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BUSINESS
COMMUNICAITON
SUBJECT :
Total Marks : 80
CASE-1 (20 Marks)
Nestle has launched quality street ,lion and after 8
choclates imported from Europe. Qualtty Street is an
assortment of chocolates priced at Rs. 7 5 for 218 gm. After
Eight is a popular adult chocolate priced at Rs.25
for 20 gm and Lion is a caramel wafer bar priced at Rs. 20
for a 45 gm bar. (Kit Kat )is priced at Rs. 6 for a 17
gm bar and has a chocolaty taste while Lion has a crunchy
taste). The brands have different tastes and will
appeal to different target segments (though the target
segment is one which may have already been exposed to
these brands during visits abroad). These brands have been
introduced in metros in upmarket stores which sell
brands bears the label "lmported by Nestle India
Ltd." indicating that they may be better than smuggled ones
(which may be stale).
Question :
Suggest suitable
media /media vehicles for promoting these brands. Give reasons in support of
your answer
What business
communication media you will utilize if you have to launch a soap in rural
India?
CASE -2 (20 Marks)
The herbal shampoo market is valued at around Rs. 100
crores. Ny/e, Ayur, Dqbur and Biotique are some of the
established brands in the market.
Helene Curtis (JK Group) has introduced a premium herbal
shampoo (with variants Shikskai, henna and qmla
and brqhmi and josur) priced between Rs. 80 and Rs. 90 (500
ml) for different types of hair. The proposition is
the benefits offered by lhe variant based on the combination
of herbs, benefits offered by the variants range
from extra protection and nourishment to colour, body and
bounce. The shampoos have been launched under
the brand name Premium Herbsl Shsmpoos and they target urban
housewives with a monthly household
income of Rs.25,000. The brand is distributed through 7
0,000 retail outlets and 120 Raymond shops. The
company has planned only point of purchase (POP) posters
initially and may consider the electronic media
later. The shampoo has an annual advertising expenditure of
Rs. 10 crores.
Question :
Comment on the
marketing mix of JK's Premium Herbsl Shampoos ?
How can you make
their communication more effective ?.
Page 2 of 2
CASE 3 (40 Marks)
Attempt all cases of the following: (10 marks each)
Iran Rafsanjan Co.,
Rafsanjan City, Iran has taken a marine insurance policy No. VB/84/3629/29
dated
20th December, 2005 from Albroz Insurance Co., Kerman City,
Iran for the import of 500 tractor gears
from Apex Products (India) Ltd., Delhi. The exporter shipped
the cargo on board vessel — SEEMA on
26th December, 2005 for Bandar Abbas Port of Iran.
As per the letter of credit condition, the exporter was
required to fax the shipment details to Albroz
Insurance Company within 24 hours of the shipment. However,
the exporter could not fax such details due
to change in telephone (fax) number of the insurance
company.
Draft an express telegram to intimate shipment details.
Yours is a
multinational company having joint venture with a Chinese company. Plant is to
be located at
Surat. The company immediately needs an Executive - Foreign
Affairs (male/female) with ability of
“writing and speaking Chinese language.
Draft a recruitment advertisement for publication under
classified column of a national daily. Salary-is no
bar for the right candidate. E-mail address
-info@krishnafashions.com
The local head office
of State Bank of India is located at 11, Parliament Street, New Delhi-110001.
The
bank wants to construct 76 flats at Noida for its employees
and invite applications for pre-qualification of
contractors. Full details are available on its website -
www.sbi.co.in or www.statebankofindia.com/
procurement_news.
Draft a notice for pre-qualification of contractors.
iv) The Joint Admission Board (JAB) of Indian Institutes of
Technology in its meeting held on 17th
September, 2005 at Kolkata has taken some decisions with
regard to Joint Entrance Examination (JEE)
2006, i.e., to appear in JEE, one must secure at least 60%
marks (55% for SC/ST and PD) in 10+2
examination; a candidate can have only two attempts with
effect from JEE-2006; and a candidate who
joins any of the IITs through JEE-2006 will not be permitted
to appear in JEE in future.* It was also
decided that candidates, who have passed their qualifying examination
in 2005 or earlier, will be allowed
to appear in JEE-2006 as the last chance, witji no
consideration of marks or attempts at JEE subject to age
requirements. On behalf of the JAB, draft a suitable press
release to be issued by organising chairman
highlighting these decisions.
BUSINESS ENVIRONMENT
CASE 1
Imagine that you are
in-charge of a major chemical plant, manufacturing points. At present, the
general awareness about the mandatory requirements for
chemical industry is very low. Even if the
compliance record is maintained, it is not disclosed to all
employees. (25 marks)
In a recent seminar of the company, many experts from
industry associations like Confederation of
Indian Industries (CII), conducted the seminar. The dangers
of non-compliance of ISO 14001 EMS
certification and Trade Sanctions, which are likely to
increase, were discussed. Even the senior
managers were involved and a lot of serious discussions took
place.
After a span of one month, the In-charge (i.e. you!)
received a call from the top management, who
want you to find out more about the ISO Certification. The
management, wants to help you, with the
help of other employees to list the critical aspects that
have potential environmental impact.
You may be feeling that you have only some vague ideas about
air pollution in paint industry
and water pollution, due to paint manufacture. You may also
recall the newspaper clipping on
internationalization of paint manufacturing practices, which
states the following points:
What are the
activities that are critical to the company’s environmental management
certification?
ii) List the activities which have potential environmental
impacts in a pint industry.
iii) List the legal requirements.
iv) Is there a trade related issue involved in this case
v) Explain, how your company can prepare itself towards
certification.
CASE 2 :
XYZ company is an
equal opportunity employer. XYZ Co has always upheld the
spirits of freedom, human welfare, fair practices and fair
treatment to all employees. It has the image
of a socially responsible company in India. XYZ Co., has
never involved itself in any study deals,
even if it could bring good profits. (15 Marks)
Also, XYZ Co. is a major IT solution provider. XYZ has
immense potential for providing
consultancy services in the African nations and South East
Asian countries. A request was received
from an African country, stating that they have an
assignment for two years. The following
conditions are to be fulfilled.
a) Employees should not bring families with them during the
assignment.
b) Women managers should not accompany the team.
c) The country and the collaborating company are not
responsible if any accident or any other
untoward incidents take place.
Please answer the following questions :
Should XYZ Co take up
the assignment?
How can XYZ Co
maintain business viability and growth without compromising on basic rights
and values enshrined? In the mission statement of the
company?
iii) What alterations may be sought in the agreement and
why?
CASE 3
On the night of
December 23, 1983 a dangerous chemical reation occurred in the Union
Carbide factory in Bhopal, when a large amount of water got
into the MIC i.e. Methyl Isocyanate
storage tank. When the leak was detected by workers at 11.30
pm, their eyes began to tear and burn.
The rest is history. About 40 tons of MIC poured out of the
tank for nearly 2 hours and escaped into
air, spreading within 8 km down wind, About 4000 people were
killed in sleep or as they fled in
terror, hundreds of thousands were injured or effected the
victims who were almost entirely the
poorest members of the population. The poisonous gas, caused
death and left the survivors with
lingering disability and diseases.
The Bhopal disaster was a result of the combination of
legal, technological, organizational and
human errors. The long term effects were made worse by the
absence of systems to care for and
compensate the victims. Also, the safety standards and
maintenance procedure at the Union Carbide
plant had been deteriorating and ignored for months.
Questions :
From Bhopal Tragedy,
what an industrial manager learns? What safety procedures are to be
followed. Study the case deeply and state what were the
defects of MIL unit. In view of this case,
prepare a disaster management plan, which could cover be
useful to a chemical company. (10 Marks)
Q 4)
List the methods of
waste management in the order of preference. (5 Marks)
What are the
advantages of solid waste incernaton? (5 Marks)
Define hazardous
waste (5 Marks)
List the legal
provisions in the Environment Protection Act pertaining to hazardous waste
(5 Marks)
Q 5)
Discuss the role of
CPCB (Central Pollution Control Board) in the pollution control activities in
India. (2 Marks)
Mention the salient
points of the 3 Acts : (2 Marks)
The Air (prevention and control of pollution) Act 1981
The Water (prevention and control of pollution) Act 1974
The Environment (Protection) Act 1986
iii) Explain the very elements of EIA (Environmental Impact
Assessment) – different types of
Impact Assessments – the benefits of EIA – The EIA process,
key points to remember while
conducting an effective EIA. (2 Marks)
Compare and contrast
“polluter pays principle” with “beneficiary pays principle”. (2 Marks)
v) What are the tenets of Risk management – explain the
steps involved through a chart. (2Marks
BUSINESS ETHICS
CASE -1 (20 Marks)
Joan, an employee of Great American Market, was warned about
her excessive absenteeism several
times, both verbally and in writing. The written warning
included notice that "further violations will
result in disciplinary actions," including suspension
or discharge.
A short time after the written warning was issued, Joan
called work to say she was not going to be in
because her babysitter had called in sick and she had to
stay home and care for her young child. Joan's
supervisor, Sylvia, told her that she had already exceeded
the allowed number of absences and warned
that if she did not report to work, she could be suspended.
When Joan did not report for her shift,
Sylvia suspended her for fifteen days.
In a subsequent hearing, Joan argued that it was not her
fault that the babysitter had canceled, and
protested that she had no other choice but to stay home.
Sylvia pointed out that Joan had not made a
good faith effort to find an alternate babysitter, nor had
she tried to swap shifts with a co-worker.
Furthermore, Sylvia said that the lack of a babysitter was
not a justifiable excuse for being absent.
Questions:
Was the suspension
fair?
Did Joan act
responsibly?
3. Should she be fired?
CASE-2 (20 Marks)
You own a cement company, and deal with most the local
contractors for cement, sand, etc. You have
a reputation of high quality products, and for good customer
service with your customers. Your
foreman has just run the standard quality control tests you
have performed regularly on your products.
When the test results are ready, you discover that the new
batch of product is 9% less durable than
your usual material. It is still well above all industry
standards and meets all building codes and
requirements for the purposes for which it is intended, but
it is, nevertheless, not up to your usual
standards. Throwing it away would cost your company many
thousands of dollars.
You decide to sell the cement anyway.
Questions:
Should you tell your customers?
Should you discount the price?
3) Should you tell your employees, so they will be
knowledgeable with the customers?
4) Would you use this cement on foundations for your own
house?
Page 2 of 3
CASE-3 (20 Marks)
Fred, a 17-year employee with Sam's Sauna, was fired for
poor job performance and poor attendance,
after accruing five disciplinary penalties within a 12-month
period under the company's progressive
disciplinary policy. A week later, Fred told his former
supervisor that he had a substance abuse
problem.
Although there was no employee assistance program in place
and the company had not been aware of
Fred's condition, their personnel director assisted Fred in
obtaining treatment by allowing him to
continue receiving insurance benefits and approved his
unemployment insurance claim.
Fred subsequently requested reinstatement, maintaining that
he had been rehabilitated since his
discharge and was fully capable of being a productive
employee. He pointed to a letter written by his
treatment counselor, which said that his prognosis for
leading a "clean, sober lifestyle" was a big
incentive for him. Fred pleaded for another chance, arguing
that his past problems resulted from drug
addiction and that Sam's Saunas should have recognized and
provided treatment for the problem.
Sam's Saunas countered that Fred should have notified his
supervisor of his drug problem, and that
everything possible had been done to help him receive
treatment. Moreover, the company stressed that
the employee had been fired for poor performance and
absenteeism. Use of the progressive discipline
policy had been necessary because the employee had committed
a string of offenses over the course of
a year, including careless workmanship, distracting others,
wasting time, and disregarding safety rules.
Questions:
Should Fred be
reinstated?
Was the company fair
to Fred in helping him receive treatment?
Did the personnel director behave ethically toward Fred?
Did he act ethically
for his company?
5) Would it be fair to other employees to reinstate Fred?
CASE-4 (20 Marks)
In January of last year, the S.S. Vulgass, an oil tanker of
the Big Dirty Oil Company ran around in the
area just north of Vancouver, spilling millions of gallons
of crude into the waters and onto the beaches
of British Columbia and southern Alaska. The damage to the
beaches and wildlife and consequently to
the tourist industry, the ecology and the quality of life of
the local residents is incalculable, but in any
case will require many millions of dollars for even the most
minimal clean-up.
The ship struck a small atoll, well-marked on the
navigational maps, but it was a dark night and the
boat was well off course. On further investigation, it was
discovered that the Captain of the Vulgass,
Mr. Slosh, had been drinking heavily. Leaving the navigation
of the ship to his first mate, Mr. Mudd,
he retired to his cabin, to "sleep it off." Mr.
Mudd had never taken charge of the ship before, and it is
now clear that he misread the maps, misjudged the waters, maintained
a speed that was inappropriate
and the accident occurred. Subsequent inquiries showed that
Captain Slosh had been arrested on two
drunk driving convictions within months of the accident. The
Vulgass itself, a double-hulled tanker,
was long due for renovation and, it was suggested, would not
have cracked up if the hull had been
trebly reinforced, as some current tankers were.
Page 2 of 3
R. U. Rich, the Chief Executive Officer of Big Dirty Oil
declared the accident a "tragedy" and offered
two million dollars to aid in the clean up. The Premier of
British Columbia was outraged.
Environmental groups began a consumer campaign against Big
Dirty Oil, urging customers to cut up
and send in their Big Dirty Oil credit cards in protest. In
a meeting to the shareholders just last month,
CEO Rich proudly announced the largest quarterly profit in
the history of the Big Dirty Oil Company.
He dismissed the protests as "the outpourings of
Greenies and other fanatics" and assured the
shareholders that his obligation was, and would always be,
to assure the highest profits possible in the
turmoil of today's market.
Questions:
The question is, who
is responsible?
Against whom should
criminal charges be leveled?
What should be done,
if anything, to punish the corporation itself?
What about the CEO?
FINANCIAL MANAGEMENT
N.B.: 1) Attempt any Four Questions
2) All questions carries equal marks.
Mr. Nimish holds the following portfolio. (10 marks)
Share Beta Investment
Alpha 0.9 Rs.12, 00,000
Beta 1.5 Rs. 3, 50,000
Carrot 1.0 Rs. 1, 00,000
What is the expected rate of return on his portfolio, if the
risk rate is 7 per cent and the
expected return on the market portfolio is 16 per cent?
A share is selling
for Rs.60 on which a dividend of Rs.4 per share is expected at the end
of the year. The expected market price after dividend
declaration is to be Rs.70. Compute the
following: - (10 marks)
(i) The return on investment ® in shares.
(ii) Dividend yield
(iii) Capital Gain Yield
(B) DIC Ltd. provides the following data: (20 marks)
Comparative trial balance
March 31 year 2 March 31 year 1 Increase(Decrease)
Debit Balance 20 10 10
Cash Rs.190 Rs. 90 Rs.100
Working capital (other than cash) 100 200 (100)
Investment (Long term) 500 400 100
Building and equipment 40 50 (10)
Total 850 750 100
Credit
Accumulated Depreciation 200 160 40
Bonds 150 100 50
Reserves 350 350 ---
Equity Shares 150 140 10
3
Total 850 750 100
Income Statement
For the period ending March 31, year 2
(Amount in Rs lakh)
Sales Rs.1000
Cost of Goods Sold 500
Selling Expense Rs.50
Administrative Expenses 50 100
Operating Income 400
Other charges
Gain on sale of building and equipment Rs 5
Loss on sale of investments (10)
Interest (6)
Taxes (189) (200)
Net Income after taxes 200
Notes: (a) The depreciation charged for the year was Rs.60
Lakh
(b) The Book value of the building and equipment disposed
was Rs 10 Lakh
(c)
Prepare a Cash Flow Statement (Based on AS-3)
A. Ltd. produces a
product which has a monthly demand of 4,000 units. The product
requires a component X which is purchased at Rs.20. For
every finished product one unit of
component is required. The ordering cost is Rs.120 per order
and the holding cost is 10 per
cent per annum. (10 marks)
You are required to calculate:
(i) Economic order quantity
(ii) If the minimum lot size to be supplied is 4, 000 units,
what is the extra cost, the
company has to incur?
(iii) What is the minimum carrying cost, the company has to
incur?
4
Master Tools Ltd. Is
currently operating its business at 75% level, producing 38275 units of
a tools component and proposes to increase capacity
utilization in the coming year by 33 1/3 % over the
existing level of production. (10 marks)
The following data has been supplied:
(1)Unit cost structure of the product at current level:
Rs.
Raw Material 5
Wages 2
Overheads 3
Fixed Overhead 2
Profit 3
_____
15
(i) Raw Material will remain in stores for 1 month before
issued for production. Material will
remain in process for further 1 month. Suppliers grant 4
months credit to the company.
(ii) Finished goods remain in godown for 2 months
(iii) Debtors are allowed credit for 2 months.
(iv) Lag in wages and overheads payments in 1 month, and
these expenses accrue evenly
throughout the production cycle.
(v) No increase either in cost of inputs or selling price is
envisaged
You are required to prepare a Projected Profitability
statement and the Working Capital
Requirement at new level, assuming that a minimum cash
balance of Rs.20000 has to be maintained.
A stock is currently
trading for Rs.29. The risk less interest is 7 % p.a continuously
compounded. Estimate the value of European call option with
a strike price of Rs.30 and a time
of expiration of 4 months. The standard deviation of the
stock’s annual return is 0.45. Apply BS
model. (20 marks)
5
(E). Following is the EPS record of AB Ltd over the past 10
years. (20 marks)
Year EPS Year EPS
10 Rs.30 5 Rs.16
9 20 4 15
8 19 3 14
7 18 2 18
6 17 1 (12)
(i) Determine the annual dividend paid each year in the
following cases:
(a) If the firm’s dividend policy is based on a constant
dividend payout ratio of 40 per cent
for all years
(b) If the firm pays at Rs 10 per share, and increases it to
Rs 12 per share when earnings
exceed Rs.14 per share for the previous 2 consecutive years.
(c) If the firm pays dividend at Rs 7 per share each except
when EPS exceeds Rs 14 per
share, when an extra dividend equal to 80 per centof
earnings beyond Rs.14 would be
paid.
(ii) Which type of dividend policy will you recommended to
the company and why?
A US MNC has its
subsidiary in India. The subsidiary has issued 15 pr cent preference
shares of the face value of Rs.100, to be redeemed at
year-end 9. Flotation costs are expected to
be 5 per cent; these costs can be amortized for tax purpose
during 8 years at a uniform rate.
The corporate tax rate is 35 per cent. Determine the costs
of preference shares from the
perspective of the subsidiary. (10 marks)
(F). (2) The US inflation rate is expected to be Rs.3 per
cent annually and that of India is
expected to be 4.5 per cent annually. The current spot rate
of US $ in India is Rs.47.4060/US $.
(10 marks)
Find the expected rate of US $ in India after one year and
after 5 years from now using
purchase power theory of exchange rate.
HUMAN RESOURCE MANAGEMENT
CASE STUDY : 1
A policy is a plan of action. It is a statement of intention
committing the management to a general course of
action. When the management drafts a policy statement to
cover some features of its personnel programmes,
the statement may often contain an expression of philosophy
and principle as well. Although it is perfectly
legitimate for an organization to include its philosophy,
principles and policy in one policy expression.
Q1) Why organizations adopt personnel policies explain the
benefits?
Q2) What are the sources and content of personnel policies?
Q3) Explain few personnel policies?
Q4) Explain principles of personnel policies?
CASE STUDY : 2
Recruitment is understood as the process of searching for
and obtaining applicants for jobs, from among
whom the rights people can be selected. Theoretically,
recruitment process is said to end with the receipt of
applications, in practice the activity extends to the
screening of applications so as to eliminate those who are
not qualified for the job.
Recruitment refers to the process of receipt of applications
from job seekers. In reality, the term is used to
describe the entire process of employee hiring. These are
recruitment boards for railways, banks and other
organization.
Explain in detail the
general purpose of recruitment?
Explain factors
governing Recruitment?
Q3) Explain the Recruitment process with diagram?
Q4) Explain Recruitment planning?
CASE STUDY : 3
Navin AGM materials, is fuming and fretting. He bumped into
Kiran, GM Materials, threw the resignation
letter on his table, shouted and walked out of the room
swiftly.
Navin has reason for his sudden outburst. He has been driven
to the wall. Perhaps details of the story will
tell the reasons for Navin’s bile and why he put in his
papers, barely four months after he took up his
assignment.
3 | P a g e
The year was 2005 when Navin quit the prestigious Sail plant
at Mumbai. As a manager material Navin
enjoyed the power. He could even place an order for
materials worth Rs 25 lakh. He needed nobody’s prior
approval.
Navin joined a pulp making plant located at Pune as AGM
Materials. The plant is owned by a prestigious
business house in India. Obviously perks, designation and
reputation of the conglomerate lured Navin away
from the public sector.
When he joined the pulp making company, little did Navin
realize that he needed prior approval to place an
order for materials worth Rs 12 lakhs. He had presumed that
he had the authority to place an order by
himself worth half the amount of what he used to do at the
mega steel maker. He placed the order material
arrived, were recived, accepted and used up in the plant.
Trouble started when the bill for Rs 12 lakh came from
vendor. The accounts department withheld payment
for the reason that the bill was not endorsed by Kiran. Kiran
rused to sign the bill as his approval was not
taken by Navin before placing the order.
Navin felt fumigated and cheated. A brief encounter with
Kiran only aggrarated the problem. Navin was
curtly told that he should have known company rules before
venturing. Navin decided to quit the company.
Does the company have
an orientation programme?
If yes how effective
is it?
How is formal
Orientation programme conducted?
Q4) If you were Navin what would have you done?
CASE STUDY : 4
Bitter it may taste, shrill it may sound, and sleepless
nights it may cause, but it is true. In a major shake up
Airbus. The European aircraft manufacturers has thrown a big
shock to its employees. Before coming to the
details of the shock, a peep into the company’s resume.
Name Airbus
Created 1970
President CEO : Vijay M.
Employees 57000
Turnover 26 Bn (Euro)
Total Aircraft sold (Feb
2007)
7187
Delivered 4598
Headquarters Paris (France)
Facilities 16
Rival Boeing
4 | P a g e
Airbus announced on February 27, 2007 that it would shed
10,000 jobs across four European contries and
sell six of its unit. N the same day the helpless workers
did what was expected of them – downed tools and
staged protests. The protesting workers at Airbus’s factory
at Meaulte, northern France, were seen picketing
outside the factory gate after holding up production a day
earlier. To be fair to Airbus, its management
entered talks with unions before the job loss and sale was
formally announced. But the talks did not mollify
the agitated workers.
Job sheating and hiring of units are a part of Power and
restructuring plan unleashed by Airbus to save itself
from increasing loss of its ground to the arch rival, Boeing
Co.
Airbus Power & Strategy was first mooted in October 2006
but sparkled a split between France & Germany
over the distribution of job losses and the placement of
future ones. Later the two countries agreed to share
both job losses and new technology.
The power and plan, if finalized, would mean a 3 per cent
reduction to Airbus’s 55000 employee strength.
Q1) Why should Power and focus on shedding jobs to save on
cost?
Q2) Are there no alternative strategies?
Q3) Will the proposed shedding of jobs and scale of six
units help airbus survive the intense competition
from Boeing?
Comment on the whole
issue?
INTERNATIONAL BUSINESS
CASE 1 (20 Marks)
Kodak started selling photographic equipment on Japan 1889
and by the 1930s it had a dominant position in
the Japanese market. But after World War II, U.S occupation
forces persuaded most U.S companies including
Kodak to leave Japan to give the war torn local industry a
chance to recover. Kodak was effectively priced out
of the market by tariff barriers; over the next 35 years
Fuji gained 70% share of the market while Kodak saw
its share slip to miserable 5%. During this period Kodak
limited much of its activities in Japan.
This situation persisted until early 1980s when Fuji
launched an aggressive export drive, attacking Kodak in
the north American and European markets. Deciding that a good
offence is the best defense, in 1984 and the
next six year, Kodak outspent Fuji in Japan by a ratio of
more than 3 to 1. It erected mammoth $ 1 million near
signs as land marks in many of the Japan’s big cities and
also sponsored Sumo wrestling, Judo, and tennis
tournaments and even the Japanese team at the 1988 Seoul
Olympics. Thus Kodak has put Fuji on defensive,
forcing it to divert resources from overseas to defend
itself at home. By 1990’s, some of Fuji’s best executives
had been pulled back to Tokyo.
All this success, however , was apparently not enough for
Kodak. In may 1995, Kodak filed a petition with the
US trade office, that accured the Japanese government and
Fuji of “Unfair trading practices”. According to the
petition, the Japanese government helped to create a ‘
profile sanctuary’ for Fuji in Japan by systematically
denying Kodak access to Japanese distribution channels for
consumer film and paper. Kodak claims Fuji has
effectively shut Kodak products out of four distributors
that have a 70% share of the photo distribution market.
Fuji has an equity position in two of the distributors,
gives large year –end relates and cash payments to all
four distributors as a reward for their loyalty to Fuji, and
owns stakes in the banks that finance them. Kodak
also claims that Fuji uses similar tactics to control 430
wholesale photo furnishing labs in Japan to which it is
the exclusive supplier. Moreover Kodak’s petition claims
that the Japanese government has actively
encourages these practices.
But Fuji a similar counter arguments relating to Kodak in
U.S. and states bluntly that Kodak’s charges are a
clear case of the pot calling the kettle back.
(a) What was the critical catalyst that led Kodak to start
taking the Japanese market seriously?
(b) From the evidence given in the case do you think Kodak’s
charges of unfair trading practices against Fuji
are valid? Support your answer.
CASE 2 (20 Marks)
Two Senior executives of world’s largest firms with
extensive holdings outside the home country speak.
Company A : “We are a multinational firm. We distribute our
products in about 100 countries. We
manufacture in over 17 countries and do research and
development in three countries. We look at all new
investment projects both domestic and overseas using exactly
the same criteria”.
The execution from company A continues, “ of course the most
of the key ports in our subsidiaries are held by
home country nationals. Whenever replacements for these men
are sought, it is the practice, if not the policy,
to look next to you at the lead office and pick some one
(usually a home country national) you know and
trust”.
Company B : “ We are multinational firm. Our product
division executives have worldwide profit
responsibility. As our organisational chart shows, the united
states is just one region on a par with Europe,
Latin America, Africa etc, in each division”.
The executive from Company B goes on to explain, “the
worldwide Product division concept is rather difficult
to implement. The senior executives incharge of this
divisions have little overseas experience. They have been
promoted from domestic ports and tend to view foreign
consumers needs as really basically the same as ours.
Also, product division executives tend to focus on domestic
market, because it generates more revenue than
foreign market. The rewards are for global performance, but
strategy is to focus on domestic. Most of the
senior executives simply do not understand what happens
overseas and really do not trust foreign executives,
even those in key portions?
Questions :
Which company is truly Multinational ? Why?
2 List three differences between Company , Multi National
company and Trans Multi National Company ?
CASE - 3 (20 Marks)
Strategic R & D by TNCs in Developing Countries
TNCs have had long units in developing host countries for
adapting products and processes to the local
conditions, and in a few cases, to products for local
markets. Since the min-1980s, however, they have also
started locating strategic R & D centres in some
developing countries, for developing generic technologies
and products for regional or global markets. The main
incentives for this are : (a) access to highly qualified
scientists as shortages of research personnel emerge in
certain fields in industrialised countries, (b) Cost
differentials in research salaries between developing and
industrialised countries, and (c) rationalisation of
operations, assigning particular affiliates the
responsibility for developing, manufacturing, and marketing
particular products worldwide. Th new trends are more
visible in industries dealing with new technologies,
such as microelectronics, biotechnology, and new materials.
In these technologies, the location of R & D can
be geographically de-linked more easily from the location of
manufacturing. It is also possible to separate R &
D in core activities from that in non-core activities.
Consequently, countries like India, Israel, Singapore,
Malaysia or Brazil serve TNCs as good locations for
strategic R & D.
For instance, Sony Corporation of Japan has around nine R
& D units in Asian developing countries. It has
three units in Singapore conducting R & D on core
components such as optical data shortage devices,
integrated chip design for audio products and CD-ROM drives,
and multimedia and microchip software. It has
three units in Malaysia working on video design, derivative
models and circuit blocks for new TV chases,
radio cassettes, discman and hi-fi receiver designs. It has
one unit in Republic of Korea focusing on the design
of compact discs, radio cassettes, tape recorders, and car
stereos. It has one in Taiwan designing and
developing video tape-recorders, minidisk players, video
CDs, and duplicators. Finally, it has one unit in
Indonesia focusing on the design of audio products.
Such units often work in collaboration with science and
technology institutes in the host country. For instance,
Daimler Benz has established such a unit in Bangalore,
India, in collaboration with the Indian Institute of
Science to work on projects related to its vehicles and
avionics business. Current work includes interface
design of avionics landing systems and smart GPS sensors for
use by the group’s business worldwide.
Source: World Investment Report 1999.
Questions:
Explain why MNCs have
located R & D centres in developing countries?
Mention the areas
where R & D activities can easily be decentralised.
CASE -4 (20 Marks)
VK Ltd a multi-product Company, furnishes you the following
data relating to the year 2000.
First Half of the year Second Half of the year
Sales Rs. 45,000 Rs. 50,000
Total Cost Rs. 40,000 Rs. 43,000
Assuming that there is no change in prices and variable
costs and that the fixed expenses are incurred equally
in the two half years periods calculate for the year 2000.
1. The Profit Volume ration
2. Fixed Expenses
3. Break-Even Sales
4. Percentage of margin of safety.
5 marks each
MANAGEMENT CONTROL SYSTEM
CASE STUDY : 1
Traditional Forecasting
Many organizations seek to mitigate some of the traditional
budgeting problems noted above by
implementing some form of forecasting. This allows managers
to update budgeted numbers with actual
results for the periods that have already occurred. The
forecasts are used to predict what will happen in
the future, often seeking to confirm whether predetermined
annual targets will still be met.
While financial managers think of forecasting in terms of
periodic forecasts, operating managers are
constantly adjusting plans, including sales estimates, which
are converted to operating plans for
production and inventory control levels. Most of these
planning efforts are conducted in numerous
discrete systems supporting different functional areas. A
great deal of effort is required to integrate and
reconcile these different views of the future.
Financial forecasts are performed on a preset schedule,
typically quarterly or monthly.
According to David Axson, author of "Best Practices in
Planning and Management Reporting" 4. Axson
explains that these process cycle times are extended due to:
„h The difficulty in getting timely information;
„h The high level of details required taking significant
time to forecast each item; and
„h The fact that much of this data is developed in a series
of disconnected spreadsheets making
integration a time-consuming process.
Many companies use a purely financial process that is
disconnected from its specific business drivers-a
mere financial accumulation of trends. These companies often
determine their monthly forecasts by
subtracting the actual results to date from their annual
targets and then dividing the remaining gap by the
months remaining. They then view the monthly result to see
if it is even possible to attain, All their
forecasting work focuses on achieving the predefined annual
targets, even if the underlying assumptions
that went into creating those targets are now Incorrect.
The level of detail used often mirrors the annual plan. Some
planners forecast at the same level of detail
that is used for actual reporting, This can result in
tremendous efforts in calculating variances and the
related explanation process.
These misconceptions often turn traditional forecasting into
merely a different pc version of the
problems with traditional budgeting. Let's examine why.
For many organizations, forecasting is a mechanical process
that adjusts future run rates upward or
downward as necessary so that the predetermined annual
targets are still met.
They ignore the fact that targets were set based on various
assumptions. What happens when the annual
targets are held but their underlying basis proves
incorrect? The great quality guru W. Edwards Deming
noted that "if you pay people to hit targets, they
often will, even if it destroys your company."
Explain the process
of cycle times given by David Axson. (20 Marks)
CASE STUDY : 2
Methodology :
Jimmy Carter, who introduced ZBB for resources allocation
and control in government explains, "In
ZBB, the budget is broken into units called DPs which are
prepared by managers at each level. These
packages include an analysis of purpose, cost, measures of
performance and benefits, alternative courses
of action and consequences of not performing the activity.
Then all packages are to be ranked in order of
priority. After several discussions between department heads
and the chief executive, the rankings are
finalized, and packages upto the level of affordability are
approved and funded."
In more specific terms the ZBB methodology as well as the
sequential stages in its introduction may be
outlined as follows:
¡E Defining the Decision Units (DUs) within the firm: A DU
is a tangible activity or group of activities
for which a single manager is responsible for successful
performance. The DU concept is akin to that of
the responsibility center. A traditional cost center, a
group of people or even a project may be a DU.
¡E Defining objectives of each DU : In clear and specific
terms and in conformity with the enterprise,
objectives and goals.
¡E Identifying activities in the form of DPs: The term D P
focuses on the analysis of each activity in the
manufacturing process according to the incident of the
relevant cost and the importance of that activity
in the overall cost structure of the organization. Thus, in
essence DPs not only refer to the costs but also
the benefits of an activity of process.
¡E Ranking of alternative DPs in the order of decreasing
benefit to the organization, using cost-benefit
analysis technique. This problem can be reduced by
concentrating on marginal priority packages. This
is because ultimately all the packages presented for funding
would generally fall into three categories:
(1) those with a high priority and high probability of
funding; (2) those with a marginal priority and
which may be funded or not funded depending on the resources
available, and (3) those with a low
priority and low probability of funding.
¡E Forwarding the ranked DPs to the next higher
organizational units, for review, merger with other
comparable DPs and for re-ranking (as the DPs are
consolidated and re-ranked, the perspective and
objectives are broadened). The consolidation and re-ranking
should preferably be done by a committee
comprising all managers whose DPs are being considered and a
chairman selected from the next higher
organizational level.
¡E Finalization of the budget proposal as well as
preparation of budgets for each DU have to be finally
approved by the top management. Before according approval,
the top management is guided, on the one
hand, by the principle of allocating resources to the OPs
showing higher benefit to cost ratios, and the
question of affordability, on the other.
Q1) Explain the stages in specific terms of ZBB Methodology.
(20 Marks)
CASE STUDY : 3
Capital Expenditures :
Another approach to deciding on capital expenditure
investments is to assign a priority to each
investment proposed. We tend to limit the priority scale to
values, as follows.
Absolute Must.
Includes security, legal, regulatory, end-of-life equipment; typically
externally
mandated, that is, you really have little or no choice.
Simply stated, if you are under very tight
capital expenditure and/or expense budget constraints, the
cutoff is drawn here.
Highly Desired/Business-Critical. Includes short-term
"break even" (less than six months),
significant short-term "return to top or bottom
line" less than months), and mega projects
already in progress.
3. Wanted. Valuable, with a longer return term (more than 12
months). Typically, these
projects get funded only if there is capital money
remaining, if resources are available, and if
revenue projections are fairly secured.
Nice to Have. Given
available bandwidth in people and money, there is a good return on
these projects, but typically the ROI has more intangibles.
Unlikely to be funded in this budget
year; might go up the priority list in subsequent budget
years. It is important to have some
projects in this priority, as it helps to better calibrate
the higher priorities.
Expenses
The following items constitute what is most typically
referred to as "the budget." The major
categories of budget expenses are:
Personnel
¡E Salaries and benefits (including hiring fees and bonuses)
¡E Training and education
¡E Travel
¡E Morale
¡E Staff-related depreciation
¡E Temporary help/consultants
¡E Miscellaneous (space, telecom, and so on)
Hardware
¡E Depreciation
¡E Maintenance
¡E Repairs
¡E Leases
Software
¡E Depreciation
¡E Maintenance
¡E Customer support
¡E Updates
¡E Repairs
¡E Leases
Services
¡E Leased lines
¡E Oursourced network services
¡E Security services
¡E Applications service providers (ASPs)
¡E Miscellaneous (transport, courier, periodicals, and so
on)
Explain the needs of
Capital Expenditure investment. (10 Marks).
Give any two
difference between hardware and software. (10 Marks).
CASE STUDY : 4
Divorce the Forecasting Process from the Target Setting and
Performance Appraisal
Forecasts must not be seen by senior managers as a tool for
questioning or reassessing performance
targets. If managers see that forecasts have an impact on
their reward and incentive plan, they will be
reluctant to present an unbiased picture.
Use Forecasts to Support
Leading organizations
Q1) Explain the difference between choosing the Right
Forecasting on frequency and horizon.
(20 Marks
MARKETING MANAGEMENT
SUBJECT : MARKETING MANAGEMENT
COURSE : Total Marks : 80
N.B.
: 1) There are questions in paper.
2)
All Questions are compulsory
Discuss
Various Marketing Research Instruments .Give suitable examples (one example
/instrument)?
(10 Marks)
Describe following in context of new product
development (NPD)? (10 Marks)
1.
The new product development decision process
2.
Risk factors hindering new product development
C)
Illustrate the marketing mix for any
two of the following? (15 Marks)
1.
Cafe Coffee Day
2.
Dr. Batra’s clinic
3.
Lux Soap
4.
HP( Hewlett Packard)
Illustrate
with examples, the differences between Product marketing &
Services
marketing? (10 Marks)
E)
Illustrate with examples, the methods/ways of evaluating advertising
effectiveness? (10 Marks)
Discuss the factors which contribute in
deciding the “price” of the product? Discuss
various
pricing methods? (10 Marks)
G)
“Laco Industries “has planned to introduce new baby shampoo in the kids market.
The company
conducted
a research in selected tier II cities in India to know the demand &
successfully
launched
its product. In this context, discuss the characteristics of the good research?
(15 Marks
Case-1 : The use of the marketing mix in product launch
Introduction
NIVEA® is an established name in high quality skin and
beauty care products. It is part of a range of
brands produced and sold by Beiersdorf. Beiersdorf, founded
in 1882, has grown to be a global company
specialising in skin and beauty care.
In the UK, Beiersdorf’s continuing goal is to have its
products as close as possible to its consumers,
regardless of where they live. Its aims are to understand
its consumers in its many different markets and
delight them with innovative products for their skin and
beauty care needs. This strengthens the trust and
appeal of Beiersdorf brands. The business prides itself on
being consumer-led and this focus has helped
it to grow NIVEA into one of the largest skin care brands in
the world.
Beiersdorf’s continuing programme of market research showed
a gap in the market. This led to the
launch of NIVEA VISAGE® Young in 2005 as part of the NIVEA
VISAGE range offering a
comprehensive selection of products aimed at young women. It
carries the strength of the NIVEA brand
image to the target market of girls aged 13-19. NIVEA VISAGE
Young helps girls to develop a proper
skin care routine to help keep their skin looking healthy
and beautiful.
The market can be developed by creating a good product/range
and introducing it to the market
(product-orientated approach) or by finding a gap in the
market and developing a product to fill it
(market-orientated approach). Having identified a gap in the
market, Beiersdorf launched NIVEA
VISAGE Young using an effective balance of the right
product, price, promotion and place. This is
known as the marketing mix or ‘four Ps’. It is vital that a
company gets the balance of these four
elements correct so that a product will achieve its critical
success factors. Beiersdorf needed to develop
a mix that suited the product and the target market as well
as meeting its own business objectives.
The company re-launched the NIVEA VISAGE Young range in June
2007 further optimising its
position in the market. Optimised means the product had a
new formula, new design, new packaging and
a new name. This case study shows how a carefully balanced
marketing mix provides the platform for
launching and re-launching a brand onto the market.
Product :
The first stage in building an effective mix is to
understand the market. NIVEA uses market research to
target key market segments which identifies groups of people
with the same characteristics such as
age/gender/attitude/lifestyle. The knowledge and
understanding from the research helps in the
development of new products. NIVEA carries out its market
research with consumers in a number of
different ways. These include:
• using focus groups to listen to consumers directly
• gathering data from consumers through a variety of
different research techniques
• product testing with consumers in different markets.
Beiersdorf’s market research identified that younger
consumers wanted more specialised face care
aimed at their own age group that offered a ‘beautifying’
benefit, rather than a solution to skin problems.
NIVEA VISAGE Young is a skin care range targeted at girls
who do not want medicated products but
want a regime for their normal skin.
Competitor products tend to be problem focussed and offer
medicated solutions. This gives NIVEA
competitive advantage. NIVEA VISAGE Young provides a unique
bridge between the teenage market
and the adult market.
The company improved the product to make it more effective
and more consumer-friendly. Beiersdorf
tested the improved products on a sample group from its
target audience before finalising the range for
re-launch. This testing resulted in a number of changes to
existing products. Improvements included:
• Changing the formula of some products. For example, it
removed alcohol from one product and used
natural sea salts and minerals in others.
• Introducing two completely new products.
• A new modern pack design with a flower pattern and softer
colours to appeal to younger women.
• Changing product descriptions and introducing larger pack
sizes.
Each of these changes helped to strengthen the product
range, to better meet the needs of the market.
Some of these changes reflect NIVEA’s commitment to the
environment. Its corporate responsibility
approach aims to:
• reduce packaging and waste - by using larger pack sizes
• use more natural products – by including minerals and sea
salts in the formula
• increase opportunities for recycling - by using recyclable
plastic in its containers.
Price :
Lots of factors affect the end price of a product, for
example, the costs of production or the business
need to maximise profits or sales. A product’s price also
needs to provide value for money in the market
and attract consumers to buy.
There are several pricing strategies that a business can
use:
• Cost based pricing – this can either simply cover costs or
include an element of profit. It focuses on the
product and does not take account of consumers.
• Penetration price – an initial low price to ensure that
there is a high volume of purchases and market
share is quickly won. This strategy encourages consumers to
develop a habit of buying.
• Price skimming – an initial high price for a unique
product encouraging those who want to be ‘first to
buy’ to pay a premium price. This strategy helps a business
to gain maximum revenue before a
competitor’s product reaches the market.
On re-launch the price for NIVEA VISAGE Young was slightly
higher than previously. This reflected
its new formulations, packaging and extended product range.
However, the company also had to take
into account that the target market was both teenage girls
and mums buying the product for their
daughters. This meant that the price had to offer value for
money or it would be out of reach of its target
market.
As NIVEA VISAGE Young is one of the leading skin care ranges
meeting the beautifying needs of this
market segment, it is effectively the price leader. This
means that it sets the price level that
competitors will follow or undercut. NIVEA needs to
regularly review prices should a competitor enter
the market at the ‘market growth’ point of the product life
cycle to ensure that its pricing remains
competitive.
The pricing strategy for NIVEA is not the same as that of
the retailers. It sells products to retailers at one
price. However, retailers have the freedom to use other
strategies for sales promotion. These take
account of the competitive nature of the high street. They
may use:
• loss leader: the retailer sells for less than it cost to
attract large volume of sales, for example by
supermarkets
• discounting – alongside other special offers, such as ‘Buy
one, get one free’ (BOGOF) or ‘two for
one’.
NIVEA VISAGE Young’s pricing strategy now generates around
7% of NIVEA VISAGE sales.
Place
Place refers to:
• How the product arrives at the point of sale. This means a
business must think about what distribution
strategies it will use.
• Where a product is sold. This includes retail outlets like
supermarkets or high street shops. It also
includes other ways in which businesses make products
directly available to their target market, for
example, through direct mail or the Internet.
NIVEA VISAGE Young aims to use as many relevant distribution
channels as possible to ensure the
widest reach of its products to its target market. The main
channels for the product are retail outlets
where consumers expect to find skin care ranges. Around 65%
of NIVEA VISAGE.
Young sales are through large high street shops such as
Boots and Superdrug. Superdrug is particularly
important for the ‘young-end’ market. The other 35% of sales
mainly comes from large grocery chains
that stock beauty products, such as ASDA, Tesco and
Sainsbury’s. Market research shows that around
20% of this younger target market buys products for
themselves in the high street stores when shopping
with friends. Research also shows that the majority of
purchasers are actually made by mums, buying for
teenagers. Mums are more likely to buy the product from
supermarkets whilst doing their grocery
shopping.
NIVEA distributes through a range of outlets that are cost
effective but that also reach the highest
number of consumers. Its distribution strategies also
consider the environmental impact of transport. It
uses a central distribution point in the UK. Products arrive
from European production plants using
contract vehicles for efficiency for onward delivery to
retail stores. Beiersdorf does not sell direct to
smaller retailers as the volume of products sold would not
be cost effective to deliver but it uses
wholesalers for these smaller accounts. It does not sell
directly through its website as the costs of
producing small orders would be too high. However, the
retailers, like Tesco, feature and sell the
NIVEA products in their online stores.
Promotion
Promotion is how the business tells customers that products
are available and persuades them to buy.
Promotion is either above-the-line or below-the-line.
Above-the-line promotion is directly paid for, for
example TV or newspaper advertising.
Below-the-line is where the business uses other promotional
methods to get the product message across:
• Events or trade fairs help to launch a product to a wide
audience. Events may be business to consumer
(B2C) whereas trade fairs are business to business (B2B).
• Direct mail can reach a large number of people but is not
easy to target specific consumers costeffectively.
• Public relations (PR) includes the different ways a
business can communicate with its stakeholders,
through, for example, newspaper press releases. Other PR
activities include sponsorship of high profile
events like Formula 1 or the World Cup, as well as donations
to or participation in charity events.
Branding – a strong and consistent brand identity
differentiates the product and helps consumers to
understand and trust the product. This aims to keep
consumers buying the product long-term.
• Sales promotions, for example competitions or sampling,
encourage consumers to buy products in the
short-term.
NIVEA chooses promotional strategies that reflect the
lifestyle of its audience and the range of media
available. It realises that a ‘one way’ message, using TV or
the press, is not as effective as talking
directly to its target group of consumers. Therefore NIVEA
does not plan to use any above-the-line
promotion for NIVEA VISAGE Young.
The promotion of NIVEA VISAGE Young is consumer-led. Using
various below-the-line routes,
NIVEA identifies ways of talking to teenagers (and their
mums) directly.
• A key part of the strategy is the use of product samples.
These allow customers to touch, feel, smell
and try the products. Over a million samples of NIVEA VISAGE
Young products will be given away
during 2008. These samples will be available through the
website, samples in stores or in ‘goody bags’
given out at VISAGE roadshows up and down the country.
• NIVEA VISAGE Young launched an interactive online magazine
called FYI (Fun, Young &
Independent) to raise awareness of the brand. The concept
behind the magazine is to give teenage girls
the confidence to become young women and to enjoy their
new-found independence. Communication
channels are original and engaging to enable teenagers to
identify with NIVEA VISAGE Young. The
magazine focuses on ‘first time’ experiences relating to
NIVEA VISAGE Young being their first
skincare routine. It is promoted using the Hit40UK chart
show and the TMF digital TV channel.
• In connection with FYI, NIVEA VISAGE Young has recognised
the power of social network sites for
this young audience and also has pages on MySpace, Facebook
and Bebo. The company is using the
power of new media as part of the mix to grow awareness
amongst the target audience.
Conclusion
NIVEA VISAGE Young is a skincare range in the UK market
designed to enhance the skin and beauty
of the teenage consumer rather than being medicated to treat
skin problems. As such, it has created a
clear position in the market. This shows that NIVEA
understands its consumers and has produced this
differentiated product range in order to meet their needs.
To bring the range to market, the business has put together
a marketing mix. This mix balances the four
elements of product, price, place and promotion. The mix
uses traditional methods of place, such as
distribution through the high street, alongside more modern
methods of promotion, such as through
social networking sites. It makes sure that the message of
NIVEA VISAGE Young reaches the right
people in the right way.
Answer the following questions:
Describe what is
meant by a business being ‘consumer led’.
What are the key
parts of the marketing mix? Explain how each works with the others.
Explain why the
balance of the marketing mix is as important as any single element.
Analyse the marketing
mix for NIVEA VISAGE Young. What are its strongest points? Explain why
you think this is so.
Case-2 : SWOT analysis in action at Škoda
Introduction
In 1895 in Czechoslovakia, two keen cyclists, Vaclav Laurin
and Vaclav Klement, designed and
produced their own bicycle. Their business became Škoda in
1925. Škoda went on to manufacture
cycles, cars, farm ploughs and airplanes in Eastern Europe.
Škoda overcame hard times over the next 65
years. These included war, economic depression and political
change. By 1990 the Czech management
of Škoda was looking for a strong foreign partner.
Volkswagen AG (VAG) was chosen because of its
reputation for strength, quality and reliability. It is the
largest car manufacturer in Europe providing an
average of more than 5 million cars a year – giving it a 12%
share of the world car market. Volkswagen
AG comprises the Volkswagen, Audi, Škoda, SEAT, Volkswagen
Commercial Vehicles, Lamborghini,
Bentley and Bugatti brands. Each brand has its own specific
character and is independent in the market.
Škoda UK sells Škoda cars through its network of independent
franchised dealers.
To improve its performance in the competitive car market,
Škoda UK’s management needed to assess its
brand positioning. Brand positioning means establishing a
distinctive image for the brand compared to
competing brands. Only then could it grow from being a small
player. To aid its decision-making, Škoda
UK obtained market research data from internal and external
strategic audits. This enabled it to take
advantage of new opportunities and respond to threats.
The audit provided a summary of the business’s overall
strategic position by using a SWOT analysis.
SWOT is an acronym which stands for:
• Strengths – the internal elements of the business that
contribute to improvement and growth
• Weaknesses – the attributes that will hinder a business or
make it vulnerable to failure
• Opportunities – the external conditions that could enable
future growth
• Threats – the external factors which could negatively
affect the business.
This case study focuses on how Škoda UK’s management built
on all the areas of the strategic audit.
The outcome of the SWOT analysis was a strategy for
effective competition in the car industry.
Strengths
To identify its strengths, Škoda UK carried out research. It
asked customers directly for their opinions
about its cars. It also used reliable independent surveys
that tested customers’ feelings. For example, the
annual JD Power customer satisfaction survey asks owners
what they feel about cars they have owned
for at least six months. JD Power surveys almost 20,000 car
owners using detailed questionnaires. Škoda
has been in the top five manufacturers in this survey for
the past 13 years. In Top Gear’s 2007 customer
satisfaction survey, 56,000 viewers gave their opinions on
152 models and voted Škoda the ‘number 1
car maker’. Škoda’s Octavia model has also won the 2008 Auto
Express Driver Power ‘Best Car’.
Škoda attributes these results to the business concentrating
on owner experience rather than on sales. It
has considered ‘the human touch’ from design through to
sale. Škoda knows that 98% of its drivers
would recommend Škoda to a friend. This is a clearly
identifiable and quantifiable strength. Škoda uses
this to guide its future strategic development and marketing
of its brand image.
Strategic management guides a business so that it can
compete and grow in its market. Škoda adopted a
strategy focused on building cars that their owners would
enjoy. This is different from simply
maximising sales of a product. As a result, Škoda’s biggest
strength was the satisfaction of its
customers. This means the brand is associated with a quality
product and happy customers.
Weaknesses
A SWOT analysis identifies areas of weakness inside the
business. Škoda UK’s analysis showed that in
order to grow it needed to address key questions about the
brand position. Škoda has only 1.7% market
share. This made it a very small player in the market for
cars. The main issue it needed to address was:
how did Škoda fit into this highly competitive, fragmented
market?
This weakness was partly due to out-dated perceptions of the
brand. These related to Škoda’s eastern
European origins. In the past the cars had an image of poor
vehicle quality, design, assembly, and
materials. Crucially, this poor perception also affected
Škoda owners. For many people, car ownership is
all about image. If you are a Škoda driver, what do other
people think?
From 1999 onwards, under Volkswagen AG ownership, Škoda
changed this negative image. Škoda cars
were no longer seen as low-budget or low quality. However, a
brand ‘health check’ in 2006 showed that
Škoda still had a weak and neutral image in the mid-market
range it occupies, compared to other players
in this area, for example, Ford, Peugeot and Renault. This
meant that whilst the brand no longer had a
poor image, it did not have a strong appeal either. This
understanding showed Škoda in which direction
it needed to go. It needed to stop being defensive in
promotional campaigns. The company had sought to
correct old perceptions and demonstrate what Škoda cars were
not. It realised it was now time to say
what the brand does stand for. The marketing message for the
change was simple. Škoda owners were
known to be happy and contented with their cars. The
car-buying public and the car industry as a whole
needed convincing that Škoda cars were great to own and
drive.
Opportunities and Threats
Opportunities
Opportunities occur in the external environment of a
business. These include for example, gaps in the
market for new products or services. In analysing the external
market, Škoda noted that its competitors’
marketing approaches focused on the product itself.
Audi emphasises the technology through its strapline,
‘Vorsprung Durch Technik’ (‘advantage through
technology’). BMW promotes ‘the ultimate driving machine’.
Many brands place emphasis on the
machine and the driving experience. Škoda UK discovered that
its customers loved their cars more than
owners of competitor brands, such as Renault or Ford.
Information from the SWOT analysis helped Škoda to
differentiate its product range. Having a
complete understanding of the brand’s weaknesses allowed it
to develop a strategy to strengthen the
brand and take advantage of the opportunities in the market.
It focused on its existing strengths and
provided cars focused on the customer experience. The focus
on ‘happy Škoda customers’ is an
opportunity. It enables Škoda to differentiate the Škoda
brand to make it stand out from the competition.
This is Škoda’s unique selling proposition (USP) in the
motor industry.
Threats
Threats come from outside of a business. These involve, for
example, a competitor launching cheaper
products. A careful analysis of the nature, source and
likelihood of these threats is a key part of the
SWOT process.
The UK car market includes 50 different car makers selling
200 models. Within these there are over
2,000 model derivatives. Škoda UK needed to ensure that its
messages were powerful enough for
customers to hear within such a crowded and competitive
environment. If not, potential buyers would
overlook Škoda. This posed the threat of a further loss of
market share.
Škoda needed a strong product range to compete in the UK and
globally. In the UK the Škoda brand is
represented by seven different cars. Each one is designed to
appeal to different market segments. For
example:
• The Škoda Fabia is sold as a basic but quality ‘city car’
• The Škoda Superb offers a more luxurious, ‘up-market’
appeal
• The Škoda Octavia Estate provides a family with a fun
drive but also a great big boot.
Pricing reflects the competitive nature of Škoda’s market.
Each model range is priced to appeal to
different groups within the mainstream car market. The
combination of a clear range with competitive
pricing has overcome the threat of the crowded market.
The following example illustrates how Škoda responded to
another of its threats, namely, the need to
respond to EU legal and environmental regulations. Škoda
responded by designing products that are
environmentally friendly at every stage of their life cycle.
This was done by for example:-
• Recycling as much as possible. Škoda parts are marked for
quick and easy identification when the car
is taken apart.
• Using the latest, most environmentally-friendly
manufacturing technologies and facilities available.
For instance, areas painted to protect against corrosion use
lead-free, water based colours.
• Designing processes to cut fuel consumption and emissions
in petrol and diesel engines. These use
lighter parts making vehicles as aerodynamic as possible to
use less energy.
• Using technology to design cars with lower noise levels
and improved sound quality. Outcomes and
benefits of SWOT analysis.
Škoda UK’s SWOT analysis answered some key questions. It
discovered that:
• Škoda car owners were happy about owning a Škoda
• the brand was no longer seen as a poorer version of
competitors’ cars.
However,
• the brand was still very much within a niche market
• a change in public perception was vital for Škoda to
compete and increase its market share of the
mainstream car market.
The challenge was how to build on this and develop the brand
so that it was viewed positively. It
required a whole new marketing strategy.
Škoda UK has responded with a new marketing strategy based
on the confident slogan, ‘the
manufacturer of happy drivers.’ The campaign’s promotional
activities support the new brand position.
The key messages for the campaign focus on the ‘happy’
customer experience and appeal at an
emotional rather than a practical level. The campaign
includes:
• he ‘Fabia Cake’ TV advert. This showed that the car was
‘full of lovely stuff’ with the happy music
(‘Favourite things’) in the background.
An improved and redesigned website which is easy and fun to
use. This is to appeal to a young
audience. It embodies the message ‘experience the happiness
of Škoda online’.
Customers are able to book test drives and order brochures
online. The result is that potential customers
will feel a Škoda is not only a reliable and sensible car to
own, it is also ‘lovely’ to own.
Analysing the external opportunities and threats allows
Škoda UK to pinpoint precisely how it should
target its marketing messages. No other market player has
‘driver happiness’ as its USP. By building on
the understanding derived from the SWOT, Škoda UK has given
new impetus to its campaign. At the
same time, the campaign has addressed the threat of external
competition by setting Škoda apart from its
rivals.
Conclusion
Škoda is a global brand offering a range of products in a
highly competitive and fragmented market. The
company must respond positively to internal and external
issues to avoid losing sales and market share.
A SWOT analysis brings order and structure to otherwise
random information. The SWOT model helps
managers to look internally as well as externally. The
information derived from the analysis gives
direction to the strategy. It highlights the key internal
weaknesses in a business, it focuses on strengths
and it alerts managers to opportunities and threats. Škoda
was able to identify where it had strengths to
compete. The structured review of internal and external
factors helped transform Škoda UK’s strategic
direction.
The case study shows how Škoda UK transformed its brand
image in the eyes of potential customers and
build its competitive edge over rivals. By developing a
marketing strategy playing on clearly identified
strengths of customer happiness, Škoda was able to overcome
weaknesses. It turned its previously
defensive position of the brand to a positive
customer-focused experience. The various awards Škoda
has won demonstrate how its communications are reaching
customers. Improved sales show that Škoda
UK’s new strategy has delivered benefits.
Answer the
What was the key
weakness that Škoda was able to identify?
What strength did
Škoda use to turn its brand weakness into an opportunity?
How has Škoda
strategically addressed external threats?
What in your view are
the important benefits of using a SWOT analysis
Case-3 : Marketing strategy for growth
Introduction
Businesses must respond to change in order to remain
competitive. Developing appropriate strategies
which allow them to move forward is essential. Wilkinson is
a prime example of a business that has
responded to changing customer needs throughout its history.
It is one of the UK’s long-established
retailers of a wide range of food, home, garden, office,
health and beauty products.James Kemsey (JK)
Wilkinson opened his first Wilkinson Store in Charnwood
Street, Leicester in 1930. After the Second
World War, the 1950s saw a rise in the use of labour-saving
devices and DIY. Wilkinson responded by
making this type of product the focus of its sales. In the
1960s customers wanted more convenience
shopping. Wilkinson started selling groceries and
supermarket goods and created the Wilko brand. In the
1980s Wilkinson extended its range of low-cost products to
include quality clothing, toys, toiletries and
perfumes. In 1995 it opened a central distribution centre in
Workshop, serving stores in the north of
England and in 2004, a new distribution centre opened in Wales.
In 2005 Wilkinson launched its
Internet shopping service, offering over 800,000 product
lines for sale online. Wilkinson currently has
over 300 stores, which carry an average of 25,000 product
lines. 40% of these are Wilko ‘own-brand’
products. The company’s target is to see this element grow
and to have over 500 stores by 2012.
Wilkinson’s growth places it in the top 30 retailers in the
UK. Recently it has faced increasing
challenges from competitors, such as the supermarket sector.
Wilkinson needed to combat this and
identify new areas for growth. Over two years it conducted
extensive market research. This has helped it
create a marketing strategy designed to continue growing by
targeting a new market segment - the
student population. This case study focuses on how Wilkinson
created and implemented this strategy,
using the findings of its market research to drive the
strategy forward.
Marketing strategy aims to communicate to customers the
added-value of products and services. This
considers the right mix of design, function, image or
service to improve customer awareness of the
business’ products and ultimately to encourage them to buy.
An important tool for helping develop an
appropriate marketing strategy is Ansoff’s Matrix. This
model looks at the options for developing a
marketing strategy and helps to assess the levels of risk
involved with each option. Marketing strategies
may focus on the development of products or markets. Doing
more of what a business already does
carries least risk; developing a completely new product for
a new audience carries the highest risk both
in terms of time and costs.
Based on its research, Wilkinson committed to a market
development strategy to sell its products to a
new audience of students. This is a medium risk strategy as
it requires the business to find and develop
new customers. It also carries costs of the marketing
campaigns to reach this new group. The main focus
of the strategy was to increase awareness of the brand among
students and encourage them to shop
regularly at Wilkinson stores.
Market research
Market research is vital for collecting data on which to
base the strategy. Market research takes one of
two main forms – primary research and secondary research.
Primary research (also called field
research) involves collecting data first hand. This can take
many forms, the main ones being interview,
questionnaires, panels and observation. Secondary research
(also called desk research) involves
collecting data which already exists. This includes using
information from reports, publications, Internet
research and company files.
Both methods have advantages and disadvantages. The
advantages of primary research are that it is
recent, relevant and designed specifically for the company’s
intended strategy. The main disadvantage is
that it is more expensive than secondary research and can be
biased if not planned well. Secondary
research is relatively cheap, can be undertaken quickly and
so enables decision-making sooner.
However, secondary research can go out-of-date and may not
be entirely relevant to the business’ needs.
Wilkinson undertook primary market research using
questionnaires from students across the UK and
secondary research using government and university
admissions data. The statistics revealed that there
were three million potential student customers.
They had a combined annual spend of around £9 billion per
year. This research confirmed that the
choice of focusing on the student market as a means of
growth was valid. Wilkinson undertook further
research to identify how to reach students and persuade them
to start shopping at Wilkinson stores. This
information was used to formulate a focus strategy. This was
aimed specifically at the needs of the
student ‘market segment’.
Marketing to students
Wilkinson involved 60 universities in research, using
questionnaires distributed to students initially in
Years 2 and 3 of a range of universities and then to
‘freshers’ (new students) through the University and
Colleges Admission Service. This ensured the widest range of
students was included to eliminate bias. It
also gave a wide range of responses. From this initial
group, students were asked a second set of
questions. Participants were rewarded with Amazon vouchers
to encourage a good take-up. The research
focused on two areas:
student awareness of
the Wilkinson brand and
reasons why students
were currently not using the stores regularly.
The market research enabled Wilkinson to put together its
marketing strategy. The aim was to ensure the
student population began shopping at Wilkinson stores early
in their student experience. This would
help to maintain their customer loyalty to Wilkinson
throughout their student years and also to develop
them as future customers after university. Repeat business
is key to sustained growth. Wilkinson
wanted to create satisfied customers with their needs met by
the Wilkinson range of products. A
marketing campaign was launched which focused on a range of
promotional tactics, specifically
designed to appeal to university students:
• Wilkinson being present at freshers’ fairs – and giving
free goody bags with sample
products directly to students
• direct mail flyers to homes and student halls, prior to
students arriving
• advertisements with fun theme, for example, showing frying
pans as tennis racquets
• web banners
• offering discounts of 15% with first purchase using the
online store
• gift vouchers
• free wallplanners.
The challenge was to get students into Wilkinson stores. The
opportunity was to capture a new customer
group at an early stage and provide essential items all year
round. This would lead to a committed
customer group and secure repeat business.
Outcomes/evaluation
Wilkinson wanted to know what would inspire students to shop
at Wilkinson more and what factors
would help to attract non-customers. The research provided
significant primary information to analyse
the effects of the campaign. Wilkinson used questionnaires
collected from the first year undergraduates
to gather qualitative data. In addition, Wilkinson obtained
quantitative data from various other
sources, including:
• redemption rates – how many people used the discount
vouchers when buying
• sales analysis – how much extra business did the stores
handle
• footfall in stores analysis – how many extra people went
into stores.
This information helped Wilkinson to develop its plans for
future marketing campaigns. It identified
Motivation factors for the student audience which would help
to encourage future purchase. Key
factors included products being cheaper than competitors and
easy access to stores. 23% of students
questioned gave ‘distance from university’ as a reason for
not regularly visiting the store. The layout of
the store was another major problem affecting repeat visits.
These findings have been taken on board by
Wilkinson in its future planning of store locations and
layouts.
Researching students’ opinions after the campaign showed
that:
• Awareness of Wilkinson brand had significantly risen from
77% to 95% of those interviewed. This
brought it in line with Morrison supermarkets, a key
competitor.
Conclusion
Wilkinson’s marketing strategy began with its corporate aim
to grow and increase stores across the UK.
It was facing increased competition from supermarkets and
needed to identify an area to focus on. To
pursue a growth strategy, Wilkinson used market research to
identify new target customers. This enabled
it to prepare marketing strategies to fit the audience.
Primary and secondary research was used to find out customer
views regarding its brand. Data indicated
the student market segment was a significant area to focus
on to achieve market development. A
marketing campaign using data from a follow-up survey was
put in place. The campaign showed
significant increase in students’ levels of awareness about
Wilkinson and its products. It encouraged
them either to shop more or to try Wilkinson for the first
time. The campaign helped to achieve many of
the business’ aims, creating increased brand awareness and
repeat visits. It also helped to inform the
company’s future strategies for growth. Market research
gathered will help to formulate future plans for
new stores. These will be in line with Wilkinson commitment
to providing communities with affordable
products across the country.
Answer the following questions
What is the
difference between primary and secondary research? Identify one example of
primary and
secondary research carried out by Wilkinson.
Explain why Wilkinson
needed a marketing strategy to help them to grow.
Evaluate the benefits
of the marketing campaign to Wilkinson.
Analyse how effective
the marketing campaign was in helping Wilkinson respond to competitive
pressures.
Case-4 : Extending the product life cycle
Introduction
Businesses need to set themselves clear aims and objectives
if they are going to succeed. The Kellogg
Company is the world’s leading producer of breakfast cereals
and convenience foods, such as cereal
bars, and aims to maintain that position. In 2006, Kellogg
had total worldwide sales of almost $11
billion (£5.5 billion). In 2007, it was Britain’s biggest
selling grocery brand, with sales of more than
£550 million. Product lines include ready-to-eat cereals
(i.e. not hot cereals like porridge) and nutritious
snacks, such as cereal bars. Kellogg’s brands are household
names around the world and include Rice
Krispies, Special K and Nutri-Grain, whilst some of its
brand characters, like Snap, Crackle and Pop, are
amongst the most wellknown in the world.
Kellogg has achieved this position, not only through great brands
and great brand value, but through a
strong commitment to corporate social responsibility. This
means that all of Kellogg’s business aims
are set within a particular context or set of ideals.
Central to this is Kellogg’s passion for the business,
the brands and the food, demonstrated through the promotion
of healthy living.
The company divides its market into six key segments.
Kellogg's Corn Flakes has been on breakfast
tables for over 100 years and represents the ‘Tasty Start’
cereals that people eat to start their day. Other
segments include ‘Simply Wholesome’ products that are good
for you, such as Kashi Muesli, ‘Shape
Management’ products, such as Special K and ‘Inner Health’
lines, such as All-Bran. Children will be
most familiar with the ‘Kid Preferred’ brands, such as
Frosties, whilst ‘Mum Approved’ brands like
Raisin Wheats are recognised by parents as being good for
their children.
Each brand has to hold its own in a competitive market.
Brand managers monitor the success of brands
in terms of market share, growth and performance against the
competition. Key decisions have to be
made about the future of any brand that is not succeeding.
This case study is about Nutri-Grain. It shows
how Kellogg recognised there was a problem with the brand
and used business tools to reach a solution.
The overall aim was to re-launch the brand and return it to
growth in its market.
The product life cycle
Each product has its own life cycle. It will be ‘born’, it
will ‘develop’, it will ‘grow old’ and, eventually,
it will ‘die’. Some products, like Kellogg’s Corn Flakes,
have retained their market position for a long
time. Others may have their success undermined by falling
market share or by competitors. The product
life cycle shows how sales of a product change over time.
The five typical stages of the life cycle are
shown on a graph. However, perhaps the most important stage
of a product life cycle happens before
this graph starts, namely the
Research and Development (R&D) stage. Here the company
designs a product to meet a need in the
market. The costs of market research - to identify a gap in
the market and of product development to
ensure that the product meets the needs of that gap - are
called ‘sunk’ or start-up costs. Nutri-Grain was
originally designed to meet the needs of busy people who had
missed breakfast. It aimed to provide a
healthy cereal breakfast in a portable and convenient
format.
Launch - Many
products do well when they are first brought out and Nutri-Grain was no
exception.
From launch (the first stage on the diagram) in 1997 it was
immediately successful, gaining almost 50%
share of the growing cereal bar market in just two years.
2. Growth - Nutri-Grain’s sales steadily increased as the
product was promoted and became well
known. It maintained growth in sales until 2002 through
expanding the original product with new
developments of flavour and format. This is good for the
business, as it does not have to spend money
on new machines or equipment for production. The market
position of Nutri-Grain also subtly changed
from a ‘missed breakfast’ product to an ‘all-day’ healthy
snack.
3. Maturity - Successful products attract other competitor
businesses to start selling similar products.
This indicates the third stage of the life cycle - maturity.
This is the time of maximum profitability, when
profits can be used to continue to build the brand. However,
competitor brands from both Kellogg itself
(e.g. All Bran bars) and other manufacturers (e.g. Alpen
bars) offered the same benefits and this slowed
down sales and chipped away at Nutri-Grain’s market
position. Kellogg continued to support the
development of the brand but some products (such as Minis
and Twists), struggled in a crowded market.
Although Elevenses continued to succeed, this was not enough
to offset the overall sales decline. Not all
products follow these stages precisely and time periods for
each stage will vary widely. Growth, for
example, may take place over a few months or, as in the case
of Nutri-Grain, over several years.
4. Saturation - This is the fourth stage of the life cycle
and the point when the market is ‘full’. Most
people have the product and there are other, better or
cheaper competitor products. This is called market
saturation and is when sales start to fall. By mid-2004 Nutri-Grain
found its sales declining whilst the
market continued to grow at a rate of 15%.
5. Decline - Clearly, at this point, Kellogg had to make a
key business decision. Sales were falling, the
product was in decline and losing its position. Should Kellogg
let the product ‘die’, i.e. withdraw it from
the market, or should it try to extend its life?
Strategic use of the product life cycle
When a company recognises that a product has gone into
decline or is not performing as well as it
should, it has to decide what to do. The decision needs to
be made within the context of the overall aims
of the business. Kellogg’s aims included the development of
great brands, great brand value and the
promotion of healthy living. Strategically, Kellogg had a
strong position in the market for both healthy
foods and convenience foods. Nutri-Grain fitted well with
its main aims and objectives and therefore
was a product and a brand worth rescuing.
Kellogg decided to try to extend the life of the product
rather than withdraw it from the market. This
meant developing an extension strategy for the product.
Ansoff’s matrix is a tool that helps analyse
which strategy is appropriate. It shows both
market-orientated and product-orientated possibilities.
Extending the Nutri-Grain cycle – identifying the problem
Kellogg had to decide whether the problem with Nutri-Grain
was the market, the product or both. The
market had grown by over 15% and competitors’ market share
had increased whilst Nutri-Grain sales in
2003 had declined. The market in terms of customer tastes
had also changed – more people missed
breakfast and therefore there was an increased need for such
a snack product.
The choice of extension strategy indicated by the matrix was
either product development or
diversification. Diversification carries much higher costs
and risks. Kellogg decided that it needed to
focus on changing the product to meet the changing market
needs.
Research showed that there were several issues to address:
1. The brand message was not strong enough in the face of
competition. Consumers were not impressed
enough by the product to choose it over competitors.
2. Some of the other Kellogg products (e.g. Minis) had taken
the focus away from the core business.
3. The core products of Nutri-Grain Soft Bake and Elevenses
between them represented over 80% of
sales but received a small proportion of advertising and
promotion budgets.
4. Those sales that were taking place were being driven by
promotional pricing (i.e discounted pricing)
rather than the underlying strength of the brand.
Implementing the extension strategy for Nutri-Grain having
recognised the problems, Kellogg then
developed solutions to re-brand and re-launch the product in
2005.
1. Fundamental to the re-launch was the renewal of the brand
image. Kellogg looked at the core
features that made the brand different and modelled the new
brand image on these. Nutri-Grain is
unique as it is the only product of this kind that is baked.
This provided two benefits:
• the healthy grains were soft rather than gritty
• the eating experience is closer to the more indulgent
foods that people could be eating (cakes and
biscuits, for example). The unique selling point, hence the
focus of the brand, needed to be the ‘soft
bake’.
2. Researchers also found that a key part of the market was
a group termed ‘realistic snackers’. These
are people who want to snack on healthy foods, but still
crave a great tasting snack. The re-launched
Nutri-Grain product needed to help this key group fulfil
both of these desires.
3. Kellogg decided to re-focus investment on the core
products of Soft Bake Bars and Elevenses as these
had maintained their growth (accounting for 61% of Soft Bake
Bar sales). Three existing Soft Bake Bar
products were improved, three new ranges introduced and poorly
performing ranges (such as Minis)
were withdrawn.
4. New packaging was introduced to unify the brand image.
5. An improved pricing structure for stores and supermarkets
was developed.
Using this information, the re-launch focused on the four
parts of the marketing mix:
• Product – improvements to the recipe and a wider range of
flavours, repositioning the brand as
‘healthy and tasty’, not a substitute for a missed breakfast
• Promotion – a new and clearer brand image to cover all the
products in the range along with
advertising and point-of-sale materials
• Place – better offers and materials to stores that sold
the product
• Price – new price levels were agreed that did not rely on
promotional pricing. This improved revenue
for both Kellogg and the stores.
As a result Soft Bake Bar year-on-year sales went from a
decline to substantial growth, with Elevenses
sales increasing by almost 50%. The Nutri-Grain brand
achieved a retail sales growth rate of almost
three times that of the market and most importantly, growth
was maintained after the initial re-launch.
Conclusion
Successful businesses use all the tools at their disposal to
stay at theSuccessful businesses use all the
tools at their disposal to stay at the top of their chosen
market. Kellogg was able to use a number of
business tools in order to successfully re-launch the
Nutri-Grain brand. These tools included the product
life cycle, Ansoff’s matrix and the marketing mix. Such
tools are useful when used properly.
Kellogg was able to see that although Nutri-Grain fitted its
strategic profile – a healthy, convenient
cereal product – it was underperforming in the market. This
information was used, along with the aims
and objectives of the business, to develop a strategy for
continuing success. Finally, when Kellogg
checked the growth of the re-launched product against its
own objectives, it had met all its aims to:
• re-position the brand through the use of the marketing mix
• return the brand to growth
• improve the frequency of purchase
• introduce new customers to the brand.
Nutri-Grain remains a growing brand and product within the
Kellogg product family.
Answer the following questions:
Using current
products familiar to you, draw and label a product life cycle diagram, showing
which
stage each product is at.
Suggest appropriate
aims and objectives for a small, medium and large business.
Consider the decision
taken by Kellogg to opt for product development. Suggest a way in which it
could have divers
Define term “Marketing Management” discuss the elements of Market
Environment? (10 Marks)
Define the term Product Management? Explain how New Product
Decisions are made? (10 Marks)
What is Customer relationship Management Explain its feature and
nature? (10Marks)
Q. 4) Explain the nature and feature of Marketing research and
Information Systems? (10 Marks)
What is Market Measurement and Forecasting? (10 Marks)
Q6) What is Segmenting and Targeting the Market? (10 Marks)
Q7) What is Advertising Management? Explain the concept of Sales
Promotion and Personal Selling?
(10 Marks)
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Q8) Write a short note (any two) (10Marks)
a) Brand Equity
b) Global Marketing
c) Direct Marketing
d) Pricing decisions
SUBJECT:-CORPORATE LAW
Total Marks—80
1) All questions carry equal marks.
2) All questions are compulsory
Q1) Write short notes (any two) (10 Marks)
Void Contracts and
Void able Contracts
Standard Terms and
Freedom of Contract
c) Banking Law
d) Negotiable Instruments
Explain the procedure
of Incorporation of Companies, issuance of
Prospectus and Rising of Capital? (10 Marks)
Explain the law of
Contract and discuss the term Offer, Acceptance and
Agreement? (10 Marks)
Discuss the
Fundamental Rights of the Business? (10 Marks)
Discuss the aims and
objectives Indian Sale of Goods Act, 1930?
(10 Marks)
Q6) What is the Intellectual Property Rights Law. Discuss
its relevance to
liberalization and Globalization? (10 Marks )
Q7) What is the aims and objectives of the Standards of
Weights and
Measures Act, 1976? (10 Marks)
Q8) Discuss in brief the Consumer Protection Act 1986? (10
Marks
SUBJECT: OPERATION MANAGEMENT
CASE STUDY : 1
Ram Dubey recently purchased a chain of dry cleaners in
North Uttar Pradesh. Although the
business is making a modest profit now, Ram suspects that if
he invests in a new press, he
could recognize a substantial increase in profits. The new
press costs $ 15,400 to purchase
and install and can press 40 shirts an hour or 320 per day.
Ram estimates that with the new
press, it will cost $ 0.25 to launder and press each shirt,
customers are charged $ 1.10 per shirt.
How many shirts will
Ram have to press to break even?
So far Ram’s workload
has varied from 50 to 200 shirts a day. How long would it take to
break even on the new press at the low demand estimate? At
the high demand estimate?
If Ram cuts his price
to $ 0.99 a shirt, he expects to be able to stabilize his customer base
at 250 shirts per day. How long would it take to break even
at the reduced price of $ 0.99?
Should Ram cut his
price and buy the new press?
CASE STUDY : 2
The Peachtree Airport in Atlanta serves light aircraft. It
has a single runway and one air traffic
controller to land planes. It takes an airplane and minutes
to land and clear the runway
(exponentially distributed) planes arrive at the airport at
the rate of 5 per hour (Poisson
distributed).
Determine the average
number of planes that will stack up waiting to land?
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Find the average time
a plane must wait in line before it can lead?
Calculate the average
time it takes a plane to clear the runway once it has notified the
airport that it is in the vicinity and wants to land?
The FAA has a rule
that an air traffic controller can, on the average, land planes a
maximum of 45 minutes out of every hour. There must be 15
minutes of idle time available to
relieve the tension. Will this airport have to hire an extra
air traffic controller?
CASE STUDY : 3
During the past few years the legislature has severely
reduced funding for State University. In
reaction, the administration at State has significantly
raised tution each year for the past 5 years.
A bargain five years ago, State is now considered an
expensive State-supported University.
Some parents and students now question the value of a state
education and applications for
admission have declined. Since a portion of State
educational funding is based on a formula
tied to enrollments, State has maintained its enrollment
levels by going deeper into its applicant
pool and accepting less qualified students.
On top of these problems, an increase in the college age
population is expected in this decade
key members of the State legislature have told the
University administration that State will be
expected to absorb additional students during this decade.
However, because of the economic
outlook and the budget situation, State should not expect
any funding increases for additional
facilities, classrooms, dormitory rooms, or faculty. The
University already has a classroom
deficit in excess of 25% and class sizes are above the
average of their Peer Institutions.
The President of the University Mr Shekhar, established
several task forces consisting of faculty
and administrations to address these problems. These groups
made a number of
recommendations, including the implementation of Total
Quality Management (TQM) practices
and more in depth focused planning.
Discuss the general
terms how forecasting might be used for planning to address these
specific problems?
Explain the role of
forecasting in initiating a TQM approach?
What are the types of
forecasting methods that might be used?
Describe the Delphi
method for forecasting?
CASE STUDY : 4
The Aurora Electronics company has been receiving a lot of
customer complaints and returns of
a front loading VCR that it manufacturers. When a videotape
is pushed into the loading
mechanism, it can stick inside with the door open, the
recorder cannot run, and it is difficult to
get the tape out. Consumers will try to pull the tape out
with their fingers or pry the tape out with
an object such as knife, pencil or screw driver or hurting
themselves.
What are the different
costs of poor quality and costs of quality assurance that might be
associated with this quality problem?
Explain the term
quality?
Discuss the
dimensions of quality for manufacturing products?
Discuss the
dimensions of quality for services?
SUB: OPERATION MANAGEMENT
N.B.: 1) Attempt any Eight Questions
2) All questions carries equal marks.
How would operations strategy for a service
industry be different if any from that
for a manufacturing
industry? (It’s an example & explains)
Consider the following two mutually exclusive
projects. The net cash flows are
given below:
YEAR NET CASH FLOWS
FROM
PROJECT A
NET CASH FLOWS
FROM PROJECT B
0 - Rs. 1,00,000 - Rs.
1,00,000/-
1 + Rs. 30,000 + Rs.
15,000/-
2 + Rs. 35,000 + Rs.
17,500/-
3 + Rs. 40,000 + Rs.
20,000/-
4 + Rs. 45,000 + Rs.
22,500/-
5 + Rs. 25,000/-
6 + Rs. 27,500/-
7 + Rs. 30,000/-
8 + Rs. 32,500/-
If the desired rate of
return is 10% which project should be chosen?
What are the levels of aggregation in
forecasting for a manufacturing
organization? How
should this hierarchy of forecasts be linked and used?
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
How would forecasting be useful for operations
in a BPO (Business processes
outsourcing) unit?
What factors may be important for this industry? Discuss.
A good work study should be followed by good
supervision for getting good
results. Explain with
an example.
What is job evaluation? Can it be
alternatively used as job ranking? How does
one ensure that job
evaluation evaluates the job and not the man? Explain with
examples?
What is the impact of technology on jobs? What
are the similarities between job
enlargement & job
rotation? Discuss the importance of training in the content of
job redesign? Explain
with examples?
What is internet connectivity? How is it
important in to days business would with
respect to materials
requirement planning & purchasing? Explain with
examples?
Would a project management organization be
different from an organization for
regular manufacturing
in what ways? Examples.
How project evaluation
different from project appraisal? Explain with examples
PRICIPLE AND PRACTISE MANAGEMENT
CASE STUDY : 1
International Case : Carrefour — Which Way to Go?
Wal-Mart's biggest global competitor is the big French
retailer Carretour, a firm that has hypermarkets, big
stores offering a variety of goods. It has made large
investments around the globe in Latin America and China.
But not all is well as competitors taking market share its
home market, for instance. There has been even
speculation of a takeover by Wal-Mart or Tesco, an English
chain. Mr. Barnard has been ousted after heading
the company for 12 years; he was replaced by Jose Luis
Durant who is of German-Spanish descent. Although
the global expansion is cited by some as success, it may be
even a big mistake. It withdrew from Japan and
sold 29 hypermarkets in Mexico. Carrefour also had problems
competing with Tesco in Slovakia and the
Czech Republic. In Germany, the company faced tough
competition from Aldi and Lidle, two successful
discounters. On the other hand, it bought stores in Poland,
Italy, Turkey, and opened new stores in China,
South Korea, and Columbia. Carrefour has become more careful
in selecting markets. But. the company is
eager to enter the Indian market, but found out in late 2006
that Wal-Mart will do so as well.
In France, where Carrefour is well established, the company
made the big mistake in its pricing policy. It
probably started with the 1999 merger with Promodes, the
French discount chain. Carrefour confused the
French clientele by losing its low-cost image; whether the
image can be changed remains to be seen. Mr.
Durant, the new CEO since 2005, embarked on the new strategy
by offering 15 percent new products in its
hypermarkets and 10 percent in its supermarkets. Moreover,
he wants to employ more staff, extend the
operating hours in certain hypermarkets, cutting prices,
trying small stores, and pushing down decision
making. Mr. Durant aims to stay only in countries where
Carrefour is among the top retailers.
Questions:
How should Mr. Durant
assess the opportunities in various countries around the world?
Should Carrefour
adopt Wal-Mart's strategy of "low prices everyday"? What would be the
advantage or
disadvantage of such a strategy?
How could Carrefour
differentiate itself from Wal-Mart?
Identify cultures in
selected countries that need to be considered in order to be successful?
CASE STUDY : 2
International Case : Reengineering the Business Process at
Procter & Gamble
Procter & Gamble (P&G), a multinational corporation
known for products such as diapers, shampoo, soap, and
toothpaste, was committed to improving value to the
customer. Its products were sold through various
channels, such as grocery retailers, wholesalers, mass
merchandisers, and club stores. The flow of goods in the
retail grocery channel was from the factory's warehouse to
the distributors' warehouses before going to the
grocery stores where customers selected the merchandise from
the shelves.
The improvement-driven company was not satisfied with its
performance and developed a variety of programs
to improve its service and the efficiency of its operation.
One such program was electronic data interchange,
3 | P a g e
which provided daily information from the retail stores to
P&G. The installation of the system resulted in
better service, reduced inventory levels, and labor-cost
savings. Another approach, the continuous
replenishment program, provided additional benefits for
P&G as well as for its retailer customers. Eventually,
the entire ordering system was redesigned, with the result
of dramatic performance improvements. The
reengineering efforts also required restructuring of the
organization. P&G had been known for its brand
management for more than 50 years. But in the late 1980s and
early 1990s, the brand management approach
pioneered by the company in the 1930s required rethinking
and restructuring. In a drive to improve efficiency
and coordination, several brands were combined with
authority and responsibility given to category managers.
Such a manager would determine overall pricing and product
policies. Moreover, the category managers had
the authority to withdraw weak brands, thus avoiding
conflict between similar brands. They were also held
responsible for the profit of the product category they were
managing. The switch to category management
required not only new skills but also a new attitude.
Questions:
The reengineering
efforts of P&G focused on the business process system. Do you think other
processes,
such as the human system, or other managerial policies need
to be considered in a process redesign?
What do you think was
the reaction of the brand managers, who may have worked under the old system
for
many years, when the category management structure was
installed?
As a consultant,
would you have recommended a top-down or a bottom-up approach, or both, to
process
redesign and organizational change?
What are the
advantages and disadvantages of each approach.
CASE STUDY : 3
International Case : The Restructuring of Daimler-Benz
In a 1996 address to stockholders and friends of
Daimler-Benz, CEO Jurgen Schrempp reviewed the position
of the diversified company. He started by saying "1995
was a dramatic year in the history of Daimler-Benz." It
was also a year that the board of management made a major
break with the past.
Daimler-Benz, with more than 300,000 employees worldwide,
consisted of four major groups: The first, by far
the biggest and most successful group, was Mercedes-Benz
with about 200,000 employees. It is best known
for its passenger cars and commercial vehicles. The second
was the AEG Daimler-Benz industries in the
business of rail systems, microelectronics, heavy diesel
engines, energy systems technology, and automation.
The third was the Aerospace Group in the business of
aircraft (the company has a more than one-third interest
in the Airbus consortium), space systems, defense and civil
systems, and propulsion systems. Finally, there
was the Inter Services Group consisting of systemshaus,
financial services, insurance brokerage, trading,
marketing services, mobile communications services, and real
estate management.
Daimler-Benz went through various development phases. From
1985 to 1990, it diversified into aerospace and
electrical engineering. The aim was to become an integrated
high-tech group. This diversification was further
consolidated in the next phase that extended from 1990 to
1995. Under the leadership of Schrempp, the core
business was redefined and the strategy refocused.
A 1995-96 portfolio review showed the need for refocusing on
what the company could do best. Top
4 | P a g e
management reevaluated its strategies and its core
businesses based on economic criteria and the strategic fit
of the various activities. It became clear that the
company's strengths were in car manufacturing, the truck
business, and the railroad sector. Mercedes Benz, for
example, had a strong competitive position with its cars
and trucks in Europe, North America, and Latin America. Vans
were also relatively strong in Europe, and
buses had a good competitive position in Latin America.
Based on this analysis, the strategies for potential
growth were through globalization and the development of new
product segments.
In 1996, top management reassessed the company's position
and its 1995 unsatisfactory results from its
operations. It was discovered that the company was exposed
to currency fluctuations that affected profitability.
The company's image was also blurred because of the ventures
into many different kinds of industries. The
management board decided to cut its losses and chart a new
direction for the company, with greater emphasis
on profitability. The organization structure was tightened
and certain businesses were divested. In fact, policy
decision from an earlier period were reversed. The
unprofitable AEG Group and the Dutch aircraft
manufacturer Fokker did not receive financial support. Since
both the Dutch government and Daimler-Benz
withdrew support, Fokker filed for bankruptcy. Although
these and other drastic decisions helped reduce the
1995 financial losses, the company's goal was not to
emphasize maximizing short-term profitability but to
work toward medium- and long-term profitability.
A number of other managerial decisions were made to achieve
the ambitious goals of reducing costs and
improving profitability. Employees close to the operations
were empowered to make decisions necessary to
carry out their tasks. The organization structure was
simplified and decentralized so that organizational units
could respond faster to environmental changes. Moreover, the
new organization structure was designed to
promote an entrepreneurial spirit. Control was exercised
through a goal-driven, performance-based reward
system. At the same time, the new structure was designed to
promote cooperation. In 1997, the board of
management restructured and integrated the Mercedes-Benz
Group into Daimler-Benz. Consequently,
Mercedes-Benz's chief, Helmut Werner, who had been given
credit for a successful model policy, resigned
from the company.
Questions:
What is your
assessment of Daimler-Benz's operations in many different fields?
Should the various
groups operate autonomously? What kinds of activities should be centralized?
Daimler-Benz is best
known for its Mercedes-Benz cars. Why do you think Daimler bought AEG in the
first
place and why did it venture into the Aerospace and Inter
Services businesses?
Given the apparent
mistakes in acquiring non-automotive businesses, what should Jurgen Schrempp do
now?
5 | P a g e
CASE STUDY : 4
International Case : Global Car Industry
How the Lexus Was Born-and Continued Its Success in the
United States, but will Lexus Succeed in Japan?
One of the best examples of global competition is in the car
industry. As the Japanese gained market share in
America, U.S. car makers required the Japanese to
self-impose quotas on cars exported to the United States.
This encouraged Japanese firms not only to establish their
plants in the United States but also to build bigger
and more luxurious cars to compete against the higher-priced
U.S. cars- and the expensive European cars such
as the Mercedes and the BMW.
One such Japanese car is the Lexus, by Toyota. This car is
aimed at customers who would like to buy a
Mercedes or BMW but cannot afford either. With a sticker
price of $35,000, the Lexus is substantially less
expensive than comparable European imports. In 1983, Toyota
set out to develop the best car in the worldmeasured
against the Mercedes and the BMW. The aim was to produce a
quiet, comfortable, and safe car that
could travel at 150 miles per hour and still avoid the gas
guzzler tax imposed on cars getting less than 22.5
miles per gallon. This seemed to be an idea of conflicting
goals: cars being fast seemed irreconcilable with
cars being at the same time fuel-efficient. To meet these
conflicting goals, each subsystem of the car had to be
carefully scrutinized, improved whenever possible, and
integrated with the total design. The first version of the
32-valve V-8 engine did not meet the fuel economy
requirement. The engineers applied a problem-solving
technique called "thoroughgoing countermeasures at the
source." This means an attempt to improve every
component until the design objectives are achieved. Not only
the engine but also the transmission and other
parts underwent close scrutiny to make the car meet U.S.
fuel requirements.
Toyota's approach to achieving quality is different from
that of German car manufacturers. The latter use
relatively labor-intensive production processes. In
contrast, Toyota's advanced manufacturing technology aims
at high quality through automation requiring only a fraction
of the work force used by German car makers.
Indeed, this strategy, if successful, may be the secret
weapon to gain market share in the luxury car market.
Questions:
Prepare a profile of
the potential buyer of the Lexus.
What should Mercedes
and BMW do to counteract the Japanese threat in the United States and Europe?
Why has the Lexus
model been very successful in the U.S. but has not been marketed in Japan?
(Suggestion: Review the frequency of repair records of
luxury cars
QUANTITATIVE METHOD
CASE STUDY: 1
The
bulbs manufactured by a company gave a mean life of 3000 hours with standard
deviation
of 400 hours. If a bulb is selected at random, what is the probability it will
have
a mean life less than 2000 hours?
Question:
Calculate the probability.
In what situation does one need probability
theory?
Define the concept of sample space, sample
points and events in context of
probability
theory.
What is the difference between objective and
subjective probability?
CASE STUDY : 2
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 cost function is c(x) = 500 + 28x where x is the number
of
units produced. Find x so that the profit is maximum.
Question:
Find the value of x.
In using regression analysis for making
predictions what are the assumptions
involved.
What is a simple linear regression model?
What is a scatter diagram method?
CASE STUDY : 3
Mr
Sehwag invests Rs 2000 every year with a company, which pays interest at 10%
p.a.
He
allows his deposit to accumulate at C.I. Find the amount to the credit of the
person
at
the end of 5th year.
Question
:
What is the Time Value of Money concept.
What do you mean by present value of money?
What is the Future Value of money.
What the amount to be credited at the end of 5th year.
CASE STUDY : 4
The
cost of fuel in running of an engine is proportional to the square of the speed
and is
Rs
48 per hour for speed of 16 kilometers per hour. Other expenses amount to Rs
300
per
hour. What is the most economical speed?
Question:
What is most economical speed?
What is a chi-square test?
What is sampling and what are its uses.
Is there any alternative formula to find the
value of Chi-square
SUB: SHIPPING MANAGEMENT
Marks : 80
what are quality
Management Systems? (Marks 10)
Explain Impact of
Competition on rates? (Marks 10)
Describe the complete
structure of shipping Operations? (Marks 10)
Explain the following
in brief? (Marks 10)
Bulk Cargo market.
b) Iron Ore trade.
c) Coal trade.
d) Grain Trade.
e) Shipping Demand Forecast.
f) Operating Cost.
g) Ship Market.
h) Freight Market.
Explain Financial
Management with the help of the following points. (Marks 20)
a) Debt Equity Mix and Dividend.
b) Treasury Function.
c) Funds from international sources.
d) Trading activities.
e) Shipping Business.
f) Buying and selling of ships.
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
2
g) Foreign Exchange transactions
h) Diversification.
6) Case --------II (Marks 20)
„h The Indian cultural belief in "Karma" if it is
for the upliftment of oneself
„h Indian society's acceptance of creation of riches by a
person by his/her ownefforts.Wealth is seen
as God's gift.
„h An almost mythical belief of bringing oneself above the
masses both in excellence and in wealth.
The impact of this belief is so deep that we have accepted
the "lotus" as our national flower which
blooms even in dirty ponds without its natural beauty and
fragrance being affected.
„h A large sea coast and a large coastal population which
earns its living from sea resources.
„h A growing offshore oil industry which provides support to
the shipping industry, especially in times
of depression in the shipping industry.
„h The existence of English as a widely spoken language
which happens to be the lingua franca of the
shipping industry.
„h Recent growth in net worth of non-resident Indians and
Indian ventures abroad who can be both
investors and users of shipping services.
Until now, my comments and questions have been
straightforward but the problem ahead is to find the
best possible solution which, if adopted or practiced, may
provide a stimulus for the growth of the shipping
industry.
The shipping industry, in view of its globalizes operations,
is so complex in nature, high on capital
requirement and low on returns (IRR), especially in
comparison to some other industries, such as a
manufacturing, in a overpopulated country like India
It will be difficult to attract existing industrialists from
other sectors to the shipping industry unless
sea transportation forms a captive part of their business or
the government provides sufficient subsidies
and protections as incentive.
Therefore, my friends, the burden for growth of Indian
shipping lies on our shoulders, being the
shipping managers in the forefront of the industry. Failure
on our part will not be pardoned by the future
generations involved in shipping.
3
Questions:-
a) Why will it not be pardoned by future generations?
b) How can executives and managers of that Indian shipping
industry take advantage of these
opportunities?
c) So now the question is: what level playing fields are
relevant today?
d) Issues on which a ship-owner should commit himself to the
nation?
Subject : SHIPPING MANAGEMENT
MARKS: 80
Describe the
Sustainable transport Mode? (Marks 3)
) Explain the Following? (Marks 3)
a) Second line of Defance?
b) Changing Technology
c) Shipping Weakness and threats
d) Ship disposal
e) Cargoes
What are shipping
Strengths and opportunities? (Marks 3)
Who are the actors in
shipping? (Marks 3)
Q5) Case ¡V 1 (Marks 15)
Today shipping has become more globalize than the air line
industry perceptions have changed nations and
companies are willing to use ships that fly any flag
provides they offer competitive freights to move
cargo/people safely and effectively from point A To B
national strategic interest has also receded since the
advent of flag of convenience ships. For ship owners and
operators of flag of convenience, their interest now
loess in operating efficiency and maximizing profits recent
examples of this phenomenon are Falklands, Iran
/ Iraq wars and the invasion of kauit in all these cases the
limitations of these ships under their own flag did
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
2
not pose a problem. The ships available far exceeded the
logistical requirement for the conflicts, and
chartering their vessels was relatively easy.
Questions
a)What does the above scenario show?
b)What does this prove?
c)What does it prove to our country ¡V INDIA
Describe the
strengths and weaknesses of the Indian shipping? (Marks 3)
Describe the
advantages and disadvantages and standards of EDI? (Marks3)
Q8) Explain the cost and value service principle? (Marks 3)
Q10) What is the principle of ¡§WHAT THE TRAFFIC CAN BEAR¡¨
(Marks 3)
Q9) what are quality Management Systems? (Marks 3)
Q11) Explain Impact of Competition on rates? (Marks 3)
Q12) Describe the complete structure of shipping Operations?
(Marks 3)
Explain the following
in brief? (Marks 8)
a) Bulk Cargo market.
b) Iron Ore trade.
c) Coal trade.
d) Grain Trade.
e) Shipping Demand Forecast.
f) Operating Cost.
g) Ship Market.
h) Freight Market.
Explain Financial
Management with the help of the following points. (Marks 8)
a) Debt Equity Mix and Dividend.
b) Treasury Function.
c) Funds from international sources.
d) Trading activities.
e) Shipping Business.
f) Buying and selling of ships.
3
g) Foreign Exchange transactions
h) Diversification.
Present an
organization Chart? (Marks 3)
Q16) Case --------II (Marks 16)
„h The Indian cultural belief in "Karma" if it is
for the upliftment of oneself
„h Indian society's acceptance of creation of riches by a
person by his/her ownefforts.Wealth is seen as
God's gift.
„h An almost mythical belief of bringing oneself above the
masses both in excellence and in wealth.
The impact of this belief is so deep that we have accepted
the "lotus" as our national flower which
blooms even in dirty ponds without its natural beauty and
fragrance being affected.
„h A large sea coast and a large coastal population which
earns its living from sea resources.
„h A growing offshore oil industry which provides support to
the shipping industry, especially in times
of depression in the shipping industry.
„h The existence of English as a widely spoken language
which happens to be the lingua franca of the
shipping industry.
„h Recent growth in net worth of non-resident Indians and
Indian ventures abroad who can be both
investors and users of shipping services.
Until now, my comments and questions have been
straightforward but the problem ahead is to find the
best possible solution which, if adopted or practiced, may
provide a stimulus for the growth of the shipping
industry.
The shipping industry, in view of its globalizes operations,
is so complex in nature, high on capital
requirement and low on returns (IRR), especially in
comparison to some other industries, such as a
manufacturing, in a overpopulated country like India
It will be difficult to attract existing industrialists from
other sectors to the shipping industry unless
sea transportation forms a captive part of their business or
the government provides sufficient subsidies and
protections as incentive.
Therefore, my friends, the burden for growth of Indian
shipping lies on our shoulders, being the
shipping managers in the forefront of the industry. Failure
on our part will not be pardoned by the future
generations involved in shipping.
4
Questions:-
a) Why will it not be pardoned by future generations?
b) How can executives and managers of that Indian shipping
industry take advantage of these
opportunities?
c) So now the question is: what level playing fields are
relevant today?
d) Issues on which a ship-owner should commit himself to the
nation?
STRATEGIC MANAGEMENT
CASE STUDY : 1
The Ahmedabad based Astral Poly Technik Ltd. is
manufacturing and provider of chlorinated poly vinyal
chloride (CPVC) piping and plumbing systems. Mr Sandeep
Engineer, its managing director reported a
strategic decision of manufacturing and marketing the ‘Blaze
master’ fire sprinkler system under an
agreement with the $ 4 billion global speciality chemical
company, Lubrizol, whose wholly-owned
subsididary Noveon Inc makes ‘Blazemaster’ for this purpose,
Astral signed a licence agreement with
Noveon to manufacturing and market its fire sprinkler system
under the brand name of ‘Blazemaster’ which
is a trade mark of Noveon. The company, in order to
strengthen its business plans, had taken a strategic
decision to enter into a techno-financial joint venture with
speciality process LLC of USA, which provided if
the required technical expertise for manufacturing CPVC
pipes and fitting for home and industrial
applications. Astral was also going for an initial public
offering to further its growth plans.
Explain the term
strategic decision making?
Explain the process
of decision making?
What is the basic
thrust of strategic decision making?
Q4) Explain in detail the issues in strategic decision
making?
CASE STUDY : 2
The essence of vision is a forward-looking view of what an
organization wishes to become, mission is what
an organization is and why it exists.
Several years ago, Peter F Drucker raised important
philosophical questions related to business what is our
business? What will it be? What it should be? These three
questions though simply worded are in reality,
the most fundamental questions that any organization can put
it itself. The answers are based on an analysis
of the underlying need of the society that any organization
strives to fulfill. The satisfaction of that need is
them, the business of the organization.
Define vision? And
explain the benefits of a vision?
What do you mean by
mission?
Q3) How are Mission statements formulated and communicated?
Q4) Explain in detail the characteristics of a Mission
statement?
CASE STUDY : 3
The major market players in Indian Food processing industry
include local companies such as Agro Tech
Foods, Dabur, Gits, Parle and Foreign companies such as
Nestle, Cadbury and Unilever.
The business environment in which the food processing
industry exists could be explained in terms of
opportunities and threats.
Opportunities just like High demand potential, low output
from organized sector. Exports of agricultural and
processed food have been rising, low cost Indian labour,
younger population, changing lifestyle, nuclear
families, increasing personal income, number of working
women, etc.
Threats just like conservative Government policies,
inadequate infrastructure for distribution and
preservation, limited assess to appropriate technology for
processing and packaging, high taxation on
packaged items etc.
Just observed how the food processing industry in India is
affected by different levels of the environment at
the global and national level.
Explain the concept
of Environment?
Explain in detail the
characteristics of Environment?
Explain Internal
Environment?
Explain External
Environment?
CASE STUDY : 4
According to a doctoral study on the corporate takeovers in
India the major reason for increased Mergers &
Acquisitions (M & A) activity were, legal reforms,
economic reforms, economic slowdown, and depressed
stock markets, etc.
Statistics related to M & A in India are quite
impressive. The market research firm found that Indian
companies spent over US $ 23 billion in 2006, a jump of over
400 percent over that in 2005, in acquiring
foreign companies, more than half of which were in Europe Inbound
(Foreign companies talking over Indian
companies) and Outbound (Indian companies talking over
Foreign companies) mergers and acquisitions
have increased dramatically.
Explain the term
mergers and acquisitions?
What are the types of
mergers and acquisitions?
Explain in detail the
reasons for mergers and acquisitions?
What are the
important issues in mergers and acquisitions?
SUBJECT: BUSINESS ENVIRONMENT
(MARKS : 80)
GROUP A:
CASE 1
Imagine that you are
in-charge of a major chemical plant, manufacturing points. At present, the
general awareness about the mandatory requirements for
chemical industry is very low. Even if the
compliance record is maintained, it is not disclosed to all
employees. (25 marks)
In a recent seminar of the company, many experts from
industry associations like Confederation of
Indian Industries (CII), conducted the seminar. The dangers
of non-compliance of ISO 14001 EMS
certification and Trade Sanctions, which are likely to
increase, were discussed. Even the senior
managers were involved and a lot of serious discussions took
place.
After a span of one month, the In-charge (i.e. you!)
received a call from the top management, who
want you to find out more about the ISO Certification. The
management, wants to help you, with the
help of other employees to list the critical aspects that
have potential environmental impact.
You may be feeling that you have only some vague ideas about
air pollution in paint industry
and water pollution, due to paint manufacture. You may also
recall the newspaper clipping on
internationalization of paint manufacturing practices, which
states the following points:
What are the
activities that are critical to the company¡¦s environmental management
certification?
) List the activities which have potential environmental
impacts in a pint industry.
) List the legal requirements.
Is there a trade
related issue involved in this case
Explain, how your
company can prepare itself towards certification.
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MBA PH.D. MOBILE: +91 9447965521 OR +91 9924764558 EMAIL:
prasanththampi1975@gmail.com
CASE 2 :
XYZ company is an
equal opportunity employer. XYZ Co has always upheld the
spirits of freedom, human welfare, fair practices and fair
treatment to all employees. It has the image
of a socially responsible company in India. XYZ Co., has
never involved itself in any study deals,
even if it could bring good profits. (15 Marks)
Also, XYZ Co. is a major IT solution provider. XYZ has
immense potential for providing
consultancy services in the African nations and South East
Asian countries. A request was received
from an African country, stating that they have an
assignment for two years. The following
conditions are to be fulfilled.
a) Employees should not bring families with them during the
assignment.
b) Women managers should not accompany the team.
c) The country and the collaborating company are not
responsible if any accident or any other
untoward incidents take place.
Please answer the following questions :
Should XYZ Co take up
the assignment?
How can XYZ Co
maintain business viability and growth without compromising on basic rights
and values enshrined? In the mission statement of the
company?
What alterations may
be sought in the agreement and why?
GROUP ¡V B
Environmental Pollution:
CASE 3
On the night of
December 23, 1983 a dangerous chemical reation occurred in the Union
Carbide factory in Bhopal, when a large amount of water got
into the MIC i.e. Methyl Isocyanate
storage tank. When the leak was detected by workers at 11.30
pm, their eyes began to tear and burn.
The rest is history. About 40 tons of MIC poured out of the
tank for nearly 2 hours and escaped into
air, spreading within 8 km down wind, About 4000 people were
killed in sleep or as they fled in
terror, hundreds of thousands were injured or effected the
victims who were almost entirely the
poorest members of the population. The poisonous gas, caused
death and left the survivors with
lingering disability and diseases.
The Bhopal disaster was a result of the combination of
legal, technological, organizational and
human errors. The long term effects were made worse by the
absence of systems to care for and
compensate the victims. Also, the safety standards and
maintenance procedure at the Union Carbide
plant had been deteriorating and ignored for months.
Questions :
From Bhopal Tragedy,
what an industrial manager learns? What safety procedures are to be
followed. Study the case deeply and state what were the
defects of MIL unit. In view of this case,
prepare a disaster management plan, which could cover be
useful to a chemical company. (10 Marks)
Q 4)
List the methods of
waste management in the order of preference. (5 Marks)
What are the
advantages of solid waste incernaton? (5 Marks)
) Define hazardous waste (5 Marks)
List the legal
provisions in the Environment Protection Act pertaining to hazardous waste
(5 Marks)
Q 5)
Discuss the role of
CPCB (Central Pollution Control Board) in the pollution control activities in
India. (2 Marks)
ii) Mention the salient points of the 3 Acts : (2 Marks)
„h The Air (prevention and control of pollution) Act 1981
„h The Water (prevention and control of pollution) Act 1974
„h The Environment (Protection) Act 1986
iii) Explain the very elements of EIA (Environmental Impact
Assessment) ¡V different types of
Impact Assessments ¡V the benefits of EIA ¡V The EIA
process, key points to remember while
conducting an effective EIA. (2 Marks)
iv) Compare and contrast ¡§polluter pays principle¡¨ with
¡§beneficiary pays principle¡¨. (2 Marks)
What are the tenets
of Risk management ¡V explain the steps involved through a chart. (2Marks
SUB : BUSINESS MANAGEMENT
N. B. : 1) Attempt any Four cases
2) All cases carry equal marks.
No : 1
REMAINS OF A DREAM
This is a tragic story, narrated in first person, of an
entrepreneur who became bankrupt
for no fault of him, without producing anything, mostly
because of the irresponsible political
and government environment. This case study, documented by
Bibek Debroy and P.D.
Kaushik and published in Business Today is reproduced here
with permission.
In the 1980s, I worked as a chemical analyst for a
transnational in Germany, but kept
thinking about shifting to India.
Opportunity knocked when I saw an advertisement by the Uttar
Pradesh government
inviting NRI professionals to start a chemical unit in the
newly identified Basti Chemical
Industrial Complex. I hail from Lucknow. Hence, this was
attractive. I inquired from the
Indian High Commission and was told that there is single
window clearance for NRI
investors. The brochure said several things about the
benefits – excise and sales tax holiday
for five years, uninterrupted power supply, low rate of
interest on loans, and clearance of
application within 30 days.
I started the application formalities for a chemical unit.
Once the application was
accepted, I requested for long leave from my employers. I
also inquired from my relatives in
Lucknow and was told that the Uttar Pradesh government’s intentions
are clear, and
developmental work is progressing at fast speed.
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MBA PH.D. MOBILE: +91 9447965521 OR +91 9924764558 EMAIL: prasanththampi1975@gmail.com
Every now and then, I received a letter from the ministry of
industry in Uttar Pradesh
to furnish some paper or the other, as part of procedural
formalities. After three months, I
received my provisional sanction letter for allotment of
land, and term loan. The letter also
stated that within six months, I must take possession of the
land, and initiate construction.
Otherwise, the deposited amount (Rs 1 lakh as part of my
contribution) will be forfeited. I
resigned from the company, and shifted permanently to India,
since my employer turned
down my request for long leave.
On reaching the complex, I was surprised to see that the
Uttar Pradesh State Industrial
Development Corporation (UPSIDC) had actually developed the
land in terms of markers,
and signboards, compared to what I had seen on my last
visit.
Though roads were not fully laid, it was evident that work
was in progress. I took
possession of my land and started construction.
Meanwhile, I approached the UPFC for granting me the term
loan for ordering the
plant and machinery. The first obstacle came from the Uttar
Pradesh State Electricity Board
(now Uttar Pradesh Power Corporation). The electricity
supply to the complex was not yet
available. On inquiring, I was told that the plan had been
sanctioned, but required clearance
from the power ministry, before undertaking further work.
The approximate time to get grid
supply ranged between four and six months.
The next obstacle came from the Uttar Pradesh Financial
Corporation (UPFC). It
could release the first instalment after I completed
construction till the plinth level. I
continued work with the help of a diesel generating set. It
took another month to reach the
plinth level.
But before I could request UPFC to release my first
instalment, I received a letter from
UPFC that I had to deposit interest against the amount paid
to the UPSIDC for land
possession. This was a shock, because interest had to be
paid even before anything was
produced.
But I had no alternative, because the first insatlment was
due. The UPFC promptly
released the first instalment after inspecting the
construction. It helped me continue
construction work, and also book for plant and machinery.
Six months went by. Construction was almost complete. I had
received three
instalments from the Uttar Pradesh Financial Corporation
(UPFC). Each time the payment of
interest was due, the required sum was adjusted from the
instalment released. If there was
any shortfall in money required for construction, I paid
from my own pocket.
But after nine months, my coffers went empty. Machinery
suppliers were after me, for
payment. UPFC insisted on interest payments, because this
was the last instalment of my
term loan and interest due couldn’t be deducted from future
instalments. I borrowed from
family and friends and paid up. Then I received the final
instalment from UPFC for plant and
machinery, with another notice that the yearly instalment
for the principal was due.
Within two months, machinery was commissioned at the site.
But electricity was yet
to reach the complex. In the previous year, I had visited
the Uttar Pradesh State Electricity
Board (UPSEB) office innumerable times. I also approached
the industry association to
assist me. But all my efforts were in vain. This did not
help me, or others like me, to get the
grid supply.
There were 14 other who were in the same boat. The biggest
company of them all –
obviously with contacts at higher levels – arranged for grid
supply from the rural feeder. But
that plan also did not take off, because the rural feeder supplied
poor quality power for a
mere six hours. A process industry requires 24 hours of
uninterrupted electricity supply
without load fluctuations. It is precisely because of this
that all 15 of us, who were waiting
for electricity, had insisted on industrial power from
UPSEB.
All plans failed. Captive generation was not a viable
alternative now. And we
continued to wait for the grid supply. We met the former
minister for industry and pleaded
our case. He assured us that he would take up the case with
the power ministry.
Meanwhile, I defaulted on interest payment. So did the
others. The final blow came in
the Assembly elections, when both the sitting : Member of
Legislative Assembly, from Basti,
and the state industrial minister lost their seats.
Suddenly, everything – from road
construction work, to the laying of sewer and phone lines –
came to a standstill.
Only the police post and the UPSKB rural feeder office
remained. The new incumbent
in the industrial ministry hailed from Saharanpur, so the
thrust of the ministry changed. Basti
was not on their priority list anymore. After waiting for
tow years, UPSEB was not able to
connect the complex with grid supply.
In the end, UPFC initiated recovery action and sealed my
unit. Besides, they claimed
that I could not get NRI treatment, with preferential
interest rates, because I had permanently
moved to India. Thus, there were also plans to file a case
against me on account of
misinforming the corporation. Experts suggested I should
file for insolvency if I wanted to
avoid going to prison. This I did in 1994. I spent Rs. 15
lakh from my own pocket.
Now, all that remains of an entrepreneurial dream is a
sealed chemical unit in Basti
and a complex legal tangle.
I was better off working for the transnational in Germany.
Power does not come out of
the barrel of a gun. A gun’s barrel comes of power,
especially when the latter does not exist.
QUESTIONS
Identify and analyse
the environmental factors in this case.
Who were all
responsible for this tragic end?
It is right on the
part of the government and promotional agencies to woo
entrepreneurs by promising facilities and incentives which
they are not sure of
being able to provide?
Should there be legislation to compensate entrepreneurs for
the loss suffered
due to the irresponsibility of public agencies? What
problems are likely to
be olved and created by such legislation?
What are the lessons
of this case for an entrepreneur and government and
promotional agencies?
No : 2
THE COSTS OF DELAY
The public sector Indian Oil Corporation (IOC), the major
oil refining and marketing
company which was also the canalizing agency for oil imports
and the only Indian company
I the Fortune 500, in terms of sales, planned to make a
foray in to the foreign market by
acquiring a substantial stake in the Balal Oil field in Iran
of the Premier Oil. The project was
estimated to have recoverable oil reserves of about 11
million tonnes and IOC was supposed
to get nearly four million tonnes.
When IOC started talking to the Iranian company for the
acquisition in October 1998,
oil prices were at rock bottom ($ 11 per barrel) and most
refining companies were closing
shop due to falling margins. Indeed, a number of good oil
properties in the Middle East were
up for sale. Using this opportunity, several developing
countries ``made a killing by
acquiring oil equities abroad.’’
IOC needed Government’s permission to invest abroad.
Application by Indian
company for investing abroad is to be scrutinized by a
special committee represented by the
Reserve Bank of India and the finance and commerce
ministries. By the time the government
gave the clearance for the acquisition in December 1999
(i.e., more than a year after the
application was made), the prices had bounced back to $24
per barrel. And the Elf of France
had virtually took away the deal from under IOC’s nose by
acquiring the Premier Oil.
The RBI, which gave IOC the approval for $15 million
investment, took more than a
year for clearing the deal because the structure for such
investments were not in place, it was
reported.
QUESTIONS
Discuss internal,
domestic and global environments of business revealed by this
case.
Discuss whether it is
the domestic or global environment that hinders the
globalization of Indian business.
Even if Elf had not
acquired Premier Oil, what would have been the impact of
the delay in the clearance on IOC?
What would have been
the significance of the foreign acquisition to IOC?
What are the lessons
of this case?
No : 3
NATURAL THRUST
Balsara Hygiene Products Ltd., which had some fairly
successful household hygiene
products introduced in 1978 a toothpaste, Promise, with
clove oil (which has been
traditionally regarded in India as an effective deterrent to
tooth decay and tooth ache) as a
unique selling proposition. By 1986 Promise captured a
market share of 16 per cent and
became the second largest selling toothpaste brand in India.
There was, however, an erosion
of its market share later because of the fighting back of
the multinationals. Hindustan
Lever’s Close-up gel appealed to the consumers, particularly
to the teens and young, very
well and toppled Promise form the second position.
Supported by the Export Import Bank of India’s Export
Marketing Finance (EMF)
programme and development assistance, Balsara entered the
Malaysian market with Promise
and another brand of tooth paste, Miswak.
The emphasis on the clove oil ingredient of the Promise
evoked good response in
Malaysia too. There was good response to Miswak also in the
Muslim dominated Malaysia.
Its promotion highlighted the fact that miswak (Latin Name :
Salvadora Persica) was a plant
that had been used for centuries by as a tooth cleaning
twig. It had reference in Koran.
Quoting from Faizal-E-Miswak, it was pointed out that
prophet Mohammed used ``miswak
before sleeping at night and after awakening.’’ The
religious appeal in the promotion was
reinforced by the findings of scientists all over the world,
including Arabic ones, of the
antibacterial property of clove and its ability to prevent
tooth decay and gums.
Market intelligence revealed that there was a growing
preference in the advanced
counties for nature based products. Balsara tied up with
Auromere Imports Inc. (AAII), Los
Angeles. An agency established by American followers of
Aurobindo, an Indian philosopher
saint. Eight months of intensive R & D enabled Balsara
to develop a tooth paste containing
24 herbal ingredients that would satisfy the required
parameter. Auromere was voted as the
No. 1 toothpaste in North Eastern USA in a US Health magazine
survey in 1991.
The product line was extended by introducing several
variants of Auromere. A
saccharine free toothpaste was introduced. It was found that
mint and menthol were taboo for
users of homoeopathic medicines. So a product free of such
mints was developed. Auromere
Fresh Mint for the young and Auromere Cina Mint containing a
combination of cinnamon
and peppermint were also introduced. When the company
relaised that Auromere was not
doing well in Germany because of the forming agent used in
the product, it introduced a
chemical free variant of the products.
QUESTIONS
Explain the
environmental factors which Balsara used to its advantage.
What is the strength
of AAII to market ayurvedic toothpaste in USA?
No : 4
THE SWAP
The Economic Times, 20 October 2000, reported that Reliance
Industries entered into
a swap deal for the export and import of 36 cargoes of
naphtha over the next six months.
Accordingly, three cargoes of 50,000 tonnes each were to be
exported every month from
Reliance Petroleum’s Jamnagar refinery and three cargoes of
the same amount were to be
imported to the Reliance Industries’ Hazira facility. The
deal was done through Japanese
traders Mitsubishi, Marubeni, ltochu, IdCmitsu and Shell.
The export was done at around
Arabian Gulf prices plus $22.
Reliance, needs petrochemical grade naphtha for its Hazira
facility which is not being
produced at Jamnagar. Therefore, its cracker at Hazira gets
petrochemical grade naphtha
from the international markets in return for Reliance
Petroleum selling another grade of
naphtha from its Jamnagar refinery to the international oil
trade.
If RIL imports naphtha for Hazira petrochemical plant, the
company does not have to
pay the 24 per cent sales tax, which it will have to pay on
a local purchase, even if it is from
Reliance Petro. Besides Reliance Petro will also get a 10
per cent duty drawback on its crude
imports if it exports naphtha from the refinery at Jamnagar.
The export of naphtha with Japanese traders is being looked
as a coup of Reliance as it
gives the company an entry into the large Japanese market.
Indian refineries have a freight advantage over the
Singapore market and can quote
better prices.
QUESTIONS
Examine the internal
and external factors behind Reliance’s decision for the
swap deal.
What environmental
changes could make swap deal unattractive in future?
Could there be any
strategic reason behind the decision to import and export
naphtha?
Should Reliance
import and export naphtha even if it does not provide any
profit advantage?
No : 5
A QUESTION OF ETHICS
TELCO opened bookings for different models of its proud
small car Indica in late
1998. The consumer response was overwhelming. Most of the
bookings were for the AC
models, DLE and DLX. The DLE model accounted for more than
70 per cent of the
bookings.
Telco has planned to commence delivery of the vehicles by
early 1999. However,
delivery schedules for the AC models were upset because of
some problems on the roll out
front. According to a report in The Economic Times dated 13
March 1999, Telco officials
attributed the delay to non-availability of air conditioning
kits.
Subros Ltd. supplies AC kits for the DLE version and Voltes
is the vendor for the
DLX version. Incidentally, Subros is also the AC supplier to
Maruti Udyog Ltd.
Telco officials alleged that Subros was being pressured by
the competitor to delay the
supply of kits. ``If this continues, we will be forced to
ask Voltas to supply kits for the DLE
version too,’’ a company official said.
QUESTIONS
Why did Telco land
itself in the problem (supply problem in respect of AC
kits)?
If the allegation
about the supplier is right, discuss its implications for the
supplier.
Evaluate the ethical
issues involved in the case. (Also consider the fact Maruti
was 50 per cent Government owned.)
No : 6
DIFFERENT FOR GAMBLE
Product and Gamble (P & G), a global consumer products
giant, ``stormed the
Japanese market with American products, American managers,
American sales methods and
strategies. The result was disastrous until the company
learnt how to adapt products and
marketing style to Japanese culture. P & G which entered
the Japanese market in 1973 lost
money until 1987, but by 1991 it became its second largest
foreign market.’’
P & G acclaimed as ``the world’s most admired marketing
machine’’, entered India,
which has been considered as one of the largest emerging
markets, in 1985. It entered the
Indian detergent marketing the early nineties with the Ariel
brand through P & G India (in
which it had a 51 percent holding which was raised 65 per
cent in January 1993, the
remaining 35 per cent being hold by the public). P & G
established P & G Home products, a
100 per cent subsidiary later (1993) and the Ariel was
transferred to it. Besides soaps and
detergents, P & G had or introduced later product
portfolios like shampoos (Pantene)
medical products (Viks range, Clearasil and Mediker) and
personal products (Whisper
feminine hygiene products, pampers diapers and old spice
range of men’s toiletries).
The Indian detergent and personal care products market was
dominated by Hindustan
Lever Ltd. (HLL). In some segments of the personal care
products market the multinational
Johnson & Johnson has had a strong presence. Tata
group’s Tomco, which had been in the
red for some time, was sold to Hindustan Lever Ltd. (HLL).
HLL, a subsidiary of P & G’s
global competitor, has been in India for about a century.
The take over of Tomco by HLL
further increased its market dominance. In the low priced
detergents segment Nirma has
established a very strong presence.
Over the period of about one and a half decades since its
entry in India, P & G
invested several thousand crores. However, dissatisfied with
its performance in India, it
decided to restructure its operations, which in several
respects meant a shrinking of activities
– the manpower was drastically cut, and thousands of
stockists were terminated. P & G,
however holds that, it will continue to invest in India.
According to Gary Cofer, the country
manager, ``it takes time to build a business category or
brand in India. It is possibly an even
more demanding geography than others.’’
China, on the other hand, with business worth several times
than in India in less than
12 years, has emerged as a highly promising market for P
& G. when the Chinese market
was opened up, P & G was one of the first MNCS to enter.
Prior to the liberalisation,
Chinese consumers had to content with shoddy products
manufactured by government
companies. Per capita income of China is substantially
higher than India’s and the Chinese
economy was growing faster than the Indian. Further, the
success of the single child concept
in China means higher disposable income.
Further it is also pointed out that for a global company
like P & G, understanding
Chinese culture was far easier since the expat Chinese in
the US was not very different from
those back home where as most Indian expats tended to adapt
far more to the cultural
nuances of the immigrant country.
One of P & G’s big in India was the compact technology
premium detergent brand
Ariel. After an initial show, Ariel, however, failed to
generate enough sales – consumers
seem to have gone by the per kilo cost than the cost per
wash propagated by the promotion.
To start with, P & G had to import the expensive
state-of-the-art ingredients, which attracted
heavy customs duties. The company estimated that it would
cost Rs. 60 per kilo for Ariel
compared to Rs. 27 for Surf and Rs. 8 for Nirma. Because of
the Rupee devaluation of the
early 1990s, the test market price of Rs. 35 for 500 gms was
soon Rs. 41 by the time the
product was launched. HLL fought Ariel back with premium
variants of Surf like Surf Excel.
It is pointed out that, ``in hindsight, even P & G
managers privately admit that
bringing in the latest compact technology was a big blunder.
In the eighties, P & G had taken
a huge beating in one of its most profitable markets, Japan,
at the hands of local company
Kao. Knowing the Japanese consumer’s fondness for small
things, Kao weaved magic with
its new-found compact technology. For a company that prided
itself on technology, the
drubbing in Japan was particularly painful. It was,
therefore, decided that compacts would
now be the lead brand for the entire Asia-Pacific region.
When P & G launched Ariel in
India, it hoped that the Indian consumer would devise the
appropriate benchmarks to
evaluate Ariel. As compacts promised economy of sue, P &
G hoped that consumers would
buy into the low-cost-per-wash story. But selling that story
through advertising was
particularly difficult, especially sine Indian consumers
believed that the washing wasn’t over
unless the bar had been used for scrubbing. Even though
Ariel was targeted at consumer with
high disposable income, who represented half the urban
population, consumers simply
baulked at the outlay.
Thereafter, one thing led to another. Ariel’s strategy of
introducing variants was a
smart move to flank Lever at every price point by cleverly
using the brand’s halo effect. And
by supporting the brand in mass media and retaining the
share of voice. By 1996, it had
become clear that Ariel’s equity as a high-performance
detergent had begun to take a
beating. Its equity as a top-of-the-line detergent was
getting eroded….Nowhere in P & G’s
history had a concept like Super Soaker been used to gain
volumes…. It was decided that
Super Soaker would no longer be supported, nor would Ariel
bar be supported in media.
QUESTIONS
Discuss the reasons
for the initial failure of P & G in Japan.
Where did P & G
go wrong (if it did) in the evaluation of the Indian market
and its strategy?
Discuss the reasons
for the difference in the performance of P & G in India and
China.
SUB: BUSINESS PLANNING
& POLICY MANAGEMENT
Instructions:
1. Maximum marks : 80
Marks
2. Attempt any 8
questions
3. Illustrate with
examples wherever applicable
XYZ Ltd. Wishes to adopt
the cost-leadership business strategy for one of its SBUs. How
should it ensure operational effectiveness in terms of
productivity, processes, people and pace?
If, after 1 year, the company wishes to change over to a
differentiation business strategy,
identify the changes it should bring in its approach to attain
operational effectiveness.
(10 marks)
Take an example of any
service institution of your choice (example: hospital) and suggest how
operational control will work in such an institution. (10 marks)
Discuss the importance of
strategic changes for the following organizational systems (a)
Information, (b) Control, (c) Appraisal, (d) Motivation, (e)
Development and (f) Planning
(10 marks)
Take an example of an
Indian company. What steps should it undertake for resource allocation
for implementing its strategies? What difficulties could be
expected while doing so and how can
they be dealt with? (10 marks)
In what way is the concept
of life cycle and SWOT analysis helpful in making strategic choice
at the business level? (10 marks)
Explain why business policy
is a capstone, integrative course. How can an understanding of
business policy help in a career choice? (10 marks)
Q7) Explain the meaning of strategic management in your own words.
Identify the roles that CEOs
play in strategic management. (10 marks)
Describe the essential
characteristics of a mission statement. In what different ways can a
mission statement be formulated? (10 marks)
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9447965521 OR +91 9924764558 EMAIL: PRASANTHTHAMPI1975@GMAIL.COM
Q9) Explain the technique of ‘balanced scorecard’.
OR
Q9) Explain the term ‘corporate restructuring’. (10 marks)
Q10) Explain the following terms: (10 marks)
1) Cost leadership
2) Differentiation
3) Focus
SUB: CORPORATE LAW
MARKS: 80
N.B.: 1 Attempt any Twelve Questions
Last two Questions
are compulsory
In the following
statements only one is correct statement. Explain Briefly?
(5 Marks)
i) An invitation to negotiate is a good offer.
ii) A quasi-contract is not a contract at all.
iii) An agreement to agree is a valid contract.
A ship-owner agreed
to carry to cargo of sugar belonging to A from Constanza to Busrah. He knew
that there was a sugar market in Busrah and that A was a
sugar merchant, but did not know that he
intended to sell the cargo, immediately on its arrival.
Owning to Shipment’s default, the voyage was
delayed and sugar fetched a lower price than it would have
done had it arrived on time. A claimed
compensation for the full loss suffered by him because of
the delay. Give your decision. Explain
Briefly? (5 Marks)
The proprietors of a
medical preparation called the “Carbolic Smoke Ball” published in several
newspapers the following advertisement:-
“£ 1000 reward will be paid by the Carbolic Smoke Ball Co.
to any person who contracts the
increasing epidemic influenza after having used the Smoke
Ball three times daily for two weeks
according to printed directions supplied with each ball. £
1000 is deposited with the Alliance Bank
showing our sincerity in the matter.
On the faith in this advertisement, the plaintiff bought a
Smoke Ball and used it as directed. She was
attacked by influenza. She sued the company for the reward.
Will she succeed? Explain Briefly
(5 Marks)
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
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the consignment could not be sent by passenger train and
asked Fazal either to remove them or
authorize their dispatch by goods train. He took no action
and the goods arrived at Allahabad a
month after they were booked.
Fazal filed a suit against Railways for damages due to late
delivery of the goods which deprived him
of the special profits at the festival sale. Decide &
explain briefly ?
(5 Marks)
‘Lifeoy’ Soap company
advertised that it would give a reward of Rs. 2000 who contracted skin
disease after using the ‘Lifeoy’ soap of the company for a
certain period according to the printed
directions. Mrs. Jacob purchased the advertised ‘Lifeboy’
and contracted skin disease inspite of
using this soap according to the printed instructions. She
claimed reward of Rs. 2000. The claim is
resisted by the company on the ground that offer was not
made to her and that in any case she had
not communicated her acceptance of the offer. Decide whether
Mrs. Jacob can claim the reward or
not. Give reasons. Explain briefly? (5 Marks)
Q.6. In each set of statements, only one is correct. State
the correct statements & Explain briefly?
a) i) A bailee has a general lien on the goods bailed.
ii) The ownership of goods pawned passes to the pawnee.
iii) A gratuitous bailment can be terminated by the bailor
even
before the stated time.
b) i) A substituted agent is as good an agent of the agent
as a subagent.
ii) An ostensible agency is as effective as an express
agency.
iii) A principal can always revoke an agent’s authority. (5
Marks)
A, an unpaid seller, sends goods to B by railway. B becomes
insolvent
And A sends a telegram to Railway authorities not to deliver
the goods to B. B. goes to the Parcel
office of Railway Yard and by presenting R. R. (Railway
Receipt) takes delivery of the goods and
starts putting them in the cart. Meanwhile the Station
Master comes running with the telegram in
hand and takes possession of the goods from B. Discuss the
rights of A and B to the goods in
possession of Railway authorities. (5 Marks)
X needs Rs. 10,000
but cannot raise this amount because his credit is not good enough. Y whose
credit is good accommodates. X by giving him a pronote made
out in favour of X, though Y owes
no money to X. X endorses the pronote to Z for value
received. Z who is holder in due course the
pronote to Z for value received. Z who is holder in due
course demands payment from Y. Can
refuse and plead the arrangement between him and X Explain
briefly?
(5 Marks)
Will C has the right
of further negotiation in the following cases: (B signs the endorsements)
Explain briefly? (5 Marks)
i) ‘Pay C for my use’
ii) ‘Pay C’)
iv) ‘Pay C or order for the account of B’
A promissory note was
made without mentioning any time for payment. The holder added the
words’ on demand on the face of the instrument. State
whether it amounted to material alteration
and explain the effect of such alteration. Explain briefly?
(5
Marks)
State whether the
following instruments are valid promissory notes:
i) I promise to pay Rs. 5000 to B on the dearth of ‘B’s
uncle provided that D in his will gives
me a legacy sufficient for the promise of payment of the
said sum.
ii) I hereby acknowledge that I owe X Rs. 5,000 on account
of rent due and I agree that the said
sum will be paid be me in regular installments.
iii) I acknowledge myself indebted to B in Rs. 5000 to be
paid on demand for value received.
(5 Marks)
A Payee holder of a
bill of exchange. He endorses it in blank and delivers it to B. B endorses in
full
to C or order. C without endorsement transfers the bill to
D. State giving reasons whether D as
bearer of the bill of exchange is entitled to recover the
payment from A or B or C. Explain briefly?
(5 Marks)
Write a short note on
the Doctrine of Indoor Management? Explain briefly?
(5 Marks)
The shareholders at
an annual general meeting passed a resolution for the payment of dividend at a
rate higher than that recommended by the Board of Directors.
Examine the validity of the resolution.
Explain briefly? (5
Marks)
In a prospectus
issued by a company the Managing Director stated that the company had paid
dividend every year during 1921 – 27, which was a fact.
However, the company had sustained losses
during the relevant period and had paid dividends out of
secret reserves accumulated in the past.
Examine the consequences of the observation made by the
Managing Director. Explain briefly?
(5 Marks)
A buys from B 400
shares in a company on the faith of a share certificate issued by the company.
A
tender to the company a transfer deed duly executed together
with B’s share certificate. The
company discovers that the certificate in the name of B has
been fraudulently obtained and refuses to
register the transfer. Advise A. Explain briefly? (5 Marks)
A insured his house
against fire. Later while insure, A killed his wife, severely injured his only
son,
set fire to the house and died in the fire. The son survived
and sued the insurer for the fire loss,
advice the insurer. Explain briefly? (5 Marks)
a) Satrang Singh
admitted his only infant son in a private nursing home. As a result of strong
dose of
medicine administered by the nursing attendant, the child
has become mentally retarded. Satrang
Singh wants to make a complaint to the District Forum under
the Consumer Protection Act, 1986
seeking relief by way of compensation on the ground that
there was deficiency in service by the
nursing home. Does his complaint give rise to a consumer
dispute? Who is the consumer in the
instant case? Explain briefly?
b) Smart booked a motor vehicle through one of the dealers.
He was informed subsequently that the
procedure for purchasing the motor vehicle had changed and
was called upon to make further
payment to continue the booking before delivery. On being
aggrieved, Smart filed a complaint with
the State Commission under the Consumer Protection Act,
1986. Will he succeed? Explain briefly?
c) Brittle and Company, a small-scale industry, sought
nursing and financing facilities from its bankers
by means of grant of further advances and adequate margin
money in anticipation of good demand
for its products. In failing to obtain this and having
become sick, it proceeds against its bankers
under the Consumer Protection Act, 1986, Will it succeed?
Explain briefly?
(5 Marks)
X who was working as
a truck driver had taken a general insurance policy to cover the risk of
injuries for a period from 1.11.1998 to 30.11.1999. He
renewed the policy for a further period of one
year on 10.11.1999. On the same day, he met with an accident
and suffered multiple injuries
including fractures. X submitted the claim along with
documents to the insurance company. The
insurance company repudiated the claim on the ground that
the premium for the renewed policy was
received in the office only at 2.30 p.m. on 10.11.1999,
while the accident had taken place at 10.00
a.m. on that day and hence there was no policy at the time
of accident. Will X succeed if he files a
complaint against the insurance company for this claim?
Explain briefly?
(5 Marks)
Avinash booked his
goods with Superfast Freight Carriers at Delhi for being carried to Ferozabad.
The goods receipt note mentioned that all the disputes would
be subject to jurisdiction of the
Mumbai Court. Avinash lodged a complaint for certain
deficiency in service against the transporter
in the District Forum at Delhi. Superfast Carriers contested
that District Forum at Delhi had no
jurisdiction to entertain the complaint as the head office
of the transporter was at Mumbai and the
jurisdiction has been clearly stated in the goods receipt
not. Is the contention of the transporter
tenable? Explain briefly? (5 Marks)
With reference to the
provisions of the Consumer Protection Act, 1986, decide the following giving
reasons in support of your answer.
i) Sukh Dukh Ltd. dispatched certain consignments of goods
by road through Fastrack Roadways Ltd.
The goods were unloaded and stored in a godown enroute on
the suggestion of consignee. A fire
broke out in the neighbouring godown spread to the godown
and goods were destroyed. The
Fastrack Roadways Ltd. claimed that there was neither
negligence nor deficiency in service on their
part and goods were being carried at “Owner risk” and since
no special premium was paid, they were
not responsible for the loss caused by fire. Whether
Fastrack Roadways Ltd. is liable to pay
damages to consignor?
ii) Life Insurance Corporation (LIC) formulated a scheme
called ‘salary saving scheme’ under which
employees of an organisation could buy an insurance policy.
Premium due on each policy was
collected by the employer from the salary of the employees
nor did it issue any premium notice.
When the widow of the deceased employee made a claim to LIC
on the death of her husband, the
LIC repudiated the claim on the ground that four
installments of premium had not been paid. The
widow was approached the consumer forum for redressal. Is
the LIC liable for deficiency in service?
Explain?
iii) Raman booked a ticket from Delhi to New York by
Lufthansa Airlines. The airport authorities in
New Delhi did not find any fault in his visa and other
documents. However, at Frankfurt airport
authorities instituted proceedings of verification because
of which Raman missed his flight to New
York. After necessary verification, Raman was able to reach
New York by the next flight. The
airline authorities’ tendered apology to Raman for the
inconvenience caused to him and also paid as
goodwill gesture a sum of Rs. 5,000. Raman intends to
institute proceedings under the Consumer
Protection Act, 1986 against Lufthansa Airlines for
deficiency in service. Will he succeed?
(10 Marks )
With reference to the
provisions of the Consumer Protection Act, 1986, decide the following giving
reasons in support of your answer.
i) Sohn sent all relevant documents in an envelope regarding
consignment of goods to a buyer in the
USA through Fast Service Couriers. The documents did not
reach the buyer as a consequence of
which the buyer could not take delivery of the goods. By the
time the duplicate copies of the
document had been received by the buyer, the season of the
goods was over. He claimed that he had
suffered a loss of US $ 5,000 as a result of the negligence
of the courier. The State Commission
ordered the payment to be made by the Fast Service Couriers,
but the National Commission in appeal
reversed the order and ordered payment of US $ 100 only as
per the receipt issued by the Fast
Service Courier to the consignor at the time of the dispatch
of the latter. Advise Sohan.
ii) Mahesh purchased a machine from Astute Ltd. to operate
it himself for earning his liverhood. He
took the assistance of a person to assist him in operating
the machine. The machine developed fault
during the warranty period. He filed a claim in the consumer
forum against the company for
deficiency in service. Astute Ltd. alleged that Mahesh did
not operate the machine himself but had
appointed a person exclusively to operate the machine. Will
Mahesh succeed?
iii) Pillai purchased a car by taking a loan from Kerala
cooperative Bank Ltd. and gave post-dated
cheques to the bank not only in respect of repayment of loan
instalments but also of premium of
insurance policy for two succeeding years. On the expiry of
the policy. Pillai’s car met with an
accident. Will Pillai succeed in getting a claim against the
Bank ? (10 Marks
Attempt any Four cases cases carries equal marks.
NO. 1
ZIP ZAP ZOOM CAR COMPANY
Zip Zap Zoom Company Ltd is into manufacturing cars in the
small car (800 cc) segment. It was set up 15
years back and since its establishment it has seen a
phenomenal growth in both its market and profitability.
Its financial statements are shown in Exhibits 1 and 2
respectively.
The company enjoys the confidence of its shareholders who
have been rewarded with growing
dividends year after year. Last year, the company had
announced 20 per cent dividend, which was the
highest in the automobile sector. The company has never
defaulted on its loan payments and enjoys a
favourable face with its lenders, which include financial
institutions, commercial banks and debenture
holders.
The competition in the car industry has increased in the
past few years and the company foresees
further intensification of competition with the entry of
several foreign car manufactures many of them being
market leaders in their respective countries. The small car
segment especially, will witness entry of foreign
majors in the near future, with latest technology being
offered to the Indian customer. The Zip Zap Zoom¡¦s
senior management realizes the need for large scale
investment in up gradation of technology and
improvement of manufacturing facilities to pre-empt
competition.
Whereas on the one hand, the competition in the car industry
has been intensifying, on the other
hand, there has been a slowdown in the Indian economy, which
has not only reduced the demand for cars,
but has also led to adoption of price cutting strategies by
various car manufactures. The industry indicators
predict that the economy is gradually slipping into
recession.
Exhibit 1 Balance sheet as at March 31,200 x
(Amount in Rs. Crore)
Source of Funds
Share capital 350
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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.
„h 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.
„h 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.
„h 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
„h R & D expenditure can be done away with till the
economy picks up.
„h Marketing and advertising expenditure can be reduced by
40 per cent.
„h 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
:
„h 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.
„h 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.
„h 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.
„h 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 ¡V Rs. 35 crore) Analyse
the debt capacity of the company.
NO. 2
COOKING LPG LTD
DETERMINATION OF WORKING CAPTIAL
Introduction
Cooking LPG Ltd, Gurgaon, is a private sector firm dealing
in the bottling and supply of domestic LPG for
household consumption since 1995. The firm has a network of
distributors in the districts of Gurgaon and
Faridabad. The bottling plant of the firm is located on
National Highway ¡V 8 (New Delhi ¡V Jaipur), approx.
12 kms from Gurgaon. The firm has been consistently
performing we.¡¨ and plans to expand its market to
include the whole National Capital Region.
The production process of the plant consists of receipt of
the bulk LPG through tank trucks, storage
in tanks, bottling operations and distribution to dealers.
During the bottling process, the cylinders are
subjected to pressurized filling of LPG followed by quality
control and safety checks such as weight,
leakage and other defects. The cylinders passing through
this process are sealed and dispatched to dealers
through trucks. The supply and distribution section of the
plant prepares the invoice which goes along with
the truck to the distributor.
Statement of the Problem :
Mr. I. M. Smart, DGM(Finance) of the company, was analyzing
the financial performance of the company
during the current year. The various profitability ratios
and parameters of the company indicated a very
satisfactory performance. Still, Mr. Smart was not fully
content-specially with the management of the
working capital by the company. He could recall that during
the past year, in spite of stable demand pattern,
they had to, time and again, resort to bank overdrafts due
to non-availability of cash for making various
payments. He is aware that such aberrations in the finances
have a cost and adversely affects the
performance of the company. However, he was unable to
pinpoint the cause of the problem.
He discussed the problem with Mr. U.R. Keenkumar, the new
manager (Finance). After critically
examining the details, Mr. Keenkumar realized that the
working capital was hitherto estimated only as
approximation by some rule of thumb without any proper
computation based on sound financial policies
and, therefore, suggested a reworking of the working capital
(WC) requirement. Mr. Smart assigned the task
of determination of WC to him.
Profile of Cooking LPG Ltd.
1) Purchases : The company purchases LPG in bulk from
various importers ex-Mumbai and Kandla, @
Rs. 11,000 per MT. This is transported to its Bottling Plant
at Gurgaon through 15 MT capacity tank
trucks (called bullets), hired on annual contract basis. The
average transportation cost per bullet exeither
location is Rs. 30,000. Normally, 2 bullets per day are
received at the plant. The company
make payments for bulk supplies once in a month, resulting
in average time-lag of 15 days.
2) Storage and Bottling : The bulk storage capacity at the
plant is 150 MT (2 x 75 MT storage tanks)
and the plant is capable of filling 30 MT LPG in cylinders
per day. The plant operates for 25 days
per month on an average. The desired level of inventory at
various stages is as under.
„h LPG in bulk (tanks and pipeline quantity in the plant) ¡V
three days average production / sales.
„h Filled Cylinders ¡V 2 days average sales.
„h Work-in Process inventory ¡V 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 :
„h Direct labour ¡V Re. 0.75 per cylinder (Bottling
expenses) ¡V paid on last day of the month.
„h Security agency ¡V Rs. 30,000 per month paid on 10th of
subsequent month.
„h Administrative staff and managers ¡V Rs. 3.75 lakh per
annum, paid on monthly basis on the last
working day.
5) Overheads :
„h Administrative (staff, car, communication etc) ¡V Rs.
25,000 per month ¡V paid on the 10th of
subsequent month.
„h Power (including on DG set) ¡V Rs. 1,00,000 per month
paid on the 7th Subsequent month.
„h Renewal of various licenses (pollution, factory, labour
CCE etc.) ¡V Rs. 15,000 per annum paid at the
beginning of the year.
„h Insurance ¡V Rs. 5,00,000 per annum to be paid at the
beginning of the year.
„h Housekeeping etc ¡V Rs. 10,000 per month paid on the 10th
of the subsequent month.
„h Regular maintenance of plant ¡V Rs. 50,000 per month paid
on the 10th of every month to the vendors.
This includes expenditure on account of lubricants, spares
and other stores.
„h Regular maintenance of cylinders (statutory testing) ¡V
Rs. 5 lakh per annum ¡V paid on monthly basis
on the 15th of the subsequent month.
„h All transportation charges as per contracts ¡V paid on
the 10th subsequent month.
„h Sales tax as per applicable rates is deposited on the 7th
of the subsequent month.
6) Sales : Average sales are 2,500 cylinders per day during
the year. However, during the winter months
(December to February), there is an incremental demand of 20
per cent.
7) Average Inventories : The average stocks maintained by
the company as per its policy guidelines :
„h Consumables (caps, ceiling material, valves etc) ¡V Rs. 2
lakh. This amounts to 15 days consumption.
„h Maintenance spares ¡V Rs. 1 lakh
„h Lubricants ¡V Rs. 20,000
„h Diesel (for DG sets and fire engines) ¡V Rs. 15,000
„h Other stores (stationary, safety items) ¡V 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.
„h 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.
„h The labour cost for additional production is paid at
double the rate during wintes.
„h No changes in other administrative overheads.
„h 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.
„h Additional amount of Rs. 3 lakh is kept as cash balance
to meet exigencies during winter.
„h No change in time schedules for any payables /
receivables.
„h The storage of finished goods inventory is restricted to
a maximum 5,000 cylinders due to statutory
requirements.
NO. 3
M/S HI-TECH ELECTRONICS
M/s. Hi ¡V tech Electronics, a consumer electronics outlet,
was opened two years ago in Dwarka, New Delhi.
Hard work and personal attention shown by the proprietor,
Mr. Sony, has brought success. However,
because of insufficient funds to finance credit sales, the
outlet accepted only cash and bank credit cards. Mr.
Sony is now considering a new policy of offering installment
sales on terms of 25 per cent down payment
and 25 per cent per month for three months as well as
continuing to accept cash and bank credit cards.
Mr. Sony feels this policy will boost sales by 50 percent.
All the increases in sales will be credit
sales. But to follow through a new policy, he will need a
bank loan at the rate of 12 percent. The sales
projections for this year without the new policy are given
in Exhibit 1.
Exhibit 1 Sales Projections and Fixed costs
Month Projected sales without instalment
option
Projected sales with instalment
option
January Rs. 6,00,000 Rs. 9,00,000
February 4,00,000 6,00,000
March 3,00,000 4,50,000
April 2,00,000 3,00,000
May 2,00,000 3,00,000
June 1,50,000 2,25,000
July 1,50,000 2,25,000
August 2,00,000 3,00,000
September 3,00,000 4,50,000
October 5,00,000 7,50,000
November 5,00,000 15,00,000
December 8,00,000 12,00,000
Total Sales 48,00,000 72,00,000
Fixed cost 2,40,000 2,40,000
He further expects 26.67 per cent of the sales to be cash,
40 per cent bank credit card sales on which a 2 per
cent fee is paid, and 33.33 per cent on instalment sales.
Also, for short term seasonal requirements, the film
takes loan from chit fund to which Mr. Sony subscribes @ 1.8
per cent per month.
Their success has been due to their policy of selling at
discount price. The purchase per unit is 90
per cent of selling price. The fixed costs are Rs. 20,000
per month. The proprietor believes that the new
policy will increase miscellaneous cost by Rs. 25,000.
The business being cyclical in nature, the working capital
finance is done on trade ¡V off basis. The
proprietor feels that the new policy will lead to bad debts
of 1 per cent.
As a financial consultant, advise the proprietor whether he
should go for the extension of credit
facilities.
Also prepare cash
budget for one year of operation of the firm, ignoring interest. The minimum
desired cash balance & Rs. 30,000, which is also the
amount the firm, has on January 1. Borrowings
are possible which are made at the beginning of a month and
repaid at the end when cash is
available.
NO.4
SMOOTHDRIVE TYRE LTD
Smoothdrive Tyre Ltd manufacturers tyres under the brand
name ¡§Super Tread¡¦ for the domestic car market.
It is presently using 7 machines acquired 3 years ago at a
cost of Rs. 15 lakh each having a useful life of 7
years, with no salvage value.
After extensive research and development, Smoothdrive Tyre
Ltd has recently developed a new tyre,
the ¡¥Hyper Tread¡¦ and must decide whether to make the
investments necessary to produce and market the
Hyper Tread. The Hyper Tread would be ideal for drivers
doing a large amount of wet weather and off road
driving in addition to normal highway usage. The research
and development costs so far total Rs.
1,00,00,000. The Hyper Tread would be put on the market
beginning this year and Smoothdrive Tyrs
expects it to stay on the market for a total of three years.
Test marketing costing Rs. 50,00,000, shows that
there is significant market for a Hyper Tread type tyre.
As a financial analyst at Smoothdrive Tyre, Mr. Mani asked
by the Chief Financial Officer (CFO),
Mr. Tyrewala to evaluate the Hyper-Tread project and to
provide a recommendation or whether or not to
proceed with the investment. He has been informed that all
previous investments in the Hyper Tread project
are sunk costs are only future cash flows should be
considered. Except for the initial investments, which
occur immediately, assume all cash flows occur at the
year-end.
Smoothedrive Tyre must initially invest Rs. 72,00,00,000 in
production equipments to make the
Hyper Tread. They would be depreciated at a rate of 25 per
cent as per the written down value (WDV)
method for tax purposes. The new production equipments will
allow the company to follow flexible
manufacturing technique, that is both the brands of tyres
can be produced using the same equipments. The
equipments is expected to have a 7-year useful life and can
be sold for Rs. 10,00,000 during the fourth year.
The company does not have any other machines in the block of
25 per cent depreciation. The existing
machines can be sold off at Rs. 8 lakh per machine with an
estimated removal cost of one machine for Rs.
50,000.
Operating Requirements
The operating requirements of the existing machines and the
new equipment are detailed in Exhibits 11.1
and 11.2 respectively.
Exhibit 11.1 Existing Machines
„h Labour costs (expected to increase 10 per cent annually
to
account for inflation) :
(a) 20 unskilled labour @ Rs. 4,000 per month
(b) 20 skilled personnel @ Rs. 6,000 per month.
(c) 2 supervising executives @ Rs. 7,000 per month.
(d) 2 maintenance personnel @ Rs. 5,000 per month.
„h Maintenance cost :
Years 1-5 : Rs. 25 lakh
Years 6-7 : Rs. 65 lakh
„h Operating expenses : Rs. 50 lakh expected to increase at
5 per cent annually.
„h Insurance cost / premium :
Year 1 : 2 per cent of the original cost of machine
After year 1 : Discounted by 10 per cent.
Exhibit 11.2 New production Equipment
„h Savings in cost of utilities : Rs. 2.5 lakh
„h Maintenance costs :
Year 1 ¡V 2 : Rs. 8 lakh
Year 3 ¡V 4 : Rs. 30 lakh
„h Labour costs :
9 skilled personnel @ Rs. 7,000 per month
1 maintenance personnel @ Rs. 7,000 per month.
„h Cost of retrenchment of 34 personnel : (20 unskilled, 11
skilled, 2 supervisors and 1 maintenance
personnel) : Rs. 9,90,000, that is equivalent to six months
salary.
„h Insurance premium
Year 1 : 2 per cent of the purchase cost of machine
After year 1 : Discounted by 10 per cent.
The opening expenses do not change to any considerable
extent for the new equipment and the
difference is negligible compared to the scale of
operations.
Smoothdrive Tyre intends to sell Hyper Tread of two distinct
markets :
The original
equipment manufacturer (OEM) market : The OEM market consists primarily of the
large automobile companies who buy tyres for new cars. In
the OEM market, the Hyper Tread is
expected to sell for Rs. 1,200 per tyre. The variable cost
to produce each Hyper Tread is Rs. 600.
2. The replacement market : The replacement market consists
of all tyres purchased after the
automobile has left the factory. This markets allows higher
margins and Smoothdrive Tyre expects
to sell the Hyper Tread for Rs. 1.500 per tyre. The variable
costs are the same as in the OEM
market.
Smoothdrive Tyre expects to raise prices by 1 percent above
the inflation rate.
The variable costs will also increase by 1 per cent above
the inflation rate. In addition, the Hyper Tread
project will incur Rs. 2,50,000 in marketing and general
administration cost in the first year which are
expected to increase at the inflation rate in subsequent
years.
Smoothdrive Tyre¡¦s corporate tax rate is 35 per cent.
Annual inflation is expected to remain constant
at 3.25 per cent. Smoothdrive Tyre uses a 15 per cent
discount rate to evaluate new product decisions.
The Tyre Market
Automotive industry analysts expect automobile manufacturers
to have a production of 4,00,000 new cars
this year and growth in production at 2.5 per year onwards.
Each new car needs four new tyres (the spare
tyres are undersized and fall in a different category)
Smoothdrive Tyre expects the Hyper Tread to capture
an 11 per cent share of the OEM market.
The industry analysts estimate that the replacement tyre
market size will be one crore this year and
that it would grow at 2 per cent annually. Smoothdrive Tyre
expects the Hyper Tread to capture an 8 per
cent market share.
You also decide to consider net working capital (NWC)
requirements in this scenario. The net
working capital requirement will be 15 per cent of sales.
Assume that the level of working capital is
adjusted at the beginning of the year in relation to the
expected sales for the year. The working capital is to
be liquidated at par, barring an estimated loss of Rs. 1.5
crore on account of bad debt. The bad debt will be a
tax-deductible expenses.
As a finance analyst, prepare a report for submission to the
CFO and the Board of Directors,
explaining to them the feasibility of the new investment.
No. 5
COMPUTATION OF COST OF CAPITAL OF PALCO LTD
In October 2003, Neha Kapoor, a recent MBA graduate and
newly appointed assistant to the Financial
Controller of Palco Ltd, was given a list of six new
investment projects proposed for the following year. It
was her job to analyse these projects and to present her
findings before the Board of Directors at its annual
meeting to be held in 10 days. The new project would require
an investment of Rs. 2.4 crore.
Palco Ltd was founded in 1965 by Late Shri A. V. Sinha. It
gained recognition as a leading producer
of high quality aluminum, with the majority of its sales
being made to Japan. During the rapid economic
expansion of Japan in the 1970s, demand for aluminum boomed,
and palco¡¦s sales grew rapidly. As a result
of this rapid growth and recognition of new opportunities in
the energy market, Palco began to diversify its
products line. While retaining its emphasis on aluminum
production, it expanded operations to include
uranium mining and the production of electric generators,
and finally, it went into all phases of energy
production. By 2003, Palco¡¦s sales had reached Rs. 14 crore
level, with net profit after taxes attaining a
record of Rs. 67 lakh.
As Palco expanded its products line in the early 1990s, it
also formalized its caital budgeting
procedure. Until 1992, capital investment projects were
selected primarily on the basis of the average return
on investment calculations, with individual departments
submitting these calculations for projects falling
within their division. In 1996, this procedure was replaced
by one using present value as the decision
making criterion. This change was made to incorporate cash
flows rather than accounting profits into the
decision making analysis, in addition to adjusting these
flows for the time value of money. At the time, the
cost of capital for Palco was determined to be 12 per cent,
which has been used as the discount rate for the
past 5 years. This rate was determined by taking a weighted
average cost Palco had incurred in raising funds
from the capital market over the previous 10 years.
It had originally been Neha¡¦s assignment to update this
rate over the most recent 10-year period and
determine the net present value of all the proposed
investment opportunities using this newly calculated
figure. However, she objected to this procedure, stating
that while this calculation gave a good estimate of
¡§the past cost¡¨ of capital, changing interest rates and
stock prices made this calculation of little value in the
present. Neha suggested that current cost of raising funds
in the capital market be weighted by their
percentage mark-up of the capital structure. This proposal
was received enthusiastically by the Financial
Controller of the Palco, and Neha was given the assignment
of recalculating Palco¡¦s cost of capital and
providing a written report for the Board of Directors
explaining and justifying this calculation.
To determine a weighted average cost of capital for Palco,
it was necessary for Neha to examine the
cost associated with each source of funding used. In the
past, the largest sources of funding had been the
issuance of new equity shares and internally generated
funds. Through conversations with Financial
Controller and other members of the Board of Directors, Neha
learnt that the firm, in fact, wished to
maintain its current financial structure as shown in Exhibit
1.
Exhibit 1 Palco Ltd Balance Sheet for Year Ending March 31,
2003
Assets Liabilities and Equity
Cash
Accounts receivable
Inventories
Total current assets
Net fixed assets
Goodwill
Total assets
Rs. 90,00,000
3,10,00,000
1,20,00,000
5,20,00,000
19,30,00,000
70,00,000
25,20,00,000
Accounts payable
Short-term debt
Accrued taxes
Total current liabilities
Long-term debt
Preference shares
Retained earnings
Equity shares
Total liabilities and
equity shareholders
fund
Rs. 8,50,000
1,00,000
11,50,000
1,20,00,000
7,20,00,000
4,80,00,000
1,00,00,000
11,00,000
25,20,00,000
She further determined that the strong growth patterns that
Palco had exhibited over the last ten years were
expected to continue indefinitely because of the dwindling
supply of US and Japanese domestic oil and the
growing importance of other alternative energy resources.
Through further investigations, Neha learnt that
Palco could issue additional equity share, which had a par
value of Rs. 25 pre share and were selling at a
current market price of Rs. 45. The expected dividend for
the next period would be Rs. 4.4 per share, with
expected growth at a rate of 8 percent per year for the
foreseeable future. The flotation cost is expected to
be on an average Rs. 2 per share.
Preference shares at 11 per cent with 10 years maturity
could also be issued with the help of an
investment banker with an investment banker with a per value
of Rs. 100 per share to be redeemed at par.
This issue would involve flotation cost of 5 per cent.
Finally, Neha learnt that it would be possible for Palco to
raise an additional Rs. 20 lakh through a 7
¡V year loan from Punjab National Bank at 12 per cent. Any
amount raised over Rs. 20 lakh would cost 14
per cent. Short-term debt has always been usesd by Palco to
meet working capital requirements and as
Palco grows, it is expected to maintain its proportion in
the capital structure to support capital expansion.
Also, Rs. 60 lakh could be raised through a bond issue with
10 years maturity with a 11 percent coupon at
the face value. If it becomes necessary to raise more funds
via long-term debt, Rs. 30 lakh more could be
accumulated through the issuance of additional 10-year bonds
sold at the face value, with the coupon rate
raised to 12 per cent, while any additional funds raised via
long-term debt would necessarily have a 10 ¡V
year maturity with a 14 per cent coupon yield. The flotation
cost of issue is expected to be 5 per cent. The
issue price of bond would be Rs. 100 to be redeemed at par.
In the past, Palco had calculated a weighted average of
these sources of funds to determine its cost of
capital. In discussion with the current Financial
Controller, the point was raised that while this served as an
appropriate calculation for external funds, it did not take
into account the cost of internally generated funds.
The Financial Controller agreed that there should be some
cost associated with retained earnings and need to
be incorporated in the calculations but didn¡¦t have any
clue as to what should be the cost.
Palco Ltd is subjected to the corporate tax rate of 40 per
cent.
From the facts outlined above, what report would Neha submit
to the Board of Directors of palco
Ltd?
NO. 6
ARQ LTD
ARQ Ltd is an Indian company based in Greater Noida, which
manufactures packaging materials for food
items. The company maintains a present fleet of five fiat
cars and two Contessa Classic cars for its
chairman, general manager and five senior managers. The book
value of the seven cars is Rs. 20,00,000 and
their market value is estimated at Rs. 15,00,000. All the
cars fall under the same block of depreciation @ 25
per cent.
A German multinational company (MNC) BYR Ltd, has acquired
ARQ Ltd in all cash deal. The
merged company called BYR India Ltd is proposing to expand
the manufacturing capacity by four folds and
the organization structure is reorganized from top to
bottom. The German MNC has the policy of providing
transport facility to all senior executives (22) of the
company because the manufacturing plant at Greater
Noida was more than 10 kms outside Delhi where most of the
executives were staying.
Prices of the cars to be provided to the Executives have
been as follows :
Manager (10) Santro King Rs. 3,75,000
DGM and GM (5) Honda City 6,75,000
Director (5) Toyota Corolla 9,25,000
Managing Director (1) Sonata Gold 13,50,000
Chairman (1) Mercedes benz 23,50,000
The company is evaluating two options for providing these
cars to executives
Option 1 : The company will buy the cars and pay the
executives fuel expenses, maintenance expenses,
driver allowance and insurance (at the year ¡V end). In such
case, the ownership of the car will lie with the
company. The details of the proposed allowances and
expenditures to be paid are as follows :
a) Fuel expense and maintenance Allowances per month
Particulars Fuel expenses Maintenance allowance
Manager
DGM and GM
Director
Managing Director
Chairman
Rs. 2,500
5,000
7,500
12,000
18,000
Rs. 1,000
1,200
1,800
3,000
4,000
b) Driver Allowance: Rs. 4,000 per month (Only Chairman,
Managing Director and Directors are
eligible for driver allowance.)
c) Insurance cost: 1 per cent of the cost of the car.
The useful life for the cars is assumed to be five years
after which they can be sold at 20 per cent
salvage value. All the cars fall under the same block of
depreciation @ 25 per cent using written down
method of depreciation. The company will have to borrow to
finance the purchase from a bank with interest
at 14 per cent repayable in five annual equal instalments
payable at the end of the year.
Option 2 : ORIX, The fleet management company has offered
the 22 cars of the same make at lease for the
period of five years. The monthly lease rentals for the cars
are as follows (assuming that the total of
monthly lease rentals for the whole year are paid at the end
of each year.
Santro Xing Rs. 9,125
Honda City 16,325
Toyota Corolla 27,175
Sonata Gold 39,250
Mercedes Benz 61,250
Under this lease agreement the leasing company, ORIX will
pay for the fuel, maintenance and driver
expenses for all the cars. The lessor will claim the
depreciation on the cars and the lessee will claim the
lease rentals against the taxable income. BYR India Ltd will
have to hire fulltime supervisor (at monthly
salary of Rs. 15,000 per month) to manage the fleet of cars
hired on lease. The company will have to bear
additional miscellaneous expense of Rs. 5,000 per month for
providing him the PC, mobioe phone and so
on.
The company¡¦s effective tax rate is 40 per cent and its
cost of capital is 15 per cent.
Analyse the financial viability of the two options. Which
option would you recommend? Why
HUMAN RESOURCE
MANAGEMENT
CASE STUDY : 1
A policy is a plan of action. It is a statement of intention
committing the management to a general course of
action. When the management drafts a policy statement to cover
some features of its personnel programmes,
the statement may often contain an expression of philosophy and
principle as well. Although it is perfectly
legitimate for an organization to include its philosophy,
principles and policy in one policy expression.
Why organizations adopt
personnel policies explain the benefits?
What are the sources and
content of personnel policies?
Explain few personnel
policies?
Explain principles of
personnel policies?
CASE STUDY : 2
Recruitment is understood as the process of searching for and
obtaining applicants for jobs, from among
whom the rights people can be selected. Theoretically, recruitment
process is said to end with the receipt of
applications, in practice the activity extends to the screening of
applications so as to eliminate those who are
not qualified for the job.
Recruitment refers to the process of receipt of applications from
job seekers. In reality, the term is used to
describe the entire process of employee hiring. These are recruitment
boards for railways, banks and other
organization.
Explain in detail the
general purpose of recruitment?
Explain factors governing
Recruitment?
Explain the Recruitment
process with diagram?
Explain Recruitment
planning?
CASE STUDY : 3
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Navin AGM materials, is fuming and fretting. He bumped into Kiran,
GM Materials, threw the resignation
letter on his table, shouted and walked out of the room swiftly.
Navin has reason for his sudden outburst. He has been driven to
the wall. Perhaps details of the story will
tell the reasons for Navin’s bile and why he put in his papers,
barely four months after he took up his
assignment.
The year was 2005 when Navin quit the prestigious Sail plant at
Mumbai. As a manager material Navin
enjoyed the power. He could even place an order for materials
worth Rs 25 lakh. He needed nobody’s prior
approval.
Navin joined a pulp making plant located at Pune as AGM Materials.
The plant is owned by a prestigious
business house in India. Obviously perks, designation and
reputation of the conglomerate lured Navin away
from the public sector.
When he joined the pulp making company, little did Navin realize that
he needed prior approval to place an
order for materials worth Rs 12 lakhs. He had presumed that he had
the authority to place an order by
himself worth half the amount of what he used to do at the mega
steel maker. He placed the order material
arrived, were recived, accepted and used up in the plant.
Trouble started when the bill for Rs 12 lakh came from vendor. The
accounts department withheld payment
for the reason that the bill was not endorsed by Kiran. Kiran
rused to sign the bill as his approval was not
taken by Navin before placing the order.
Navin felt fumigated and cheated. A brief encounter with Kiran
only aggrarated the problem. Navin was
curtly told that he should have known company rules before
venturing. Navin decided to quit the company.
Does the company have an
orientation programme?
If yes how effective is it?
How is formal Orientation
programme conducted?
If you were Navin what
would have you done?
CASE STUDY : 4
Bitter it may taste, shrill it may sound, and sleepless nights it
may cause, but it is true. In a major shake up
Airbus. The European aircraft manufacturers has thrown a big shock
to its employees. Before coming to the
details of the shock, a peep into the company’s resume.
Name Airbus
Created 1970
President CEO : Vijay M.
Employees 57000
Turnover 26 Bn (Euro)
Total Aircraft sold (Feb
2007)
7187
Delivered 4598
Headquarters Paris (France)
Facilities 16
Rival Boeing
Airbus announced on February 27, 2007 that it would shed 10,000
jobs across four European contries and
sell six of its unit. N the same day the helpless workers did what
was expected of them – downed tools and
staged protests. The protesting workers at Airbus’s factory at
Meaulte, northern France, were seen picketing
outside the factory gate after holding up production a day
earlier. To be fair to Airbus, its management
entered talks with unions before the job loss and sale was
formally announced. But the talks did not mollify
the agitated workers.
Job sheating and hiring of units are a part of Power and
restructuring plan unleashed by Airbus to save itself
from increasing loss of its ground to the arch rival, Boeing Co.
Airbus Power & Strategy was first mooted in October 2006 but
sparkled a split between France & Germany
over the distribution of job losses and the placement of future
ones. Later the two countries agreed to share
both job losses and new technology.
The power and plan, if finalized, would mean a 3 per cent
reduction to Airbus’s 55000 employee strength.
Why should Power and focus
on shedding jobs to save on cost?
Are there no alternative
strategies?
Will the proposed shedding
of jobs and scale of six units help airbus survive the intense competition
from Boeing?
Comment on the whole issue?
SUBJECT : INTERNATIONAL BUSINESS
COURSE : Total Marks : 80
CASE 1 (20 Marks)
Kodak started selling photographic equipment on Japan 1889
and by the 1930s it had a dominant position in
the Japanese market. But after World War II, U.S occupation
forces persuaded most U.S companies including
Kodak to leave Japan to give the war torn local industry a
chance to recover. Kodak was effectively priced out
of the market by tariff barriers; over the next 35 years
Fuji gained 70% share of the market while Kodak saw
its share slip to miserable 5%. During this period Kodak
limited much of its activities in Japan.
This situation persisted until early 1980s when Fuji
launched an aggressive export drive, attacking Kodak in
the north American and European markets. Deciding that a
good offence is the best defense, in 1984 and the
next six year, Kodak outspent Fuji in Japan by a ratio of
more than 3 to 1. It erected mammoth $ 1 million near
signs as land marks in many of the Japan’s big cities and
also sponsored Sumo wrestling, Judo, and tennis
tournaments and even the Japanese team at the 1988 Seoul
Olympics. Thus Kodak has put Fuji on defensive,
forcing it to divert resources from overseas to defend
itself at home. By 1990’s, some of Fuji’s best executives
had been pulled back to Tokyo.
All this success, however , was apparently not enough for
Kodak. In may 1995, Kodak filed a petition with the
US trade office, that accured the Japanese government and
Fuji of “Unfair trading practices”. According to the
petition, the Japanese government helped to create a ‘
profile sanctuary’ for Fuji in Japan by systematically
denying Kodak access to Japanese distribution channels for
consumer film and paper. Kodak claims Fuji has
effectively shut Kodak products out of four distributors
that have a 70% share of the photo distribution market.
Fuji has an equity position in two of the distributors,
gives large year –end relates and cash payments to all
four distributors as a reward for their loyalty to Fuji, and
owns stakes in the banks that finance them. Kodak
also claims that Fuji uses similar tactics to control 430
wholesale photo furnishing labs in Japan to which it is
the exclusive supplier. Moreover Kodak’s petition claims
that the Japanese government has actively
encourages these practices.
But Fuji a similar counter arguments relating to Kodak in
U.S. and states bluntly that Kodak’s charges are a
clear case of the pot calling the kettle back.
What was the critical
catalyst that led Kodak to start taking the Japanese market seriously?
From the evidence
given in the case do you think Kodak’s charges of unfair trading practices
against Fuji
are valid? Support your answer.
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CASE 2 (20 Marks)
Two Senior executives of world’s largest firms with
extensive holdings outside the home country speak.
Company A : “We are a multinational firm. We distribute our
products in about 100 countries. We
manufacture in over 17 countries and do research and
development in three countries. We look at all new
investment projects both domestic and overseas using exactly
the same criteria”.
The execution from company A continues, “ of course the most
of the key ports in our subsidiaries are held by
home country nationals. Whenever replacements for these men
are sought, it is the practice, if not the policy,
to look next to you at the lead office and pick some one
(usually a home country national) you know and
trust”.
Company B : “ We are multinational firm. Our product
division executives have worldwide profit
responsibility. As our organisational chart shows, the
united states is just one region on a par with Europe,
Latin America, Africa etc, in each division”.
The executive from Company B goes on to explain, “the
worldwide Product division concept is rather difficult
to implement. The senior executives incharge of this
divisions have little overseas experience. They have been
promoted from domestic ports and tend to view foreign
consumers needs as really basically the same as ours.
Also, product division executives tend to focus on domestic
market, because it generates more revenue than
foreign market. The rewards are for global performance, but
strategy is to focus on domestic. Most of the
senior executives simply do not understand what happens
overseas and really do not trust foreign executives,
even those in key portions?
Questions :
Which company is truly Multinational ? Why?
List three
differences between Company , Multi National company and Trans Multi National
Company ?
CASE - 3 (20 Marks)
Strategic R & D by TNCs in Developing Countries
TNCs have had long units in developing host countries for
adapting products and processes to the local
conditions, and in a few cases, to products for local
markets. Since the min-1980s, however, they have also
started locating strategic R & D centres in some
developing countries, for developing generic technologies
and products for regional or global markets. The main
incentives for this are : (a) access to highly qualified
scientists as shortages of research personnel emerge in
certain fields in industrialised countries, (b) Cost
differentials in research salaries between developing and
industrialised countries, and (c) rationalisation of
operations, assigning particular affiliates the
responsibility for developing, manufacturing, and marketing
particular products worldwide. Th new trends are more
visible in industries dealing with new technologies,
such as microelectronics, biotechnology, and new materials.
In these technologies, the location of R & D can
be geographically de-linked more easily from the location of
manufacturing. It is also possible to separate R &
D in core activities from that in non-core activities.
Consequently, countries like India, Israel, Singapore,
Malaysia or Brazil serve TNCs as good locations for strategic
R & D.
For instance, Sony Corporation of Japan has around nine R
& D units in Asian developing countries. It has
three units in Singapore conducting R & D on core
components such as optical data shortage devices,
integrated chip design for audio products and CD-ROM drives,
and multimedia and microchip software. It has
three units in Malaysia working on video design, derivative
models and circuit blocks for new TV chases,
radio cassettes, discman and hi-fi receiver designs. It has
one unit in Republic of Korea focusing on the design
of compact discs, radio cassettes, tape recorders, and car
stereos. It has one in Taiwan designing and
developing video tape-recorders, minidisk players, video
CDs, and duplicators. Finally, it has one unit in
Indonesia focusing on the design of audio products.
Such units often work in collaboration with science and
technology institutes in the host country. For instance,
Daimler Benz has established such a unit in Bangalore,
India, in collaboration with the Indian Institute of
Science to work on projects related to its vehicles and
avionics business. Current work includes interface
design of avionics landing systems and smart GPS sensors for
use by the group’s business worldwide.
Source: World Investment Report 1999.
Questions:
Explain why MNCs have
located R & D centres in developing countries?
Mention the areas
where R & D activities can easily be decentralised.
CASE -4 (20 Marks)
VK Ltd a multi-product Company, furnishes you the following
data relating to the year 2000.
First Half of the year Second Half of the year
Sales Rs. 45,000 Rs. 50,000
Total Cost Rs. 40,000 Rs. 43,000
Assuming that there is no change in prices and variable
costs and that the fixed expenses are incurred equally
in the two half years periods calculate for the year 2000.
The Profit Volume
ration
Fixed Expenses
3. Break-Even Sales
4. Percentage of margin of safety.
5 marks each
SUBJECT : MARKETING MANAGEMENT
Total Marks : 80
Case-1 : The use of the marketing mix in product launch
Introduction
NIVEA® is an established name in high quality skin and
beauty care products. It is part of a range of brands produced and
sold by Beiersdorf. Beiersdorf, founded in 1882, has grown
to be a global company specialising in skin and beauty care.
In the UK, Beiersdorf’s continuing goal is to have its
products as close as possible to its consumers, regardless of where they
live. Its aims are to understand its consumers in its many
different markets and delight them with innovative products for
their skin and beauty care needs. This strengthens the trust
and appeal of Beiersdorf brands. The business prides itself on
being consumer-led and this focus has helped it to grow
NIVEA into one of the largest skin care brands in the world.
Beiersdorf’s continuing programme of market research showed
a gap in the market. This led to the launch of NIVEA
VISAGE® Young in 2005 as part of the NIVEA VISAGE range
offering a comprehensive selection of products aimed at
young women. It carries the strength of the NIVEA brand
image to the target market of girls aged 13-19. NIVEA VISAGE
Young helps girls to develop a proper skin care routine to
help keep their skin looking healthy and beautiful.
The market can be developed by creating a good product/range
and introducing it to the market (product-orientated approach)
or by finding a gap in the market and developing a product
to fill it (market-orientated approach). Having identified a gap in
the market, Beiersdorf launched NIVEA VISAGE Young using an
effective balance of the right product, price, promotion
and place. This is known as the marketing mix or ‘four Ps’.
It is vital that a company gets the balance of these four elements
correct so that a product will achieve its critical success
factors. Beiersdorf needed to develop a mix that suited the product
and the target market as well as meeting its own business
objectives.
The company re-launched the NIVEA VISAGE Young range in June
2007 further optimising its position in the market.
Optimised means the product had a new formula, new design,
new packaging and a new name. This case study shows how a
carefully balanced marketing mix provides the platform for
launching and re-launching a brand onto the market.
Product :
The first stage in building an effective mix is to
understand the market. NIVEA uses market research to target key market
segments which identifies groups of people with the same
characteristics such as age/gender/attitude/lifestyle. The
knowledge and understanding from the research helps in the
development of new products. NIVEA carries out its market
research with consumers in a number of different ways. These
include:
• using focus groups to listen to consumers directly
• gathering data from consumers through a variety of
different research techniques
• product testing with consumers in different markets.
Beiersdorf’s market research identified that younger
consumers wanted more specialised face care aimed at their own age
group that offered a ‘beautifying’ benefit, rather than a
solution to skin problems. NIVEA VISAGE Young is a skin care
range targeted at girls who do not want medicated products
but want a regime for their normal skin.
ANSWERS PROVIDED. CON: DR PRASANTH MBA PH.D. MOBILE: +91
9447965521 OR +91 9924764558 EMAIL: PRASANTHTHAMPI1975@GMAIL.COM
Competitor products tend to be problem focussed and offer
medicated solutions. This gives NIVEA competitive advantage.
NIVEA VISAGE Young provides a unique bridge between the
teenage market and the adult market.
The company improved the product to make it more effective
and more consumer-friendly. Beiersdorf tested the improved
products on a sample group from its target audience before
finalising the range for re-launch. This testing resulted in a
number of changes to existing products. Improvements
included:
• Changing the formula of some products. For example, it
removed alcohol from one product and used natural sea salts and
minerals in others.
• Introducing two completely new products.
• A new modern pack design with a flower pattern and softer
colours to appeal to younger women.
• Changing product descriptions and introducing larger pack
sizes.
Each of these changes helped to strengthen the product
range, to better meet the needs of the market.
Some of these changes reflect NIVEA’s commitment to the
environment. Its corporate responsibility approach aims to:
• reduce packaging and waste - by using larger pack sizes
• use more natural products – by including minerals and sea
salts in the formula
• increase opportunities for recycling - by using recyclable
plastic in its containers.
Price :
Lots of factors affect the end price of a product, for
example, the costs of production or the business need to maximise profits
or sales. A product’s price also needs to provide value for
money in the market and attract consumers to buy.
There are several pricing strategies that a business can
use:
• Cost based pricing – this can either simply cover costs or
include an element of profit. It focuses on the product and does
not take account of consumers.
• Penetration price – an initial low price to ensure that
there is a high volume of purchases and market share is quickly won.
This strategy encourages consumers to develop a habit of
buying.
• Price skimming – an initial high price for a unique
product encouraging those who want to be ‘first to buy’ to pay a
premium price. This strategy helps a business to gain
maximum revenue before a competitor’s product reaches the market.
On re-launch the price for NIVEA VISAGE Young was slightly
higher than previously. This reflected its new formulations,
packaging and extended product range. However, the company
also had to take into account that the target market was both
teenage girls and mums buying the product for their
daughters. This meant that the price had to offer value for money or it
would be out of reach of its target market.
As NIVEA VISAGE Young is one of the leading skin care ranges
meeting the beautifying needs of this market segment, it is
effectively the price leader. This means that it sets the
price level that competitors will follow or undercut. NIVEA needs to
regularly review prices should a competitor enter the market
at the ‘market growth’ point of the product life cycle to ensure
that its pricing remains competitive.
The pricing strategy for NIVEA is not the same as that of
the retailers. It sells products to retailers at one price. However,
retailers have the freedom to use other strategies for sales
promotion. These take account of the competitive nature of the
high street. They may use:
• loss leader: the retailer sells for less than it cost to
attract large volume of sales, for example by supermarkets
• discounting – alongside other special offers, such as ‘Buy
one, get one free’ (BOGOF) or ‘two for one’.
NIVEA VISAGE Young’s pricing strategy now generates around
7% of NIVEA VISAGE sales.
Place
Place refers to:
• How the product arrives at the point of sale. This means a
business must think about what distribution strategies it will
use.
• Where a product is sold. This includes retail outlets like
supermarkets or high street shops. It also includes other ways in
which businesses make products directly available to their
target market, for example, through direct mail or the Internet.
NIVEA VISAGE Young aims to use as many relevant distribution
channels as possible to ensure the widest reach of its
products to its target market. The main channels for the
product are retail outlets where consumers expect to find skin care
ranges. Around 65% of NIVEA VISAGE.
Young sales are through large high street shops such as
Boots and Superdrug. Superdrug is particularly important for the
‘young-end’ market. The other 35% of sales mainly comes from
large grocery chains that stock beauty products, such as
ASDA, Tesco and Sainsbury’s. Market research shows that
around 20% of this younger target market buys products for
themselves in the high street stores when shopping with
friends. Research also shows that the majority of purchasers are
actually made by mums, buying for teenagers. Mums are more
likely to buy the product from supermarkets whilst doing their
grocery shopping.
NIVEA distributes through a range of outlets that are cost
effective but that also reach the highest number of consumers. Its
distribution strategies also consider the environmental
impact of transport. It uses a central distribution point in the UK.
Products arrive from European production plants using
contract vehicles for efficiency for onward delivery to retail stores.
Beiersdorf does not sell direct to smaller retailers as the
volume of products sold would not be cost effective to deliver but it
uses wholesalers for these smaller accounts. It does not
sell directly through its website as the costs of producing small
orders would be too high. However, the retailers, like
Tesco, feature and sell the NIVEA products in their online stores.
Promotion
Promotion is how the business tells customers that products
are available and persuades them to buy. Promotion is either
above-the-line or below-the-line. Above-the-line promotion
is directly paid for, for example TV or newspaper advertising.
Below-the-line is where the business uses other promotional
methods to get the product message across:
• Events or trade fairs help to launch a product to a wide
audience. Events may be business to consumer (B2C) whereas trade
fairs are business to business (B2B).
• Direct mail can reach a large number of people but is not
easy to target specific consumers cost-effectively.
• Public relations (PR) includes the different ways a
business can communicate with its stakeholders, through, for example,
newspaper press releases. Other PR activities include
sponsorship of high profile events like Formula 1 or the World Cup, as
well as donations to or participation in charity events.
Branding – a strong and consistent brand identity
differentiates the product and helps consumers to understand and trust the
product. This aims to keep consumers buying the product
long-term.
• Sales promotions, for example competitions or sampling,
encourage consumers to buy products in the short-term.
NIVEA chooses promotional strategies that reflect the
lifestyle of its audience and the range of media available. It realises
that a ‘one way’ message, using TV or the press, is not as
effective as talking directly to its target group of consumers.
Therefore NIVEA does not plan to use any above-the-line
promotion for NIVEA VISAGE Young.
The promotion of NIVEA VISAGE Young is consumer-led. Using
various below-the-line routes, NIVEA identifies ways of
talking to teenagers (and their mums) directly.
• A key part of the strategy is the use of product samples.
These allow customers to touch, feel, smell and try the products.
Over a million samples of NIVEA VISAGE Young products will
be given away during 2008. These samples will be
available through the website, samples in stores or in ‘goody
bags’ given out at VISAGE roadshows up and down the
country.
• NIVEA VISAGE Young launched an interactive online magazine
called FYI (Fun, Young & Independent) to raise
awareness of the brand. The concept behind the magazine is
to give teenage girls the confidence to become young women
and to enjoy their new-found independence. Communication
channels are original and engaging to enable teenagers to
identify with NIVEA VISAGE Young. The magazine focuses on
‘first time’ experiences relating to NIVEA VISAGE Young
being their first skincare routine. It is promoted using the
Hit40UK chart show and the TMF digital TV channel.
• In connection with FYI, NIVEA VISAGE Young has recognised
the power of social network sites for this young audience
and also has pages on MySpace, Facebook and Bebo. The
company is using the power of new media as part of the mix to
grow awareness amongst the target audience.
Conclusion
NIVEA VISAGE Young is a skincare range in the UK market
designed to enhance the skin and beauty of the teenage
consumer rather than being medicated to treat skin problems.
As such, it has created a clear position in the market. This
shows that NIVEA understands its consumers and has produced
this differentiated product range in order to meet their needs.
To bring the range to market, the business has put together
a marketing mix. This mix balances the four elements of product,
price, place and promotion. The mix uses traditional methods
of place, such as distribution through the high street, alongside
more modern methods of promotion, such as through social
networking sites. It makes sure that the message of NIVEA
VISAGE Young reaches the right people in the right way.
Answer the following questions:
Describe what is
meant by a business being ‘consumer led’.
What are the key
parts of the marketing mix? Explain how each works with the others.
Explain why the
balance of the marketing mix is as important as any single element.
Analyse the marketing
mix for NIVEA VISAGE Young. What are its strongest points? Explain why you
think this is so.
Case-2 : SWOT analysis in action at Škoda
Introduction
In 1895 in Czechoslovakia, two keen cyclists, Vaclav Laurin
and Vaclav Klement, designed and produced their own bicycle.
Their business became Škoda in 1925. Škoda went on to
manufacture cycles, cars, farm ploughs and airplanes in Eastern
Europe. Škoda overcame hard times over the next 65 years.
These included war, economic depression and political change.
By 1990 the Czech management of Škoda was looking for a
strong foreign partner. Volkswagen AG (VAG) was chosen
because of its reputation for strength, quality and
reliability. It is the largest car manufacturer in Europe providing an average
of more than 5 million cars a year – giving it a 12% share
of the world car market. Volkswagen AG comprises the
Volkswagen, Audi, Škoda, SEAT, Volkswagen Commercial
Vehicles, Lamborghini, Bentley and Bugatti brands. Each brand
has its own specific character and is independent in the
market. Škoda UK sells Škoda cars through its network of
independent franchised dealers.
To improve its performance in the competitive car market,
Škoda UK’s management needed to assess its brand positioning.
Brand positioning means establishing a distinctive image for
the brand compared to competing brands. Only then could it
grow from being a small player. To aid its decision-making,
Škoda UK obtained market research data from internal and
external strategic audits. This enabled it to take advantage
of new opportunities and respond to threats.
The audit provided a summary of the business’s overall
strategic position by using a SWOT analysis. SWOT is an acronym
which stands for:
• Strengths – the internal elements of the business that
contribute to improvement and growth
• Weaknesses – the attributes that will hinder a business or
make it vulnerable to failure
• Opportunities – the external conditions that could enable
future growth
• Threats – the external factors which could negatively
affect the business.
This case study focuses on how Škoda UK’s management built
on all the areas of the strategic audit. The outcome of the
SWOT analysis was a strategy for effective competition in
the car industry.
Strengths
To identify its strengths, Škoda UK carried out research. It
asked customers directly for their opinions about its cars. It also
used reliable independent surveys that tested customers’
feelings. For example, the annual JD Power customer satisfaction
survey asks owners what they feel about cars they have owned
for at least six months. JD Power surveys almost 20,000 car
owners using detailed questionnaires. Škoda has been in the
top five manufacturers in this survey for the past 13 years. In
Top Gear’s 2007 customer satisfaction survey, 56,000 viewers
gave their opinions on 152 models and voted Škoda the
‘number 1 car maker’. Škoda’s Octavia model has also won the
2008 Auto Express Driver Power ‘Best Car’.
Škoda attributes these results to the business concentrating
on owner experience rather than on sales. It has considered ‘the
human touch’ from design through to sale. Škoda knows that
98% of its drivers would recommend Škoda to a friend. This is
a clearly identifiable and quantifiable strength. Škoda uses
this to guide its future strategic development and marketing of its
brand image.
Strategic management guides a business so that it can
compete and grow in its market. Škoda adopted a strategy focused on
building cars that their owners would enjoy. This is
different from simply maximising sales of a product. As a result, Škoda’s
biggest strength was the satisfaction of its customers. This
means the brand is associated with a quality product and happy
customers.
Weaknesses
A SWOT analysis identifies areas of weakness inside the
business. Škoda UK’s analysis showed that in order to grow it
needed to address key questions about the brand position.
Škoda has only 1.7% market share. This made it a very small
player in the market for cars. The main issue it needed to
address was: how did Škoda fit into this highly competitive,
fragmented market?
This weakness was partly due to out-dated perceptions of the
brand. These related to Škoda’s eastern European origins. In the
past the cars had an image of poor vehicle quality, design,
assembly, and materials. Crucially, this poor perception also
affected Škoda owners. For many people, car ownership is all
about image. If you are a Škoda driver, what do other people
think?
From 1999 onwards, under Volkswagen AG ownership, Škoda
changed this negative image. Škoda cars were no longer seen
as low-budget or low quality. However, a brand ‘health
check’ in 2006 showed that Škoda still had a weak and neutral image
in the mid-market range it occupies, compared to other
players in this area, for example, Ford, Peugeot and Renault. This
meant that whilst the brand no longer had a poor image, it
did not have a strong appeal either. This understanding showed
Škoda in which direction it needed to go. It needed to stop
being defensive in promotional campaigns. The company had
sought to correct old perceptions and demonstrate what Škoda
cars were not. It realised it was now time to say what the brand
does stand for. The marketing message for the change was
simple. Škoda owners were
known to be happy and contented with their cars. The
car-buying public and the car industry as a whole needed convincing
that Škoda cars were great to own and drive.
Opportunities and Threats
Opportunities
Opportunities occur in the external environment of a
business. These include for example, gaps in the market for new
products or services. In analysing the external market,
Škoda noted that its competitors’ marketing approaches focused on the
product itself.
Audi emphasises the technology through its strapline,
‘Vorsprung Durch Technik’ (‘advantage through technology’). BMW
promotes ‘the ultimate driving machine’. Many brands place
emphasis on the machine and the driving experience. Škoda UK
discovered that its customers loved their cars more than
owners of competitor brands, such as Renault or Ford.
Information from the SWOT analysis helped Škoda to differentiate
its product range. Having a complete understanding of
the brand’s weaknesses allowed it to develop a strategy to
strengthen the brand and take advantage of the opportunities in the
market. It focused on its existing strengths and provided
cars focused on the customer experience. The focus on ‘happy
Škoda customers’ is an opportunity. It enables Škoda to
differentiate the Škoda brand to make it stand out from the
competition. This is Škoda’s unique selling proposition
(USP) in the motor industry.
Threats
Threats come from outside of a business. These involve, for
example, a competitor launching cheaper products. A careful
analysis of the nature, source and likelihood of these
threats is a key part of the SWOT process.
The UK car market includes 50 different car makers selling
200 models. Within these there are over 2,000 model derivatives.
Škoda UK needed to ensure that its messages were powerful
enough for customers to hear within such a crowded and
competitive environment. If not, potential buyers would
overlook Škoda. This posed the threat of a further loss of market
share.
Škoda needed a strong product range to compete in the UK and
globally. In the UK the Škoda brand is represented by seven
different cars. Each one is designed to appeal to different
market segments. For example:
• The Škoda Fabia is sold as a basic but quality ‘city car’
• The Škoda Superb offers a more luxurious, ‘up-market’
appeal
• The Škoda Octavia Estate provides a family with a fun
drive but also a great big boot.
Pricing reflects the competitive nature of Škoda’s market.
Each model range is priced to appeal to different groups within the
mainstream car market. The combination of a clear range with
competitive pricing has overcome the threat of the crowded
market.
The following example illustrates how Škoda responded to
another of its threats, namely, the need to respond to EU legal and
environmental regulations. Škoda responded by designing
products that are environmentally friendly at every stage of their
life cycle. This was done by for example:-
• Recycling as much as possible. Škoda parts are marked for
quick and easy identification when the car is taken apart.
• Using the latest, most environmentally-friendly
manufacturing technologies and facilities available. For instance, areas
painted to protect against corrosion use lead-free, water
based colours.
• Designing processes to cut fuel consumption and emissions
in petrol and diesel engines. These use lighter parts making
vehicles as aerodynamic as possible to use less energy.
• Using technology to design cars with lower noise levels
and improved sound quality. Outcomes and benefits of SWOT
analysis.
Škoda UK’s SWOT analysis answered some key questions. It
discovered that:
• Škoda car owners were happy about owning a Škoda
• the brand was no longer seen as a poorer version of
competitors’ cars.
However,
• the brand was still very much within a niche market
• a change in public perception was vital for Škoda to
compete and increase its market share of the mainstream car market.
The challenge was how to build on this and develop the brand
so that it was viewed positively. It required a whole new
marketing strategy.
Škoda UK has responded with a new marketing strategy based
on the confident slogan, ‘the manufacturer of happy drivers.’
The campaign’s promotional activities support the new brand
position. The key messages for the campaign focus on the
‘happy’ customer experience and appeal at an emotional
rather than a practical level. The campaign includes:
• he ‘Fabia Cake’ TV advert. This showed that the car was
‘full of lovely stuff’ with the happy music (‘Favourite things’) in
the background.
• An improved and redesigned website which is easy and fun
to use. This is to appeal to a young audience. It embodies the
message ‘experience the happiness of Škoda online’.
Customers are able to book test drives and order brochures
online. The result is that potential customers will feel a Škoda is
not only a reliable and sensible car to own, it is also
‘lovely’ to own.
Analysing the external opportunities and threats allows
Škoda UK to pinpoint precisely how it should target its marketing
messages. No other market player has ‘driver happiness’ as
its USP. By building on the understanding derived from the
SWOT, Škoda UK has given new impetus to its campaign. At the
same time, the campaign has addressed the threat of
external competition by setting Škoda apart from its rivals.
Conclusion
Škoda is a global brand offering a range of products in a
highly competitive and fragmented market. The company must
respond positively to internal and external issues to avoid
losing sales and market share.
A SWOT analysis brings order and structure to otherwise
random information. The SWOT model helps managers to look
internally as well as externally. The information derived
from the analysis gives direction to the strategy. It highlights the key
internal weaknesses in a business, it focuses on strengths
and it alerts managers to opportunities and threats. Škoda was able
to identify where it had strengths to compete. The
structured review of internal and external factors helped transform Škoda
UK’s strategic direction.
The case study shows how Škoda UK transformed its brand
image in the eyes of potential customers and build its
competitive edge over rivals. By developing a marketing
strategy playing on clearly identified strengths of customer
happiness, Škoda was able to overcome weaknesses. It turned
its previously defensive position of the brand to a positive
customer-focused experience. The various awards Škoda has
won demonstrate how its communications are reaching
customers. Improved sales show that Škoda UK’s new strategy
has delivered benefits.
Answer the
What was the key
weakness that Škoda was able to identify?
What strength did
Škoda use to turn its brand weakness into an opportunity?
How has Škoda
strategically addressed external threats?
What in your view are
the important benefits of using a SWOT analysis
Case-3 : Marketing strategy for growth
Introduction
Businesses must respond to change in order to remain
competitive. Developing appropriate strategies which allow them to
move forward is essential. Wilkinson is a prime example of a
business that has responded to changing customer needs
throughout its history. It is one of the UK’s long-established
retailers of a wide range of food, home, garden, office, health
and beauty products.James Kemsey (JK) Wilkinson opened his
first Wilkinson Store in Charnwood Street, Leicester in 1930.
After the Second World War, the 1950s saw a rise in the use
of labour-saving devices and DIY. Wilkinson responded by
making this type of product the focus of its sales. In the
1960s customers wanted more convenience shopping. Wilkinson
started selling groceries and supermarket goods and created
the Wilko brand. In the 1980s Wilkinson extended its range of
low-cost products to include quality clothing, toys,
toiletries and perfumes. In 1995 it opened a central distribution centre in
Workshop, serving stores in the north of England and in
2004, a new distribution centre opened in Wales. In 2005 Wilkinson
launched its Internet shopping service, offering over
800,000 product lines for sale online. Wilkinson currently has over 300
stores, which carry an average of 25,000 product lines. 40%
of these are Wilko ‘own-brand’ products. The company’s target
is to see this element grow and to have over 500 stores by
2012.
Wilkinson’s growth places it in the top 30 retailers in the
UK. Recently it has faced increasing challenges from competitors,
such as the supermarket sector. Wilkinson needed to combat
this and identify new areas for growth. Over two years it
conducted extensive market research. This has helped it
create a marketing strategy designed to continue growing by
targeting a new market segment - the student population.
This case study focuses on how Wilkinson created and
implemented this strategy, using the findings of its market
research to drive the strategy forward.
Marketing strategy aims to communicate to customers the
added-value of products and services. This considers the right mix
of design, function, image or service to improve customer
awareness of the business’ products and ultimately to encourage
them to buy. An important tool for helping develop an
appropriate marketing strategy is Ansoff’s Matrix. This model looks at
the options for developing a marketing strategy and helps to
assess the levels of risk involved with each option. Marketing
strategies may focus on the development of products or
markets. Doing more of what a business already does carries least
risk; developing a completely new product for a new audience
carries the highest risk both in terms of time and costs.
Based on its research, Wilkinson committed to a market
development strategy to sell its products to a new audience of
students. This is a medium risk strategy as it requires the
business to find and develop new customers. It also carries costs of
the marketing campaigns to reach this new group. The main
focus of the strategy was to increase awareness of the brand
among students and encourage them to shop regularly at
Wilkinson stores.
Market research
Market research is vital for collecting data on which to
base the strategy. Market research takes one of two main forms –
primary research and secondary research. Primary research (also
called field research) involves collecting data first hand.
This can take many forms, the main ones being interview,
questionnaires, panels and observation. Secondary research (also
called desk research) involves collecting data which already
exists. This includes using information from reports,
publications, Internet research and company files.
Both methods have advantages and disadvantages. The
advantages of primary research are that it is recent, relevant and
designed specifically for the company’s intended strategy.
The main disadvantage is that it is more expensive than secondary
research and can be biased if not planned well. Secondary
research is relatively cheap, can be undertaken quickly and so
enables decision-making sooner. However, secondary research
can go out-of-date and may not be entirely relevant to the
business’ needs.
Wilkinson undertook primary market research using
questionnaires from students across the UK and secondary research
using government and university admissions data. The statistics
revealed that there were three million potential student
customers.
They had a combined annual spend of around £9 billion per
year. This research confirmed that the choice of focusing on the
student market as a means of growth was valid. Wilkinson
undertook further research to identify how to reach students and
persuade them to start shopping at Wilkinson stores. This
information was used to formulate a focus strategy. This was
aimed specifically at the needs of the student ‘market
segment’.
Marketing to students
Wilkinson involved 60 universities in research, using
questionnaires distributed to students initially in Years 2 and 3 of a
range of universities and then to ‘freshers’ (new students)
through the University and Colleges Admission Service. This
ensured the widest range of students was included to
eliminate bias. It also gave a wide range of responses. From this initial
group, students were asked a second set of questions.
Participants were rewarded with Amazon vouchers to encourage a good
take-up. The research focused on two areas:
student awareness of
the Wilkinson brand and
reasons why students
were currently not using the stores regularly.
The market research enabled Wilkinson to put together its
marketing strategy. The aim was to ensure the student population
began shopping at Wilkinson stores early in their student
experience. This would help to maintain their customer loyalty to
Wilkinson throughout their student years and also to develop
them as future customers after university. Repeat business is
key to sustained growth. Wilkinson wanted to create
satisfied customers with their needs met by the Wilkinson range of
products. A marketing campaign was launched which focused on
a range of promotional tactics, specifically designed to
appeal to university students:
• Wilkinson being present at freshers’ fairs – and giving
free goody bags with sample
products directly to students
• direct mail flyers to homes and student halls, prior to
students arriving
• advertisements with fun theme, for example, showing frying
pans as tennis racquets
• web banners
• offering discounts of 15% with first purchase using the
online store
• gift vouchers
• free wallplanners.
The challenge was to get students into Wilkinson stores. The
opportunity was to capture a new customer group at an early
stage and provide essential items all year round. This would
lead to a committed customer group and secure repeat business.
Outcomes/evaluation
Wilkinson wanted to know what would inspire students to shop
at Wilkinson more and what factors would help to attract
non-customers. The research provided significant primary
information to analyse the effects of the campaign. Wilkinson used
questionnaires collected from the first year undergraduates
to gather qualitative data. In addition, Wilkinson obtained
quantitative data from various other sources, including:
• redemption rates – how many people used the discount
vouchers when buying
• sales analysis – how much extra business did the stores
handle
• footfall in stores analysis – how many extra people went
into stores.
This information helped Wilkinson to develop its plans for
future marketing campaigns. It identified Motivation factors for
the student audience which would help to encourage future
purchase. Key factors included products being cheaper than
competitors and easy access to stores. 23% of students
questioned gave ‘distance from university’ as a reason for not
regularly visiting the store. The layout of the store was
another major problem affecting repeat visits. These findings have
been taken on board by Wilkinson in its future planning of
store locations and layouts.
Researching students’ opinions after the campaign showed
that:
• Awareness of Wilkinson brand had significantly risen from
77% to 95% of those interviewed. This brought it in line with
Morrison supermarkets, a key competitor.
Conclusion
Wilkinson’s marketing strategy began with its corporate aim
to grow and increase stores across the UK. It was facing
increased competition from supermarkets and needed to
identify an area to focus on. To pursue a growth strategy, Wilkinson
used market research to identify new target customers. This
enabled it to prepare marketing strategies to fit the audience.
Primary and secondary research was used to find out customer
views regarding its brand. Data indicated the student market
segment was a significant area to focus on to achieve market
development. A marketing campaign using data from a followup
survey was put in place. The campaign showed significant
increase in students’ levels of awareness about Wilkinson and
its products. It encouraged them either to shop more or to
try Wilkinson for the first time. The campaign helped to achieve
many of the business’ aims, creating increased brand
awareness and repeat visits. It also helped to inform the company’s
future strategies for growth. Market research gathered will
help to formulate future plans for new stores. These will be in line
with Wilkinson commitment to providing communities with
affordable products across the country.
Answer the following questions
What is the
difference between primary and secondary research? Identify one example of
primary and secondary research
carried out by Wilkinson.
Explain why Wilkinson
needed a marketing strategy to help them to grow.
Evaluate the benefits
of the marketing campaign to Wilkinson.
Analyse how effective
the marketing campaign was in helping Wilkinson respond to competitive
pressures.
Case-4 : Extending the product life cycle
Introduction
Businesses need to set themselves clear aims and objectives
if they are going to succeed. The Kellogg Company is the
world’s leading producer of breakfast cereals and
convenience foods, such as cereal bars, and aims to maintain that position.
In 2006, Kellogg had total worldwide sales of almost $11
billion (£5.5 billion). In 2007, it was Britain’s biggest selling
grocery brand, with sales of more than £550 million. Product
lines include ready-to-eat cereals (i.e. not hot cereals like
porridge) and nutritious snacks, such as cereal bars.
Kellogg’s brands are household names around the world and include Rice
Krispies, Special K and Nutri-Grain, whilst some of its
brand characters, like Snap, Crackle and Pop, are amongst the most
wellknown in the world.
Kellogg has achieved this position, not only through great
brands and great brand value, but through a strong commitment to
corporate social responsibility. This means that all of
Kellogg’s business aims are set within a particular context or set of
ideals. Central to this is Kellogg’s passion for the
business, the brands and the food, demonstrated through the promotion of
healthy living.
The company divides its market into six key segments.
Kellogg's Corn Flakes has been on breakfast tables for over 100 years
and represents the ‘Tasty Start’ cereals that people eat to
start their day. Other segments include ‘Simply Wholesome’
products that are good for you, such as Kashi Muesli, ‘Shape
Management’ products, such as Special K and ‘Inner Health’
lines, such as All-Bran. Children will be most familiar with
the ‘Kid Preferred’ brands, such as Frosties, whilst ‘Mum
Approved’ brands like Raisin Wheats are recognised by
parents as being good for their children.
Each brand has to hold its own in a competitive market.
Brand managers monitor the success of brands in terms of market
share, growth and performance against the competition. Key
decisions have to be made about the future of any brand that is
not succeeding. This case study is about Nutri-Grain. It
shows how Kellogg recognised there was a problem with the brand
and used business tools to reach a solution. The overall aim
was to re-launch the brand and return it to growth in its market.
The product life cycle
Each product has its own life cycle. It will be ‘born’, it
will ‘develop’, it will ‘grow old’ and, eventually, it will ‘die’. Some
products, like Kellogg’s Corn Flakes, have retained their
market position for a long time. Others may have their success
undermined by falling market share or by competitors. The
product life cycle shows how sales of a product change over
time. The five typical stages of the life cycle are shown on
a graph. However, perhaps the most important stage of a product
life cycle happens before this graph starts, namely the
Research and Development (R&D) stage. Here the company
designs a product to meet a need in the market. The costs of
market research - to identify a gap in the market and of
product development to ensure that the product meets the needs of
that gap - are called ‘sunk’ or start-up costs. Nutri-Grain was
originally designed to meet the needs of busy people who had
missed breakfast. It aimed to provide a healthy cereal
breakfast in a portable and convenient format.
1. Launch - Many products do well when they are first
brought out and Nutri-Grain was no exception. From launch (the first
stage on the diagram) in 1997 it was immediately successful,
gaining almost 50% share of the growing cereal bar market in
just two years.
2. Growth - Nutri-Grain’s sales steadily increased as the
product was promoted and became well known. It maintained
growth in sales until 2002 through expanding the original
product with new developments of flavour and format. This is good
for the business, as it does not have to spend money on new
machines or equipment for production. The market position of
Nutri-Grain also subtly changed from a ‘missed breakfast’
product to an ‘all-day’ healthy snack.
3. Maturity - Successful products attract other competitor
businesses to start selling similar products. This indicates the third
stage of the life cycle - maturity. This is the time of
maximum profitability, when profits can be used to continue to build the
brand. However, competitor brands from both Kellogg itself
(e.g. All Bran bars) and other manufacturers (e.g. Alpen bars)
offered the same benefits and this slowed down sales and
chipped away at Nutri-Grain’s market position. Kellogg continued
to support the development of the brand but some products
(such as Minis and Twists), struggled in a crowded market.
Although Elevenses continued to succeed, this was not enough
to offset the overall sales decline. Not all products follow
these stages precisely and time periods for each stage will
vary widely. Growth, for example, may take place over a few
months or, as in the case of Nutri-Grain, over several
years.
4. Saturation - This is the fourth stage of the life cycle
and the point when the market is ‘full’. Most people have the product
and there are other, better or cheaper competitor products.
This is called market saturation and is when sales start to fall. By
mid-2004 Nutri-Grain found its sales declining whilst the
market continued to grow at a rate of 15%.
5. Decline - Clearly, at this point, Kellogg had to make a
key business decision. Sales were falling, the product was in decline
and losing its position. Should Kellogg let the product
‘die’, i.e. withdraw it from the market, or should it try to extend its
life?
Strategic use of the product life cycle
When a company recognises that a product has gone into
decline or is not performing as well as it should, it has to decide
what to do. The decision needs to be made within the context
of the overall aims of the business. Kellogg’s aims included the
development of great brands, great brand value and the
promotion of healthy living. Strategically, Kellogg had a strong
position in the market for both healthy foods and
convenience foods. Nutri-Grain fitted well with its main aims and
objectives and therefore was a product and a brand worth
rescuing.
Kellogg decided to try to extend the life of the product
rather than withdraw it from the market. This meant developing an
extension strategy for the product. Ansoff’s matrix is a
tool that helps analyse which strategy is appropriate. It shows both
market-orientated and product-orientated possibilities.
Extending the Nutri-Grain cycle – identifying the problem
Kellogg had to decide whether the problem with Nutri-Grain
was the market, the product or both. The market had grown by
over 15% and competitors’ market share had increased whilst
Nutri-Grain sales in 2003 had declined. The market in terms of
customer tastes had also changed – more people missed
breakfast and therefore there was an increased need for such a snack
product.
The choice of extension strategy indicated by the matrix was
either product development or diversification. Diversification
carries much higher costs and risks. Kellogg decided that it
needed to focus on changing the product to meet the changing
market needs.
Research showed that there were several issues to address:
The brand message was
not strong enough in the face of competition. Consumers were not impressed
enough by the
product to choose it over competitors.
Some of the other
Kellogg products (e.g. Minis) had taken the focus away from the core business.
The core products of Nutri-Grain
Soft Bake and Elevenses between them represented over 80% of sales but received
a
small proportion of advertising and promotion budgets.
Those sales that were
taking place were being driven by promotional pricing (i.e discounted pricing)
rather than the
underlying strength of the brand.
Implementing the extension strategy for Nutri-Grain having
recognised the problems, Kellogg then developed solutions to rebrand
and re-launch the product in 2005.
Fundamental to the
re-launch was the renewal of the brand image. Kellogg looked at the core
features that made the brand
different and modelled the new brand image on these.
Nutri-Grain is unique as it is the only product of this kind that is
baked. This provided two benefits:
• the healthy grains were soft rather than gritty
• the eating experience is closer to the more indulgent
foods that people could be eating (cakes and biscuits, for example).
The unique selling point, hence the focus of the brand,
needed to be the ‘soft bake’.
Researchers also found
that a key part of the market was a group termed ‘realistic snackers’. These
are people who want to
snack on healthy foods, but still crave a great tasting
snack. The re-launched Nutri-Grain product needed to help this key
group fulfil both of these desires.
Kellogg decided to
re-focus investment on the core products of Soft Bake Bars and Elevenses as
these had maintained
their growth (accounting for 61% of Soft Bake Bar sales).
Three existing Soft Bake Bar products were improved, three new
ranges introduced and poorly performing ranges (such as
Minis) were withdrawn.
New packaging was
introduced to unify the brand image.
An improved pricing
structure for stores and supermarkets was developed.
Using this information, the re-launch focused on the four
parts of the marketing mix:
• Product – improvements to the recipe and a wider range of
flavours, repositioning the brand as ‘healthy and tasty’, not a
substitute for a missed breakfast
• Promotion – a new and clearer brand image to cover all the
products in the range along with advertising and point-of-sale
materials
• Place – better offers and materials to stores that sold
the product
• Price – new price levels were agreed that did not rely on
promotional pricing. This improved revenue for both Kellogg and
the stores.
As a result Soft Bake Bar year-on-year sales went from a
decline to substantial growth, with Elevenses sales increasing by
almost 50%. The Nutri-Grain brand achieved a retail sales
growth rate of almost three times that of the market and most
importantly, growth was maintained after the initial
re-launch.
Conclusion
Successful businesses use all the tools at their disposal to
stay at theSuccessful businesses use all the tools at their disposal to
stay at the top of their chosen market. Kellogg was able to
use a number of business tools in order to successfully re-launch
the Nutri-Grain brand. These tools included the product life
cycle, Ansoff’s matrix and the marketing mix. Such tools are
useful when used properly.
Kellogg was able to see that although Nutri-Grain fitted its
strategic profile – a healthy, convenient cereal product – it was
underperforming in the market. This information was used,
along with the aims and objectives of the business, to develop a
strategy for continuing success. Finally, when Kellogg
checked the growth of the re-launched product against its own
objectives, it had met all its aims to:
• re-position the brand through the use of the marketing mix
• return the brand to growth
• improve the frequency of purchase
• introduce new customers to the brand.
Nutri-Grain remains a growing brand and product within the
Kellogg product family.
Answer the following questions:
Using current
products familiar to you, draw and label a product life cycle diagram, showing
which stage each product is
at.
Suggest appropriate
aims and objectives for a small, medium and large business.
Consider the decision
taken by Kellogg to opt for product development. Suggest a way in which it
could have diversified
instead. Justify your answer.
SUBJECT: OPERATIONS MANAGEMENT
Total Marks : 80
NB.1)
All questions carry equal marks.
All questions are compulsory.
read questions carefully.
Figures to the right indicate full marks.
Explain the concept Six Sigma. Bring out the
significance of Six Sigma in Quality
Management?
(10 Marks)
Define Project Management and explain its
nature and features? (10 Marks)
What is Process Analysis? Explain the steps in
Manufacturing Process Selection
and
Design? (10Marks)
Enumerate and explain the Theory of
Constraints? (10 Marks)
Q5)
Write short notes (any two) (10
Marks)
a)
Inventory Control
b)
Operations Scheduling
c)
Aggregate Sales and Operations Planning
Explain the following concept (any two) (10 Marks)
1)
Product Design
2)
Strategic Capacity Management
3)
Lean Productions
Q7)
Define Material Requirements Planning. Discuss its various components? (10 Marks)
Q8)
What is Supply Chain Strategy? Discuss its characteristics? (10 Marks
SUB: QUANTITATIVE METHODS
N. B.: 1) Answer any Sixteen
What is a linear
programming problem? Discuss the scope and role of linear
programming in solving management problems. Discuss and
describe the role
of linear programming in managerial decision-making bringing
out
limitations, if any.
Explain the concept
and computational steps of the simplex method for solving
linear programming problems. How would you identify whether
an optimal
solution to a problem obtained using simplex algorithm is
unique or not?
a) What is the difference between a feasible solution, a
basic feasible
solution, and an optimal solution of a linear programming
problem?
b) What is the difference between simplex solution procedure
for a
`maximization’ and a `minimization’ problem?
c) Using the concept of net contribution, provide an
intuitive explanation
of why the criterion for optimality for maximization problem
is different
from that of minimization problems.
Outline the steps involved in the simplex algorithm for
solving a linear
programming maximization problem. Also define the technical
terms used
therein.
``Linear programming
is one of the most frequently and successfully employed
Operations Research techniques to managerial and business
decisions.’’
Elucidate this statement with some examples.
…2…
ANSWERS PROVIDED. CON: DR PRASANTH MBA PH.D. MOBILE: +91
9447965521 OR +91 9924764558 EMAIL: PRASANTHTHAMPI1975@GMAIL.COM
…2…
Describe the
transporation problem and give its mathematical model. Explain,
by taking an illustration, the North-West Corner Rule, the Least
Cost Method
and the Vogel’s Approximation Method to obtain the initial
feasible solution to
a transportation problem.
Discuss the various methods of finding initial feasible
solution of a
transportation problem and state the advantages,
disadvantages, and areas of
application for them.
What is an assignment
problem? It is true to say that it is a special case of the
transportation problem? Explain. How can you formulate an
assignment
problem as a standard linear programming problem?
Illustrate. What do you
understand by an assignment problem? Give a brief outline
for solving it.
What are different
types of inventories? Explain. What functions does
inventory perform? State the two basic inventory decisions
management must
make as they attempt to accomplish the functions of
inventory just described
by you.
What is queuing
theory? What type of questions are sought to be answered in
analyzing a queuing system? Give a general structure of the
queuing system
and explain. Illustrate some queuing situations. What is
queuing theory? In
what types of problem situations can it be applied
successfully? Discuss giving
examples.
What is a replacement
problem? Describe some important replacement
situations and policies. Briefly explain the costs which are
relevant to
decisions for replacement of depreciable assets. Illustrate
their behaviour and
explain how the optimal time for replacement of an asset can
be determined.
…3…
…3…
What kinds of
decision-making situations may be analysed using PERT and
CPM techniques? State the major similarities between PERT
and CPM. Under
what circumstances is CPM a better technique of project
management than
PERT? A construction company has received a contract to
build an office
complex. It has frequently engaged itself in constructing
such buildings.
Which of the two network techniques, PERT and CPM, should in
your opinion,
be employed by the company? Why?
Describe the steps
involved in the process of decision making. What are payoff
and regret functions? How can entries in a regret table be
derived from a
pay-off table?
11. What do you understand by Markov processes? In what
areas of management
can they be applied successfully? What do you understand by
transition
probabilities? Is the assumption of stationary transition
probabilities realistic,
in your opinion? Why or why not?
12. Explain how the probability tree helps to understand the
problem of Markov
processes. Explain the method of calculation of ending up in
each absorbing
state when a chain beings in a particular transient state.
What is
fundamental matrix of Markov chains? What does it calculate?
13. What is simulation? Describe the simulation process.
State the major two
reasons for using simulation to solve a problem. What are
the advantages and
limitations of simulation? ``When it becomes difficult to
use an optimization
technique for solving a problem, one has to resort to
simulation’’. Discuss.
``Simulation is typically the process of carrying out
sampling experiments on
the models of the system rather than the system itself.’’
Elucidate this
statement by taking some examples.
…4…
…4…
14. A company has three offers for its existing equipment in
one of the divisions.
The first buyer is willing to pay Rs. 50,000 at the end of 8
years’ period. The
second buyer offers Rs. 39,000—consisting of an immediate
payment of Rs.
14,000 and Rs. 25,000 after 6 years. The third buyer agrees
to buy the
equipment for Rs. 29,000 payable right away. Which is the
best offer for the
company if it can earn an interest @ 8% per annum on the money
received?
15. What is the difference between qualitative and
quantitative techniques of
forecasting. When is a qualitative model appropriate?
Briefly discuss the
Delphi method of making forecasts.
16. a) How do you distinguish between resource leveling and
resource
allocation problems? State and explain an algorithm for
resource
allocation.
b) Explain the following as they are used in PERT/CPM
(i) Beta distribution, and (ii) Budget over-run.
…5…
…5…
The following table
gives data on normal time and cost, and crash time and
cost for a project.
`Duration (Weeks) Total Cost (Rs)
Activity
Normal Crash Normal Crash
1 – 2 3 2 300 450
2 – 3 3 3 75 75
2 – 4 5 3 200 300
2 – 5 4 4 120 120
3 – 4 4 1 100 190
4 – 6 3 2 90 130
5 – 6 3 1 60 110
i) Draw the network and find out the critical path and the
normal project
duration.
ii) Find out the total float associated with each activity.
iii) If the indirect costs are Rs. 100 per week, find out
the optimum duration by
crashing and the corresponding project costs.
iv) With the crash duration indicated, what would be the
minimum crash
duration possible, ignoring indirect costs?
18. What is a `game’ in game theory? What are the properties
of a game? Explain
the ``best strategy’’ on the basis of minimax criterion of
optimality. Describe
the maximin and minimax principles of game theory.
…6…
…6…
Explain the steps
involved in solution to dynamic programming problems.
Explain the following in the context of dynamic programming:
(a) Stages
(b) States
(c) Pay-off function
(d) Recursive relationship
A political campaign
for election to the parliament is entering its final stage
and pre-poll surveys are medicating a very close contest in
a certain
constituency. One of the candidates in the constituency has
sufficient funds to
give five full-page advertisements in four different areas.
Based on the polling
information, an estimate has been made of the approximate
number (in
thousands) of additional votes that can be polled in
different areas. This is
shown below.
No. of Area
Commercial Ads A B C D
0
0
0
0
0
1 9 13 11 7
2 15 17 1 15
3 1 21 23 25
4 25 23 21 29
5 31 25 27 33
Using dynamic programming, determine how the five commercial
ads be
distributed between the four areas so as to maximize the
estimated number of
votes.
Research Methodology
Compare 'verification
principle' of Logical Positivism with 'Falsifiability' of Karl
Popper and their relevance in Research Method. {5 Marks}
Discuss the concept of
hypothesis, in the light of 'Falsifiability Criterion' of Karl
Popper. { 5 Marks}
Distinguish between
'Constitutive' and 'Operational' definitions. {5 Marks}
What is a Projective Test?
What is the advantage of this test over the other forms of
tests? {5 Marks}
5. Discuss the purpose of 'Research Design'. {5 Marks}
6. Distinguish between 'Descriptive Statistics' and 'Inferential
Statistics'. {5 Marks}
7. Discuss the theories of Truth and their relevance to
Quantitative and Qualitative
Research. { 5 Marks }
8. Discuss 'Case Study' method in Qualitative Methodology. { 5
Marks }
9. Explain 'Data Reduction' and 'Data Display' in Qualitative
Research. { 5 Marks }
10 Discuss the philosophical foundation of Qualitative
Methodology. { 5 Marks }
AN ISO 9001 : 2000 CERTIFIED INTERNATIONAL B-SCHOOL
11.Choose an area of your interest in Research and draft a
Research Proposal with Title,
Research problems, Hypothesis, Variables, Quantification schemes
of variables, Research
Design and Analysis plan. ( 20 marks )
12. Explain different levels of measurement giving appropriate
example of each level.
{ 5 Marks }
13. Why is questionnaire still widely used in spite of its
limitations? Mention some
important points to be kept in mind while constructing a
questionnaire. (10 marks )
14. What is validity of a tool ? Describe different types of
validity . { 5 Marks }
15. Compare the steps of a qualitative & quantitative
research. { 5 Marks }
16. Discuss Interview as a technique of data collection. { 5 Marks
}
Attempt any 5 cases ,equal marks for all cases.
CASE-1 (16 Marks)
A professor is interested in following whether the
"good" students finish the test earlier or later than
the others in the class. He observes a particular test and
gets the following data given below
If 'good' students are those who get 90 and above, can the
professor conclude that good students finish
the test randomly (use a 5% level of significance) ?Explain
Order of
finishing test Marks Scored
1 - 10 94 70 85 89 92 98 63 88 74 85
11 - 20 69 90 57 86 79 72 80 93 66 74
21 - 30 50 55 47 59 68 63 89 51 90 88
CASE-2 (16 Marks)
The weight (gms) of 31 books picked from a consignment are
as follows:
106, 107, 76, 82, 106, 107, 175, 93, 187, 95, 123, 125, 111,
92, 86, 70, 127, 68, 130, 129, 139,
119,115, 128, 100, 186, 84,99, 113, 204, 111
Test whether this sample may be treated as random? Briefly
explain?
Case-3 (16 Marks)
A local supermarket has experienced a decline in unit sales
and little change in rupee value sales.
Profits have almost vanished. The chief executive in
searching for ways to revitalize the operation, was
advised to increase the number of hours the market is open
for business. He comes to you for advice in
structuring a research problem that will provide relevant
information for decision making, Define the
research problem taking care to:
(a) state the relevant question.
(b) enumerate the alternative answers.
(c) clearly define the units of analysis and characteristics
of interest.
CASE-4 (16 Marks)
According to the National Retail Federation and Center for
Retailing Education at the University of
Florida, the four main sources of inventory shrinkage are
employee theft, shoplifting, administrative
error, and vendor fraud. The estimated annual dollar amount
in shrinkage ($millions) associated with
each of these data sources are as follows
Employee theft $ 17918.6
Shop lifting $ 15191.9
Administrative error $ 7617.6
Vendor fraud $ 2553.6
Total $43281.7
Construct a pie chart to depict these data ?
CASE-5 (16 Marks)
The market for jewellery in India is second only to that for
foods and the trade is built around so-called
family jewelers. Tanishq belongs to the House of Tata and,
true to the group's policy it aims at bringing
in credibility and professionalism to the jewellery
industry.
India's jewellery market is estimated to be worth Rs. 400
billion a year and the share of the organised
sector -jewellery stores and brands managed by corporate
houses - stands at about Rs. 10 billion. This
small but significant niche is largely the creation of
Tanishq, a path-breaking effort that has earned a
well-deserved reputation for reliability and excellence, and
for introducing pioneering concepts in an
industry where tradition once ruled. The brand has a 40%
share of the organised jewellery market and
a 1% bite of the overall jewellery pie. There are more than
300,000 independent, non-branded
jewellery retailers in India.
Tanishq was a trailblazing endeavour to create a national
retail chain that would provide consumers
with jewellery of reliable worth and high design value. Its
entry changed, in more ways than one, the
way the Indian jewellery market operates. With 66 exclusive
outlets spread across some 50 cities and a
fully integrated jewellery manufacturing facility at Hosur,
in Tamil Nadu, Tanishq has emerged as one
of India's biggest retailers.
The introduction of 'Karatmeters' - instruments that can be
easily used by consumers to measure the
purity of gold in a non-destructive manner - at its outlets
is a key innovation that has developed
tremendous equity for the brand. Another Tanishq novelty,
one on which the brand's growth strategy is
premised, is in the matter of differentiated designs, be
they contemporary or traditional, Indian or
international.
Modern retail values and principles in the selling of
branded jewellery in Indiaare almost completely
the handiwork of Tanishq. The brand has broken fresh ground
in retailing by creating exclusive outlets
with hitherto unknown in-store ambience and hospitality
touchstones. It has launched new collections
at a quicker rate than its competitors, and conducted
marketing promotions and fashion shows to
enhance the shopping experience of consumers.
Although the purchase of branded jewellery is still a new
experience for a whole lot of Indians, the
Tanishq brand enjoys increasing levels of consumer loyalty.
In 2002, about one million people
shopped at Tanishq stores all over the country. A highlight
of the brand's success is that, while the
jewellery market growth has declined during the past two
years, Tanishq has recorded an annual
growth of approximately 40%.
Besides catering to Indian consumers, Tanishq has
successfully entered key export markets such as the
US, the UK, theMiddle East, Singapore and Australia. This is
testimony to the brand's ability to craft
products that meet the requirements of varied cultures and
sensibilities. The brand Tanishq, like the
Tata name, has established itself as an ethical brand,
earning the respect and affection of its consumers.
The Tanishq portfolio comprises a wide range of jewellery,
including 18-carat studded products, 22-
carat plain-gold products, silverware and coins. Tanishq is
the first brand in the jewellery category to
introduce collections designed exclusively for the modern
Indian woman, especially working women.
Among the Tanishq collections that have caught the
imagination of consumers are Aria and Diva.
Collection G, with a selection of over 90 designs, addressed
the everyday jewellery needs of working
women. Positioned as ‘9-to-5 jewellery’, the collection is
stylish and modern and is designed to suit all
forms of attire, western and Indian, casual and formal. The
introduction of lightweight gold –jewellery
that looked heavy but was light in weight and on the purse
–marked another milestone in Tanishq’s
brand history.
Tanishq’s retail boutiques are temples for the brand and are
used as a platform for celebration, be it the
launch of a new collection, a new marketing promotion or a
festival. This gives Tanishq outlets a
unique appeal and consumers an opportunity to heighten their
shopping experience. One of Tanishq’s
more innovative ideas is to offer special schemes during
various festivals. Tanishq has also initiated a
loyalty program called the Golden Harvest Savings Scheme,
which offers buyers the benefit of getting
more jewellery than what they have paid for. The scheme
allows consumers to planfuture purchases in
advance and pay for them in easy installments.
In sync with the Tata brand values, Tanishq is synonymous
with trust and purity in a category that is
fraught with questionable practices. Being a member of the
Tata family has meant that it can leverage
the group’s well-earned reputation for ethics and values in
a business where such attributes are critical
to win the trust of consumers. Tanishq consumers can afford
to take issues such as purity for granted,
and they know they can depend upon the brand to deliver
quality products all the time. The brand’s
winning virtues in design and overall quality have shaped a
class of discerning buyers who seek the
best in jewellery products.
Leadership and innovation are two of the other brand
features that Tanishq is consistently identified
with. These values have helped the brand bond with its
consumers like no other Indian jewellery
retailer.
Tanishq has deliberately moved away from mass-media
advertising and focused on store promotions to
make the brand more accessible to consumers. This has been
done to correct the consumer perception
that the brand is highly priced and only meant for the rich
and the famous. This approach has also
ensured that Tanishq’s promotional approach is product-led.
Read the caselet carefully and answer the following
questions:
Discuss the various
bases or criteria for segmenting consumer markets. Explain Tanishq’s
segmentation and positioning strategy.
What are Tanishq’s
key brand values or brand strengths? Explain.
What are the strength
and weakness of Tanisq
CASE-6 (16 Marks)
A recent survey on washing machines conducted among
housewives showed that most of them
belonged to middle income households, were generally
employed had growing up children and
preferred a compact, easy-to-use, top-loading washing
machine. They wanted a machine that gets
clothes clean and comes with a trouble-free service. If you
were the marketer of Whirlpool's washing
machine, how will you use this information for planning your
marketing strategy?
CASE-7 (16 Marks)
A company wishes to launch a new tooth paste which can
effectively prevent cavities and tooth decay
as well make teeth whiter. But the tooth paste markets is
highly crowed with multiple brands. Design a
questionnaire to identify product attributes important to
consumers and consumer purchase behaviour.
Also decide the target group on whom the questionnaire can
be executed.
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