the company had a
choice to book a Normal Rake or a Jumbo Rake. At times, the company was engaging the services of the
CONCOR (Container Cooperation of India) where a train of 62 to 70 wagons, each wagon with about
26tonnes capacity was used for transportation. Instead, if the company decided to send the material by
road, the company had a choice between Trailer (25 to 30 tones) and Truck (52 to 20 tones). The choice
of transportation mode was majorly based on the quantity of dispatch.
Examination Paper of Operations Management
IIBM Institute of Business Management 7
As soon as the material was dispatched from the manufacturing plant, the respective CA used to get a
Stock Transfer Chalaan electronically through Virtual Private Network, which was develop by a
professional software service provider. In-transit, monitoring was generally done with the help of Indian
railways, if the mode was Rail. Otherwise, truck/trailer drivers were contact through mobile phones.
Transit generally took 5-6 days, providing time for CA took plan for receiving material. The CA use to
utilize this time for arranging material handling devices like: Heavy cranes and required labour. The
material thus unloaded was reaching the warehousing stock yard where CA was responsible for arranging
the material as per the warehousing norms of ISL.
The company broadly classified materials into Long Products and Rounds. Products following into each
category were further classified by their size, shape and utility and the company used a distinct colour
code for this purpose. Each sub category of material had a specific place for down loading. The company
used Bin System for this purpose. While downloading the material in stockyard, the company norms
insisted that CA arrange for providing Dunnage Material. This unable the CA to store material without a
direct contact with land surface and thus reduced the probability of material deterioration. Material was
stored in the stockyard until an authorized representative of the customer used to come and collect it.
While dispatching material to the customer, a Loading Slip was generated against the Delivery Order. The
company also belived in maintaining long-term relationships with the suppliers as well as the buyers. It
always prioritized the needs of its regular and important customers over others and this worked out to be a
win-win strategy.
Operational problems were majorly because of uncertainties in transportation, fluctuations in supply of
electricity and the load bearing capacity of the soil in the stockyard. Some more problems were
encountered whenever there was a change in CA and these were overcome by training the employees of
the new CA and keeping the old CA responsible for the material in his stockyard for six months after the
contract as well. Observations reveal that, at times there were situations wherin CAs had to do those
things which they were not legally supposed to do because of the pressures mounted by political leaders
with selfish interests.
Conclusions
Despite these problems, this model of outsourcing logistics was working out very well for the company.
The practices, which were started in the year 1996 have sustained major changes in the environment and
are being practiced even in 2006. It has enhanced the supply chain competency of the company by
enabling it leverage more on its core competency, which leads to increased productivity.
1. Analyze the case in view of the logistics outsourcing practices of the ISL?
2. Discuss the importance of logistics outsourcing with reference to supply chain management?
Caselet 2
Introduction
S.K Das established ABC Pharma in 1961 in New Delhi, marketed antibiotics and became brand leaders
in Amphicilin and Cephalexin orals. The company went public in the year 1973. In 1983, ABC
established a plant in Mandideep (MP, India) with various dosage form facilities. In 2004, it became
India’s largest pharmaceutical company, manufacturing and marketing world-class generics, branded
generic pharmaceuticals and active pharmaceutical ingredients. It was ranked amongst the top 10 generic
companies worldwide. The company’s product were sold in over 100 countries with manufacturing
operations in 7 countries and ground presence in 44. The company had an expanding international
Examination Paper of Operations Management
IIBM Institute of Business Management 8
portfolio of affiliates, joint ventures and representative offices across the globe with joint venture/
subsidiaries in US, UK, Germany, France, Spain, Ireland, Netherlands, India, China, Brazil, South Africa,
etc.While ABC aggressively pursued the internationalization of its business, the growth strategy equally
foucoused on enhancing market share n India. The company had a strong brand marketing team and
distribution network in India.
Milestones
By the end of December 31, 2004, global sales had reached US $ 1178 million and registered a growth of
21%. Overseas market accounted for 78% of the global sales. US accounted for 36%, while Europe and
BRIC (Brazil, Russia, India and China) countries contributed 16% and 26% to global sales, with a
combined turnover of US $924 million. The company’s vision was to achieve significant business in
proprietary prescription products with a strong presence in developed markets. It also aspired to be
amongst the top 5 generic players with a US $5 billion sale by next decade. To translate these objectives
into reality and to optimize value creation, the Company had adopted a multi-pronged strategy. The major
thrust areas for future were acquisition of brands overseas, emphasis on brand marketing in the US and
Europe and entering high potential new marets with value added product offerings.
The company had established state-of-the-art multi-disciplinary R&D facilities at Gurgaon, India. ABC
was one of the largest investor on R&D in the Indian pharmaceutical industry, with 7% of its sales during
2004. The company’s major research focus was in the areas of Urology, Anti-invectives, Respiratory,
Anti-inflammatory and Metabolic disorders segments. ABC’s continued focus on R&D had resulted in
several approvals in developed markets and significant progress in New Drug Delivery Response
(NDDR).
Fourth Party Logistics (4PL)
The company believes in building strong and long term relationships with limited number of logistics
service providers. They also focoused on outsourcing the activities like warehouse management, packing
and custom clearance through Freight Forwarders. They always believed in their core competencies. The
logistics service providers took care of storage and inventory management and ensured the availability of
the right product at the right place and at right time. Through outsourcing, they achieved focus on the core
competencies, cost saving, effective supply chain management, cross-pollination of better available
practices and wider and effective geographical coverage. The company practiced Fourth Party Logistics
(4PL) services by providing ERP as a backbone system for the third party logistics service providers. The
palette packing services were outsourced from a local company including the packing material. The
responsibility of complete documentation and custom clearance for import and export of goods had also
been outsourced through Custom House Agents (CHA) and Freights Forwarders (FF) under the
supervision of GM – Global Supply Chain.
The warehouse management was done with the help of Bar-code Technology, which facilitied in tracing
of materials on a single click of a mouse resulting into smooth inward and outward flow of materials. In
future, ABC was planning to have Radio Frequency Identification (RFID) Technology to manage the
warehouse activities in a more effective and efficient manner. The company had divided its global
operations into four regions viz., R1-Middle East with headquarter at India; R2-CIS, Africa and Europe
with headquarter at London; R3-Far East ad Latin America with headquarter at Singapore; R4-US with
headquarters at New York on the basis of convenience, market potential and market share.
Collaborative Relationship
The company established its global supply chain hub at Mandideep (near Bhopal, India). They managed
their operations with one GM-Supply Chain, one Senior Manager Commercial and four Shipment
Officers. Each Shipment Officer had four support employees outsourced through freight forwarders.
These people were responsible for the day-to-day activities under the administrative control of ABC. GM-
Examination Paper of Operations Management
IIBM Institute of Business Management 9
Supply Chain was responsible for managing the relations with Supply Chain Partners, Freight forwarders
and Custom House Agents (CHA). The company had been a pioneer in launching the genetic versions of
products on the same day at which the product to get off patent, which helped them in getting an edge
over competitors. They managed to maintain the dignity, discipline and business ethics without violating
the laws of patent. This was possible because of the strong and long term relationship with logistic service
providers. There was a strong level of belonging, faith and trust amongst the supply chain partners. To
maintain the good relations, the company practiced making timely payments to the service providers.
They also opened the account in the same bank in which the service providers had their account so that
prompt money transfer could take place. As a result of this, service providers were so concerned about the
shipments of the company that they dedicated 25 refrigerated cargos each equipped with location tracking
facility to track the status of the shipments.
The relationship and commitments of service providers was endorsed on January 10, 2003 when Ramipril
was going off patents in Europe. ABC having strong presence n Germany wanted to encash the
oppournity by making its Rampril available in Germany right on January 11, 2003, so as to take lead in
available generic market. However, ABC did not know the number and size of competition they would be
facing. The underlying fear of getting the shipment late and therby losing the advantage of being first was
very clear on the faces of ABCs top managers. The task was urgent and important; any delay in
availability was to cost heavily. The D-day was January 10, 2003 and the shipment was to be airlifted
from Mumbai so as to reach Germany after midnight of January 10, 2003 but before dawn of January 11,
2003. Two Boeing were chartered to lift the goods from Mumbai Airport, but the task was not simple, as
the goods were to be surface transported from Mandideep to Mumbai in a carvan of 70 cargos. To worsen
the things, the transporters had announced strike during that period.
The urgency was briefed to freight forwarder, who was caught between relationship with ABC and
membership of the Transporters’ Association. He had the option of pleasing any one of them.
The long association and the relationship with ABC got priority and the freight forwarder assured ABC’s
Senior Commercial Manager to carry out the assigned responsibility. Going against the directives of
association, the freight forwarder contacted the police authorities and obtained a security cover
throughout Maharastra. The freight owner consider himself as one of the responsible members of ABC
and was personally receiving the cargo and getting it loaded at Mumbai airport. The scheduled departure
had a lead-time of two days. However, he freight forwarder insisted and stayed at Mumbai at his own cost
to see the goods leaving India successfully. It was a mission for ABC and the freight forwarder in which
collaborative relationship surpassed all limitations and the goods landed in Germany-just-in-time.
1. What modification would you suggest in enhancing the existing logistics system?
2. Critically analyze the efforts of ABC in launching generic versions of products going off
patents?
END OF SECTION B
Section C: Applied Theory (30 marks)
 This section consists of Long Questions.
 Answer all the questions.
 Each question carries 15 marks.
 Detailed information should form the part of your answer (Word limit 150 to 200 words).
1. Define Logistic support in the context of the production /construction phase. What are
Examination Paper of Operations Management
IIBM Institute of Business Management 10
the elements of Logistic support?
2. Define reliability & maintainability. What are their major characteristics?

Barry and Communication Barriers CASE STUDY SOLUTION

Barry and Communication Barriers CASE STUDY SOLUTION
Barry and Communication Barriers CASE STUDY SOLUTION
Barry and Communication Barriers CASE STUDY SOLUTION
Barry and Communication Barriers Effective Communication as a Motivator One common
complaint employees voice about supervisors is inconsistent messages – meaning one
supervisor tells them one thing and another tells them something different. Imagine you are the
supervisor/manager for each of the employees described below. As you read their case, give
Examination Paper of Business Communication
IIBM Institute of Business Management
consideration to how you might help communicate with the employee to remedy the conflict.
Answer the critical thinking questions at the end of the case then compare your answers to the
Notes to Supplement Answers section. Barry is a 27-year old who is a foodservice manager at a
casual dining restaurant. Barry is responsible for supervising and managing all employees in
the back of the house. Employees working in the back of the house range in age from 16 years
old to 55 years old. In addition, the employees come from diverse cultural and ethnic
backgrounds. For many, English is not their primary language. Barry is Serv Safe® certified and
tries his best to keep up with food safety issues in the kitchen but he admits it’s not easy.
Employees receive “on the job training” about food safety basics (for example, appropriate
hygiene and hand washing, time/temperature, and cleaning and sanitizing). But with high
turnover of employees, training is often rushed and some new employees are put right into the
job without training if it is a busy day. Eventually, most employees get some kind of food safety
training. The owners of the restaurant are supportive of Barry in his food safety efforts because
they know if a food safety outbreak were ever linked to their restaurant; it would likely put
them out of business. Still, the owners note there are additional costs for training and making
sure food is handled safely. One day Barry comes to work and is rather upset even before he
steps into the restaurant. Things haven’t been going well at home and he was lucky to rummage
through some of the dirty laundry and find a relatively clean outfit to wear for work. He admits
he needs a haircut and a good hand scrubbing, especially after working on his car last evening.
When he walks into the kitchen he notices several trays of uncooked meat sitting out in the
kitchen area. It appears these have been sitting at room temperature for quite some time. Barry
is frustrated and doesn’t know what to do. He feels like he is beating his head against a brick
wall when it comes to getting employees to practice food safety. Barry has taken many efforts to
get employees to be safe in how they handle food. He has huge signs posted all over the kitchen
with these words: KEEP HOT FOOD HOT AND COLD FOOD COLD and WASH YOUR HANDS
ALWAYS AND OFTEN. All employees are given a thermometer when they start so that they can
temp food. Hand sinks, soap, and paper towels are available for employees so that they are
encouraged to wash their hands frequently.
Questions
1. What are the communication challenges and barriers Barry faces? (10)
2. What solutions might Barry consider in addressing each of these challenges and barriers? (10)

Embracing and pursuing change CASE STUDY ANSWER

Embracing and pursuing change CASE STUDY ANSWER
Embracing and pursuing change CASE STUDY ANSWER
Embracing and pursuing change CASE STUDY ANSWER
Embracing and pursuing change
Introduction
AEGON UK is part of one of the world’s largest pension and insurance groups. The AEGON Group has over 27,000 employees. It has over 25 million customers worldwide. In the UK it has grown its customer base. It has also bought other businesses. Its aim is to become ‘the best lone;-term savings and protection business within the UK’. To achieve this, it is keen to change in order to improve. AEGON also needed to raise its profile in the UK. The companies which it bought, such as Scottish Equitable, tended to keep their own brand image. AEGON therefore needed to build on the global strength of the Group.
External factors
External factors are those outside the control of the business. It is vital for businesses to be aware of these changes. Changes that have affected AEGON include:
* people are living longer so need better pensions
* the insurance industry has had a poor reputation. In some cases the wrong products for people’s needs were sold. This is called miss-selling. As a result, the Financial Services Authority (FSA) made regulation tighter.
* financial products can be hard for people to grasp
Investment returns have been less than predicted. Many people have therefore not ended up with the sums that they had hoped for
There is a lot of competition in the industry.
Why change?
Government imposed price controls reduced profitability. Also. AEGON was not a well-known brand. It needed to be better known before consumers would see it as a good place for long-term investment. AEGON went through a ‘discovery’ phase. This was to find out what it needed to do to reach its aim. It set out to find out:
* what the brand stood for in the UK

• what they wanted it to stand for
• how they were going to reach this.

A brand audit was used. This looked at AEGON both from within and outside. This information could then be used to plan change.
Creating a culture

The culture of an organization refers to the way that it works. AEGON created a culture of change. AEGON needed to do well financially. This was linked to raising awareness of the brand and building on AEGON’s global strength. This meant:
* financial services in simpler forms that customers could grasp
* a workforce improved through training and development. This would b•, better able to manage change
* a more distinct market presence.
AEGON developed a framework to help all its staff support its brand values.

Implementing change
AEGON used a number of methods to achieve the
* external promotional campaigns
* the new Chief Executive (C1 O) talked to the media about the need for change
* new and innovative products were launched,
AEGON’s success can be seen through the record results, increased new business and growth in earnings.
Conclusion
AEGON recognized a need to give itself a greater market presence. The change has made the organization much more customer focused. As a result it is more effective.
Issues for discussion.
1. What are the external factors influencing the change. Discuss
2. Identify the reasons for change
3. Creating a new culture is a key part of the change process
4. Carry out the implementation of the above.

INTERNATIONAL TRADE CASE STUDY SOLUTION

INTERNATIONAL TRADE CASE STUDY SOLUTION
INTERNATIONAL TRADE CASE STUDY SOLUTION
INTERNATIONAL TRADE CASE STUDY SOLUTION

International trade
For centuries Britain has been a country that relies on international trade. We purchase goods and services from other countries and in return we sell them goods and services produced here. An import is a purchase by UK citizens from overseas. An export is a sale by UK citizens to a member of another country.
Visible and invisible trade items
For the purpose of classification we call the tangible goods that we trade visible items. We call the services that we trade invisible items. Exports bring currency into the UK whereas imports lead to an outflows of currency.
The UK has always done well on her invisible account. This is because we developed a world-wide reputation for commercial services. Some of our major invisible earnings come from the following:
* Selling insurance policies through Lloyd’s.
* Bank services to foreigners,
* Tourists spending money in the UK.
On the news every month we hear that the UK has made a surplus on invisible trade showing that we have sold more invisible services than we have bought. The accounts for a particular month might show:
* Invisible exports ?100 billion
* Invisible imports ?80 billion
* Invisible surplus f20 billion
At the same time the UK frequently makes a loss on her visible trade.
A typical current account showing the UK’s trading with the rest of the world in a given period, may therefore look like the following:
Visible exports 500 Invisible exports 400 Total exports 900
Visible imports 650 Invisible imports 200 Total imports 850
Visible balance -150 Invisible balance 200 Current balance 50
The current account of the UK balance of payments gives a good guide to current trading in visible and invisibles with the rest of the world.
Issues for Discussion
1. Analyze the case at length

SUSTAINABLE BUSINESS AT CORUS CASE STUDY SOLUTION

SUSTAINABLE BUSINESS AT CORUS CASE STUDY SOLUTION
SUSTAINABLE BUSINESS AT CORUS CASE STUDY SOLUTION
SUSTAINABLE BUSINESS AT CORUS CASE STUDY SOLUTION

Sustainable business at Corus
Introduction
Corus is the UK’s biggest steel manufacturer. Even so, it still has to compete. In 2004 it launched a programme to make itself more efficient. Part of the program, called ‘Restoring Success’, focuses on recycling steel. The world economy is growing. The demand for steel has increased as more nations such as India and China have grown. Recycling as part of sustainable development has thus become vital. It has become a main concern for Corus.
What is sustainable?
Sustainable development is linked to resources. It means leaving at least as much for the future as we had to start with. This shows respect for the environment. It also shows thought the future. Everyone should try to aim for sustainability. This includes governments, businesses and people.
Recycling
Steel can be recycled over and over again with no loss of quality. This makes it stand out in terms of sustainability. It is easy to extract steel from waste because of its unique magnetic properties and recycle it from scrap. By recycling steel Corus helps to:
* preserve natural resources
* protect the environment
* meet targets for reducing waste.
Corus is working hard to make the public aware of what can and should be recycled. Steel can be recycled from drink and food cans, lids, paint cans and aerosols. Not everyone knows what can be recycled. For instance, 57% of consumers recycle drinks cans but only 7% recycle aerosols. Corus is working to develop a ‘closed loop’ for steel.
The steel would go from consumers to recycling plants, then into production and back to consumers.
Stakeholders
Corus sees that there are two sides to recycling. There are gains, but there can also be extra costs. To keep all of its stakeholders happy, it must balance these. There are effects on :
the planet. Fewer resources are used but energy is needed to recycle
* consumers. They have a smaller carbon footprint but more time is needed to recycle
* employees. More are involved in recycling
*communities. Less waste is stored in landfill but there may be noise from recycling plants.
Gains include lower production costs, governments hitting recycling targets and all of us having a better planet to live on.
Costs and benefits
It is possible to weigh up costs and benefits. A monetary value can be put on them. Businesses want gains to outweigh costs. Corus gains from recycling. Socially. Corus gains a good reputation. There is reduced impact on the environment, lower energy use and less waste. There are also costs. These include the cost of recycling and of collecting and sorting waste steel. Corus has created a number of targets to help measure its success. These are called Key Performance Indicators. They include
• Corus’ UK energy use being reduced to less than 1997 levels
• an increase in the steel recycling rate to 55%.

Conclusion
Corus works to recycle as much as it can. This helps towards greater sustainability. It shows concern for all its stakeholders. Consumers can also help by recycling as much as they can.
Issues for Discussion
1. What is sustainability and whose responsibility is it?
2. Describe three actions that an individual can take to support sustainability and two actions that a business can take?
3. Steel lends itself to recycling. What actions could be taken to increase public awareness of steel recycling?
4. Recommend actions that individuals and businesses can take to enhance the closed loop ‘steel to steel’ recycling process.
5. Recommend ways in which the benefits of steel recycling can be increased compared to the costs of recycling steel.

CREATING WORLD CLASS QUALITY STANDARDS CASE STUDY SOLUTION

CREATING WORLD CLASS QUALITY STANDARDS CASE STUDY SOLUTION
CREATING WORLD CLASS QUALITY STANDARDS CASE STUDY SOLUTION
CREATING WORLD CLASS QUALITY STANDARDS CASE STUDY SOLUTION
Creating world class quality standards
Introduction
Customers expect to be able to buy products that meet certain standards. Standards can be written down and published for use by manufacturers and service providers. They can be used as guidance. BSI stands for British Standards Institution. It was the world’s first Standards body, and is the National Standards Body for the UK. BSI works in three main fields:
. Setting British and international standards
. Product testing
. Quality management systems (QMS)
Standards are based on agreed best practice. Businesses are keen to use standards to show they have a place in global markets. There are thousands of standards covering all manner of goods and services.
Quality
A quality product or service does what the customer wants it to do. This may differ from market to market. For instance, a cheap football provides enough `quality’ for a village match. For a league match, a better ball would be needed. Many organizations try to build quality into everything they do. They do this by using a QMS. This provides a framework that helps the business to improve in all areas. BSI helps organizations to identify best practice and translates this into standards. BSI publishes almost 20,000 standards and each year adds 2,000 new or revised standards to this list.
The importance of standards
Standards exist at a number of levels. These include:
* International Standards, (ISO). These need to be agreed between countries, so are the most complex
* European Standards (EN)
* British Standards (BS).
BSI contributes to all three.
Standards help protect consumers’ safety. They also promote research. They promote the sharing of knowledge. They help businesses to compete. In markets where it is hard to compete on price, businesses can use standards to help them compete on quality.
The Kitemark
BSI is independent. It works with both the private and public sector. It makes sure that safety and quality standards in the UK and around the world are built into products. BSI also owns the famous Kitemark symbol which you see on many products. It shows that a business has had a product tested to the relevant standard. Schemes cover various products and services. Examples include lighting, 13 amp plugs, motor cycle helmets and car repair garages. The Kitemark shows that the business sees safety and quality as vital. It shows the customer that the product or service has been tested and has reached the relevant Standard. Other symbols are required by law, for instance, CE marking. This shows that a product conforms to certain European Union regulations.
Processes
ISO 9001 is a key international standard. It shows that the business uses a QMS. It shows that quality is built into all aspects of operations. This must include all systems, whether inside or outside of the business. It therefore includes suppliers. There are eight quality measures that must be met to gain certification to ISO 9001.
Conclusion
Products include both goods and services. These can be made, operated and sold on a global basis. International standards for them are therefore vita. BSI helps to create these standards. Standards help businesses to build good reputations based on quality, safety and reliability.
Issues for Discussion
1. What do you understand by the term `quality’ in relation to a product you buy?
2. What is the BSI Kitemark? How might this help you to choose a product to purchase?
3. How might meeting the Standard ISO 9001 help a business to gain a competitive advantage over a rival?
4. Assume that you have developed a new manufacturing process – how might the BSI help you to develop this process?

ARKA JAIN MBA CASE STUDY ANSWER SHEETS PROVIDED

ARKA JAIN MBA CASE STUDY ANSWER SHEETS PROVIDED
ARKA JAIN MBA CASE STUDY ANSWER SHEETS PROVIDED
ARKA JAIN MBA CASE STUDY ANSWER SHEETS PROVIDED

SUB: CONSUMER BEHAVIOUR

N. B. : 1) Attempt all Four Case studies
2) All questions carry equal marks.

CASE STUDY 1

Kellogg India ltd.

Top mangers of Kellogg India ltd received unsettling reports of a gradual drop in sales. Managers realized that it would be tough to get the Indian consumer to accept its products. Kellogg banked heavily on the quality of its crispy flakes. But pouring hot milk on the flakes made them soggy and did not take good and not many Indian consumers like to have them with cold milk.

A typical average middle class Indian family did not have breakfast on regular basis like their wetern counterparts. Those who did have breakfast, consumed parathas, idlis , bread, butter, jam, milk tea and local food preparations. According to analysis, a major reason for kellogg’s failure was the fact that the tastes of its product did not suit Indian breakfast habits. Kellogg sources were however quick to assert that the company was not trying to change these habits; the idea was only to launch its products on the health platform and make consumers see the benefit of this healthier alternative. Another reason for low demand was premium pricing adopted by the company

Disappointed with the poor performance, Kellogg decides to launch two of its highly successful brands- chocos and frosties in India. The success of these variants took even Kellogg by surprise and sales picked up significantly. This was followed by the launch of chocos breakfast cereal biscuits.

The success of chocos and Frosties also led to kellogg’s decision to focus on totally Indiansing its flavors in the future. Kellogg also introduced packs of different sizes to suit Indian consumption patterns and purchasing power.

Kellogg tied up with the Indian diet association to launch a nation wide public service initiative to raise awareness about iron deficiency problems. The company has also modified its product, particularly the addition of iron fortification in breakfast cereals.

However, Kellogg continued to have the image of a premium brand and its consumption is limited to a few well of sections of the Indian market.

Question

Question 1:- How effectively Kellogg has met conditions of marketing concept?

Question 2:- Suggest ways how Kellogg can have more influence on consumption behavior of Indian consumer?

Question 3:- SWOT Analysis of Kellogg?

CASE STUDY 2

Amway’s Relationship with Stakeholders

Amway is one of the largest direct sales companies in the world. It continues to be a family owned business which was founded in 1959. Today, it employs 14,000 people worldwide and markets over 450 product lines. Its vision is to help people lead better lives. Its success is largely due to its three million ABOs (Amway Business Owners) spread across 80 countries. Thanks to Amway, these people have a business of their own.
The only shareholders of Amway are the families that own Amway. The communication channels used by Amway to communicate regularly with its internal and external stakeholders are websites, email, events, publications and membership of trade bodies.

Amway sells directly to consumers, without the presence of retail outlets. It has its own supply chain through the ABOs. Amway seeks regular feedback from the ABOs and customers to find out how well it is doing and to improve service. The ABOs are independent small businesses, but depend on Amway suppliers to produce quality products.

Amway’s involvement with communities is a part of its vision to ‘help people lead better lives’. It promotes its corporate social responsibility (CSR) all over the world. Corporate social responsibility at Amway involves supporting social causes, acting in an ethical manner by making good products and supporting its stakeholders in a number of ways. For example, Amway has partnered with the children’s charity UNICEF. It helps provide vaccinations to fight the world’s six most deadly diseases. It has chosen this charity because of its ABOs’ concern about families.

Ethical businesses get actively involved in improving the communities where they work. Amway’s business ethics not only provides a clear framework within which to work, but also gives it a positive business advantage. Its ‘One by One’ program is good for both the environment and for business. This program supports organic farming, seeks to reduce waste and packaging and to switch to renewable energy sources. There is a cost involved in these practices, but this can be balanced against the benefits derived by both the business and the community.

Amway has to balance the needs of its many different stakeholders. It sets high standards of ethics and codes of conduct, in order to make sure that these are upheld. Its CSR program helps the environment, its own employees and underprivileged children all around the world.

Question

Question 1:- Who are the external stakeholders that Amway communicates with?

Question 2:- What communication channels would you recommend to Amway, apart from what is mentioned in the case and why?

Question 3:- stakeholders are the consumer of Amway. Comment

CASE STUDY 3

A Consumer’s Buying Decision Process

Lalith is a stores manager and head of the distribution centre in an Indian company that’s located in one of the developing cities. His family includes his parents who have retired from their respective banking professions, his wife who is working as a librarian in a college, his twin sons who are now eligible for primary school admissions and an unemployed younger sister whose marriage is fixed. Lalith belongs to a middle class segment but more or less, the income level and family saving is good.
Lalith’s parents are conservative in nature. They prefer to spend on the basic necessities and those essential things that make up a living. However, Lalith likes to have a comfortable lifestyle and spends most of his earnings on furnishings and interior decor. Recently, Lalith had bought two air-conditioners but his parents didn’t let him install it in their room. So, he had to put the second one in the children’s room. Lalith often ignores his parent’s advices and does what he feels like doing. He is also planning to purchase a car within a year. His wife doesn’t mind Lalith’s spending habits but she is very particular to ensure that her salary is spent only on the household expenses and the rest goes to the Fixed Deposit of her Bank.
Now, since Lalith’s sister is getting married soon, his parents have insisted on Lalith to spend less and save more so that the marriage ceremony takes place in a splendid way. Lalith’s marriage was a small event because most of the relatives and friends had already informed that they could not attend the occasion for personal reasons. And so, Laith’s parents wanted to invite all the relatives and friends for their daughter’s wedding and make the occasion a grand success. Due to this reason, there are small fights happening in the house and Lalith feels that his income is not enough to meet the requirements. He is getting irritated over small things and he has lost concentration on his work.
Then, one particular working day when Lalith was carrying out his usual routine work at the warehouse he gets a sudden call from the Vice-President (VP) of the company asking him to meet within the next half an hour. He is surprised and at the same time nervous about the meeting wondering what was the meeting about. He delegates some work to his assistant and then hurries to the adjacent building block. The top authorities of the company had their offices in this block. No sooner he enters the building he is called inside the VP’s chamber and after some time when Lalith comes out of the room he realizes that he has received a cash reward for a record work he had accomplished a long time back. The top management even presented him a Certificate of Excellence and a personal letter asking him to lead by example. When he comes back to his office he also realizes that a copy of his certificate was put across the company’s internal e-mails and notice boards. He is very happy with the recognition he deserved especially with the Cash amount he received and commits himself to solving more complicated tasks at the workplace.
Realising the need for a car before his sister’s marriage, he even decides to purchase a car without wasting much time. He takes a friend along when selecting the type of car, the brand, the features and other attributes. Lalith is not particular about the brand but he prefers to have a big, spacious car which also is convenient for long distance traveling. He has an unclear budget above which he is not willing to pay for the car. His friend tells him that while deciding the features, color and other aspects, he may have to spend additional amount as well. At the end, he and his friend list down the three suitable brands that meets Lalith’s considerations. After thinking for about a week, regarding the three car choices, Lalith finally selects one among them. In the next two days, he completes all the formalities and payments with respect to the purchase. He also tells the showroom executives to deliver the car to his home. He already has a driving license but then he decides to keep a driver till he gets the confidence to drive a big car. 2 His parents are also happy seeing that Lalith, his wife and kids are excited about owning a car. Lalith manages to convince his conservative parents that savings are important but spending on finer things in life is not bad as well especially when you are in a position to do so. His sister’s marriage takes place with grandeur and Lalith gets the opportunity to display his big car in front of the guests.

After recognizing Lalith’s family background, status and situation,

Question 1) What do you think are the factors that influence Lalith’s buying behavior in general? According to Maslow’s need hierarchy theory, what are the needs of Lalith as a consumer and as an individual?

Question 2) Identify and analyze Lalith’s decision-making stages when he purchased the car.

CASE STUDY 4

ABC Electronics Ltd. – A Wrong Analysis of Consumer Behavior

ABC Electronics Ltd. was a company established in 1983 by Mr. Manoj Kumar and over the years had emerged as one of the leaders in the growing segment ofthe electronics and home appliances market in India. Currently it has a market share of 30% of the home appliances market. Its product strategy has been to offer a wide range, right from mono stereo, two in ones and sophisticated music systems to televisions, refrigerators, washing machines, ovens and microwave ovens. ABC’s marketing strategy also included offering the above products so as to match the needs and budget of the middle and upper middle classes.

In 1991, Prasad, son of Mr. Manoj Kumar, took over as the Managing Director of the company. Seeing the intense competition in the post liberalization scenario, Prasad was keen to follow the principle that once you have decided on your target customer, you follow him/her relentlessly with attractive offerings. In 1994, he developed a well focused promotion and distribution strategy. The promotion strategy involved an advertising budget of Rs. 10 crores, a special training program for the sales force and offering freebies and various other sales promotion techniques. In terms of distribution, Prasad selected exclusive showrooms and franchisees to display their wide range of products. The location of the exclusive retail outlets was also selected so as to match the perceptions of the consumers as an “exclusive showroom” for them.
However, even after two years of implementing the new promotion and distribution strategy, the sales of ABC Electronics did not pick up to the extent that the company thought it would. Prasad then directed the marketing manager to conduct a study of other retail outlets to know the trend. The results revealed that there was a change in consumers’ perceptions regarding purchasing consumer durables. There seemed to be a
preference for purchasing goods from multi brand, rather than from single brand outlets.

Questions
1. Where do you think Prasad went wrong in his analysis of consumer behavior?
2. Discuss the change in the role of the consumer today, as compared to the consumer five years ago

Tamarind Menswear CASE STUDY SOLUTION

Tamarind Menswear CASE STUDY SOLUTION
Tamarind Menswear CASE STUDY SOLUTION
Tamarind Menswear CASE STUDY SOLUTION
Tamarind Menswear CASE STUDY SOLUTION
Tamarind Menswear CASE STUDY SOLUTION

Tamarind Menswear
Given below is a preliminary questionnaire for retailers and consumers of a recently launched menswear
brand. Can you list down the research objectives for both questionnaires? Can you modify the given
questionnaires to a final draft?
TAMARIND QUESTIONNAIRE FOR RETAILERS
1. Do you have Tamarind? Yes/No
2. What do you think about it?
3. Is there place in the market for one more readymade garment company?
4. What kind of products does Tamarind have? Are they good?
5. Is it a threat to any existing brand? If yes, which one?
6. If it is not a available, what is your view about advertising so heavily before the product is launched?
7. Are people coming and asking for Tamarind?
8. The range of clothes with the retailer.
9. Price range.
10. Name of the shop and so on.
TAMARIND QUESTIONNAIRE FOR CONSUMERS
1. Which ads do you recall?
2. Which garment ads do you recall?
3. Have you seen the Tamarind ad?
4. What do you remember from the ads?
5. Do you like the ad? Why?
6. What is the main message?
7. What kind of clothes are Tamarind?
8. What do you think will be the price range?
9. Will you buy it? Why?

Tamarind Menswear CASE STUDY SOLUTION
Tamarind Menswear CASE STUDY SOLUTION
Tamarind Menswear CASE STUDY SOLUTION
Tamarind Menswear CASE STUDY SOLUTION
Tamarind Menswear CASE STUDY SOLUTION

Consumer Perception of High-end IT Education CASE STUDY ANSWER

Consumer Perception of High-end IT Education CASE STUDY ANSWER
Consumer Perception of High-end IT Education CASE STUDY ANSWER
Consumer Perception of High-end IT Education CASE STUDY ANSWER
Consumer Perception of High-end IT Education CASE STUDY ANSWER
Consumer Perception of High-end IT Education CASE STUDY ANSWER
Consumer Perception of High-end IT Education CASE STUDY ANSWER

Consumer Perception of High-end IT Education
This case study of recent origin (2001), illustrates the use of free-response questions which permit respondents
to give unstructured answers. The responses are given in the form of excerpted quotes from the study at the
end of the case. The entire study was bigger in scope and results. These reported results are only for the
purpose of illustration and do not constitute the complete analysis.
BACKGROUND
SSI, a computer education centre, has added Internet to its portfolio. Now SSI plans to re-launch its course
called Internet in its updated form. The course includes ASP, XML, WAP, .NET and BLUETOOTH, the last one
being offered only by SSI’s Internet.
Research Objectives
To find out
 The deciding factors for taking up a particular High-End I.T. course.
 Whether the course contents of Internet are actually in “demand”.
 The strengths and weaknesses of Internet.
Methodology
Collecting information through
 questionnaires
 face-to-face interviews
 telephonic interviews
 internet
Sample Composition
Students of SSI as well as from competing computer education providers (NIIT, Aptech, Radiant, Tata Infotech).
Sample size : 80 (25% SSI + 75% others)
Results from Some Free Response Questions for Students’ Comments
The following are quotations from some students’ comments on the institute, course, and so on.
“Right now the I.T. market in U.S. has gone down. Bluetooth is still in a kind of an infancy stage with no
real commercially proven success. There is a lot of investment in the technology. Recently it has hit a few
roadblocks—you will see from the info in the links (viz http://www.bluetooth.com/ and
http://www.zdnet.co.uk/news/specials/1999/04/bluetooth/)”
 Computer professional (New Jersey, USA)
“MS (Micro Soft) has come up with the .NET, which works on the Windows 2000 platform. Anything to do
with Internet will be ‘hot’. And MS won’t leave it halfway”.
● Faculty (Radiant)
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Subject: Marketing Research Marks:100
“I did my GNIIT, now I am doing Java at RADIANT. Did not continue there because I wanted to do only
Java; and NIIT, though it is very good, has only long-term courses. Want to get into an I.T. career. From what I
have heard, Aptech is not up to the mark. Don’t know much about SSI or Internet. .NET is the latest course
here.”
 Student (Radiant)
“I am doing Radiant.NET with C#, ASP.NET, XML, SOAP, and so forth because it is the latest after Java”.
 Student (Radiant)
“I joined Radiant because I heard that the course material is very good. Faculty is also good. Finished my
Java from there. And I plan to do a post graduate in I.T. NIIT is too expensive. Cost-wise, I guess SSI and Radiant
are comparable. Don’t know more about SSI.”
 Student (Radiant)
“I did my Java from TCI because I stay close by (Annanagar). Radiant is more expensive. Also TCI gives me
a ‘Government of India’ certificate. I am working as a web page designer. I am being trained in XML and so on
by my company itself.”
 Ex-Student (TCI)
“.NET has not yet come into the market. hence we do not have the course. We have C#, XML, WAP.”
 Counselor (NIIT)
“Of course NIIT is expensive compared to the other institutes. But when one is focussed on one’s career,
one does not crib about money. After interacting with my faculty, I have a very good knowledge about the I.T.
world. Now I would not even think of changing. I have a background in BCA and am doing my Java here.”
 Student (NIIT)
“NIIT has got a name that is recognised the world over more than any other institute in India. Hence I
prefer to be in NIIT. I plan to work abroad. I am currently doing E-Commerce course in NIIT, which includes
XML, ASP, WAP and so forth.”
 Student (NIIT)
“I just know about NIIT. So I am here. Plan to do a short-term course here itself after my GNIIT, which I
will finish this year.”
 Student (NIIT)
“I have no background in computers, but I do not find any difficulty in doing my Internet course. NIIT and
APTECH are too expensive.”
 Student (SSI)
Question
1. Write don a brief summary of all the answers given above. How does this differ from the analysis of
structured-response questions?

Consumer Perception of High-end IT Education CASE STUDY ANSWER
Consumer Perception of High-end IT Education CASE STUDY ANSWER
Consumer Perception of High-end IT Education CASE STUDY ANSWER
Consumer Perception of High-end IT Education CASE STUDY ANSWER
Consumer Perception of High-end IT Education CASE STUDY ANSWER

CONSCIENCE OR COMPETITIVE EDGE CASE STUDY SOLUTION

CONSCIENCE OR COMPETITIVE EDGE CASE STUDY SOLUTION
CONSCIENCE OR COMPETITIVE EDGE CASE STUDY SOLUTION
CONSCIENCE OR COMPETITIVE EDGE CASE STUDY SOLUTION
CONSCIENCE OR COMPETITIVE EDGE CASE STUDY SOLUTION
CONSCIENCE OR COMPETITIVE EDGE CASE STUDY SOLUTION

CONSCIENCE OR COMPETITIVE EDGE
The plane touched down at Mumbai airport precisely on time. Olivia Jones made her way through the
usual immigration bureaucracy without incident and was finally ushered into a waiting limousine,
complete with uniformed chauffeur and soft black leather seats. Her already considerable excitement
at being in India for the first time was mounting. As she cruised the dark city streets, she asked her
chauffeur why so few cars had their headlights on at night. The driver responded that most drivers
believed that headlights use too much petrol! Finally, she arrived at her hotel, a black marble
monolith, grandiose and decadent in its splendour, towering above the bay.
The goal of her four-day trip was to sample and select swatches of woven cotton from the mills in
and around Mumbai, to be used in the following season’s youth-wear collection of shirts, trousers,
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Subject: International Business Marks: 100
and underwear. She was thus treated with the utmost deference by her hosts, who were invariably
Indian factory owners or British agents for Indian mills. For three days she was ferried from one airconditioned office to another, sipping iced tea or chilled lemonade, poring over leather-bound swatch
catalogues, which featured every type of stripe and design possible. On the fourth day, Jones made a
request that she knew would cause some anxiety in the camp. “I want to see a factory,” she declared.
After much consultation and several attempts at dissuasion, she was once again ushered into a
limousine and driven through a part of the city she had not previously seen. Gradually, the hotel and
the Western shops dissolved into the background and Jones entered downtown Mumbai. All around
was a sprawling shantytown, constructed from sheets of corrugated iron and panels of cardboard
boxes. Dust flew in spirals everywhere among the dirt roads and open drains. The car crawled along
the unsealed roads behind carts hauled by man and beast alike, laden to overflowing with straw or
city refuse—the treasure of the ghetto. More than once the limousine had to halt and wait while a
lumbering white bull crossed the road.
Finally, in the very heart of the ghetto, the car came to a stop. “Are you sure you want to do this?”
asked her host. Determined not be faint-hearted, Jones got out the car.
White-skinned, blue-eyed, and blond, clad in a city suit and stiletto-heeled shoes, and carrying a
briefcase, Jones was indeed conspicuous. It was hardly surprising that the inhabitants of the area
found her an interesting and amusing subject, as she teetered along the dusty street and stepped
gingerly over the open sewers.
Her host led her down an alley, between the shacks and open doors and inky black interiors. Some
shelters, Jones was told, were restaurants, where at lunchtime people would gather on the rush mat
floors and eat rice together. In the doorway of one shack there was a table that served as a counter,
laden with ancient cans of baked beans, sardines, and rusted tins of fluorescent green substance that
might have been peas. The eyes of the young man behind the counter were smiling and proud as he
beckoned her forward to view his wares.
As Jones turned another corner, she saw an old man in the middle of the street, clad in a waist cloth,
sitting in a large bucket. He had a tin can in his hand with which he poured water from the bucket
over his head and shoulders. Beside him two little girls played in brilliant white nylon dresses,
bedecked with ribbons and lace. They posed for her with smiling faces, delighted at having their
photograph taken in their best frocks. The men and women around her with great dignity and grace,
Jones thought.
Finally, her host led her up a precarious wooden ladder to a floor above the street. At the top Jones
was warned not to stand straight, as the ceiling was just five feet high. There, in a room not 20 feet by
40 feet, 20 men were sitting at treadle sewing machines, bent over yards of white cloth. Between
them on the floor were rush mats, some occupied by sleeping workers awaiting their next shift. Jones
learned that these men were on a 24-hour rotation, 12 hours on and 12 hours off, every day for six
months of the year. For the remaining six months they returned to their families in the countryside
to work the land, planting and building with the money they had earned in the city. The shirts they
were working on were for an order she had placed four weeks earlier in London, an order of which
she had been particularly proud because of the low price she had succeeded in negotiating. Jones
reflected that this sight was the most humbling experience of her life. When she questioned her host
about these conditions, she was told that they were typical for her industry—and most of the Third
World, as well.
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Subject: International Business Marks: 100
Eventually, she left the heat, dust and din to the little shirt factory and returned to the protected, airconditioned world of the limousine.
“What I’ve experienced today and the role I’ve played in creating that living hell will stay with me
forever,” she thought. Later in the day, she asked herself whether what she had seen was an
inevitable consequence of pricing policies that enabled the British customer to purchase shirts at
£12.99 instead of £13.99 and at the same time allowed the company to make its mandatory 56
percent profit margin. Were her negotiating skills—the result of many years of training—an indirect
cause of the terrible conditions she has seen?
Once Jones returned to the United Kingdom, she considered her position and the options open to her
as a buyer for a large, publicly traded, retail chain operating in a highly competitive environment.
Her dilemma was twofold: Can an ambitious employee afford to exercise a social conscience in his or
her career? And can career-minded individuals truly make a difference without jeopardising their
future? Answer her
CONSCIENCE OR COMPETITIVE EDGE CASE STUDY SOLUTION
CONSCIENCE OR COMPETITIVE EDGE CASE STUDY SOLUTION
CONSCIENCE OR COMPETITIVE EDGE CASE STUDY SOLUTION
CONSCIENCE OR COMPETITIVE EDGE CASE STUDY SOLUTION
CONSCIENCE OR COMPETITIVE EDGE CASE STUDY SOLUTION

DELVING DEEP INTO USER’S MIND CASE STUDY SOLUTION

DELVING DEEP INTO USER’S MIND CASE STUDY SOLUTION
DELVING DEEP INTO USER’S MIND CASE STUDY SOLUTION
DELVING DEEP INTO USER’S MIND CASE STUDY SOLUTION
DELVING DEEP INTO USER’S MIND CASE STUDY SOLUTION
DELVING DEEP INTO USER’S MIND CASE STUDY SOLUTION

DELVING DEEP INTO USER’S MIND
Whirlpool is an American brand alright, but has succeeded in empowering the Indian housewife with
just the tools she would have designed for herself. A washing machine that doesn’t expect her to get
‘ready for the show’ (Videocon’s old jingle), nor adapt her plumbing, power supply, dress sense,
values, attitudes and lifestyle to suit American standards.
The Indian Institute of Business Management & Studies
Subject: International Business Marks: 100
That, in short, is the reason that Whirlpool White Magic, in just three years since its launch in 1999,
has become the choice of the discerning Indian housewife. Also worth noting is how quickly the
brand’s sound mnemonic, ‘Whirlpool, Whirlpool’, has established itself.
Whiteboard beginning
As a company, the US-based white goods major Whirlpool had entered India in 1989, in a joint
venture with the TVS group. Videocon, which had pioneered washing machines in India, was the
market leader with its range of low-priced ‘washers’ (spinning tubs) and semi-automatic machines,
which required manual supervision and some labour. The brand’s TV commercial, created by Punebased SJ Advertising, has evoked considerable interest with its jingle (‘It washes, it rinses, it even
dries your clothes, in just a few minutes…and you’re ready for the show’). IFB-Bosch’s front-loading,
fully automatic machines, which could be programmed and left to do their job, were the labour-free
option. But they were considered expensive and unsuited to Indian conditions. So Videocon faced
competition from me-too machines such as BPL-Sanyo’s. TVS Whirlpool was something of an alsoran.
The market’s sophistication started rising in the 1990s and there was a growing opportunity in the
price-performance gap between expensive automatics and laborious semi-automatics. In 1995,
Whirlpool gained a majority control of TVS Whirlpool, which was then renamed Whirlpool Washing
Machines Ltd (WMML). Meanwhile, the parent bought Kelvinator of India, and merged the
refrigerator business in 1996 with WMML to create Whirlpool of India (WOI), to market both fridges
and washing machines. Whirlpool’s ‘Flexigerator’ fridge hit the market in 1997. Two years later, WOI
launched its star White Magic range of washing machines.
Whitemagic was late to the market, but WOI converted this to a ‘knowledge advantage’ by using the
1990s to study the Indian market intensely, through qualitative and quantitative market research
(MR) tools, with the help of IMRB and MBL India. The research team delved deep into the psyche of
the Indian housewife, her habits, her attitude towards life, her schedule, her every day concerns and
most importantly, her innate ‘laundry wisdom’.
If Ashok Bhasin, vice-president marketing, WOI, was keen on understanding the psychodynamics of
Indian clothes washing, it was because of his belief that people’s attitudes and perceptions of
categories and brands are formed against the backdrop of their bigger attitudes in life, which could
be shaped by broader trends. It was intuitive, to begin with, that the housewife wanted to gain direct
control over crucial household operations. It was found that clothes washing was the daily activity
for the Indian housewife, whether it was done personally, by a maid, or by a machine.
The key finding, however, was the pride in self-done washing. To the CEO of the Indian household,
there was no displacing the hand wash as the best on quality. And quality was to be judged in terms
of ‘whiteness’. Other issues concerned water consumption, quantity of detergent used, and fabric
care—also something optimized best by herself. A thorough wash, done with gentle agility, was what
the magic was all about.
That was the break-through insight used by Whirlpool for the design of all its washing machines,
which adopted a ‘1-2, 1-2 Hand Wash Agitator System’ to mimic the preferred handwash technique.
With a consumer so particular about washing, one could expect her to be value-conscious on other
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Subject: International Business Marks: 100
aspects too. Sure enough, WOI found the housewife willing to pay a premium for a product designed
the way she wanted it. Even for a fully automatic, she wanted a top-loader; this way, she doesn’t fear
clothes getting trapped in if the power fails, and retains the ability to lift the shutter to take clothes
out (or add to the wash) even while the machine is in the midst of its job.
The target consumer, defined psychographically as the Turning Modernist (TM), was decided upon
only after the initial MR exercise was concluded. This was also the stage at which the unique selling
proposition (USP)—‘whitest white’—was thrashed out.
WOI first launched a fully automatic machine, with the hand-wash agitator. Then came the deluxe
model with a ‘hot wash’ function. The product took off well, but WOI felt that a large chunk of the TM
segment was also budget-bound. And was quite okay with having to supervise the machine. This
consumer’s identity as a ‘home-maker’ was important to her, an insight that Whirlpool was using for
the brand overall, in every product category.
So WOI launched a semi-automatic washing machine, with ‘Agisoak’ as a catchword to justify a 10—
15 per cent premium over other brand’s semi-automatics available in India.
The advertising, WOI was clear, had to flow from the same stream of reasoning. It had to be
responsive, caring, modern, stylish, and warm, and had to portray the victory of the Homemaker.
FCB-Ulka, which had bagged Whirlpool’s account in March 1997 from contract (in a global alignment
shift), worked with WOI to coin the sub-brand Whitemagic, to break into consumer mindspace with
the whiteness proposition.
The launch commercial on TV, in August 1999, scored a big success with its ‘Whirlpool, Whirlpool’
jingle…and a mother’s fantasy of her daughter’s clothes wowing others. A product demonstration
sequence took the ‘1-2, 1-2’ message home, reassuring the consumer that the wash would be just as
good as that of her own hand. The net benefit, of course, was an unharried home life.
Second Wave
Sadly, the Indian market for washing machines has been in recession for the past two years, with
overall volumes declining. This makes it a fight for market share, with the odds stacked against
premium players.
Even though Whirlpool has sought to nudge the market’s value perception upwards, Videocon
remains the largest selling brand in volume terms with its competitively priced machines. Washers
have been displaced by semi-automatics, which are now the market’s mainstay (in the Rs 7,000-
12,000 price range). In fact, these account for three-fourths of the 1.2 million units the Indian market
sold in 2000. With a share of 17 per cent, Whirlpool is No. 2 in this voluminous segment.
Whirlpool’s bigger success has been in the fully automatic segment (Rs 12,000-36,000 range). This is
smaller with sales of 177,600 units in 2000, but is predicted to become the dominant one as Indian
GDP per head reaches for the $1,000 mark. With a 26 per cent share, Whirlpool has attained
leadership of this segment.
That places WOI at the appropriate juncture to plot the value curve to be ascended over the new
decade.
According to IMRB data, Whirlpool finds itself in the consideration set of 54 per cent of all
prospective washing machine buyers, and has an ad recall of close to 85 per cent. This indicates the
The Indian Institute of Business Management & Studies
Subject: International Business Marks: 100
medium-term potential of Whitemagic, a Rs20.5 crore on a turnover of Rs1,042.8 crore, one-fifth of
which was on account of washing machines.
The innovations continue. Recently, Whirlpool has launched semi-automatic machines with ‘hot
wash’. The brand’s ‘magic’ isn’t showing signs of wearing off either. The current ‘mummy’s magic’
campaign on TV is trying to sell Whitemagic as a competent machine even for heavy duty washing
such as ketchup stains on a white tablecloth.
The Homemaker, of course, remains the focus of attention. And she remains as vivacious, unruffled,
and in control as ever. The attitude: you can sling the muckiest of stuff on to white cloth, but
sparkling white is what it remains for its her hand that’ll work the magic, with a little help from some
friends… such as Whirlpool.
Questions
1. What product strategy did WOI adopt? And why? Global standardisation? Local
customisaton?
2. What pricing strategy did WOI follow? What, according to you, could have been the
appropriate strategy?
3. What lessons can other white goods manufacturers learn from WOI?

DELVING DEEP INTO USER’S MIND CASE STUDY SOLUTION
DELVING DEEP INTO USER’S MIND CASE STUDY SOLUTION
DELVING DEEP INTO USER’S MIND CASE STUDY SOLUTION
DELVING DEEP INTO USER’S MIND CASE STUDY SOLUTION
DELVING DEEP INTO USER’S MIND CASE STUDY SOLUTION

LATE MOVER ADVANTAGE CASE STUDY ANSWER

LATE MOVER ADVANTAGE CASE STUDY ANSWER
LATE MOVER ADVANTAGE CASE STUDY ANSWER
LATE MOVER ADVANTAGE CASE STUDY ANSWER
LATE MOVER ADVANTAGE CASE STUDY ANSWER
LATE MOVER ADVANTAGE CASE STUDY ANSWER
LATE MOVER ADVANTAGE CASE STUDY ANSWER

LATE MOVER ADVANTAGE?
Though a late entrant, Toyota is planning to conquer the Indian car market. The Japanese auto major
wants to dispel the notion that the first mover enjoys an edge over the rivals who arrive late into a
market.
Toyota entered the Indian market through the joint venture route, the partner being the Bangalore
based Kirloskar Electric Co. Know as Toyota Kirloskar Motor (TKM), the plant was set up in 1998 at
Bidadi near Bangalore.
To start with, TKM released its maiden offer—Qualis. Qualis is not a newly conceived, designed, and
brought out vehicle. Rather it is the new avatar of Kijang under which brand the vehicle was sold in
markets like Indonesia.
Qualis virtually had no competition. Telco’s Sumo was not a multi-utility vehicle like Qualis. Rather, it
was mini-truck converted into a rugged all-purpose van. More importantly, Toyota proved that even
its old offering, but decked up for India, could offer better quality than its competitor. Backed by a
carefully thought out advertising campaign that communicated Toyota’s formidable global
reputation, Qualis went on a roll and overtook Tata Sumo within two years of launch.
Sumo sold 25,706 vehicles during 2000-2001, compared to a 3 per cent growth over the previous
year, compared to 25,373 of Qualis. But during 2001-2002, it was a different story. Qualis had been
clocking more than 40 per cent share of the market. At the end of Sept 2001, Qualis had sold over
25,000 units, compared to Sumo’s 18000 plus.
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Subject: International Business Marks: 100
The heady initial success has made TKM think of the future with robust confidence. By 2010, TKM
wants to make and sell one million vehicles per year and garner one-third share of the Indian
market.
The firm is planning to introduce a wide range of vehicle—a sub-compact, a sedan, a luxury car and a
new multi-utility vehicle to replace Qualis. A significant percentage of the vehicles will be exported.
But Toyota is not as lucky in China. Its strategy of ‘late entry’ in China seems to have back fired. In
2005, it sold just 1,83,000 cars in China, the fastest growing auto market in the world. Toyota ranks
ninth in the market, far behind Volkswagen, General Motors, Hyundai and Honda.
Toyota delayed producing cars in China until 2002, when it entered a joint venture with a local
company, the First Auto Works Group (FAW). The first car manufactured by Toyota-FAW, the Vios,
failed to attract much of a market, as, despite its unremarkable design, it was three times as
expensive as most cars sold in China.
Late start was not the only problem. There were other lapses too. Toyota assumed the Chinese
market would be similar to the Japanese market. But Chinese market, in reality, resembled the
American market.
Sales personnel in Japan are paid salaries. They succeeded in building a loyal clientele for Toyota by
providing first-class service to them. Likewise, most Japanese auto dealers sell a single brand,
thereby ensuring their loyalty to it. Japan is a relatively a well-knit country with an ethnically
homogeneous population. Accordingly, Toyota used nationwide advertising to market its products in
its home country.
But China is different. Sales people are paid commissions and most dealers sell multiple brands.
Obviously, loyalty plays little role in motivating either the sales staff or the dealers, who will ignore a
slow selling product should a more profitable one turn up. Besides, China is a large, diverse country.
A standardised ad campaign will not do. Luckily, Toyota is learning its lessons.
Competition in the Chinese market is tough, and Toyota’s success in reaching its goal of selling a
million cars a year, by 2010, is uncertain. But, its chances are brighter as the company is able to
transfer lessons learned in the American market to its operations in China.
Questions
1. Why has the ‘late corner’s strategy’ of Toyota failed in China, though it succeeded in India?
2. Why has Toyota failed to capture the Chinese market? Why is it trailing behind its rivals?

LATE MOVER ADVANTAGE CASE STUDY ANSWER
LATE MOVER ADVANTAGE CASE STUDY ANSWER
LATE MOVER ADVANTAGE CASE STUDY ANSWER
LATE MOVER ADVANTAGE CASE STUDY ANSWER
LATE MOVER ADVANTAGE CASE STUDY ANSWER

THE ECONOMY OF KENYA CASE STUDY SOLUTION

THE ECONOMY OF KENYA CASE STUDY SOLUTION
THE ECONOMY OF KENYA CASE STUDY SOLUTION
THE ECONOMY OF KENYA CASE STUDY SOLUTION
THE ECONOMY OF KENYA CASE STUDY SOLUTION
THE ECONOMY OF KENYA CASE STUDY SOLUTION

THE ECONOMY OF KENYA
Kenya’ economy has been beset by high rates of unemployment and underemployment for many
years. But at no time has it been more significant and more politically dangerous than in the late
1990s as an authoritarian beset by corruption, cronyism and economic plunder threatened the
economic stability of this once proud nation. Yet Kenya still has great potential. Located in East
Africa, it has a diverse geographic and climatic endowment. Three-fifths of the nation is semiarid
desert (mostly in the north), and the resulting infertility of this land has dictated the location of 85
per cent of the population (30 million in 2000) and almost all economic activity in the southern twofifths of the country. Kenya’s rapidly growing population is composed of many tribes and is
extremely heterogeneous (including traditional herders, subsistence and commercial farmers, Arab
Muslims, and cosmopolitan residents of Nairobi). The standard of living at least in major cities, is
relatively high compared to the average of other sub-Saharan African countries.
However, widespread poverty (per capita US$360), high unemployment, and growing income
inequality make Kenya a country of economic as well as geographic diversity. Agriculture is the most
important economic activity. About three quarters of the population still lives in rural areas and
about 7 million workers are employed in agriculture, accounting for over two-thirds of the total
workforce.
Despite many changes in the democratic system, including the switch from a federal to a republican
government, the conversion of the prime ministerial system into a presidential one, the transition to
a unicameral legislature, and the creation of a one-party state, Kenya has displayed relatively high
political stability (by African standards) since gaining independence from Britain in 1963. Since
independence, there have been only two presidents. However, this once stable and prosperous
capitalist nation has witnessed widespread ethnic violence and political upheavals since 1992 as a
deteriorating economy, unpopular one-party rule, and charges of government corruption create a
tense situation.
The Indian Institute of Business Management & Studies
Subject: International Business Marks: 100
An expansionary economic policy characterised by large public investments, support of small
agricultural production units, and incentives for private (domestic and foreign) industrial investment
played an important role in the early 7 per cent rate of GDP growth in the first decade after
independence. In the following seven years (1973-80), the oil crisis let to a lower GDP growth to an
annual rate of 5 per cent. Along with the oil price shock, lack of adequate domestic saving and
investment slowed the growth of the economy. Various economic policies designed to promote
industrial growth led to a neglect of agriculture and a consequent decline in farm prices, farm
production, and farmer incomes. As peasant farmers became poorer, more migrated to Nairobi,
swelling an already overcrowded city and pushing up an existing high rate of urban unemployment.
Very high birthrates along with a steady decline in death rates (mainly through lower infant
mortality) led Kenya’s population growth to become the highest in the world (4.1 per cent per year)
in 1988. Population growth fell to a still high rate of 2.4 per cent for the period 1990-2000.
The slowdown in GDP growth persisted in the following five years (1980-85), when the annual
average was 2.6 per cent. It was a period of stabilization in which political shakiness of 1982 and the
severe drought in 1984 contributed to a slowdown in industrial growth. Interest rates rose and
wages fell in the public and private sectors. An improvement in the budget deficit and current
account trade deficit, obtained through cuts in development expenditures and recessive policies
aimed at reducing imports, contributed to lower economic growth. By 1990, Kenya’s per capita
income was 9 per cent lower than it was in 1980–$370 compared to $410. It continued to decline in
the 1990s. In fact, GDP per capita fell at an annual average rate of 0.3 per cent throughout the decade.
At the same time, the urban unemployment rate rose to 30 per cent.
Comprising 23 per cent of 2000 GDP AND 77 per cent of merchandise exports, agricultural
production is the backbone of the Kenyan economy. Because of its importance, the Kenyan
government has implemented several policies to nourish the agricultural sector. Two such policies
include fixing attractive producer prices and making available increasing amounts of fertilizer.
Kenya’s chief agricultural exports are coffee, tea, sisal, cashew nuts, pyrethrum, and horticultural
products. Traditionally, coffee has been Kenya’s chief earner in foreign exchange.
Although Kenya is chiefly agrarian, it is still the most industrialised country in eastern Africa. Public
and private industry accounted for 16 per cent of GDP in 2000. Kenya’s chief manufacturing activities
are food processing and the production of beverages, tobacco, footwear, textiles, cement, metal
products, paper, and chemicals.
Kenya currently faces a multitude of problems. These include a stagnating economy, growing
political unrest, a huge budget deficit, high unemployment, a substantial balance of payments
problem, and a stubbornly high population growth rate.
With the unemployment rate already at 30 per cent and its population growing, Kenya faces the
major task of employing its burgeoning labour force. Yet only 10-15 per cent of seekers land jobs in
the modern industrial sector. The remainder must find jobs in the self-employment sector; in the
agricultural sector, where wages are low and opportunities are scarce; or join the masses of the
unemployed.
In addition to the unemployment problem, Kenya must always be concerned with how to feed its
growing population. An increase in population means an increasing demand for food. Yet only 20 per
cent of Kenya’s land is arable. This implies that the land must become increasingly productive.
Unfortunately, several factors work to constrain Kenya’s food output, among them fragmented
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Subject: International Business Marks: 100
landholdings, increasing environmental degradation, the high cost of agricultural inputs, and
burdensome governmental involvement in the purchase, sale, and pricing of agricultural output.
For the fiscal year 1995, the Kenyan budget deficit was $362 million, well above the government’s
target rate. Dealing with a high budget deficit is a second problem Kenya currently faces. Following
the collapse of the East African Common Market, Kenya’s industrial growth rate has declined; as a
result the government’s tax base has diminished. To supplement domestic savings, Kenya has had to
turn to external sources of finance, including foreign aid grants from Western governments. Its
highly protected public enterprises have been turning in a poor performance, thus absorbing a large
chunk of the government budget. To pay for its expenses, Kenya has had to borrow from
international banks in addition to foreign aid. In recent years, government borrowing from the
international banking system rose dramatically and contributed to a rapid growth in money supply.
This translated into high inflation and pinched availability of credit.
Kenya has also had a chronic international balance of payments problem. Decreasing prices for its
exports, combined with increasing prices for its imports, left Kenya importing almost twice as much
as it exported in 2000, at $3,200 million in imports and only $1,650 million in exports. World
demand for coffee, Kenya‘s predominant exports, remains below supply. In 2001-01, a dramatic
surge in coffee exports from Vietnam hurt Kenya further. Hence Kenya cannot make full use of its
comparative advantage in coffee production, and its stock of coffee has been increasing. Tea, another
main export, has also had difficulties. In 1987, Pakistan, the second largest importer of Kenyan tea,
slashed its purchases. Combined with a general oversupply in the world market, this fall in demand
drove the price of tea downward. Hence Kenya experienced both a lower dollar value and quantity
demanded for one of its principal exports.
Kenya faces major challenges in the years ahead as the economy tries to recover. Current is expected
to be no more than 1 to 2 per cent annually. Heavy rains have spoiled crops and washed away roads,
bridges, and telephone lines. Foreign exchange earnings from tourism, once promising, dropped by
40 per cent in the mid-1990s, then suffered again after the August 7, 1998, terrorist bombing of the
US embassy in Nairobi. Even more frightening, however, is the prospect of growing hunger as
Kenya’s maize (corn) crop has failed to meet rising internal demand and dwindling foreign exchange
reserves have to be spent to import food. Corruption is perceived to be so widespread that the
International Monetary Fund and World Bank suspended $292 million in loans to Kenyan in the
summer of 1997 while insisting on tough new austerity measures to control public spending and
weed out economic cronyism. As a result, the economy went into a tailspin, foreign investors fled the
country, and inflation accelerated markedly.
Unfortunately, needed structural adjustments resulting form the World Bank—and IMF—induced
austerity demands usually take a long time. Whether the Kenyan political and economic system can
withstand any further deterioration in living conditions is a major question. Public protests for
greater democracy and a growing incidence of ethnic violence may be harbingers of things to come.
Fig 1 Continuum of Economic Systems
Pure Market Pure Centrally Planned Economy
Economy
The Indian Institute of Business Management & Studies
Subject: International Business Marks: 100
The US France India China
Canada Brazil Cuba
UK North Korea
Questions
1. Is the economic environment of Kenya favourable to international business? Yes or no—
substantiate.
2. In the continuum of economic systems (see Fig 1), where do you place Kenya and why?

THE ECONOMY OF KENYA CASE STUDY SOLUTION
THE ECONOMY OF KENYA CASE STUDY SOLUTION
THE ECONOMY OF KENYA CASE STUDY SOLUTION
THE ECONOMY OF KENYA CASE STUDY SOLUTION
THE ECONOMY OF KENYA CASE STUDY SOLUTION

IIBMS MBA EXAM ANSWER SHEETS – IIBMS MBA CASE STUDY ANSWER

IIBMS MBA EXAM ANSWER SHEETS – IIBMS MBA CASE STUDY ANSWER
IIBMS MBA EXAM ANSWER SHEETS – IIBMS MBA CASE STUDY ANSWER
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IIBMS MBA EXAM ANSWER SHEETS – IIBMS MBA CASE STUDY ANSWER

ARROW AND THE APPAREL INDUSTRY
Ten years ago, Arvind Clothing Ltd., a subsidiary of Arvind Brands Ltd., a member of the Ahmedabad
based Lalbhai Group, signed up with the 150- year old Arrow Company, a division of Cluett Peabody
& Co. Inc., US, for licensed manufacture of Arrow shirts in India. What this brought to India was not
just another premium dress shirt brand but a new manufacturing philosophy to its garment industry
which combined high productivity, stringent in-line quality control, and a conducive factory
ambience.
Arrow’s first plant, with a 55,000 sq. ft. area and capacity to make 3,000 to 4,000 shirts a day, was
established at Bangalore in 1993 with an investment of Rs 18 crore. The conditions inside—with
good lighting on the workbenches, high ceilings, ample elbow room for each worker, and plenty of
ventilation, were a decided contrast to the poky, crowded, and confined sweatshops characterising
the usual Indian apparel factory in those days. It employed a computer system for translating the
designed shirt’s dimensions to automatically mark the master pattern for initial cutting of the fabric
layers. This was installed, not to save labour but to ensure cutting accuracy and low wastage of cloth.
The over two-dozen quality checkpoints during the conversion of fabric to finished shirt was unique
to the industry. It is among the very few plants in the world that makes shirts with 2 ply 140s and 3
ply 100s cotton fabrics using 16 to 18 stitches per inch. In March 2003, the Bangalore plant could
produce stain-repellant shirts based on nanotechnology.
The reputation of this plant has spread far and wide and now it is loaded mostly with export orders
from renowned global brands such as GAP, Next, Espiri, and the like. Recently the plant was
identified by Tommy Hilfiger to make its brand of shirts for the Indian market. As a result, Arvind
Brands has had to take over four other factories in Bangalore on wet lease to make the Arrow brand
of garments for the domestic market.
In fact, the demand pressure from global brands which want to outsource form Arvind Brands is so
great that the company has had to set up another large factory for export jobs on the outskirts of
Bangalore. The new unit of 75,000 sq. ft. has cost Rs 16 crore and can turn out 8,000 to 9,000 shirts
per day. The technical collaborators are the renowned C&F Italia of Italy.
Among the cutting edge technologies deployed here are a Gerber make CNC fabric cutting machine,
automatic collar and cuff stitching machines, pneumatic holding for tasks like shoulder joining, threat
trimming and bottom hemming, a special machine to attach and edge stitch the back yoke, foam
finishers which use air and steam to remove creases in the finished garment, and many others. The
stitching machines in this plant can deliver up to 25 stitches per inch. A continuous monitoring of the
production process in the entire factory is done through a computerised apparel production
management system, which is hooked to every machine. Because of the use of such technology, this
plant will need only 800 persons for a capacity which is three times that of the first plant which
employs 580 persons.
Exports of garments made for global brands fetched Arvind Brands over Rs 60 crore in 2002, and
this can double in the next few years, when the new factory goes on full stream. In fact, with the
The Indian Institute of Business Management & Studies
Subject: International Business Marks: 100
lifting of the country-wise quota regime in 2005, there will be surge in demand for high quality
garments from India and Arvind is already considering setting up two more such high tech exportoriented factories.
It is not just in the area of manufacture but also retailing that the Arrow brand brought a wind of
change on the Indian scene. Prior to its coming, the usual Indian shirt shop used to be a clutter of
racks with little by way of display. What Arvind Brands did was to set up exclusive showrooms for
Arrow shirts in which the functional was combined with aesthetic. Stuffed racks and clutter
eschewed. The product were displayed in such a manner the customer could spot their qualities from
a distance. Of course, today this has become standard practice with many other brands in the
country, but Arrow showed the way. Arrow today has the largest network of 64 exclusive outlets
across India. It is also present in 30 retail chains. It branched into multi-brand outlets in 2001, and is
present in over 200 select outlets.
From just formal dress shirts in the beginning, the product range of Arvind Brands has expanded in
the last ten years to include casual shirts, T-shirts, and trousers. In the pipeline are light jackets and
jeans engineered for the middle-aged paunch. Arrow also tied up with the renowned Italian designer,
Renato Grande, who has worked with names like Versace and Marlboro, to design its Spring /
Summer Collection 2003. The company has also announced its intention to license the Arrow brand
for other lifestyle accessories like footwear, watches, undergarments, fragrances, and leather goods.
According to Darshan Mehta, President, Arvind Brands Ltd., the current turnover at retail prices of
the Arrow brand in India is about Rs 85 crore. He expects the turnover to cross Rs 100 crore in the
next few years, of which about 15 per cent will be from the licensed non-clothing products.
In 2005, Arvind Brands launched a major retail initiative for all its brands. Arvind Brands licensed
brands (Arrow, Lee and Wrangler) had grown at a healthy 35 per cent rate in 2004 and the company
planned to sustain the growth by increasing their retail presence. Arvind Brands also widened the
geographical presence of its home-grown brands, such as Newport and Ruf-n Tuf, targeting small
towns across India. The company planned to increase the number of outlets where its domestic
brands would be available, and draw in new customers for readymades. To improve its presence in
the high-end market, the firm started negotiating with an international brand and is likely to launch
the brand.
The company has plans to expand its retail presence of Newport Jeans, from 1200 outlets across 480
towns to 3000 outlets covering 800 towns.
For a company ranked as one of the world’s largest manufactures of denim cloth and owners of
world famous brands, the future looks bright and certain for Arvind Brands Ltd.
Company profile
Name of the Company :Arvind Mills
Year of Establishment :1931
Promoters : Three brothers–Katurbhai, Narottam Bhai, and Chimnabhai
Divisions :Arvind Mills was split in 1993 into Units—textiles, telecom and garments.
Arvind Ltd. (textile unit) is 100 per cent subsidiary of Arvind Mills.
The Indian Institute of Business Management & Studies
Subject: International Business Marks: 100
Growth Strategy :Arvind Mills has grown through buying-up of sick units, going global and
acquisition of German and US brand names.
Questions
1. Why did Arvind Mills choose globalization as the major route to achieve growth when the
domestic market was huge?
2. How does lifting of ‘Country-wise quota regime’ help Arvind Mills?
3. What lessons can other Indian businesses learn form the experience of Arvind Mills?

IIBMS MBA EXAM ANSWER SHEETS – IIBMS MBA CASE STUDY ANSWERIIBMS MBA EXAM ANSWER SHEETS – IIBMS MBA CASE STUDY ANSWERIIBMS MBA EXAM ANSWER SHEETS – IIBMS MBA CASE STUDY ANSWERIIBMS MBA EXAM ANSWER SHEETS – IIBMS MBA CASE STUDY ANSWERIIBMS MBA EXAM ANSWER SHEETS – IIBMS MBA CASE STUDY ANSWER

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Business Communication
Answer the following question.
Q1. What are the categories of Information in C.V (10
marks)
Q2. Define Interview & explain any 5 types in details (10
marks)
Q3. Write notes on Intended form ,Block form and Modified Block form (10
marks)
Q4. Which are the factors affecting negotiation (10
marks)
Q5. Which are the 6 great helpers of Presentation (10
marks)
Q6. Write notes on Listeners Related Barriers (10
marks)
Case Studies
case study (20
Marks)
Sushma works in Infosoft solution pvt ;td. She works there as a project leader. Occasionally her job demands comi
early for her duties or stay late till evening hours. Once she was handling two projects simultaneously and on one su
day she had convened a meeting with her team members regarding project delivery. She had called her team membe
at 0800 hours. Sushma is a disciplinarian and generally she follows duty timings strictly. Discipline starts with me, w
her firm principle. She had made a habit of coming five minutes early at least. However on that day she could not ma
at the scheduled meeting time of 0800 hours and she was worried that her reputation could be at stake. Time was 08
hours and she reached main gate of her company. Hurriedly she swiped her card and rushed towards board room. Th
time few housemen were doing cleaning. One of the housemen had spread soap solution on the floor. Unaware of wh
is on the floor, she continued to rush to the board room. The floor was made of marbles and soap solution was sprinkl
over it. Sushma could not control her balance on the slippery floor and fell down. Slippery floor dragged her a couple
feet further. The impact was so strong that she wailed loudly. Her team members rushed to help her. Somehow s
could get up and she was taken to the hospital. It was discovered that her hip bone was broken. As a result, she w
immobile for about two months because of the injury. Later in investigation, it was revealed that the housemen who w
cleaning the floor has not put the sign board “CAUTION: FLOOR is WET.
Answer the following question.
Q1. What was the major cause of the accident?
8/10/22, 12:52 PM Exam Paper
https://www.isbm.org.in/examsoft/exampaper_final.php?id=71517 2/2
Q2. What would happen to sushma’s reputation after the incident?

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Maruthi Udyog Ltd CASE STUDY SOLUTION

Maruthi Udyog Ltd CASE STUDY SOLUTION

CONTACT US FOR SOLUTION

 

Maruti Udyog L:td.MUL is the largest auto manufacturer in India. It has 70 percent share of the small car segment and 40 percent of the luxury segment. It was set up as a joint venture between the Government of India and Suzuki motors of Japan. Today the government has reduced its stake and it is a Suzuki firm. It has a vendor network of nearly 450, a third of who have ISO 9000 certification. It also has joint ventures with some of its vendors to ensure quality and timely delivery. Maruti has about 14 models to cars, vans and jeep. In the small car segment, it completes with Santro of Hyundai and Indica from the Tatas.

 

Maruti’s vision and mission statement are given below

Vision:  To be competitive worldwide in products and services retain leadership in the country and aspire for a good market share internationally.

Mission: To sell a variety of cars- modern, high technology and fuel efficient – in the Indian and foreign markets.

The firm’s values are as follows

Growth oriented organization ready to change to meet customers demand at short notice.

Value  for money for the customers.

Stakeholders’ involvement and  satisfaction.

Responsible corporate citizen.

 

Competitive Analysis of Maruti

 

Maruti had a good run till 1998 when several international players challenged its supremacy . In the small car segment, Santro of Hyundai, and Indica from the Tatas pose major problems for Maruti . In the luxury segment, its Esteem faces competition from Honda City, Opel Astra , Ford Escort and Ford Ikon. Its jeep Gypsy faces competition from Mahindra& Mahindra’s jeeps, and Tata’s Sumo and Safari.

 

Threat of new entrants is real as the segment of middle class cars is growing rapidly, Volvo, Volkswagen and Toyota are also planning to enter the market.

 

To beat Maruti’s brand image, economics of scale and marketing and service network , new firms have to spend a lot of money and efforts and that could be the entry barrier.

Critical success factors of Maruti:

1. Suzuki technology
2. Economic scale of production
3. Strong R&D.
4. Timely market feedback as a result of continuous research
5. Large range of models.
6. Strong dealer network
7. Large service network around the country with trained technicians.
8. Quality programmes (Kaizan)
9. Design expertise
10. Brand equity
11. Provides leasing options, hire purchase schemes.

 

Realising the imminence of competition in 1998 , Maruti planned to have relationship marketing , with an idea of selling Maruti cars to its existing customer base and upgrading product purchase . Maruti introduced Zen Alto and Wagon R, for this purpose.

MUL  has competitive advantages in the segments it operates in to counter the onslaught of competition it even reduced the price and went for volume business .MUL has maintained its competitive advantage in the following manner.

1. Superior Suzuki compact car technology.
2. Value for money
3. Low maintenance cost.
4. Reliable quality
5. Largest network of dealers and service centres.
6. large product range for various needs and pockets.
7. Easy availability and attractive finance schemes .
8. ISO certification, even for a large number of dealers.
9. Technology transfers to important vendors for ensuring quality supplies.

 

Maruti is a household’s name not only in India but in a number of countries of the west as well. With a modest beginning in 1997 when it exported 102 cars, now MUL exports to more than 30,000 cars to 74 countries. The countries include Italy, Holland and Chile;  around 70 percent sales are to Europe.

Maruti looks confidently to the future with the following agenda:

1. Commitment to customer satisfaction/delight.
2. Expansion and modernization of facilities.
3. New model as per market demand
4. Model upgradation .
5. Market research to remain proactive in the market.
6. Emphasis on overseas markets
7. Finance for the customers.

 

Questions:

1. Discuss the main issues narrated in the case in your own style.
2. Carry out a SWOT Analysis.
3. Based on the Analysis of the case, put forth your views and suggestions.

 

 

 

 

 

 

 

Creating world class quality standards CASE STUDY SOLUTION

Creating world class quality standards CASE STUDY SOLUTION

Creating world class quality standards 

Introduction 

Customers expect to be able to buy products that meet certain standards.  Standards can be written down and published for use by manufacturers and service providers.  They can be used as guidance.  BSI stands for British Standards Institution.  It was the world’s first Standards body, and is the National Standards Body for the UK.  BSI works in three main fields: 

. Setting British and international standards

. Product testing

. Quality management systems (QMS) 

Standards are based on agreed best practice.  Businesses are keen to use standards to show they have a place in global markets.  There are thousands of standards covering all manner of goods and services. 

Quality 

A quality product or service does what the customer wants it to do.  This may differ from market to market.  For instance, a cheap football provides enough `quality’ for a village match.  For a league match, a better ball would be needed.  Many organizations try to build quality into everything they do.  They do this by using a QMS.  This provides a framework that helps the business to improve in all areas.  BSI helps organizations to identify best practice and translates this into standards.  BSI publishes almost 20,000 standards and each year adds 2,000 new or revised standards to this list. 

The importance of standards 

Standards exist at a number of levels.  These include:

* International Standards, (ISO).  These need to be agreed between countries, so are the most complex 

* European Standards (EN) 

* British Standards (BS). 

BSI contributes to all three. 

Standards help protect consumers’ safety.  They also promote research.  They promote the sharing of knowledge.  They help businesses to compete.  In markets where it is hard to compete on price, businesses can use standards to help them compete on quality. 

The Kitemark 

BSI is independent.  It works with both the private and public sector.  It makes sure that safety and quality standards in the UK and around the world are built into products.  BSI also owns the famous Kitemark symbol which you see on many products.  It shows that a business has had a product tested to the relevant standard.  Schemes cover various products and services.  Examples include lighting, 13 amp plugs, motor cycle helmets and car repair garages.  The Kitemark shows that the business sees safety and quality as vital.  It shows the customer that the product or service has  been tested and has reached the relevant Standard.  Other symbols are required  by law, for instance, CE marking.  This shows that a product conforms to certain European Union regulations. 

Processes 

ISO 9001 is a key international standard.  It shows that the business uses a QMS.  It shows that quality is built into all aspects of operations.  This must include all systems, whether inside or outside of the business.  It therefore includes suppliers.  There are eight quality measures that must be met to gain certification to ISO 9001. 

Conclusion 

Products include both goods and services.  These can be made, operated and sold on a global basis.  International standards  for them are therefore vita.  BSI helps to create these standards.  Standards help businesses to build good reputations based on quality, safety and reliability. 

Issues for Discussion 

1.  What do you understand by the term `quality’ in relation to a product you buy?

2.  What is the BSI Kitemark?  How might this help you to choose a product to purchase?

3.  How might meeting the Standard ISO 9001 help a business to gain a competitive advantage over a rival?

4.  Assume that you have developed a new manufacturing process – how might the BSI help you to develop this process? 

Hunter Hunts for College Grads CASE STUDY SOLUTION

Hunter Hunts for College Grads CASE STUDY SOLUTION

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Hunter Hunts for College Grads

 

Woody Hunter had been an HRM analyst with Control Data Corporation (CDC) for three years but was recently reassigned to the college recruitment staff.  The basic duties in his new job were to visit college and university campuses and interview seniors in order to identify individuals who could fill entry-level positions at CDC in accounting, engineering and marketing.

After three months’ travelling on the road, Woody received a report summarizing his performance to dat.  The figures showed he had conducted 540 preliminary interviews on 18 different campuses. Woody had follow-up interviews with 136 of these students, or approximately 25 percent.  Based on these second interviews, Woody recommended to his supervisor that 71 candidates be invited for company-paid visits to appropriate CDC manufacturing and administrative facilities where new college graduates were needed.  All of Woody’s selectees were offered visits.

What concerned Woody and his supervisor was this statistic:  Only four of the seventy-one candidates accepted the CDC invitation.  Based on over seven years of recruiting experience with CDC, Woody’s supervisor said that the company traditionally had better than a 60 percent acceptance rate.  Woody’s boss knew there was something seriously wrong. He asked Woody to summarize how he described opportunities at CDC to the recruits.

“I ask the students if they have read the CDC literature in the placement office,” replied Woody.  “Most usually have, but if they haven’t I highlight what we do at CDC, the kind of entry-level positions we have to fill, and the kind of people we’re looking for.  But I know that these students have heard similar propaganda from a dozen other big company recruiters.  So I emphasize the things CDC has that others don’t.  One thing I never fail to mention is our benefit package.  It is superior to anybody else’s.  I tell students about our tuition-reimbursement plan, our comprehensive health insurance program, and our pension system. I tell them that our pension plan vests after only five years.  I point out that the employee pays nothing into it-that all the costs are paid by CDC.  Most important, I emphasize that they can retire at age fifty five and receive 80 percent of the salary they were making in their last year.  There’s not a pension plan anywhere that attractive.  I even take the time to show the students how, with inflation figured in; they can probably expect a pension of $200,000 or $300,000 a year if they come to work for CDC.”

 

Questions:

1. What role do you think benefits play in the employment decision of a new college graduate?
2. What role do you think the beginning salary plays in the employment decision of a new

college graduate?

1. What suggestions would you make that might improve Woody’s acceptance ratio?

ANNAMALAI UNIVERSITY MBA ANNUAL STREAM 2022-23 QUESTIONS

ANNAMALAI UNIVERSITY MBA ANNUAL STREAM 2022-23 QUESTIONS

FOR ANSWER CONTACT US

2.1ORGANIZATIONAL BEHAVIOUR
1. Understanding the basic concepts of Organizational Behaviour prepare a
Behavioural frame work for a newly established IT company in Chennai. –
Student can imagine the size and turnover of the industry.
2. To understand the importance of the concepts personality, perception, and
attitude of employees in an organization, prepare an interview schedule,
conduct an interview with 2-3 executives of any one organization and present
the results.
3. After listing out the qualities and theories of leadership, have a discussion with
one or two real world leaders of your choice and present the outcome.
4. Identify a suitable case to understand Organizational Culture, analyze the case
and present it with issues and strategies
2.2 MANAGEMENT INFORMATION SYSTEM
1. How can information Technology support a company’s business processes and
Decision Making, and give it a Competitive Advantage? Give examples to
illustrate your answer.
2. Why do you think there have been so many business failures among “dot-com”
companies that were devoted only to retail e-commerce?
3. Explain the management information system in various marketing strategy
which are adopted by various company. Explain with examples.
4. Discuss the executive information system and executive support system in
various marketing organisation.
2.3 DATABASE MANAGEMENT SYSTEM
1. Draw the various schemes of baking system and explain the involvement of view
levels of data abstraction.
2. Draw an E-R diagram for ordering an item in the inventory control system.
3. Develop a conceptual data model for a Hospital Information System and write a
PL/SQL program using oracle to perform the following tasks.
4. Print the patient details – according to room wise.
a) Print the patient details – according to the disease wise.
b) Print the patient details – according to the doctors attending them
c) Consider a real system of your interest and give the skeleton of the
development of DSS for that system.
3
2.4E-COMMERCE
1. Enumerate Security of Internet hosts and networks, Public key infrastructure,
Safety of E-Commerce applications, Electronic payment systems, Trust and
reputation in E-Commerce.
2. Discuss about the prevention procedures of the fire wall to avoid the attack of
Hackers.
3. “On line Shopping generate new economy”- Comment your opinion with proper
Justification.
4. Discuss the role played by E-commerce in providing customer service at the
various stages (product selection to post purchase) in an online buying
transaction.
2.5 ENTERPRISE RESOURCE PLANNING
1. How will you execute the Gap Analysis phase of ERP implementation for a very
large manufacturing industry? Discuss the steps involved in this scenario.
2. Explain the Planning and Execution Model based on integrated process for a
service industry.
3. Discuss the common myths about ERP and find practical solutions for
dispelling them in your organization.
4. Most companies today have made significant investments in information
technology systems. Write a case study of Integrating ERP, CRM and SCM
creates a single view of organizational profitability.
2.6 DATA WAREHOUSING AND DATA MINING
1. Explain the schemas which are used in a data warehouse design with suitable
examples. Which schema design is more popular? Draw a schema design for a
university admission system. Consider appropriate dimensions and fact table as
required.
2. How can business dimensions be useful for defining requirements in a business
data warehouse? in which situation jad methodology may be useful for
collecting requirements?
3. Compare rolap with molap servers. which one do you consider more appropriate
for data warehouse applications and why?
4. Develop an algorithm for classification using decision trees. illustrate the
algorithm with a relevant example.
4
2.7.1 SOFTWARE PROJECT MANAGEMENT
1. Company has the plan to implant software applications to manage its inverting
function.
a) Identify the options available towards providing inverting solutions.Narrate
the comparative advantage and disadvantages of each option.
2. Identify the organization providing software solutions for retail applications
a) Develop the project network diagram that can support the implementation
scheme for such retail solutions.
3. Bring out the organization involved in implementing software solutions.
a) Narrate the role of project support office for such organizations.
4. Identify the key deliverables in Bank ware (core banking) solutions
2.7.2ADVANCED WEB DESIGN
1. Web Programming HTML Elements with Cascading Style Sheet (CSS)- Discuss
2. Enumerate the role of DOM(Document object model) in website Development
3. Illustrate your views on the data types supported by VB Script, and conditional
statements in VB Script
4. on click, on mouse over, on mouse out, on change and on submit event types in
JavaScript with example programs.

QUANTITATIVE TECHNIQUES CASE STUDY QUESTIONS

QUANTITATIVE TECHNIQUES CASE STUDY QUESTIONS

FOR SOLUTION CONTACT US

Quantitative Techniques
Case Studies
Case
(20Marks)
Since 9/11•terrorism has cased threat attacks which have drawn the attention of political and media world. The US hto launch. a ‘war on terror’ and applied a range of counteract terrorism safety measures towards aviation, pubtransportation, ports, borders, public Hermie places, etc. While these steps may show cheap course of act!on government and security services, it is quite expensive. According to the calculations done by Mueller and Stewa(2011), the expenditure of US homeland and security has gone over 1.1 trillion dollars, which includes federal, state adomestic government, and private sector, and also the cost of opportunity. The Iraq an Afghanistan wars have added 1trillion dollars to this expenditure. The expenditure of federal, state and local US government on home ground securhas been estimated to 75 billion dollars more than the last levels of 2001. It is seen that US is not the only country to in these high level of expenses, even though no other country can match its per capita or GDP expenditure. Fexample, increased expenditure• on homeland security in UK, Canada and Australia is nearly one half to one quarter US expenditure per capita or GDP. Nevertheless, in 2009, the government spent nearly 141.6 billion dollars each yeon homeland security. This figure is expected to reach about 300 billion dollars by 2016.
After 9/11, the main objectihas been to prevent or alleviate any harm or casualty as a result of terrorism. The main issue is, if this expenditure counteracting terrorism been invest.ed in a way that has increased the cost of security of the public efficiently or noHence, the commission report of 9/11, among other issues, was called upon
• the US government to execute safemeasures which show evaluation of risks and effectiveness of expenditure. Nevertheless, while the US needs tevaluate expenditure benefits for government regulations, such evaluation seems co have not been done for homelasecurity in general, or for the DHS (department of homeland security). One of the causes could be that DHS is not abto take up such evaluation.
The NRC (national research council) committee of the National Academics of ScienceEngineering and Medicine, made a request through S Congress to evaluate the functions of DHS, which was working the project for almost 2 years, came up with some surprising result-. Besides e’•aluation of natural disasters, tcommittee ‘did not find any DHS risk analysis capabilities and methods that are yet adequate for supporting DHdecision making.’ Due to which, very less confidence could be had in most of the risk evaluation done by DHS. Tcommittee said that “it is not yet clear that DHS is on a
I ! trajectory for development of methods and capability thatsufficient
to ensure reliable risk analyses”.
usually the government and their rigid agencies shoo a neutral behavtowards their decision making. Stewart says that “the standard criterion for deciding whether a government; programmcan be justified on economic principles is net present value – the discounted monetized value of expected net benef(i.e., benefits minus costs)” and that “expected values (an unbiased estimate) is the appropriate estimate for use” (UM1992).
Answer the following question.
Q1.
What are the reasons that show that DHS is incapable in evaluating the risks of national security?(Hint: while the US needs to evaluate expenditure benefits for government regulations, such evaluation
7/23/22, 4:06 PM Exam Paper
https://www.isbm.org.in/examsoft/exampaper_final.php?id=71253 2/3
seem to have not been done for homeland security in general, DHS is not able to take up suchevaluation.)
Q2.
The government spent nearly 141.6 billion dollars each year on (Hint: homeland security)
CASE STUDY
(20Marks)
The price P per unit at which a company can sell all that it produces is given by the
function P(x) = 300 — 4x. The cofunction is c(x) = 500 + 28x where x is the number
of units produced. Find x so that the profit is maximum.
Answer the following question.
Q1.
Find the value of x.
Q2.
In using regression analysis for making predictions what are the assumptions involved.
Q3.
What is a simple linear regression model?
Q4.
What is a scatter diagram method?
CASE STUDY
(20Marks)
Mr Sehwag invests Rs 2000 every year with a company, which pays interest at 10% p.a.
He allows his deposit accumulate at C.I. Find the amount to the credit of the person
at the end of 5th year.
Answer the following question.
Q1.
What is the Time Value of Money concept.
Q2.
What do you mean by present value of money?
Q3.
What is the Future Value of money.
Q4.
What the amount to be credited at the end of 5th year.
case study
(20Marks)
Time series analysis has two important aims: 1) recognizing the quality of the phenomenon shown by the series studies, and 2) Both the aims need the plan of the viewed time series data is recognized and somewhat officiaexplained:
A time series is said to be a ‘collection of observations made in sequence with time’. For example: recordilevel of daily rainfall, periodical total domestic product of US, and monthly strength of the. workers in Marine Corps forspecific rank and MOS. The evaluation of time series gives instruments for picking a symbolic model and deliveriforecasts. There are two sorts of times series data:
• Continuous: in this the data consists of study at every moment, fexample, seismic movement recorded on a seismogram.
• Discrete: the data contains recordings taken at differeperiods
,like, statistics of each month crime. Until the data is absolutely haphazard, studies in time series are usuarelated to each and the following studies could be partly ascertain by the last values. For instance, the reasopertaining to the meteorology which have an effect on the temperature for any given day tend to have some affect on tnext day’s climate. Hence, the observations of the past temperature are helpful for predicting temperatures for tfollowing days. •
A time series can be deterministic if there are no haphazard or feasible features but goes in a set aforeseeable manner. The data gathered during the classical physics experiment like showing Newton’s Law of Motion,one example of a deterministic time series. The stochastic type of series is more appropriate to the econometfunction. Stochastic variables contain undefined or arbitrary viewpoint. Though the worth of each study cannot precisely foreseen, calculating the various observations could follow the expected method. These methods can explained through the statistical models. According to these models, studies differ erratically on the underlying meavalue
whtch is the role of time. Time series data can be put in the following categories: one or more performance factotrend, seasonality, cyclical function and random sound.
Various kinds of time series predicting models give forecasthrough extrapolating the previous performance of the values of a specified
\’l!riable of interest. Consecutive study econometric times series are generally not free and forecast can be made on the basis of last observations. Althouprecise predictions can be made with deterministic time series, predictions of stochastic time series are restricted ‘conditional statements regarding the future on the basis of particular hypothesis.’ Armstrong (2001) says, “The basAssumption is that the variable ui!! continue in the future as it has behaved in the past. ” Particularly, the time seripredictions are suitable for stochastic type of data in which the fundamental root cause of variation like, trend, cyclicperformance, seasonality, and uneven variations, do not change radically m time. Therefore, modeling is considered be more suitable temporarily instead of permanent predictions.
Answer the following question.
7/23/22, 4:06 PM Exam Paper
https://www.isbm.org.in/examsoft/exampaper_final.php?id=71253 3/3
Q1.
Write briefly on time-series analysis. (Hint: recognizing the quality of the phenomenon shown by theseries of studies, and, both the aims need the plan of the viewed time series data is recognized andsomewhat officially explained)

COOKING LPG LTD DETERMINATION OF WORKING CAPITAL SOLUTION

COOKING LPG LTD DETERMINATION OF WORKING CAPITAL SOLUTION

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CASE : 01

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 10^th 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 10^th of subsequent month.
• Power (including on DG set) – Rs. 1,00,000 per month paid on the 7^th 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 10^th of the subsequent month.
• Regular maintenance of plant – Rs. 50,000 per month paid on the 10^th 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 15^th of the subsequent month.
• All transportation charges as per contracts – paid on the 10^th subsequent month.
• Sales tax as per applicable rates is deposited on the 7^th 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.

 

Suppose you are Mr.Keen Kumar,  the new manager.  What steps will you take for the growth of Cooking LPG Ltd.?

 

 

 

ZIP ZAP ZOOM CAR COMPANY CASE STUDY SOLUTION

ZIP ZAP ZOOM CAR COMPANY CASE STUDY SOLUTION

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Case 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 favorable 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.

1. A maximum of 10 percent reduction in sales volume will take place.
2. 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 :

• 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.

 

• 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.
• 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)

Question:

Analyse the debt capacity of the company.

 

 

XIBMS DMS EXAM ANSWER SHEETS PROVIDED

XIBMS DMS EXAM ANSWER SHEETS PROVIDED

 

Xaviers Institute of Business Management Studies

 

Subject Title:             BUSINESS COMMUNICATION                                                                          

                                                                                                                                                    Maximum Marks: 80           

                                                                                                                                                                                                                                               

Answer Any five questions (5 x 16 = 80 Marks)

 

1. Explain verbal symbols and their advantages in Communication.

(OR)

Differentiate between ‘posture’ and ‘gesture’ using specific examples.

 

 

 

2. Explain the following roadblocks which make communication slow and inefficient:
3. Strong emotion
4. Self centeredness

(OR)

How does ‘Lack of common language’ remain a roadblock to effective communication? Explain.

 

 

 

 

3. Imagine that you are going to give a lecture to a group of business executives. How will you structure your presentation?

(OR)

1. What is an agenda (of a meeting)? Explain the purpose of preparing an agenda.
2. Imagine that you are the GM of STAR TV Ltd., Chennai-63. Your company had achieved a sales target of 1,50,000 TV sets during the year 2009. But in 2011 till Nov. 2010, your company could sell only 1,00,000 TV sets. You have convened a meeting of the sales Managers and marketing executives of your company to discuss the ways and means of achieving the target sales.
3. Prepare an inter-office memo informing those concerned to attend.
4. Prepare an agenda of the meeting.

 

 

 

 

4. a. Read the following letter sent to a dealer and analyse the tone of the letter.

ABC Electrical Ltd.,

52, Gandhi Road, Coimbatore – 641 047

1. Madhavan,

Sales Manager.                                                                                                                                 Dt : 10.12.2010

 

To

The Manager,

Sathiya Agencies,

21, Swamy Sivanandha Salai,

Salem-11.

 

Sir,

Ref : Our bill No. 4225 dt: 21.06.2010.

 

We have sent 15 five HP Electrical motors as per your request six months ago.  You have paid 50% of the total cost of the motors at the time of placing orders for the supply. You

have not bothered to settle the remaining money. Inspite of repeated reminders you are silent.  Do you think you can cheat us? You must be a fool to think so. If you do not settle the bill next week, we will file a case in the court to recover the money.

 

Sincerely yours,

Sales Manager.

1. Rewrite the above letter with a suitable tone.

 

5. What are the important factors of persuasion? Explain any Four.

 

 

 

 

 

 

6. Case study : (Compulsory)

 

Hunter Hunts for College Grads

 

Woody Hunter had been an HRM analyst with Control Data Corporation (CDC) for three years but was recently reassigned to the college recruitment staff.  The basic duties in his new job were to visit college and university campuses and interview seniors in order to identify individuals who could fill entry-level positions at CDC in accounting, engineering and marketing.

After three months’ travelling on the road, Woody received a report summarizing his performance to dat.  The figures showed he had conducted 540 preliminary interviews on 18 different campuses. Woody had follow-up interviews with 136 of these students, or approximately 25 percent.  Based on these second interviews, Woody recommended to his supervisor that 71 candidates be invited for company-paid visits to appropriate CDC manufacturing and administrative facilities where new college graduates were needed.  All of Woody’s selectees were offered visits.

What concerned Woody and his supervisor was this statistic:  Only four of the seventy-one candidates accepted the CDC invitation.  Based on over seven years of recruiting experience with CDC, Woody’s supervisor said that the company traditionally had better than a 60 percent acceptance rate.  Woody’s boss knew there was something seriously wrong. He asked Woody to summarize how he described opportunities at CDC to the recruits.

“I ask the students if they have read the CDC literature in the placement office,” replied Woody.  “Most usually have, but if they haven’t I highlight what we do at CDC, the kind of entry-level positions we have to fill, and the kind of people we’re looking for.  But I know that these students have heard similar propaganda from a dozen other big company recruiters.  So I emphasize the things CDC has that others don’t.  One thing I never fail to mention is our benefit package.  It is superior to anybody else’s.  I tell students about our tuition-reimbursement plan, our comprehensive health insurance program, and our pension system. I tell them that our pension plan vests after only five years.  I point out that the employee pays nothing into it-that all the costs are paid by CDC.  Most important, I emphasize that they can retire at age fifty five and receive 80 percent of the salary they were making in their last year.  There’s not a pension plan anywhere that attractive.  I even take the time to show the students how, with inflation figured in; they can probably expect a pension of $200,000 or $300,000 a year if they come to work for CDC.”

 

Questions:

1. What role do you think benefits play in the employment decision of a new college graduate?
2. What role do you think the beginning salary plays in the employment decision of a new

college graduate?

1. What suggestions would you make that might improve Woody’s acceptance ratio?

 

Xaviers Institute of Business Management Studies

 

Marks: 80

 

Business Environment

 

Note: Attempt any five questions (question no. 1. is compulsory)

1. Attempt any four of the following questions:

(a) Explain the relevance of ecological issues to business environment.

(b) Analyze the social responsibility of business towards employees.

(c) State the basic objectives of regulating business.

(d) Describe the basic instruments of fiscal policy in lndia

(e) State various measures for the prevention and settlement of the industrial disputes.

(f) Explain the thrust areas of the new economic policy.

2. Discuss how does the environment acts as a stimulant to business.Analyse why business often does little for physical environment preservation despite the fact that it is significant for business activity.
3. Analyze the fourfold role of the government in business. Also explain in what respects the role of government has been redefined in lndia during the 1990s.
4. “The Industrial Policy of 1991 makes a clear departure from the Industrial Policy of 1956” Comment.
5. Discuss the various forms of foreign capital flows. Do you think entering o{ MNC’s in less developed countries is risky ?
6. Describe the recent export promotion measures of the Government of India.
7. Write short notes on any two of the following:

(a) Political and legal environment of business

(b) Nehru – Mahalanobis strategy of development

(c) Financial reforms in India

(d) Merits of globalisation from the point of view of India’s s economic development

 

Xaviers Institute of Business Management Studies

 

                                              Business Ethics

Max. Marks: 80

SECTION – A

1. Answer any ten of the following in about 3-4 lines each: (2×10-20)

a) Define Business Ethics.
b) What is morality?
c) How religion and ethics are related?
d) What is ethical dilemma?
e) Define Corporate Governance.
f) Whar are attitudes?
g) What is the psychological egoism?
h) State the two unethical practices in Software Company?
i) What are tax ratios?
j) List four features of utilitarianism?
k) What is whistle blowing?
l) What is software privacy?

SECTION – B

Answer any three of the following. Each question carries 5 marks. (3×5=15)

2. Explain the significance of ethics in business planning and decision making.
3. What are corporate crimes? What are their effects on society?
4. What are the implications of unethical practices on human resource management?
5. What do you mean by classical utilitarianism? Explain its principles.
6. Explain the benefits of good corporate governance.

SECTION – C

Answer any three of the following. Each question carries fifteen marks. (3×15=45)

7. Explain the ethical issues involved in managing finance with an objective
of maximizing shareholders wealth rather than shareholders interests.

8. Describe congnitivism and non-congnitivism ethical theories.

9. Explain the impact of corporate governance of Narayana Murthy Committee.

10. Explain the factors influencing ethical environment a service organization.

11. Explain the corporate social responsibility towards the educational institutions.

 

Xaviers Institute of Business Management Studies

 

Marks 100

 

FINANCIAL MANAGEMENT

 

 

Note: Attempt any five questions. All questions carry equal marks.

1. (A) Explain the Business Entity concept, Accrual concept and Consistency concept of Accounting.

(b) What do you understand by capitalization of earnings? How is the value of a firm ascertained with the help of its earnings? Explain with an example.

2. The following is the Trial Balance of Mr. Keshav Kant on 31st March 2006.

	Rs.	Rs.
	Dr.	Cr.
Capital	–	8,00,000
Drawings	60,000	–
Opening Stock	75,000	–
Purchases	15,95,000	–
Freight on Purchases	25,000	–
Wages (11 months upto 28-2-2006)	66,000	–
Sales	–	23,10,000
Salaries	1,40,000	–
Postage & Telephones	12,000	–
Printing and Stationery	18,000	–
Miscellaneous expenses	30,000	–
Creditors	–	3,00,000
Investments	1,00,000	–
Discount received	–	15,000
Debtors	2,50,000	–
Bad Debts	15,000	–
Provision for Bad Debts	–	8,000
Building	3,00,000	–
Machinery	5,00,000	–
Furniture	40,000	–
Commission on Sales	45,000	–
Interest on Investments	–	12,000
Insurance (year upto 31 .7 .2006)	24,000	–
Bank Balance	1,50,000	–
	34,45,000	34,45,000

Adjustments:

(i) Closing Stock Rs. 2, 25,000.

(ii) Machinery worth Rs. 45,000 purchased on 1.10.2005 was shown as purchases. Freight paid on the machinery was Rs. 5,000 which is included in the Freight on Purchases.

(iii) Commission is payable at 2% on Sales.

(iv) Investments were sold at 10% profit but the entire sale proceeds have been taken as Sales.

(v) Write off Bad Debts Rs. 10,000 and create .a Provision for Doubtful Debts at 5% of Debtors.

(vi) Depreciate Building by 2% p.a. and Machinery and Furniture @ 10% p.a

Prepare Trading and Profit and Loss A/c for the Year ending 31st March 2006 and a Balance Sheet as on that date

3. Distinguish between Operating Leverage and Financial Leverage. What will be the effect of small change in Sales on Net Income, Return on Equity and Earnings Per Share if both these leverages are considerable? Explain.
4. (a) What is Production Budget ? What factors are taken into consideration while preparing a Production Budget? Why are separate budgets prepared For each of the elements of production costs? Explain.

(b) What is a Rolling Budget? Why is it prepared? Explain the procedure of its preparation.

5. An Engineering Company has received an export order for its sole product that would require the use of half of the factory’s total capacity, which is estimated at 4 lakh units per annum. The condition of the export order is that it has to be accepted in full: acceptance of a part is not allowed

The factory is currently operating at 60% level to meet the demand of its domestic customers. As against the current price of Rs. 6 per unit, the export offer is Rs. 4.70 per unit, which is less than the total cost of current production. The cost break-down is given below:

Direct material: Rs. 2.50 per unit

Direct labour: 1.00 per unit

Variable expenses: 0.50 per unit

Fixed overhead: 1.00 per unit

Total: 5.00 per unit

The company has the following options:

(a) Accept the export order and cut back domestic sales as necessary

(b) Remove the capacity constraint by installing balancing equipment and also by working overtime to meet both domestic and export demand. This will increase fixed overheads by Rs. 15,000 annually and additional cost for overtime work will amount to Rs. 40,000 for the year.

(c) Appoint a sub-contractor to manufacture the additional requirement and meet the domestic and export requirements in full by supplying raw materials, paying a conversion charge @ Rs. 2 per unit and appointing a supervisor at a salary of Rs. 3,000 per month for checking the quality of the product and controlling operations at the manufacturing unit

(d) Refuse the order.

You are required to prepare a statement of costs and profits under each of the options and give your recommendation to the company giving the reasons for the same.

6. Aditya Company’s equity shares are being traded in the market at Rs. 54 per share with a price-earning ratio of 9. The company’s payout is 72%. It has 1,00,000 equity shares of Rs. 10 each and no preference shares. Book value per share is Rs. 42.

You are required to calculate:

(i) Earnings per Share

(ii) Net Income

(iii) Dividend Yield, and

(iv) Return on Equity

7. Comment on the following statements:

(a) The greater the variability of cash flows, the higher should be the minimum cash balance.

(b) As there is no explicit cost of retained earnings, these funds are free of cost.

(c) Dividend, Investment and Financing decisions are inter-dependent.

(d) Profitability Index is more relevant in the evaluation and ranking of projects than Internal Rate of Return.

8. Write short notes on the following:

(a) Performance Budget

(b) Amortization of Intangible Assets

(c) Accounting Standards

(d) Funds from Business Operations

 

 

IIBMS DMS EXAM ANSWER SHEETS PROVIDED

IIBMS DMS EXAM ANSWER SHEETS PROVIDED

Attempt Any Four Case Study

Case Study 1 : Structuring global companies

 

As the chapter illustrates, to carry out their activities in pursuit of their objectives, virtually all organisations adopt some form of organisational structure. One traditional method of organisation is to group individuals by function or purpose, using a departmental structure to allocate individuals to their specialist areas (e.g. Marketing, HRM and so on ). Another is to group activities by product or service, with each product group normally responsible for providing its own functional requirements. A third is to combine the two in the form of a matrix structure with its vertical and horizontal flows of responsibility and authority, a method of organisation much favoured in university Business Schools.

What of companies with a global reach: how do they usually organise them-
selves?

Writing in the Financial Times in November 2000 Julian Birkinshaw, Associate Professor of Strategic and International Management at London Business School, identifies four basic models of global company structure:

• The International Division – an arrangement in which the company establishes a
  separate division  to  deal  with  business  outside  its  own  country.  The
  International Division would typically be concerned with tariff and trade issues,
  foreign agents/partners and other aspects involved in selling overseas. Normally
  the division does not make anything itself, it is simply responsible for interna-
  tional sales. This arrangement tends to be found in medium-sized companies
  with limited international sales.

The Global Product Division – a product-based structure with managers responsible
for their product line globally. The company is split into a number of global busi-
nesses arranged by product (or service) and usually overseen by their own
president. It has been a favoured structure among large global companies such as
BP, Siemens and 3M.

• The Area Division – a geographically based structure in which the major line of
  authority lies with the country (e.g. Germany) or regional (e.g. Europe) manager who
  is responsible for the different product offerings within her/his geographical area.
  ● The Global Matrix – as the name suggests a hybrid of the two previous structural
  types. In the global matrix each business manager reports to two bosses, one
  responsible for the global product and one for the country/region. As we indi-
  cated in the previous edition of this book, this type of structure tends to come
  into and go out of fashion. Ford, for example, adopted a matrix structure in the
  later 1990s, while a number of other global companies were either streamlining
  or dismantling theirs (e.g. Shell, BP, IBM).

As Professor Birkinshaw indicates, ultimately there is no perfect structure and organisations tend to change their approach over time according to changing circumstances,  fads,  the  perceived  needs  of  the  senior  executives  or  the predispositions of powerful individuals. This observation is no less true of universities than it is of traditional businesses.

Case study questions

1. Professor Birkinshaw’s article identifies the advantages and disadvantages of being a global business. What are his major arguments?

 

2. In your opinion what are likely to be the key factors determining how a global company will organise itself?

 

Case 2 : Resource prices

 

As we saw in Chapter 1, resources such as labour, technology and raw materials
constitute inputs into the production process that are utilised by organisations to
produce outputs. Apart from concerns over the quality, quantity and availability of
the different factors of production, businesses are also interested in the issue of
input prices since these represent costs to the organisation which ultimately have
to be met from revenues if the business is to survive. As in any other market, the
prices of economic resources can change over time for a variety of reasons, most, if
not all, of which are outside the direct control of business organisations. Such fluc-
tuations in input prices can be illustrated by the following examples:

• Rising labour costs – e.g. rises in wages or salaries and other labour-related costs
  (such as pension contributions or healthcare schemes) that are not offset by
  increases in productivity or changes in working practices. Labour costs could rise
  for a variety of reasons including skills shortages, demographic pressures, the
  introduction of a national minimum wage or workers seeking to maintain their
  living standards in an inflationary period.
• Rising raw material costs – e.g. caused by increases in the demand for certain raw
  materials and/or shortages (or bottlenecks) in supply. It can also be the result of
  the need to switch to more expensive raw material sources because of customer
  pressure, environmental considerations or lack of availability.
• Rising energy costs – e.g. caused by demand and/or supply problems as in the oil
  market in recent years, with growth in India and China helping to push up
  demand and coinciding with supply difficulties linked to events such as the war
  in Iraq, hurricanes in the Gulf of Mexico or decisions by OPEC.
  ● Increases in the cost of purchasing new technology/capital equipment – e.g.
  caused by the need to compete with rivals or to meet more stringent government
  regulations in areas such as health and safety or the environment.

As the above examples illustrate, rising input prices can be the result of factors operating at both the micro and macro level and these can range from events which are linked to natural causes to developments of a political, social and/or economic kind. While many of these influences in the business environment are uncontrollable, there are steps business organisations can (and do) often take to address the issue of rising input prices that may threaten their competitiveness. Examples include the following:

• Seeking cheaper sources of labour (e.g. Dyson moved its production of vacuum
  cleaners to the Far East).
• Abandoning salary-linked pension schemes or other fringe benefits (e.g. com-
  pany cars, healthcare provisions, paid holidays).
• Outsourcing certain activities (e.g. using call centres to handle customer com-
  plaints, or outsourcing services such as security, catering, cleaning, payroll, etc.). ● Switching raw materials or energy suppliers (e.g. to take advantage of discounts

by entering into longer agreements to purchase).

 

• Energy-saving measures (e.g. through better insulation, more regular servicing of
  equipment, product and/or process redesign).
• Productivity gains (e.g. introducing incentive schemes).

In addition to measures such as these, some organisations seek cost savings through
divestment of parts of the business or alternatively through merger or takeover
activity. In the former case the aim tends to be to focus on the organisation’s core
products/services and to shed unprofitable and/or costly activities; in the latter the
objective is usually to take advantage of economies of scale, particularly those asso-
ciated with purchasing, marketing, administration and financing the business.

 

 

Case study questions

1. If a company is considering switching production to a country where wage costs
   are lower, what other factors will it need to take into account before doing so?

 

2. Will increased environmental standards imposed by government on businesses
   inevitably result in higher business costs?

 

Case 3 : Government and business – friend or foe?

 

As we have seen, governments intervene in the day-to-day working of the economy
in a variety of ways in the hope of improving the environment in which industrial
and commercial activity takes place. How far they are successful in achieving this
goal is open to question. Businesses, for example, frequently complain of over-
interference  by  governments  and  of  the  burdens  imposed  upon  them  by
government legislation and regulation. Ministers, in contrast, tend to stress how
they have helped to create an environment conducive to entrepreneurial activity
through the different policy initiatives and through a supportive legal and fiscal
regime. Who is right?

While there is no simple answer to this question, it is instructive to examine the
different surveys which are regularly undertaken of business attitudes and condi-
tions in different countries. One such survey by the European Commission – and
reported by Andrew Osborn in the Guardian on 20 November 2001 – claimed that
whereas countries such as Finland, Luxembourg, Portugal and the Netherlands
tended to be regarded as business-friendly, the United Kingdom was perceived as
the most difficult and complicated country to do business with in the whole of
Europe. Foreign firms evidently claimed that the UK was harder to trade with than
other countries owing to its bureaucratic procedures and its tendency to rigidly
enforce business regulations. EU officials singled out Britain’s complex tax formali-
ties, employment regulations and product conformity rules as particular problems
for foreign companies – criticisms which echo those of the CBI and other represen-
tative bodies who have been complaining of the cost of over-regulation to UK firms
over a considerable number of years.

The news, however, is not all bad. The Competitive Alternatives study (2002) by
KPMG of costs in various cities in the G7 countries, Austria and the Netherlands
indicated that Britain is the second cheapest place in which to do business in the
nine industrial countries (see www.competitivealternatives.com). The survey, which
looked at a range of business costs – especially labour costs and taxation -, placed
the UK second behind Canada world-wide and in first place within Europe. The
country’s strong showing largely reflected its competitive labour costs, with manu-
facturing costs estimated to be 12.5 per cent lower than in Germany and 20 per
cent lower than many other countries in continental Europe. Since firms frequently
use this survey to identify the best places to locate their business, the data on rela-
tive costs are likely to provide the UK with a competitive advantage in the battle for
foreign inward investment (see Mini case, above).

 

Case study questions

1. How would you account for the difference in perspective between firms who often
   complain of government over-interference in business matters and ministers who
   claim that they have the interests of business at heart when taking decisions?

 

2. To what extent do you think that relative costs are the critical factor in determining
   inward investment decisions?

 

 

Case 4 : The end of the block exemption

 

As we have seen in the chapter, governments frequently use laws and regulations to promote competition within the marketplace in the belief that this has significant benefits for the consumer and for the economy generally. Such interventions occur not only at national level, but also in situations where governments work together to provide mutual benefits, as in the European Union’s attempts to set up a ‘Single Market’ across the member states of the EU.

While few would deny that competitive markets have many benefits, the search
for increased competition at national level and beyond can sometimes be
restrained by the political realities of the situation, a point underlined by a previous
decision of the EU authorities to allow a block exemption from the normal rules of
competition in the EU car market. Under this system, motor manufacturers operat-
ing within the EU were permitted to create networks of selective and exclusive dealerships and to engage in certain other activities normally outlawed under the competition provisions of the single market. It was argued that the system of selective and exclusive distribution (SED) benefited consumers by providing them with a cradle-to-grave service, alongside what was said to be a highly competitive supply situation within the heavily branded global car market.

Introduced in 1995, and extended until the end of September 2002, the block
exemption was highly criticised for its impact on the operation of the car market in
Europe. Following a critical report by the UK competition authorities in April 2000,
the EU published a review (in November 2000) of the workings of the existing
arrangement for distributing and servicing cars, highlighting its adverse conse-
quences for both consumers and retailers and signalling the need for change. Despite
intensive lobbying by the major car manufacturers, and by some national govern-
ments, to maintain the current rules largely intact, the European Commission
announced its intention of replacing the block exemption regulation when it expired
in September, subject of course to consultation with interested parties.

In essence the Commission’s proposals aimed to give dealers far more independ-
ence from suppliers by allowing them to solicit for business anywhere in the EU
and to open showrooms wherever they want; they would also be able to sell cars
supplied by different manufacturers under the same roof. The plan also sought to
open up the aftersales market by breaking the tie which existed between sales and
servicing. The proposal was that independent repairers would in future be able to
get greater access to the necessary spare parts and technology, thereby encouraging
new entrants to join the market with reduced initial investment costs.

While these proposals were broadly welcomed by groups representing consumers
(e.g. the Consumer Association in the UK), some observers felt that the planned
reforms did not go far enough to weaken the power of the suppliers over the market
(see e.g. the editorial in the Financial Times, 11 January 2002). For instance it
appeared to be the case that while manufacturers would be able to supply cars to
supermarkets and other new retailers, they would not be required by law to do so,
suggesting that a market free-for-all was highly unlikely to emerge in the foreseeable
future. Equally the Commission’s plans appeared to do little to protect dealers from
threats to terminate their franchises should there be a dispute with the supplier.

In the event the old block exemption scheme expired at the end of September
2002 and the new rules began the next day. However, the majority of the provisions
under the EC rules did not come into effect until the following October (2003) and
the ban on ‘location clauses’ – which limit the geographical scope of dealer opera-
tions – only came into effect two years later. Since October 2005 dealers have been
free to set up secondary sales outlets in other areas of the EU, as well as their own
countries. This is expected to stengthen competition between dealers across the
Single Market to the advantage of consumers (e.g. greater choice and reduced prices).

 

 

Case study questions

1. Can you suggest any reasons why the European Commission was willing to grant
   the block exemption in the first place, given that it ran counter to its proposals for
   a Single Market?

 

2. Why might the new reforms make cars cheaper for European consumers?

 

Case 5 : The sale of goods on the Internet

 

The sale of consumer goods on the Internet (particularly those between European member states) raises a number of legal issues. First, there is the issue of trust, with-
out which the consumer will not buy; they will need assurance that the seller is genuine, and that they will get the goods that they believe they have ordered.
Second, there is the issue of consumer rights with respect to the goods in question: what rights exist and do they vary across Europe? Last, the issue of enforcement: what happens should anything go wrong?

 

Information and trust

Europe recognises the problems of doing business across the Internet or telephone
and it has attempted to address the main stumbling blocks via Directives. The
Consumer Protection (Distance Selling) Regulations 2000 attempts to address the
issues of trust in cross-border consumer sales, which may take place over the
Internet (or telephone). In short, the consumer needs to know quite a bit of infor-
mation, which they may otherwise have easy access to if they were buying face to
face. Regulation 7 requires inter alia for the seller to identify themselves and an
address must be provided if the goods are to be paid for in advance. Moreover, a
full description of the goods and the final price (inclusive of any taxes) must also
be provided. The seller must also inform the buyer of the right of cancellation available under Regulations 10-12, where the buyer has a right to cancel the contract for seven days starting on the day after the consumer receives the goods or services. Failure to inform the consumer of this right automatically extends the period to three months. The cost of returning goods is to be borne by the buyer, and the seller is entitled to deduct the costs directly flowing from recovery as a restocking fee. All of this places a considerable obligation on the seller; however, such data should stem many misunderstandings and so greatly assist consumer faith and confidence in non-face-to-face sales.

Another concern for the consumer is fraud. The consumer who has paid by
credit card will be protected by section 83 of the Consumer Credit Act 1974, under
which a consumer/purchaser is not liable for the debt incurred, if it has been run
up by a third party not acting as the agent of the buyer. The Distance Selling
Regulations extend this to debit cards, and remove the ability of the card issuer to
charge the consumer for the first £50 of loss (Regulation 21). Moreover, section 75
of the Consumer Credit Act 1974 also gives the consumer/buyer a like claim against
the credit card company for any misrepresentation or breach of contract by the
seller. This is extremely important in a distance selling transaction, where the seller
may disappear.

 

What quality and what rights?

The next issue relates to the quality that may be expected from goods bought over
the Internet. Clearly, if goods have been bought from abroad, the levels of quality
required in other jurisdictions may vary. It is for this reason that Europe has
attempted to standardise the issue of quality and consumer rights, with the
Consumer Guarantees Directive (1999/44/EC), thus continuing the push to encour-
age cross-border consumer purchases. The implementing Sale and Supply of Goods
to Consumer Regulations 2002 came into force in 2003, which not only lays down
minimum quality standards, but also provides a series of consumer remedies which
will be common across Europe. The Regulations further amend the Sale of Goods
Act 1979. The DTI, whose job it was to incorporate the Directive into domestic law
(by way of delegated legislation) ensured that the pre-existing consumer rights were
maintained, so as not to reduce the overall level of protection available to con-
sumers. The Directive requires goods to be of ‘normal’ quality, or fit for any
purpose made known by the seller. This has been taken to be the same as our pre-
existing ‘reasonable quality’ and ‘fitness for purpose’ obligations owed under
sections 14(2) and 14(3) of the Sale of Goods Act 1979. Moreover, the pre-existing
remedy of the short-term right to reject is also retained. This right provides the
buyer a short period of time to discover whether the goods are in conformity with
the contract. In practice, it is usually a matter of weeks at most. After that time has
elapsed, the consumer now has four new remedies that did not exist before, which
are provided in two pairs. These are repair or replacement, or price reduction or
rescission. The pre-existing law only gave the consumer a right to damages, which
would rarely be exercised in practice. (However, the Small Claims Court would
ensure a speedy and cheap means of redress for almost all claims brought.) Now
there is a right to a repair or a replacement, so that the consumer is not left with an
impractical action for damages over defective goods. The seller must also bear the
cost of return of the goods for repair. So such costs must now be factored into any

business sales plan. If neither of these remedies is suitable or actioned within a ‘rea-
sonable period of time’ then the consumer may rely on the second pair of
remedies. Price reduction permits the consumer to claim back a segment of the pur-
chase price if the goods are still useable. It is effectively a discount for defective
goods. Rescission permits the consumer to reject the goods, but does not get a full
refund, as they would under the short-term right to reject. Here money is knocked
off for ‘beneficial use’. This is akin to the pre-existing treatment for breaches of
durability, where goods have not lasted as long as goods of that type ought reason-
ably be expected to last. The level of compensation would take account of the use
that the consumer has (if any) been able to put the goods to and a deduction made
off the return of the purchase price. However, the issue that must be addressed is as
to the length of time that goods may be expected to last. A supplier may state the
length of the guarantee period, so a £500 television set guaranteed for one year
would have a life expectancy of one year. On the other hand, a consumer may
expect a television set to last ten years. Clearly, if the set went wrong after six
months, the consumer would only get £250 back if the retailer’s figure was used,
but would receive £475 if their own figure was used. It remains to be seen how this
provision will work in practice.

One problem with distance sales has been that of liability for goods which arrive
damaged. The pre-existing domestic law stated that risk would pass to the buyer once
the goods were handed over to a third-party carrier. This had the major problem in
practice of who would actually be liable for the damage. Carriers would blame the
supplier and vice versa. The consumer would be able to sue for the loss, if they were
able to determine which party was responsible. In practice, consumers usually went
uncompensated and such a worry has put many consumers off buying goods over the
Internet. The Sale and Supply of Goods to Consumer Regulations also modify the
transfer of risk, so that now the risk remains with the seller until actual delivery. This
will clearly lead to a slight increase in the supply of goods to consumers, with the
goods usually now being sent by insured delivery. However, this will avoid the prob-
lem of who is actually liable and should help to boost confidence.

 

Enforcement

Enforcement for domestic sales is relatively straightforward. Small-scale consumer
claims can be dealt with expeditiously and cheaply under the Small Claims Court.
Here claims under £5000 for contract-based claims are brought in a special court
intended to keep costs down by keeping the lawyers’ out of the court room, as a vic-
torious party cannot claim for their lawyers’ expenses. The judge will conduct the
case in a more ‘informal’ manner, and will seek to discover the legal issues by ques-
tioning both parties, so no formal knowledge of the law is required. The total cost of
such a case, even if it is lost, is the cost of issuing the proceedings (approximately

10 per cent of the value claimed) and the other side’s ‘reasonable expenses’. Expenses
must be kept down, and a judge will not award value which has been deliberately run
up, such first-class rail travel and stays in five star hotels. Residents of Northampton
have hosted a trial of an online claims procedure, so that claims may now be made
via the Internet. (www.courtservice.gov.uk outlines the procedure for MCOL, or
Money Claims Online.) Cases will normally be held in the defendant’s court, unless the complainant is a consumer and the defendant a business.

 

Enforcement is the weak point in the European legislation, for there is, as yet, no
European-wide Small Claims Court dealing with transnational European transac-
tions. The consumer is thus forced to contemplate expensive civil action abroad in a
foreign language, perhaps where no such small claims system exists – a pointless
measure for all but the most expensive of consumer purchases. The only redress lies
in EEJ-Net, the European Extra-Judicial Network, which puts the complainant in
touch with any applicable professional or trade body in the supplier’s home member
state. It does require the existence of such a body, which is unlikely if the transac-
tion is for electrical goods, which is one of the most popular types of Internet
purchase. Therefore, until Europe provides a Euro Small Claims Court, the consumer
cross-border buyer may have many rights, but no effective means of enforcement.
Until then it would appear that section 75 of the Consumer Credit Act 1974, which
gives the buyer the same remedies against their credit card company as against the
seller, is the only effective means of redress.

 

Case study questions

1. Consider the checklist of data which a distance seller must provide to a consumer
   Is this putting too heavy a burden on sellers?

 

2. Is a consumer distance buyer any better off after the European legislation?
3. Are there any remaining issues that must be tackled to increase European cross-
   border consumer trade?

Attempt Any Four Case Studies

Case I

PROVIDE ADVICE TO AN ENTREPRENEUR ABOUT INTELLECTUAL PROPERTY PROTECTION

 

Locked doors and a security system protect your equipment, inventory and payroll. But what protects your business’s most valuable possessions? IP laws can protect your trade secrets, trademarks and product design, provided you take the proper steps. Chicago attorney Kara E.F. Cenar of Welsh and Katz, an IP firm, contends that businesses should start thinking about these issues earlier than most do. “Small businesses tend to delay securing IP protection because of the expense,” Cenar says. “They tend not to see the value of IP until a competitor infringes.” But a business that hasn’t applied for copyrights or patents and actively defended tem will likely have trouble making its case in court.

 

One reason many business owners don’t protect their intellectual property is that they don’t recognize the value of the intangibles they own. Cenar advises business owners to take their business plans to an experienced IP attorney and discuss how to deal with these issues. Spending money upfront for legal help can save a great deal later by giving you strong copyright or trademark rights, which can deter competitors from infringing and avoid litigation later.

 

Once you’ve figured out what’s worth protecting, you have to decide how to protect it. That isn’t always obvious. Traditionally, patents prohibit others from copying new devices and processes, while copyrights do the same for creative endeavors such as books, music and software. In many cases, though, the categories overlap. Likewise, trademark law now extends to such distinctive elements as a product’s color and shape. Trade dress laws concerns how the product is packaged and advertised. You might be able to choose what kind of protection to seek.

For instance, one of Welsh & Katz’s clients is Ty Inc., maker of plush toys. Before launching the Beanie Baby line, Cenar explains, the owners brought in business and marketing plans to discuss IP issues. The plan was for a limited number of toys in a variety of styles, and no advertising except word-of-mouth. Getting a patent on a plush toy might have been impossible and would have taken several years, too long for easily copied toys. Trademark and trade dress protection wouldn’t help much, because the company planned a variety of styles. But copyrights are available for sculptural art, and they’re inexpensive and easy to obtain. The company chose to register copyrights and defend them vigorously. Cenar’s firm has fended off numerous knockoffs.

 

That’s the next step: monitoring the market-place for knockoffs and trademark infringement, and taking increasingly firm steps to enforce your rights. Efforts typically begin with a letter of warning and could end with a court-ordered cease-and-desist order or even an award of damages. “If you don’t take the time to enforce [your trademark], it becomes a very weak mark,” Cenar says. But a strong mark deters infringement, wins lawsuits and gets people to settle early.” Sleep on your rights, and you’’’ lose them. Be proactive, and you’ll protect them – and save money in the long run.

An inventor with a newly invented technology comes to you for advice on the following matters:

 

Questions:

 

1. In running this new venture, I need to invest al available resources in producing the products and attracting customers. How important is it for me to divert money from those efforts to protect my intellectual property?

 

2. I have sufficient resources to obtain intellectual property protection, but how effective is that protection without a large stock of resources to invest in going after those that infringe on my rights? If I do not have the resources to defend a patent, is it worth obtaining one in the first place?

 

3. Are there circumstances when it is better for me not to be an innovator but rather produce “knock-offs” of other innovations?

 

 

Case II – Provide advice to an entrepreneur about firing employees

 

Firing an employee is a messy business. Just the thought of having to recruit, train and manage a new sales soul is enough to keep some sales managers from following through with the task. But holding on to a salesperson who’s not performing or who’s disruptive to the team is guaranteed to exacerbate matters down the road. But how do you know when it’s time to say “you’ve gotta go”? It’s simple, according to Tricia Timkin: “Lack of production, lack of production, lack of production,” says the president of Padigent, a Carol Stream, Illinois, human resources consulting firm for emerging companies.

 

Dave Anderson, president of Dave Anderson’s Learn to Lead, concurs that performance is one criterion for firing. Anderson, whose Los Altos, California, company offers sales, management and leadership consulting, thinks reps who are “dishonest, selfish or disrespectful” should face the axe.

 

You may fear firing a rep will cause a morale dip in the troops. After all, someone’s buddy is getting shown the door. But making a tough choice can bolster the spirits of your sales squad. Says Tamkin: “Firing can positively affect morale [because] it sends a message that the company will take strong measures to ensure the success of the organization. Poor performers lower the morale of the team, and they continually break momentum and diminish the credibility of the sales manager.

Before firing, however, steps must be taken to legally protect your business. It’s crucial that the employee has been warned in advance in writing. Coaching sessions with failing sales people will help protect you when it comes time to separate. Tamkin advises that documentation must be developed in advance of the firing, and that when it comes time for the employee to go, the manger should conduct an exit interview. Though firing will never be a savory part of a manager’s job description, it’s short – term pain for long – term gain. “Managers have to realize that when they keep the wrong person,” Anderson says, “there’s more damage to the company than just lack of production.”

 

Here are some firing guidelines from William Skip Miller’s ProActive Sales Management (AMACOM):

1. Never in your office: if it’s your office, you can’t leave if the employee wants to stay and talk.
2. Short and Sweet: As you walk in the door, say, “The reason I’m here is to tell this is your last day of employment with this company.” Just get it out.
3. Never on a Friday: If fired on a Friday, the employee can’t start the process of feeling good. All he or she can do is stew about it over the weekend.
4. Outside help: If the employee says he or she has consulted an attorney or other legal counsel, stop the conversation immediately and consult your HR department or attorney, whoever helped you draft your company policy.
5. No hanging around: Personal effects can be retrieved, but have the person leave the building.

 

Advice to an entrepreneur:

An entrepreneur, whose business has stopped growing, has read the above article and comes to you for advice:

 

1. Gee, these managers discussed in the article are a bit rough. Even if one particular person is not producing as expected, doesn’t this person still deserve to be treated with respect?

 

2. It appears that the automatic assumption is that the employee is at fault for not performing and therefore should be fired. But shouldn’t the responsibility fall on me as the manager and the system that I have introduced? Maybe the person is performing as well as the situation allows?

 

3. How am I to build team spirit within my small company when I single out one person for lack of production and fire him or her?

 

Case III – Provide advice to an entrepreneur about small business investment companies

 

It started out as a straightforward consulting project for Mahendra Vora and research partner Sundar Kadaya. They were analyzing software trends and perusing market research studies to assess the size of various software markets. But after spending 40 hours looking for information that should have taken 10 minutes to access, the pair concluded that more advanced tools were needed to search the internet and databases of public information. Within months, they launched Intelliseek Inc., providing software to capture, track and analyze information for use in strategic planning, market research, product development and brand marketing. Vora, 39, was no stranger to start-ups. By the time he co-founded Intelliseek in 1997, he already had three business launches under his belt. He sold all three to Fortune 500 firms, providing capital for Intelliseek. His initial investment of a few million dollars supported operations the first couple of years and through two major product launches.

 

By 1999, the Cincinnati Company was laying the groundwork for its first round of venture capital.Vora had had two years to contemplate his dream investor. Foremost, size did matter: The venture capitalist should have the wherewithal for ongoing financing, but not be so large that it shunned all but elaborate business models. Finding an investor with a broad network of investing partners also was important to the $10million company. “If you become wildly successful and plan to raise $50 million someday, then [the investor] should have access to the big investors. The network is also important because it can [introduce] you to customers,” says Vora, whose clients include CBS, Ford Motor Co. and Nokia. Finally, Vora was looking for operational experience. “A lot of VCs are phenomenal in advising you about what to do, but they’ve never done it themselves,” he observes. Vora ultimately found his venture match in Cincinnati-based River Cities Capital Funds, a small business investment company. While River Cities was not large, it was well-connected and managed by industry veterans with extensive professional experience.

 

Starting Small

Licensed and regulated by the SBA, SBICs are generally organized and operated like any other venture capital fund. But unlike traditional funds, SBICs use their own capital and long-term loans to small companies. On the whole, SBICs tend to be more risk-tolerant than banks or traditional venture capitalists….Inteliseek’s SBIC banker removed barriers to reaching larger, mainstream investors. Led by river cities capital funds, the initial $6 million investment included capital from the venture arm of Nokia; later investors included Ford Motor Co. and General Atlantic Partners LLC. “once you get a VC like River Cities, it is much easier to get access to bigger VCs,” says Vora. “They can go to VCs and say ‘One of our companies is doing so well, we’re going to put in more money, and you guys should come in’.”

Down But Not Out

SBICs invested roughly $2.8 billion in about 2,100 companies in the 12-month period ending September 30, 2002 down from $4.6 billion invested in 2,254 companies in the same period one year earlier. Like mainstream investors, they have had to adjust to deteriorating economic conditions.  “Valuations have come down on deals, and due diligence periods have increased,” says Patrick Hamner, vice resident of Capital Southwest Corp., a Dallas-based SBIC. “People are being far more discriminating in how they invest their capital.”

“The bar has been raised even more for small businesses trying to get capital,” he continues. “As opposed to the overall venture industry, which has had a very marked decline in financing activity, SBICs are down but still active.”

Nor has quality been an overriding concern, even as SBICs engage in riskier deals than their mainstream counterparts. “Part of what has happened with the bursting of the bubble is that the ideas being proposed are based on more substantive models,” says Edwin Robinson, managing director of River Cities Capital Funds. “A lot of the excess is being wrung out the system.” While the venture shakeup has impacted conventional the way some SBICs operate. “During the bubble years, there was probably more of an inclination to overfund,” says NASBICs Mercer. “I don’t mean in  the sense that money might not be justified, but to make the unconditional investment. I suspect that what you’re seeing now is a lot more investing on a milestone basis.” For instance, a company that requires $3 million over three years is likely to receive $1 million upfront, getting the rest after meeting revenue and growth targets. Fewer venture dollars, coupled with the banking industry’s reticence to lend to small businesses, has contributed to an overall capital shortage, adds Mercer. “Banks that had been out a little bit further on the risk curve than they probably normally do,” he says. “The banks’ own proclivity and the regulators kind of forced a pullback, so there has been a tremendous pullback in bank credit availability even for small businesses that have had long time banking relationships.”

 

The SBIC program, meanwhile, is attracting mainstream investors having difficulty raising capital for venture-backed investments. The increased interest bodes well for the small firms that SBICs target: companies with a net worth of less than $18 million and average after-tax earning of less than $6 million for the past two years.

 

Advice to an entrepreneur

An entrepreneur, who is an owner manager of a small business and looking to raise $4,00,000, has read the above article and comes to you for advice:

1. What are the advantages of going to an SBIC over and above a business angle or venture capitalist?
2. What are the disadvantages and how can they be minimized?

 

Case IV -Provide advice to an entrepreneur about being more innovative

 

When Neil Franklin began offering round-the-clock telephone customer service in 1998, customers loved it. The offering fit the strategic direction Franklin had in mind for Dataworkforce, his Dallas-based telecommunications – engineer staffing agency, so he invested in a phone system to route after hours calls to his 10 employees’ home and mobile phones. Today, Franklin, 38, has nearly 50 employees and continues to explore ways to improve Dataworkforce’s service. Twenty-four-hour phone service has stayed, but other trials have not. One failure was developing individual Web sites for each customer. “We took it too far and spent $30,000 then abandoned it,” Franklin recalls. A try at globally extending the brand by advertising in major world cities was also dropped. “It worked pretty well,” Franklin says, “until you added up the cost.”

Franklin’s efforts are similar to an approach called “portfolios of initiatives” strategy. The idea, according to Lowell Bryan, a principal in McKinney & Co., the NYC consulting firm that developed it, is to always have a number of efforts underway to offer new products and services, attack new markets or otherwise implement strategies, and to actively manage these experiments so you don’t miss an opportunity or over commit to an unproven idea.

 

The portfolio of initiatives approach addresses a weakness of conventional business plans-that they make assumptions about uncertain future developments, such as market and technological trends, customer responses, sales and competitor reactions. Bryan compares the portfolio of initiatives strategy to the ship convoys used in World War II to get supplies across oceans. By assembling groups of military and transport vessels and sending them in a mutually supportive group, planners could rely on at least some reaching their destination. In the same way, entrepreneurs with a portfolio of initiatives can expect some of them to pan out.

 

Making a Plan

Three steps define the portfolio of initiatives approach. First, you search for initiatives in which you have or can readily acquire a familiarity advantage – meaning you know more than competitors about a business. You can gain familiarity advantage using low-cost pilot programs and experiments, or by partnering with more knowledgeable allies. Avoid business in which you can’t acquire a familiarity advantage, Bryan says.

After you identify familiarity-advantaged initiatives, began investing in them using a disciplined, dynamic management approach. Pay attention to how initiatives relate to each other. They should be diverse enough that the failure of one wont endanger the others, but should also all fit into your overall strategic direction. Investments, represented by product development efforts, pilot programs, market tests and the like, should start small and increase only as they prove themselves. Avoid over investing before initiatives have proved themselves. The third step is to pull the plug on initiatives that aren’t working out, and step up investment in others. A portfolio of initiatives will work in any size company. Franklin pursues 20 to 30 at any time, knowing 90 percent wont pan out, “The main idea is to keep those initiatives running,” he says. “If you don’t, you’re slowing down.”

 

Advice to an entrepreneur

An entrepreneur, who wants his firm to be more innovative, has read the above article and come to you for advice:

 

1. This whole idea of experimentation seems to make sense, but all those little failures can add up, and if there enough of them, then this could lead to one big failure-the business going down the drain. How can I best get the advantages of experimentation in terms of innovation while also reduction the costs so that I don’t run the risk of losing my business?
2. My employees, buyers, and suppliers like working for my company because we have a lot of wins. I am not sure how they will take it when our company begins to have a lot more failures (even if those failures are small)- it is a psychological thing. How can I handle this trade-off?
3. Even if everyone else accepts it, I am not sure how I will cope. When projects fail it hits me pretty hard emotionally. Is it just that I am not cut out for this type of approach?

 

 

 

Case V – PROVIDE ADVICE TO AN ENTREPRENEUR ABOUT NONTRADITIONAL FINANCING

 

When Lissa D’Aquanni created a gourmet chocolate business in her Albany, New York, basement in 1998, she had not only a passion for candy-making, but also a knack for spurring citizen involvement. The former nonprofit executive had worked for women’s advocacy groups, most recently promoting breast cancer awareness. If there was one thing she knew, it was how to rally community support.

 

Her ability to leverage local resources would be invaluable as she made her business a fixture of her Albany neighborhood. And in no area were those skills as critical as in financing last year, D’Aquanni wanted to move her business, the chocolate Gecko, to an abandoned building three blocks away, she needed $25,000.” Volunteers also helped renovate the building, cutting project costs form an estimated $3,00,000.

 

Check out D’Aquanni’s unorthodox and creative financing plan: An economic development group, the Albany Local Development Corp., loaned her $95,000 to buy the building. D’Aquanni obtained a $1,00,000 government guaranteed loan from a local credit union to renovate the structure. Façade improvements were funded through a matching grant program to encourage commercial development in Albany. A local community development financial institution used a state program to fund energy-efficient upgrades, including new windows, light fixtures, furnaces and siding. Says D’Aquanni, “ There were lots of different pieces of the puzzle to identify and figure out how to access.”

 

Conventional financing wasn’t an option. “I was looking at a business that did about $44,000 in sales doing a $260,000 project, and the traditional funders were apprehensive,” explains D’Aquanni, 37. They urged her to rent a storefront rather than buy the rundown building. Undeterred, D’Aquanni met with a neighborhood group to develop her expansion plan. It wasn’t the first time the community had helped out. In 1999, the cashstrapped chocolatier needed molds and a temperer for the Christmas rush. Recalling a strategy she had seen in a magazine, she sold discounted gift certificates to raise capital. D’Aquanni offered customers $25 in free chocolates for every $100 in gift certificates purchase. “A lot of folks mailed them as gifts to friends, family and co-workers,” D’Aquanni says. “ And most of those people ordered chocolates. My customer base expanded.”

 

Indeed, many entrepreneurs successfully launch a business only to encounter funding hardships as they attempt to grow. The ability to think outside the box, experts say, is critical for firms short on funding. “There are pockets of money out there, whether it be municipalities, counties, chambers of commerce,” says Bill Brigham, Director of the Small Business Development Center in Albany. “Those are the loan programs that no one seems to have information about. A lot of these programs will not require the collateral and cash that is typical of traditional [loans]. They may be a little more lenient as far as credit history goes. That’s one of the key roles we can play-what entrepreneur is going to think [he or she] can qualify for HUD money?

 

Advice to an entrepreneur

 

An entrepreneur, who is looking to expand but has limited access to traditional financing, has read the above article and comes to you for advice:

 

1. I want to find a little pot of gold like Lissa D’Aquanni. Where should I look?
2. I like the gift certificate idea to raise money and build my business. What other types of products do you think that approach will work for?
3. Over the years I have paid a lot of taxes. Should I feel guilty for accessing government – subsidized monies to build my business, or should I feel justified?

 

 

Attempt Any Four Case Study

 

Case 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 favorable 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.

1. A maximum of 10 percent reduction in sales volume will take place.
2. 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 :

• 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.

 

• 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.
• 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)

Question:

Analyse the debt capacity of the company.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASE – 2   GREAVES LIMITED

 

Started as trading firm in 1922, Greaves Limited has diversified into manufacturing and marketing of high technology engineering products and systems. The company’s mission is “manufacture and market a wide range of high quality products, services and systems of world class technology to the total satisfaction of customers in domestic and overseas market.”

Over the years Greaves has brought to India state of the art technologies in various engineering fields by setting up manufacturing units and subsidiary and associate companies. The sales of Greaves Limited has increased from Rs 214 crore in 1990 to Rs 801 crore in 1997. The sales of Greaves Limited has increased from Rs 214 crore in 1990 to Rs 801 crore in 1997. Profits before interest and tax (PBIT) of the company increased from Rs 15 crore to Rs 83 crore in 1997. The market price of the company’s share has shown ups and downs during 1990 to 1997. How has the company performed? The following question need answer to fully understand the performance of the company:

 

Exhibit 1

 

GREAVES LTD. Profit and Loss Account ending on 31 March          (Rupees in crore)
	1990	1991	1992	1993	1994	1995	1996	1997
Sales Raw Material and Stores Wages and Salaries Power and fuel Other Mfg. Expenses Other Expenses Depreciation Marketing and Distribution Change in stock	214.38 170.67 13.54 0.52 0.61 11.85 1.85 4.86 1.18	253.10 202.84 15.60 0.70 0.49 15.48 1.72 5.67 3.10	287.81 230.81 18.03 1.11 0.88 16.35 1.52 5.14 4.93	311.14 213.79 37.04 3.80 2.37 25.54 4.62 5.17 0.48	354.25 245.63 37.96 4.43 2.36 31.60 5.99 9.67 – 1.13	521.56 379.83 48.24 6.66 3.57 41.40 8.53 10.81 5.63	728.15 543.56 60.48 7.70 4.84 45.74 9.30 12.44 11.86	801.11 564.35 69.66 9.23 5.49 48.64 11.53 16.98 – 5.87
Total Op Expenses	202.72	239.40	268.91	291.85	338.77	493.41	672.20	731.75
Operating Profit Other Income Non-recurring Income	11.61 2.14 1.30	13.70 3.69 2.28	18.90 4.97 0.10	19.29 4.24 10.98	15.48 7.72 16.44	28.15 14.35 0.46	55.95 11.35 0.52	69.36 13.08 1.75
PBIT	15.10	19.67	23.97	34.51	39.64	42.98	65.67	82.64
Interest	5.56	6.77	11.92	19.62	17.17	21.48	28.25	27.54
PBT	9.54	12.90	12.05	14.89	22.47	21.50	37.42	55.10
Tax PAT Dividend Retained Earnings	3.00 6.54 1.80 4.74	3.60 9.30 2.00 7.30	4.90 7.15 2.30 4.85	0.00 14.89 4.06 10.83	4.00 18.47 7.29 11.18	7.00 14.50 8.58 5.92	8.60 28.82 12.85 15.97	15.80 39.30 14.18 25.12

 

Exhibit 2

 

GREAVES LTD. Balance Sheet                                (Rupees in crore)
	1990	1991	1992	1993	1994	1995	1996	1997
ASSETS Land and Building Plant and Machinery Other Fixed Assets Capital WIP Gross Fixed Assets Less: Accu. Depreciation Net Tangible Fixed Assets Intangible Fixed Assets	3.88 11.98 3.64 0.09 19.59 12.91 6.68 0.21	4.22 12.68 4.14 0.26 21.30 14.56 6.74 0.19	4.96 12.98 4.38 10.25 23.57 15.79 7.78 0.05	21.70 33.49 5.18 11.27 71.64 19.84 51.80 4.40	30.82 50.78 6.95 34.84 123.39 25.74 97.65 22.03	39.71 75.34 8.53 14.37 137.95 33.90 104.05 22.45	42.34 92.49 8.87 13.92 157.62 42.56 115.06 20.04	43.07 104.45 10.35 14.36 172.23 53.87 118.86 21.11
Net Fixed Assets	6.89	6.93	7.83	56.20	119.68	126.50	135.10	139.97
Raw Materials Finished Goods Inventory Accounts Receivable Other Receivable Investments Cash and Bank Balance Current Assets Total Assets LIABILITIES AND CAPITAL Equity Capital Preference Capital Reserves and Surplus	5.26 29.37 34.63 38.16 32.62 3.55 8.36 117.32 124.21   9.86 0.20 27.60	6.91 33.72 40.63 53.24 40.47 14.95 8.91 158.20 165.13   9.86 0.20 32.57	7.26 38.65 45.91 67.97 49.19 15.15 12.71 190.93 198.76   9.86 0.20 37.42	21.05 53.39 74.44 93.30 24.54 27.58 13.29 233.15 289.35   18.84 0.20 100.35	28.13 52.26 80.39 122.20 59.12 73.50 18.38 353.59 473.27   29.37 0.20 171.03	44.03 58.09 102.12 133.45 64.32 75.01 30.08 404.98 531.48   29.44 0.20 176.88	53.62 69.97 123.59 141.82 76.57 75.07 33.46 450.51 585.61   44.20 0.20 175.41	50.94 64.09 115.03 179.92 107.31 76.45 48.18 526.89 666.86   44.20 0.20 198.79
Net Worth	37.66	42.63	47.48	119.39	200.60	206.52	219.81	243.19
Bank Borrowings Institutional Borrowings Debentures Fixed Deposits Commercial Paper Other Borrowings Current Portion of LT Debt	14.81 4.13 4.77 12.31 0.00 2.33 0.00	19.45 3.43 16.57 14.45 0.00 3.22 0.00	26.51 9.17 19.99 15.03 0.00 3.10 0.08	24.82 38.09 4.56 14.08 0.00 3.18 0.12	55.12 38.76 4.37 15.57 15.00 17.08 15.08	64.97 69.69 4.37 17.75 0.00 1.97 0.02	70.08 89.26 2.92 20.81 0.00 2.36 1.49	118.28 63.60 1.49 19.29 0.00 2.57 1.57
Borrowings	38.35	57.12	73.72	84.61	130.82	158.73	183.94	203.66
Sundry Creditors Other Liabilities Provision for tax, etc. Proposed Dividends Current Portion of LT Dept	37.52 5.70 3.18 1.80 0.00	49.40 10.16 3.82 2.00 0.00	59.34 10.70 5.14 2.30 0.08	77.27 3.59 0.31 4.06 0.12	113.66 1.42 4.40 7.29 15.08	148.13 1.99 7.70 8.58 0.02	153.63 1.70 12.19 12.85 1.49	179.79 3.04 21.43 14.18 1.57
Current Liabilities	48.20	65.38	77.56	85.35	141.85	166.42	181.86	220.01
TOTAL LIABILITIES Additional information: Share premium reserve Revaluation reserve Bonus equity capital	124.21       8.51	165.13       8.51	198.76       8.51	289.35   47.69 8.91 8.51	473.27   107.40 8.70 8.51	531.67   107.91 8.50 8.51	585.61   93.35 8.31 23.25	666.86   93.35 8.15 23.25

 

Exhibit 3

 

GREAVES LTD. Share Price Data
	1990	1991	1992	1993	1994	1995	1996	1997
Closing share price (Rs) Yearly high share price (Rs) Yearly low share price (Rs) Market capitalization (Rs crore EPS (Rs) Book value (Rs)	27.19 29.25 26.78 65.06 4.79 35.64	34.74 45.28 21.61 67.77 6.82 37.22	121.27 121.27 34.36 236.56 9.73 42.54	66.67 126.33 48.34 274.84 1.93 57.75	78.34 90.00 42.67 346.35 2.66 40.61	71.67 100.01 68.34 316.87 7.16 64.98	47.5 90.00 45.00 210.02 5.03 45.35	48.25 85.00 43.75 213.34 9.01 50.73

 

 

 

 

Questions

 

1. How profitable are its operations? What are the trends in it? How has growth affected the profitability of the company?
2. What factors have contributed to the operating performance of Greaves Limited? What is the role of profitability margin, asset utilisation, and non-operating income?
3. How has Greaves performed in terms of return on equity? What is the contribution of return on investment, the way of the business has been financed over the period?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASE – 3   CHOOSING BETWEEN PROJECTS IN ABC COMPANY

 

ABC Company, has three projects to choose from. The Finance Manager, the operations manager are discussing and they are not able to come to a proper decision. Then they are meeting a consultant to get proper advice. As a consultant, what advice you will give?

 

The cash flows are as follows. All amounts are in lakhs of Rupees.

 

Project 1:

Duration 5 Years

Beginning cash outflow = Rs. 100

Cash inflows (at the end of the year)

Yr. 1 – Rs 30; Yr. 2 – Rs 30; Yr. 3 – Rs 30; Yr.4 – 10; Yr.5 – 10

 

Project 2:

Duration 5 Years

Beginning Cash outflow Rs. 3763

Cash inflows (at the end of the year)

Yr. 1 – 200; Yr. 2 – 600; Yr. 3 – 1000; Yr. 4 – 1000; Yr. 5 – 2000.

 

Project 3:

Duration 15 Years

Beginning Cash Outflow – Rs. 100

Cash Inflows (at the end of the year)

Yrs. 1 to 10 – Rs. 20 (for 10 continuous years)

Yrs. 11 to 15 – Rs. 10 (For the next 5 years)

 

Question:

If the cost of capital is 8%, which of the 3 projects should the ABC Company accept?

 

 

 

 

 

 

 

 

 

 

 

 

 

CASE – 4   STAR ENGINEERING COMPANY

 

Star Engineering Company (SEC) produces electrical accessories like meters, transformers, switchgears, and automobile accessories like taximeters and speedometers.

SEC buys the electrical components, but manufactures all mechanical parts within its factory which is divided into four production departments Machining, Fabrication, Assembly, and Painting—and three service departments—Stores, Maintenance, and Works Office.

Though the company prepared annual budgets and monthly financial statements, it had no formal cost accounting system. Prices were fixed on the basis of what the market can bear. Inventory of finished stocks was valued at 90 per cent of the market price assuming a profit margin of 10 per cent.

In March, the company received a trial order from a government department for a sample transformer on a cost-plus-fixed-fee basis. They took up the job (numbered by the company as Job No 879) in early April and completed all manufacturing operations before the end of the month.

Since Job No 879 was very different from the type of transformers they had manufactured in the past, the company did not have a comparable market price for the product. The purchasing officer of the government department asked SEC to submit a detailed cost sheet for the job giving as much details as possible regarding material, labour and overhead costs.

SEC, as part of its routine financial accounting system, had collected the actual expenses for the month of April, by 5th of May. Some of the relevant data are given in Exhibit A.

The company tried to assign directly, as many expenses as possible to the production departments. However, It was not possible in all cases. In many cases, an overhead cost, which was common to all departments had to be allocated to the various departments using some rational basis. Some of the possible bases were collected by SEC’s accountant. These are presented in Exhibit B.

He also designed a format to allocate the overhead to all the production and service departments. It was realized that the expenses of the service departments on some rational basis. The accountant thought of distributing the service departments’ costs on the following basis:

1. Works office costs on the basis of direct labour hours.
2. Maintenance costs on the basis of book value of plant and machinery.
3. Stores department costs on the basis of direct and indirect materials used.

The accountant who had to visit the company’s banker, passed on the papers to you for the required analysis and cost computations.

 

 

REQUIRED

 

Based on the data given in Exhibits A and B, you are required to:

 

1. Complete the attached “overhead cost distribution sheet” (Exhibit C).
   Note: Wherever possible, identify the overhead costs chared directly to the production and service departments. If such direct identification is not possible, distribute the costs on some “rational basis.
2. Calculate the overhead cost (per direct labour hour) for each of the four producing departments. This should include share of the service departments’ costs.
3. Do you agree with:
   a.   The procedure adopted by the company for the distribution of overhead costs?
   b.   The choice of the base for overhead absorption, i.e. labour-hour rate?

 

 

Exhibit A

 

STAR ENGINEERING COMPANY Actual Expenses(Manufacturing Overheads) for April
	RS	RS
Indirect Labour and Supervisions: Machining Fabrication Assembly Painting Stores Maintenance   Indirect Materials and Supplies Machining Fabrication Assembly Painting Maintenance   Others Factory Rent Depreciation of Plant and Machinery Building Rates and Taxes Welfare Expenses (At 2 per cent of direct labour wages and Indirect labour and supervision) Power (Maintenance—Rs 366; Works Office Rs 2,200, Balance to Producing Departments) Works Office Salaries and Expenses Miscellaneous Stores Department Expenses	33,000 22,000 11,000 7,000 44,000 32,700     2,200 1,100 3,300 3,400 2,800     1,68,000 44,000 2,400 19,400     68,586     1,30,260 1,190	1,49,700             12,800                         4,33,930   5,96,930

 

 

 

 

 

 

 

 

 

Exhibit B

STAR ENGINEERING COMPANY Projected Operation Data for the Year
Department	Area (sq.m)	Original Book of Plant & Machinery Rs	Direct Materials Budget   Rs	Horse Power Rating	Direct Labour Hours	Direct Labour Budget   Rs
Machining Fabrication Assembly Painting Stores Maintenance Works Office Total	13,000 11,000 8,800 6,400 4,400 2,200 2,200 48,000	26,40,000 13,20,000 6,60,000 2,64,000 1,32,000 1,98,000 68,000 52,80,000	62,40,000 21,60,000   10,80,000       94,80,000	20,000 10,000 1,000 2,000       33,000	14,40,000 5,28,000 7,20,000 3,30,000       30,18,000	52,80,000 25,40,000 13,20,000 6,60,000       99,00,000

 

Note

 

The estimates given in this exhibit are for the budgeted year January to December where as the actuals in Exhibit A are just one month—April of the budgeted year.

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit C STAR ENGINEERING COMPANY Actual Overhead Distribution Sheet for April
Departments Overhead Costs	Production Departments						Service Departments			Total Amount Actuals for April (Rs)	Basis for Distribution
A. Allocation of Overhead to all departments A.1 Indirect Labour and Supervision										1,49,700
A.2 Indirect materials and supplies										12,800
A.3 Factory Rent										1,68,000
A.4 Depreciation of Plant and Machinery										44,000
A.5 Building Rates and Taxes										2,400
A.6 Welfare Expenses										19,494
A.7 Power										68,586
A.8 Works Office Salaries and Expenses										1,30,260
A.9 Miscellaneous Stores Expenses										1,190
A. Total (A.1 to A.9)										5,96,430
B. Reallocation of Service Departments Costs to Production Departments
B.1 Distribution of Works Office Costs
B.2 Distribution of Maintenance Department’s Costs
B.3 Distribution of Stores Department’s Costs
Total Charged to Producing C. Departments (A+B)										5,96,430
D. Labour Hours Actuals for April	1,20,000		44,000	60,000		27,500
E. Overhead Rate/Per Hour (D)

 

 

 

 

Case 5: EASTERN MACHINES COMPANY

 

Raj, who was in charge production felt that there are many problems to be attended to. But Quality Control was the main problem, he thought, as he found there were more complaints and litigations as compared to last year. With the demand increasing, he does not want to take any chances.

 

So he went down to assembly line, but was greeted by an unfamiliar face. He introduced himself.

 

Raj: I am in charge of checking the components, which we use, when we assemble the machines for customers. For most of the components, suppliers are very reliable and we assume that there will not be any problem. When we generally test the end product, we don’t have failures.

 

Namdeo: I am Namdeo. I was in another dept. and has been transferred recently to this dept.

 

Raj: Recently we have been having problems, and there has been some complaint or other about the machines we have supplied. I am worried and would like to check the components used. I would like to avoid lot of expensive rework.

 

Namdeo: But it would be very expensive to test every one of them. It will take at least half an hour for each machine. I neither have the staff nor the time. It will be rather pointless as majority of them will pass the test.

 

Raj: There has been more demand than supply for these machines in last 2 years. We have been buying many components from many suppliers. We have been producing more with extra shifts. We are trying to capture the market and increase our market share.

 

Namdeo: We order for components from different places, and sometimes we do not have time to check all. There is a time lag between order and supply of components, and we cannot wait as production will stop. We use whatever comes soon as we want to complete our orders.

 

Raj: Oh! Obviously we need some kind of checking. Some sampling technique to check the quality of the components. We need to get a sample from each shipment from our component suppliers. But I do not know how many we should test.

 

Namdeo: We should ask somebody from our statistics dept. to attend to this problem.

 

As a Statistician, advice what kind of Sampling schemes can we consider, and what factors will influence choice of scheme. What are the questions we should ask Mr. Namdeo, who works in the assembly line?