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7 Read the case given below and answer the questions given at the end.

Ms. Subhashini had graduated with a degree in foreign languages. As the

child of a military family, she had visited many parts of the world and had
traveled extensively in Europe. Despite these broadening experiences, she
had never given much thought to a career until her recent divorce from Mr.
Srinivas.

Needing to provide her own income, Ms. Subhashini began to look for work.
After a fairly intense but unsuccessful search for a job related to her foreign
language degree, she began to evaluate her other skills. She had become a
proficient typist in college and decided to look into secretarial work. Although
she still wanted a career utilizing her foreign language skills, she felt that the
immediate financial pressures would be eased in a temporary secretarial
position.

Within a short period of time, she was hired as a clerk/typist in a typing pool at
Life Insurance Company. Six months later, she became the top typist in the
pool and was assigned as secretary to Mrs. Arora, manager of marketing
research. She was pleased to get out of the pool and to get a job that had
more variety in the tasks to perform. Besides, she also got a nice raise in pay.

Everything seemed to proceed will for the next nine months. Mrs. Arora was
pleased with Subhashini’s work, and she seemed happy with her work.
Subhashini applied for a few other more professional jobs in other areas
during this time. However, each time her application was rejected for lack of
related education and/or experience in the area.

Over the next few months, Arora noticed changes in Subhashini. She did not
always dress as neatly as she had in the past, she was occasionally late for
work, some of her lunches extended to two hours, and most of her productive
work was done in the morning hours. Arora did not wish to say anything
because Subhashini had been doing an excellent job and her job tasks still
were being accomplished on time. However, Subhashini’s job behavior
continued to worsen. She began to be absent frequently on Mondays or
Fridays. The two-hour lunch periods became standard, and her work
performance began to deteriorate. In addition, Arora began to suspect that
Subhashini was drinking heavily, due to her appearance some mornings and
behavior after her two-hour lunches.
Arora decided that she must confront Subhashini with the problem. However,
she wanted to find a way to help her without losing a valuable employee.
Before she could set up a meeting, Subhashini burst through her door after
lunch one day and said :

“I want to talk to you Mrs. Arora.”

“That’s fine,” Arora replied, “ Shall we set a convenient time?”

“No ! I want to talk now.”

“OK, why don’t you sit down and let’s talk?”

Arora noticed that Subhashini was slurring her words slightly and she was not
too steady.

“Mrs. Arora, I need some vacation time.”

“I’m sure we can work that out. You’ve been with the company for over a year
and have two weeks’ vacation coming.”

“No, you don’t understand. I want to start it tomorrow.”

“But, Subhashini, we need to plan to get a temporary replacement. We can’t

just let your job go for two weeks.”

“Why not? Anyway anyone with an IQ above 50 can do my job. Besides, I

need the time off.”

“Subhashini, are you sure you are all right?”

“Yes, I just need some time away from the job.”

Arora decided to let Subhashini have the vacation, which would allow her
some time to decide what to do about the situation.

Arora thought about the situation the next couple of days. It was possible that
Subhashini was an alcoholic. Hoever, she also seemed to have a negative
reaction to her job. Maybe Subhashini was bored with her job. She did not
have the experience or job skills to move to a different type of job at present.
Arora decided to meet with the Personnel Manager and get some help
developing her options to deal with Subhashini’s problem.

Questions :

1. What is the problem in your opinion? Elaborate.

2. Assume that you are the Personnel Manager. What are the alternatives
available with Mrs. Arora?
3. What do you consider the best alternative? Why?

8. Please read the case given and answer the questions that follow:

Ceylon Fertilizer is a urea-manufacturing unit having a capacity of 500 tonnes

per day. The total work force of the plant is around 2,000. Being a self-
contained plant, it has its own workshop in order to take care of regular
maintenance work. The workshop functions in two shifts a day under a shift in
charge for each shift who is in the cadre of AEE. The workers have been
grouped into two groups, i.e., Relay ‘A’ and ‘B’. The shift routine changes
once a week, Sunday being a weekly holiday. Besides the two shifts, there
are a group of people under a Senior AEE attending in general shift hours.

The Relay ‘A’, consisting of 18 workers is placed under the charge of Shri
Muthu who is a graduate in mechanical engineering. After undergoing training
for a period of six months in various divisions in fertilizer, he had acquired a
thorough knowledge of works to be undertaken by the Workshop. After being
as a Relay Supervisor for 3 years, he has been recently promoted to the post
of AEE, who is the shift in charge. When he joined the workshop, he found
that the tasks were done with application of thumb-rules and higher officers
had to be satisfied with such a quality of work.

Shri muthu, on witnessing this, started to instruct his workers in various

theoretical aspects of welding, machining etc., which he had studied in his
college. They all highly appreciated the skill and techniques he had taught.
The workers now learnt to do things in a better way. Thus, he gained the
confidence of workers. As he was able to finish his work in time and in a better
way than Relay ‘B’, more work orders were allotted to his group. A few
workers in his group started to grumble and the Foreman came and told Mr.
Muthu that the “other relay workers do not have much work-load and our
workers too do not want to strain much and they are murmuring over getting
more work”. Mr. Muthu, however, convinced the Foreman that extra work
should be taken as a credit and recognition, and they should do their best.
After this had happened some workers even tried to get transferred to the
other-Relay.

One morning, Mr. Muthu was making arrangements for the work to be taken
and was giving instructions to his the work to be taken and was giving
instructions to his foreman. Turner, Kali, came and told him, “Sir, father of
Fitter Sami expired last night and we all want to go and attend the funeral,”
and added, “It is customary for the men in workshop to attend such funerals
and the shift-incharge has to arrange a lorry or any conveyance for the people
to go to Sami’s house, which is nearly eight kms. From the plant.” Since
Muthu joined the company, this was first such instance occurring and as he
had to finish some urgent work orders, he told the worker Kali, “You all need
not go to the funeral. I can, however, permit a few of you as representatives of
Relay ‘A’ to go and offer condolences to Sami’s family.” Further, he regretted
that he would not make any arrangements for conveyance. This statement
created a turbulence among the workers and a group of workers stopped the
work and started demanding that they be allowed to attend the funeral or else
they wanted to stop work in the coming shifts. Foreman hurried up to AEE Mr.
Muthu to explain the turbulent situation in the shop- floor.

On hearing this, Muthu told his Foreman, “I have given you an alternative and
I have already told the urgency of work and I am going to allocate the work as
per planning schedule. If the work is not done, I may have to take action
against you.” Then the group of workers started discussing among themselves
as to what to do next. A turner came forth and said, “You are not considerate
enough to human matters and if you are still adamant we may prefer half-a-
day wages-cut as we must go and attend the funeral. Anyhow you have to
make arrangements for our conveyance.” Mr. Muthu at this instance noted
that a small group, who were usually complaining about the workload and
were murmuring, were keenly interested in the affair. He decided to face the
situation as a matter of prestige. He decided to face the situation as a matter
of prestige. He issued the gate pass t whoever wished to go, still emphasizing
that he would not arrange any conveyance. Nearly 25 per cent of the workers
remained and the others collected money from all for the funeral and went off.

On that day Mr. Muthu, could finish only a part of the work as planned and he
had to explain what had happened in his Relay, to his boss.

When he came the next morning, it was rumored that only a few of the
workers attended the funeral and the others had gone to the cinema theatre
near the village. Mr. Muthu got irritated by the workers behavior and started
writing memos to those who had received the gate pass the previous day.
Some workers got annoyed by this action of Mr. Muthu and they approached
the union to intervene. The news had spread to other divisions and there was
an air there was an air of protest at all places in the Fertilizer Plants.

Questions
1. What are the dominant features of this case?
2. What is your view of the action taken by Mr. Muthu?
3. What are the weaknesses and strong points, as you consider, of Mr. Muthu
as a Manager?
4. How would you have tackled the situation, if you were Mr. Muthu?

7 Read the case carefully and answer the questions given at the end.

One afternoon in June 1972, Rao, industrial engineer of P.M.A. company, was
called to the office of his immediate superior V.R. Naik, the production
manager. Naik said, “Rao, I want to discuss a situation in the production
department. A lot of people feel that Govindan is not the right man for the
Assistant Superintendent’s position. The President and others have decided
that I have got to fire Govindan or at least move him out of production.
Everyone wants to fire Govindan, but I won’t do it to him. I was talking with
Bhadra this morning, and we decided that you might be able to make use of
Govindan in your department.”

Rao was surprised by both the information, and the proposal.

Naik concluded his comments with, “Rao I am asking you to take Govindan.
You can say ‘No’. But then he gets fired. I have told Govindan this. Also,
Govindan knows that if he goes with you he will take a pay cut. However, I
think you can make use of him both to your own and his satisfaction. You are,
anyway, carrying out an in-process quality control, and you might be able to
make good use of Govindan in view of his long technical experience of
production work. Think it over, and let me know by tomorrow.

Roa thought over the matter.

PMA company had been a successful enterprise until March 1972 at which
time it suffered a sharp decline of profits : sales had fallen off, and production
costs had risen. The President adopted three measures which he hoped
would improve the condition. First, by creating an Industrial Engineering
department for establishing work standards on all production operations, to
determine which manufacturing costs were out of line and where remedial
action should be taken. Rao, 28 years old, who had been with the company
for two years in the Purchasing department, was selected. Rao had B.E. and
MBA degrees to his credit. What he lacked in his business experience he
made up by his eagerness to learn. He was ambitious and liked by his
associates. He wanted a transfer from Purchasing to Production for better
opportunities for advancement.

Secondly, he consulted a Management Consultation firm to make a study of

the Production Department. They pointed out that the chain of command was
too long from Production Manager through Plant Superintendent through
Assistant Superintendent to Foremen. They recommended the elimination of
the position of Assistant Superintendent.

Thirdly, he enagaged an Industrial Psychologist to appraise all the

Supervisory Personnel.

Govindan had been with the Company for 20 years since its founding and
during this period had worked on every production operation, and his last 11
years had been in supervisory capacity. His manners were rough and
aggressive, he had little formal education. The Industrial Psychologist’s report
about Govindan contained the following points :

1. Evaluation for the position of Assistant Superintendent : Not good enough.

2. Capacity for good human relations in supervision : Will have friction

frequently.

3. Need for development counselling : Counselling greatly needed.

4. General evaluation : Govindan had a good ability profile. He suffers from a

sense of inferiority. He does not like the responsibility of making decisions. His
supervision is that of Autocratic type. Though he has the ability, as far as his
personality make-up is concerned, he is out of place in the present position.
Questions :

(a) What is the problem in the case? Explain.

(b) Explain Govindan’s behaviour and work experience vis-a-vis the
psychologist’s report.
(c) How do you see Naik’a suggestion to Rao? Give reasons.
(d) What are Rao’s considerations is taking a decision? What should he do?
Explain.

 Read carefully the case and answer the questions given at the end.

SARVODAYA STRUCTURALS LTD.

Sarvodaya Structural Limited was engaged in the fabrication o f heavy

structural. The company had six shops besides engineering, accounts,
personnel, sales, and administrative departments. It employed 7000 men. The
chief executive of the company was the General Manager.

In one of the shops employing 1000 men. 900 tons of structural were
fabricated every month. The day-to-day management of the shop was
entrusted to the Manager, who was assisted by the shop were Preparation.
Marking, and Finishing.

In the Marking and Finishing Sections, the work was supervised by two
Foremen each. The Preparation Section was under the direct supervision of
the Senior Foreman, who , in addition, planned and coordinated the work of all
the three sections. The Preparation Section was responsible for the collection
and classification of own and his satisfaction. You are anyway, carrying out an
in-process quality control, and you might be able to make good use of
Govindan in view of his long technical experience of production work. Think it
over, and let me know by tomorrow.

Rao thought over the matter.

PMA company had been a successful enterprise until March 1972 at which
time it suffered a sharp decline of profits: sales had fallen off, and production
costs had risen. The president adopted three measures which he hoped
would improve the condition. First, by creating an Industrial Engineering
department for establishing work standards on all production operations, to
determine which manufacturing costs were out of line and where remedial
action should be taken. Rao. 28 years old, who had been with the company
for two years in the Purchasing department, was selected. Rao had B.E. and
MBA degrees to his credit. What he lacked in his business experience he
made up by his eagerness to learn. He was ambitious and liked by his
associates. He wanted a transfer from. Purchasing to Production for better
opportunities for advancement.

Secondly, he consulted a Management Consultation firm to make a study of

the Production Department. They pointed out that the chain of command was
too long from Production Manager through Plant Superintendent through
Assistant Superintendent to Foremen. They recommended the elimination of
the position of Assistant Superintendent.

Thirdly, he engaged an Industrial Psychologist to appraise all the Supervisory

Personnel.

Govindan had been with the Company for 20 years since its founding and
during this period had worked on every production operation, and his last 11
years had been in supervisory capacity. His manners were rough and
aggressive, he had little formal education. The industrial Psychologist’s report
about Govindan contained the following points:

(i) Evaluation for the position of Assistant Superintendent: Not good enough.
(ii) Capacity for good human relations in supervision: Will have friction
frequently.
(iii) Need for development counseling; Counseling greatly needed.
(iv) General evaluation: Govindan had a good ability profile. He suffers from a
sense of inferiority. He does not like the responsibility of making decisions. His
supervision is that of Autocratic type. Though he has the ability, as far as his
personality make-up is concerned, he is out of place in the present position.

Questions:

1. What is the problem in the case? Explain.

2. Explain Govindan’s behaviour and work experience vis-à-vis the
psychologist’s report.
3. How do you see Naik’s suggestion to Rao? Give reasons.
4. What are Rao’s considerations is taking a decision? What should he do?
Explain.
 Read the case and answer th question given at the end.

The ABC Manufacturing Company is a plant under the direction of a plant

manager who is known as a strict disciplinarian. One day a strict
disciplinarian. One day a foreman noticed Bhola,one of the workers, at the
time-clock punching out two cards- his own and the card of Nathu, a fellow
worker. Since it was the rule of the company that each man must punch out
his own card, the foreman asked Bhola to accompany him to the Personnel
Director,who interpreted the incident as a direct violation of a rule and gave
immediate notice of discharge to both workers.

The two workers came to see the Personnel Director on the following day.
Nathu claimed innocence on the ground that he had not asked for his card to
be punched and did not know at the time that it was being punched. He had
been offered a ride by a frienf who could not wait for him to go through the
punch-out procedure. Nathu was worried about his wife who was ill at home
and was anxious to reach home and was anxious to reach home as quickly as
possible. He planned to take his card to the foreman the next morning for
reintatement, a provision sometimes exercised in such cases.

These circumstances were verified by Bhola. He claimed that he had punched

Nathu’s card the same time he punched his own, not being conscious of any
wrongdoing.

The Personnel Director was inclined to believe the story of the two men but
did not feel he could reverse the action taken. He recognized that these men
were good workers and had good records prior to this incident. Nevertheless,
they had violated a rule for which the penalty was immediate discharge. He
also reminded them that it was the policy of the company to enforce the rules
without exception.

A few days later the Personnel Director, the plant Manager, and the Sales
Manager sat together at lunch. The Sales Manager reported that he was
faced with the necessity of notifying one of their best customers that his order
must be delayed because of the inability of one department to conform to
schedule. The department in question was the one from which the two
workers had been discharged. Not only had men to date, but disgruntlement
over the incident had led to significant decline in the cooperation of other
workers.
The Personnel Director and the Sales Manager took the position that the
discharge of these two valuable men could have been avoided if there had
been provision for considering the incident was costly to the company in the
possible loss of a costomer,in the dissatisfaction within the employee group,
and in the time and money that would be involved in recruiting and training
replacements.

The Plant Manager could not agree with this point of view. “ We must have
rules if we are to have efficiency; and the rules are no good unless we enforce
them. Further more, if we start considering all these variations in
circumstances, we start considering all these variations in circumstances, we
will find ourselves loaded down with everybody thinking he is an exception.”
He admitted that the grievances were frequent but countered with the point
that they could be of little consequence if the contract agreed to by the union
was followed to the letter.

Questions

1 Place yourself in the position of the Personnel Director in this situation.

Which of the following courses of the information which he has available at the
time of the decision?
(a) Would you have discharged both men?
(b) Would you have discharged Bhola only?
(c) Would you have discharged Nathu only?
(d) Would you have discharged neither of them?

Justify your choice of decision.

2 What policy and procedural changes would you recommend for the handling
of future cases of this type?

Read the case and answer th question given at the end.

The company Ross was founded in the name of its president, Michael Ross,
about twelve years ago. Mr. Ross had developed a highly sensitive
equipment, which instantly found use in defense and civilian production fields.
As a consequence, the company grew very rapidly. It had fifteen employees at
the beginning. After ten years of its successful operation the strength of the
employees increased to 1,000.

As of today, the company’s top management consists of Mr. Ross’s earliest

associates, many of whom are around fifty years of age. They are a highly
self-confident group who have worked together closely over the years.
However, trouble started when the company had to face severe competition
from other companies. This led to considerable decline in profit margins. Also
the cost of manufacturing rose too high, and there was much confusion and
divided responsibility in management. Most decisions were made by the top
management group and there was little delegation of authority. Many recently
hired executives complained that their ideas were given very little
consideration by the top management and that there was a little or no chance
for their upgradation. As a consequence, some of the recently hired
executives had started leaving the company to join elsewhere.

Questions

(a) What are the dominant characteristics of this organization?

(b) What sort of strategy for change management do you suggest for this
company?

(c) As a professional manager what would be your role in introducing

organisation development activities?

(d) What type of leadership style will be most suitable for this organization and
why?

One afternoon in June 1972, Seth, the industrial engineer of ABC Company,
was called to the office of his immediate superior Kapil, the production
manager. Kapil said, "Seth. I want to discuss a situation in the production
department. A lot of people feel that Joshi is not the right man for the
Assistant Superintendent’s position. The President and others have decided
that I
have got to fire Joshi or at least move him out of production. Everyone wants
to fire Joshi, but I won't do it to him. I was talking with Bhai this morning and
we decided that you might be able to make use of Joshi in your department.

Seth was surprised by both the information, and the proposal.

Kapil concluded his comments with “Seth I am asking you to take Joshi. You
can say ‘No’. But then he gets fired. I have told Joshi this. Also, Joshi knows
that if he goes with you he will take a pay cut. However, I think you can make
use of him both to your own and his satisfaction. You are anyway, carrying our
an in-process quality control, and you might be able to make good use of
Joshi in view of his long technical experience of production work. Think it over,
and let me know by tomorrow.

Seth thought over the matter.

ABC Company had been a successful enterprise until March 1972 at which
time it suffered a sharp decline of profits: sales had fallen off, and production
costs had risen. The President adopted three measures, which he hoped
would improve the condition. First, by creating an Industrial Engineering
department for establishing work standards on all production operations, to
determine which manufacturing costs were out of line and where remedial
action should be taken. Seth, 28 years old, who had been with the company
for two years in the Purchasing department, was selected Seth had B.E and
M.B.A. degrees to his credit. What he lacked in his business experience he
made up by his eagerness to learn. He was ambitious and liked by his
associates. He wanted a transfer from Purchasing to Production for better
opportunities for advancement.

Secondly, he consulted a Management Consultation firm to make a study of

the Production Department. They pointed out that the chain of command was
too long from Production Manager through Plant Superintendent through
Assistant Superintendent to Foremen. They recommended the elimination of
the position of Assistant Superintendent.

Thirdly, he engaged an Industrial Psychologist to appraise all the Supervisory

Personnel.

Joshi had been with the Company for 20 years since its founding, and during
this period had worked on every production operation, and his last 11 years
had been in supervisory capacity. His manners were rough and aggressive,
and he had little formal education. The Industrial Psychologist’s report about
Joshi contained the following points:

(i) Evaluation for the position of Assistant Superintendent, Not good enough.
(ii) Capacity for good human relations in supervision: Will have friction
frequently.
(iii) Need for development counseling: Counseling greatly needed.
(iv) General evaluation: Joshi had a good ability profile. He suffers from a
sense of inferiority. He does not like the responsibility of making decisions. His
supervision is that of autocratic type. Though he has the ability, as far as his
personality makes–up is concerned, he is out of place in the present position.

Questions:

(a) What is the core problem in the case? Explain.

(b) Explain Joshi's behaviour and works experience vis–a–vis the psychologist
report.
(c) How do you see Kapil’s suggestion to Seth? Give reasons.
(d) What are Seth's considerations in taking a decision? What should he do?
Explain.

Ceylon Fertilizer is a urea-manufacturing unit having a capacity of 500 tonnes

per day. The total work force of the plant is around 2,000. Being a self–
contained plant, it has ifs own workshop in order to take care of regular
maintenance work. The workshop functions in two shifts a day under a shift
incharge for each shift who is in the cadre of AEE. The workers have been
grouped into two groups, i.e., Relay 'A' and 'B'. The shift routine changes once
a week, Sunday being the weekly holiday. Besides the two shifts, there are a
group of people under a Senior AEE attending in general shift hours.

The Relay 'A', consisting of 18 workers is placed under the charge of Shri
Muthu who is a graduate in mechanical engineering. After undergoing training
for a period of six months in various divisions in fertilizers, he had acquired a
thorough knowledge of works to be undertaken by the Workshop. After being
a Relay Supervisor for 3 years, he has been recently promoted to the post of
AEE, who is the shift Incharge. When he joined the workshop, he found that
the tasks were done with the application of thumb–rules and higher officers
had to be satisfied with such a quality of work.

Shri Muthu, on witnessing this, started to instruct his workers in various

theoretical aspects of welding, machining etc. which he had studied in his
college. They all highly appreciated the skill and techniques he had taught.
The workers now learnt to do things in a better way. Thus, he gained the
confidence of workers. As he was able to finish his work in time and in a better
way than Relay 'B', more work orders were allotted to his group. A few
workers in this group started to grumble and one of the Foremen came and
told Mr. Muthu that the "other relay workers do not have much work load and
our workers too do not want to strain much and they are murmuring over
getting more work." Muthu, however, convinced the Foreman that extra work
should be taken as a credit and recognition, and they should do their best.
Alter this had happened some workers even tried to get transferred to the
other Relay.

One morning, Muthu was making arrangements for the work to be taken and
was giving instructions to his foreman. Turner, Kali, came and told him, "Sir,
father of Fitter Sami expired last night and we all want to go and attend the
funeral" and added "it is customary for the men in the workshop to attend such
funerals and the shift-incharge has to arrange a lorry or any conveyance for
the people to go to Sami's house, which is nearing eight km from the Plant.
Since Muthu joined the company, this was the first such instance occurring
and as he had to finish some urgent work orders. He told the worker Kali,
"You all need not go to the funeral. I can, however, permit a few of you as
representatives of Relay 'A' to go and offer condolences to Sami's family.”
Further, he regretted that he would not make any arrangements for
conveyance, This statement created a turbulence among the workers and a
group of workers stopped the work and started demanding that they be
allowed to attend the funeral or else they wanted to stop work in the coming
shifts. The Foreman hurried up to AEE, Mr. Muthu to explain the turbulent
situation on the
Shop–floor.

On hearing this, Muthu told his Foreman, I have given you an alternative and I
have already told the urgency of work and I am going to allocate the work as
per planning schedule. If the work is not done, l may have to take action
against you.” Then the group of workers started discussing among themselves
as to what to do next. A Turner came forth and said, "You are not considerate
enough on human matters and if you are still adamant we may prefer half-a-
day wages cut as we must go and attend the funeral. Anyhow you have to
make arrangements for our conveyance." Muthu ai this instance noted that a
small group, who were usually complaining about the workload and were
murmuring, were keenly interested in the affair. He decided to face the
situation as a matter of prestige. He issued the gate pass to whoever wished
to go, still emphasizing that he would not arrange any conveyance. Nearly 25
per cent of the workers remained and the others collected money from all for
the funeral and went off.

On that day, Muthu could finish only a part of the work as planned and he had
to explain what had happened in his Relay, to his boss.

When he came the next morning, it was rumored that only a few of the
workers attended the funeral and the others had gone to the cinema theatre
near the village. Muthu got irritated by the workers' behaviour and started
writing memos to those who had received the gate pass the previous day.
Some workers got annoyed by this action of Muthu and they approached the
union to intervene. The news had spread to other divisions and there was an
air of protest at all places in the Fertilizer Plant.

Questions:

(a) What is your view of the action taken by Mr. Muthu?

(b) What are the weakness and strong points, as you consider, of Mr. Muthu
as a Manager?
(c) How would you have tackled the situation, if you were Mr. Muthu?

Mr. Banerjee is the Chief Executive of a medium sized pharmaceutical firm in

Calcutta. He holds a Ph.D. in Pharmacy. However, he has not been involved
in research and development of new products for two decades. Though
turnover is not a problem for the company, Mr. Banerjee and his senior
colleagues noticed that the workers on hourly basis are not working upto their
full potential. It is a well – known fact that they filled their days with
unnecessary and unproductive activities and worked only for the sake of a pay
cheque. In the recent past the situation has become quite alarming as the
organization began to crumble under the weight of uneconomical effort. The
situation demanded immediate managerial attention and prompt rectificational
measures. Mr. Banerjee knew very well that the only way to progress and
prosper is to motivate workers to peak performance through various incentive
plans.

One fine morning, Mr. Banerjee contacted the Personnel Manager and
enquired: "What is the problem with the workers on hourly basis? The wage
bill shows that we pay them the highest in the industry. Our working conditions
are fine. Our fringe benefits are excellent. Still these workers are not
motivated. What do they require really?" The personnel Manager gave the
following reply: "l have already informed you a number of times, that money,
working conditions and benefits are not enough. Other things are equally
important. One of the workers in that group recently gave me a clue as to why
more and more workers are joining the bandwagon of non-performers'. He felt
bad that hard work and efficiency go unnoticed and unrewarded in our
organization. Our promotions and benefit plans are tied to length of service.
Even the lazy workers, accordingly, enjoy all the benefits in the organization.
Which, in fact, according to the worker, should go to only those who work
hard." Mr. Banerjee then wanted the personnel Manager to look into the
problem more closely and find out a solution to the problems of workers on
hourly basis.

Questions:

(a) What is the key problem in the case? What probably may be the "other
things" which the personnel Manger is pointing out to Mr. Banerjee?
(b) Discuss the problem of motivation in this case, relating to Herzberg's
theory.
(c) What would be your recommendations as personnel Manager to tackle the
problem in the organization?

MS-2 Management of Human Resources

Question Papers

. Please read the following two cases and answer the questions given at the
end of each.

(A) Case Study

Mr. Ramchandran is the Chief Executive of ABC Limited Recently, it was

decided by the Board ot Directors that it would be profitable fot the corporation
to set up a separate Marketing Department. Mr. Ramchandran has been
directed to pick up a person who he feels is capable of heading the
departrnenl. and then puting this person in charge of getting the department
on its feet. After considering a number of good men Mr. Ramchandran has
narrowed the field down to two possible choices : Rajesh Mehta and Pramod
Kumar.

Rajesh Mehta has a good track record with the company. He was hired eight
years ago, and through the years he has shown a good deal of drive and
initiative in all of his endeavours. He is an aggressive young man, and has
received the nickname of 'go-getter' in his department. Although Mehta seems
to be more concerned at times with ends rather than means,'he is very
efficient and is considered a good leader by those who work under him. As
one worker stated. "Although he can get rough with you at times, you always
know where you stand with him, and when you have done a good job, he lets
you know it." Mehta is also credited with accepting full responsibility, in all
cases, and making quick decisions when action is called for.

Pramod Kumar has been with the company for eleven years. He is well liked
by all in his department and his work is first rate. Kumar's leadership style
differs from Mehta's in that Kumar is not as aggressive and quick to act as
Mehta. Before Kumar makes a decision, he generally consults others who he
feels can contribute further information on a given subject. This often includes
those who work under him. Those who work under Kumar consider him a
good leader, and state that the atmosphere of participation produced by
Kumar really encourages their utmost individual output while on the job. This
can be seen by the production increase which soon occurred when Kumar
became the head of his work force.

Questions

(a) If you were Mr Ramchandran whom would you select as the head of the
Marketing Deptt. ? why ?

(b) Will you give any weightage to the length of service in the organization ?
Why ?

(B) Case Study

Raghav Chemicals Ltd. has planned for computerization of nearly 50 per cent
of the production operations and control. Ii has taken care of all resources in
the computerization plan including human resources- The present inventory of
human resources and future requirements of the production department were
specified as given hereunder.

Category of Human Resources Present lnventory Requirements after Computerisat

Chemical engineers (Operation) 15 8

Chemical engineers (Maintenance and control) 10 6

Mechanical engineers (Maintenance) 2 2

Snpervisors 10 2
 Category of Human Resources Present lnventory Requirements after Computerisat

Operators 30 10

Quality conirollers 5 1

  72 29

The human resource planners suggested the redeployment of chemical

engineers in their newly started sister concern, i.e., Laxman Paper Mills Ltd.,
and retrench surplus of employees of all other categories. They also
recommended to the management that there was no need for further
recruitment or for any other action plan.

The computerization was over by the end of 1998. When the management
wanted to start the production on the newly computerized process, it was
shocked to note that not many employees in the production department were
suitable to the new jobs and the information supplied by the human resource
planners in this regard did not match with the reality.

Questions :

a) Identify the problem in this case

b) To what extent are the human resource planners responsible for the
present state of affairs ?

c) What should the management do now to deal with the problem taking into
account both the short-term and long term perspective ?

 Read the case carefully and answer the questions at the end.

Vishal Industries Ltd., is a medium sized engineering factory employing 250

employees. The Factory Manager advised the Personnel Manager of the
company to select a right man to fill up the vacancy of a "Time-Keeper". The
Personnel Manager inserted an advertisement for this post in prominent local
newspapers and received a large number of applications although specific job
description and job requirements were embodied in the advertisement. After
preliminary screening of applications, the Personnel Manager selected only 6
applications out of 197 and sent them "Application Blank" for collecting their
detailed information. On receipt of Applications and on further scrutiny, it was
observed that two candidates were age-bared, although they had a good
experience at their credit and one candidate had a suspicious personal life.
The Personnel Manager therefore selected only 3 candidates and sent them
call-letters for a personal interview on a stipulated date.

Only two candidates out of three appeared for the interview before the
Interview Panel consisting of three interviewers. The panel had therefore to
take a decision on selection, either of Mr. Tukaram Patil or Mr. Girish
Mahajan. The personal traits and merits of these two candidates are as
follows :

Mr. Tukaram Patil, a young man of 30 years, has worked for a year in the
Time Office of a reputed company. He is an exceptionally sociable, amicable
individual who enjoys mixing with employees. His verbal skills are average.
But he has a good degree of hardness. He can sit late in office and prepare
payrolls of employees and complete the checking of paysheets a day before
the actual date of payment. He does not demand extra remuneration or over-
time for sitting late hours in office. He is a good sportsman also and has
worked as a secretary of a sports club. A glaring weakness as revealed during
the interview is that Mr. Patil's memorv is not strong and he may forget a task
assigned to him. But he is straight forward and frankly accepts his limitations.

Mr. Girlsh Mahajan, is also a youth, aged 25, and has a good personality.
above average communication skills, but at times is "rough" in dealing with
people. His clerical and computational skills are excellent. He does not on his
own mix with people or take part in extra curricular activities. He joined a
textile mill as a clerk in the Time Office and was promoted to the post of
Assistant Time Keeper within a period of 5 years. He is against the principle of
sitting late in office. His sense of time keeping, punctuality is good and
regular. He feels that attendance of employees must be posted in the regular
register on the same day and paysheets must be kept ready on 1st of every
month and sent to A/c Department, for checking before 3rd inst. Similarly, he
prepares PF/ESI statements and returns in time and submits the same to
respective Government authorities in time. However, Mr. Girish Mahajan is
short tempered and at times he also had heated arguments with managerial
executives. He limits his existence to his working table and if anybody
unconnected with the rime-office work comes near his table, he loses his
temper.

Questions :
(a) In terms of overall capabilities and job requirements, whom will you
recommend out of the two candidates, in your capacity as a Personnel
Manager ?

(b) What are the criteria of your decision ?

(c) In case the other two members of the interview Panel differ from your
decision, how will you convince them ?

(d) As a Manager HR, what will you do to improve the interpersonal relations
in the organization ?

Please read the following two cases and answer the questions given at the
end of each.

A. Case Study - MANAGEMENT DEVELOPMENT

Any efforts and inputs to improve current or future management performance

by imparting knowledge, changing attitudes and enhancing skill is called
management development. It is an in-house activity and includes co-acting,
given professional inputs to increase knowledge and attempts to change
attitudes and enhance managerial skills. The aim of such programmes is to
improve the performance of the organization itself. The Management
Development process consists of (1) Assessing the organizational needs (2)
Appraising Manager's Performance (3) Developing Manager's performance by
sustained efforts.

"DELTA PRODUCTS''

Delta Products is a company manufacturing under one shed number of

products requiring for Housing and Building Construction Industry. The
products include hardware like door knobs, hinges, lock, tower bolts, sanitary
fittings and floor tiles. AII requirements of housing and building construction
industry are manufactured in different departments at its Bhopal plant. The
company wishes to produce and market top grade products. Mr. Chakravarty,
the Director of Operations has been on foreign tour for over three months to
see the manufacturing facilities at different plants world over Mr Chakavarty's
goal is to give to the industry, world class quality product at competitive rates
and prices. His ambition is to make DELTA the class one producer in this
activity in India. Mr. Chakravady is a highly qualified technocrat with excellent
background at engineering, general and marketing management. He had
however limited exposure to Human Resource Management. You are hired as
Manager of Human Resources. The supporting team of highly qualified
engineers, purchase managers and marketing managers are young and
almost all of them are in the age group of 25 to 28 and very enthusiastic. They
are excellent as individuals but lack the team spirit and work very hard to
excel in their respective specialized knowledge. Many problems have come
up for lack of communication, coordination, quality management and delivery
schedules. The plant maintenance is below average. The inventories are high
and the industrial relations poor as none of the managers had any exposure to
this subject.

You are required to make a comprehensive Management Development

Programme for Managers and Assistant Managers.

Questions :

a) How would you plan a programme for the young managers ?

b) How will you test the existing level of their skills, attitudes and team spirit ?
c) What methods of developmental training would you like to use and why ?

B. Case Study - APPRAISING PERFORMANCE

All progressive companies have some formal or informal appraising systems

for appraising the performance of their employees. Performance Appraisal is
defined as any procedure that involves assessing employees' performance
against set standards and, providing feedback to the employees assessed.

The aim is to motivate employees (a) to improve their performance (b)

encourage for better performance above par.

The reasons for performance appraisal are (1) For salary decisions, rewards,
promotion. {2) To review employee's work related behaviour with a view to
correcting any deficiencies. Appraisal should be central to career planning
process.

AMBER PHARMACEUTICALS

In a pharma company manufacturing and marking drugs and medicines, the

research staff has developed a number of new products and formulations
which are effective. But at the same time it has to meet severe competition
from stalwarts with foreign collaboration. Mr. Shah, the Vice President
Marketing has a very successful Pharma Marketing background. He has been
with the company for the past 4 years. Mr. Shah had made ambitious plans for
capturing sizeable share of market in the Gujarat State. The company being
medium sized, Mr. Shah had kept his marketing department and the
marketing team lean and trim. The field sales staff was given aggressive
targets and were virtually pushed to reach the respective targets. The field
staff worked to their best abilities to compete their respective targets. Mr.
Shah had himself been working hard almost 11- 12 hours a day.

There was no formal appraisal and reward system in the company. During last
5 years more than 60 Medical Representatives and the Area Supervisors had
left the company due to unsatisfactory increments and promotions. Those who
left the company were star workes. But Mr. Shah did not care for this high
turnover. He was over confident that he would be able to hire freshers and
also select candidates who were not happy with their remuneration in their
respective company. Mr. Shah had never communicated to the field sales
staff about their performance or reasons for not recognizing their outstanding
performance in a few cases. There was on the whole a great dissatisfaction
and good performers were leaving the company.

Questions:

(a) What do you perceive is the basic problem in 'AMBER' ?

(b) What are the steps you will take serially to correct the situation ?
(c) In the event of your suggesting a Performance Appraisal System
(i) How will you decide a suitable system of appraisal ?
(ii) Will your system include merit, rewards and promotions ?

MS-3 Economic and Social Environment

Question Papers
SECTION B

6. Given below are the policy initiatives on small-scale industries in 2002 -

2003 and the performance of small scale sector during the last decade. Go
through them carefully and answer the questions at the end.

Policy initiatives on small-scale industries in 2002 - 03

 Fifty one items were deserved in May 2002.
 In the Union Budget 2002 - 03, income-tax exemption was granted to
the income of the Credit Guarantee Fund Trust for Small Industries for 5
years.
 In the Union Budget 2002 - 03, the general SSI Excise Exemption
Scheme has been extended to air guns, air rifles and air pistols (not
covered under the Arms Act, 1959); articles of apparel, knitted or
crocheted, marble and Bengal lights.
 National Awards for scheduled commercial banks were constituted by
the Ministry of Small Scale Industries for best performance in terms of
lending to SSIs. The first ever Awards were given away in the 3rd SSI
Convention on August 28, 2002.
 A Biotechnology Cell has been created in the Ministry of SSI under the
Chairmanship of Development Commissioner (Small Scale Industries)
to facilitate the development and promotion of biotechnology-based
industries in the small scale sector.
 For technology upgradation and quality improvement in SSI sector, the
scope of the ongoing ISO 9000 reimbursement scheme has been
enlarged to include reimbursement of expenses for ISO 14001
Environment Standard with effect from October 28, 2002.
Questions: (a) Briefly discuss the implications of the policy initiatives taken on
small scale industries in 2002 - 03.

(b) Looking at the data, the exports in small scale sector are increasing, but
the SSI reservation in India is handicapping the development of efficient
economies of scale. Discuss.

(c) Discuss the ways and means to overcome the problems of the growth of
SSI sector in India.
MS-05 Management of Machines and
Materials Question Papers
The time and cost estimates of different activities of a project and their
precedence relationships are given below:

Overhead costs amount Rs. 1000 per week.

(i) Draw the network and show the critical path.

(ii) Crash the network to the minimum possible duration. What will the critical
activities be after such crashing?

A project has seven activities. The relevant data about these activities are
given below:

Activity Dependence Normal Crash Normal

duration duration cost (Rs.)
(days)

A -- 7 5 500

B A 4 2 400

C A 5 5 500

D A 6 4 800

E B, C 7 4 700
 F C, D 5 2 800

G E, F 6 4 800

i) Draw the network and find out the normal duration and minimum duration

ii) What is the percentage increase in cost to complete the project in 21 days?

2. a) i) Give some reasons why methods analysis are needed.

ii) If an average worker could be identified, what advantages would there be in

using that person for a time study? What are some reasons why an average
worker might not be studied?

b) Udhampur Distilleries ltd has for existing facilities - W, X, Y, Z. The details

of these facilities are given below. The company wants to locate a new facility
such that the total transportation cost is the minimum. Advise the
management of the company about the best possible location using the
simple median model. Also, find the total transportation cost.

Existing facility Annual Loads between F and new Cost of moving one unit Coordin
F Facility (Units) distance (Rs)

W 279 10 (2

X 473 10 (7

Y 350 10 (5

Z 266 10 (1

3. a) A battery wholesale company purchases batteries for Rs. 140, and it

costs Rs. 11 to proces an order. The company sells about 12000 of a
particular type of battery per year at uniform rate. the company is open 5 days
a week for 52 weeks per year. The order lead time is 3 days, and the
company wants to have an average of 2 days sales on hand as safety stock
when new order is scheduled to arrive. The holding cost is estimated to be 24
% of the item cost per year. Determine

i) EOQ
ii) Expected level of the maximum inventory.
iii) Reorder level
iv) Average inventory level
v) Average annual cost to hold inventory

b) The following table contains info concerning four jobs that are awaiting
processing at a work centre

Job job time (days) Due date (days)

A 14 20

B 10 16

C 7 15

D 6 17

Suppose the jobs using

i) Shortest processing time (SPT)

ii) Processing with due dates assume the list is by order of arrival

For each of the methods, determine the average job flow time, average
lateness and average number of jobs at the work centre. is one method
superior to the other. explain

4. a) i) Describe value anaysis. Why is purchasing department sometimes

helpful in value analysis programmes.

ii) Should the supplier with the highest quality-lowest price combination always
be selected over other. Explain.

b) Assume that an airline, a hotel, and a hospital have chosen quality for
differentiation. Identify two or more measures of quality for a firm in each of
these industries.

5 a) Discuss the issue of centralization versus decentralization of the

purchasing function.

b) Describe the 'integrated concept of material mangement' and state how it is

important in managing a big manufacturing company.
SECTION B

6. A construction project has 10 activities. :

Activity Immediate Predecessor Time (we

1 -- 4

2 1 2

3 1 4

4 1 3

5 2, 3 5

6 3 6

7 4 2

8 5 3

9 6,7 5

10 8,9 7

i) Draw the network and find out the normal duration and minimum duration

ii) Find the critical path?

iii) If activities 1 and 10 cannot be shortened, but activities 2 through 9 can be

shortened to a minimum of 1 week at a cost of Rs. 50000 per week, which
activities would you shorten to cut the project by four weeks?

7. Write short notes on any four of the following:

a) Cost of quality
b) Taxonomy of waste
c) VED analysis
d) Preventive maintenance
e) CRAFT
f) CAD/CAM
2. a) A ball bearing company is planning to install an additional plant which will
require leasing new equipment for a monthly payment of Rs. 60000. varibel
cost would be Rs. 20 per item and each item would retail for Rs. 70.

i) How many ball bearings must be sold in order to break even?

ii) What would be the profit or loss if 1000 items are sold in a mont?

iii) How many items must be sold to realize a profit of Rs. 40000?

b) Some Japanese forms have a policy of rotating their managers among

different managerial jobs. In contrast, Americal companies are more likely to
specialize in a certain area (e.g., finance or operations). Discuss the
advantages and disadvantages of each of these approaches. hich do you
prefer? Why?

3. a) Determine the optimum batch size for an item produced on a

manufacturing facility with the following data:

Consumption rate: 500 items/ month

Production rate: 1500 items/ month
Storage cost: Rs. 100 per unit / year
Setup charges per batch: Rs. 2000
Interest charges: Rs. 50 per unit per year
What is the break-up of annual item cost, and holding cost at the optimum?

b) Five jobs are to be run on two processes, all in th sequence of the first
process 1, then process 2. The duration of the operations is indicated in the
table below:

Job process 1 standing time (hours) process 2 varnish time (hou

A 2.25 1.25

B 2.00 2.25

C 1.00 2.00

D 2.50 2.00

E 1.75 1.75
Sequence the jobs according to the Johnson's rule.

4. a) Why is purchasing such an important part of materials management?

Also explain the reasons for involving the purchasing department in value
analysis.

b) Explain why quality should be better by following the "TQM" concept than in
a system that depends on final inspection. Give an example of how improving
quality can also increase productivity.

5 a) What are some changes a company may make in the way it operates so
that it will require less inventory?

b) Differentiate between wastivity and productivity. Explain whether reducing

wastivity and increasing productivity imply one and the same thing.

SECTION B

6. The R & D department is planning to bid on a large project for the

development of a new communication system for commercial planes. The
accompanying tale shows the activities, times and sequence required.

Activity Immediate Predecessor Time (we

A -- 3

B A 2

C A 4

D A 4

E B 6

F C, D 6

G D, F 2

H D 3

I E, G, H 3

i) Draw the network diagram

ii) Find the critical path?

iii) Suppose you want to shorten the completion time as much as possible,
and have the option of shortening any of all of B, C, D, and G each by two
weeks. Which would you shorten?

iv) What is the new critical path and earliest completion time?

7. Write short notes on any four of the following:

a) Operating characterists curve
b) Zero defects
c) Standardisation and codification
d) Delphi technique
e) Job enrichment
f) Assembly line balancing

7. A particular city is trying to find the best location for a master solid waste
disposal station. At present four substations are located at the following co-
ordinate locations. Station 1 (4, 12), station 2 (65, 4), station 3 (11, 9), station
4 (1, 13).

The number of loads hauled monthly to the master station will be 300, 200,
350, 400 from station 1, 2, 3, and 4 respectively. Use the simple median
model to find the best location.

MS-06 Marketing For Managers Question

Papers

Read the case given below and answer the questions given at the end.

An electronic gadgets manufacturing firm wanted to market in India a small,

hand-held electronic instrument for measuring blood pressure at home. The
price of the instrument was fixed at around Rs. 3000 a piece. Being a
specialty product, it was perceived to have only a limited clientele. As the firm
had no established channel of distribution, it decided to take the direct-
marketing route. The product was unique in the sense that it offered the
convenience of constant monitoring of blood pressure at home, in office or
anywhere, without having to visit the doctor. It could save a lot of time and
inconvenience, especially for busy professionals, executives, businessmen
and all those who had a hectic work schedule. Since it was a relatively
expensive product, senior executives, professionals and businessmen above
45 years of age, having an income of more than Rs. 15,000 per month were
expected to be the prospective buyers. The firm adopted the following
procedure for identifying and enlisting prospects.

In order to prepare a cold list, an advertisement of the product, along with a

coupon, was released in two leading business newspapers in Bombay.
Interested individuals were asked to fill up the printed coupon and send it to
the firm within 10 days to get a free booklet on management of blood
pressure. Personal particulars relevant to identifying the ‘qualifying prospects’
Such as income, age, profession, residential address and details of any
health-related problem were to be filled in the coupon. A majority of the people
who responded were found to be suffering from blood pressure, obesity or
heart-related problems. A cold list of about 5,000 individuals was generated
on the basis of filled-in coupons. This list was further scrutinized and names of
individuals below 40 years of age and those who did not fulfil the income
criteria were dropped, as were the names of apparently non-serious
respondents who might have sent the coupon more out of curiosity. The
residual list of about 3,500 respondents was treated as the hot list.

Another alternative to this newspaper ad approach, as suggested by the

research agency was to obtain a list of credit card holders from reputed banks
such as ANZ Grindlays Bank, Citibank, Canara Bank, State Bank of India and
Bank of Baroda. The firm could then have sorted out the names of card
holders who were above the age of 40 and occupied senior executive
positions in private or public organizations. This would have formed the cold
list. Next, the firm could have sent a brochure and a personal letter to them
offering to arrange a free demonstration of the product at their residences. All
those who responded would have formed the hot list. However, this approach
was not taken due to some logistic problems. The respondents were then
clustered into different segments on the basis of their health status : those
who had only mild blood pressure but no other problem; those suffering from
obesity and blood pressure both; those suffering from blood pressure and
some cardiac problem; those who had blood pressure and diabetes with or
without some cardiac problem; and so on. This database of all the listed
people with their detailed health profiles helped the firm in identifying specific
needs of the respondents.

Questions (a) What elements of promotion mix would be more appropriate for
the company to market blood pressure instruments, and why?

(b) What should be the long run promotional strategy for the company?

Please read the case given and answer the questions that follow:

For many years McDonald's enjoyed worldwide success built on a few well-
known, highly standard conditions. The company with the Golden Arches
served a simple menu - hamburgers, french fries, and milkshakes orsoft
drinks. The food was priced low, its quality was consistent, and it was served
speedily from establishments that all looked alike and were extremely clean.

In recent years, however, McDonald's has seen its growth rate slow down and
its dominant market position slip. Why? The changes been occuring in the
company's external environment.

We will start with the population picture. Foir many years McDonals's main
customer group was young couples with several kids. Today, people are
marrying at a much later age and families have fewer children, so Mc Donald's
traditional customer base is eroding. Then there are the cultural changes. Also
consumers have become more health conscious. let's face it - burgers, fries,
and shakes are not exactly at the top of dietitians menu recommendations
today.

Consumers want convenience. in the past they hopped in the car and drove to
McDonald's. Today they can pop something into the microwave oven or
phone domino's to have a pizza delivered. Another challenge came as
consumers became more concerned about physical environment. McDonald's
polystyrene hamburger packaging was attacked by people who demand the
sue of recycled and or/ biodegradable products. Paralleling all these
challenges were the growing number and effectiveness of competitors.

Questions

i) Identify and discuss the major environmental changes being faced by

McDonald's.
ii) What course of action should the company CEO pursue to regain its
dominant market position?
b) What king od distribution channel would you recommend for the following
products and why ?
i) Personal computers
ii) Industrial lubricant

Please read the case given and answer the questions that follow:

The furnishing limited is a small chain of distributors of good quality office

furniture, carpets, safes and cabinets. Within each category, the company
offers a wide variety of products, with a great many variations of each product
being offered. For example, the company currently offers some 4 different
designs of chairs and 23 varieties of office desks. The company keeps in
touch with advances made in the office furniture field worldwide and
introduces those products which are in keeping with the needs of the market
in terms of design, workmanship, value for money and technical
specifications.

Fine furnishing trades only in good quality furniture. Differences between its
products and cheaper, lower quality ones are well known to those who have
several years of experience in the business.

An important feature the company feels is the availability of a complete list of

components of the furniture system. This enables customers to add bits and
pieces of matching designs and colour in the furniture. Such components are
available for sale separately. Systems are maintained in stock by the
company for a number of years, and spare parts for chairs and other furniture
are always available.

The trade is currently witnessing a downturn due to recession. Fine furnishing

hasl also experienced the same over the past two years. In addition, it had to
trim its profit margins. Last year, it barely broke evenand this year it is heading
for a loss for the first time in the company's twenty year history.

Questions

i) Explain the term product-item, product-line and product mix in the context of
the above situation.

ii) Advice the company in relation to its product mix. How will your
recommendations affect the company's image?
Please read the case given and answer the questions that follow:

Hotel holiday Inn spends a large amount of money on a bonus programme for
frequent hotel guests, while the hilton corporation, a direct competitor spends
hardly a fifth of the amount spent by Holiday inn on it.

Hilton puts most of its marketing resources into nationwide print and television
advertisements, while holiday inn does little of either.

Traditionally, demandfor hotel rooms has outpaced supply. But now cities
have too many hotels; occupancy rates have come down and the room rates
have also come down.

Holiday inn believes that with its bonus programme, they can gather detailed
information about the frequent customers and they can be approached
through direct main, and also offer incentives like free meals, free stay in
hotels particularly where occupancy is low. Yet competitors such as Jilton are
of opinion that Holiday Inn is merely rewarding guests who would otherwise
also stay at Holiday Inn.

Questions

i) How is marketing a service different from marketing a good?

ii) What techniques Holiday inn should use to fill more rooms?

MS-07 Information Systems for Managers

Question Papers

Lance Eliot made the following comment in Al Expert (1994) "When you log on
to the network, a slew of agents might start watching. If you download a file
about plant life, a seed company agent might submit your name for a
company mailing. Besides sending junk nails, such spying agents could pick
up your habits and preferences and perhaps make assumptions about your
private life. It could note what days you get onto the system, how long you
stay on, and what part of the country you live in. Is this an invasion on your
privacy? Should legislation prevent such usage of intelligent agents? Perhaps
a network police (more intelligent agents) could enforce proper network
usage."

(a) Prepare arguments to support your perspective on this issue.

(b) Prepare counter arguments on the same issue.

7. Write short notes on :

(a) Digital Signatures - Future trends

(b) Genetic Algorithms
(c) Online Analytical Processing (OLAP)
(d) Garbage-in-garbage-out (GIGO)

MS-09 Managerial Economics Question

Papers

MS-10 Organisational Design,

Development and Change Question
Papers
6. Read the following case carefully and answer the questions given at
the end:

In 1995 Ford motor company announced a major reorganization called "Ford

2000". The idea, championed by chairman and CEO, Alex Trotman and vice
chairman Edward E. Hagenlacker, eliminated more than a dozen engineering
design centres around the world and consolidated them into only five- of
which four are in Dearborn, Michigan, and one in Europe. The one in Europe
was responsible for creating one basic design for small acres for the world
market and then marking minor modifications for local markets. For example,
the same template will be used in Europe, south america, and asia. The four
design centres in Dearborn will do the same for large front-wheel drive cars,
rear-wheel drive cars, pick up trucks, and commercial vehicles. The
consolidation effort requires that more than twenty-five housand salaries
employees relocate or at least report to new managers. Manufacturing and
assembly will still take place in plants around the world.

The purpose is to intgrate Ford's operations around the world and

revolutionize the way it designs and builds more than seventy lines of cars
and trucks, which it sells in more than two hundred markets. The goals are
reduced duplication of effort, increase volume purchasing, save more than
$4billion per year, and double profitability. All this for a company made #3.8
billion profit from automotive operations in 1995 and $ 5.3 billion overall.
Trotman continues to have the support of the Ford family, who still controls
40% of the voting stock in the company.

Part of the new plan is a top-secret strategic document that outlines every
new car and truck Ford will design, produce, and sell around the world
through 2003. The plan calls for reducing the basic design platforms from 24
to 16 and increasing the total number of models by 50%, while saving billions
of dollars. For example, the new 1996 Taurus serves as the platform for
several other models, both in the United states and around the world.

In structure, the system is really a matrix. rather than working in a functional

organization with traditional hierarchies and centralised decision making,
employees are assigned to a design centre, such as small cars, and then to a
group according to their specialities, such as drive trains. Mangers then
mediate the disputes that occur between the design centres and the
specialities. Employees will have to change their ways of doing their work as
they design cars and trucks to fit global markets rather than a single, relatively
homogenous one. Management knows that employees feel a great deal of
insecurity and uncertainity about the company and their jobs as they make the
shift. carrying the message to all employees has been a constant job for
Trotman and Hagenlacker simce the original announcement.

Management also knows that Ford tried similar design integration with their
"World Car" in the late 1970s, which failed primarily due to turf battles among
designers and engineers. The cars that resulted were rarely the cost savers
Ford hoped for, and were so dull in their design that no one bought them.
Trotman expects different results this time because of the consolidation of the
design centres, the new organziation structure, and because advances in
technology have made the inner working of cars so similar that only the outer,
visible portions of the casr need to be different to satisfy regional tastes.
By mid-1996, however, the reorganization was not going so well. The
transaction had left many employees still wondering whom they worked for
and with a feeling that everything was out of control. The culprit seems to
have been a reorganization of the reorganization! Trotman now plans to
reduce the number of design centres from 5 to 3. people are moving and
reporting relationships are changing once again. Group vice president jacques
A. Nasser, who may succeed Trotman by 1998 or so, has promised $1.1
billion in savings under the new system. Some have claimed that the "new"
reorganization really puts things back the way they were before the first
reorganization. However, there design centres is alot fewer than dozens that
existed before. But this second reorganization, before employees really got
settled into the first one, may have devastating effects. Suppliers and
employees do not know whom to contact to get questions answere or disputes
resolved. All they get on phone is voice mail, since everybody is in meetings
trying to work out the new reorganization. Top mangement has been relatively
successful through the years. They say that the organizations needs to evolve
to meet their ambitions goals and the competetion.

Questions

a) Describe the changes in structure that Ford expects from the Ford 2000.
b) How do you explain the continuing problem that employees are having with
adapting to the new structure of Ford 200?
c) Is a matrix structure the proper structure for Ford 2000?

Read the case given below and answer the questions given at the end.

The middle managers of a large firm were told by the corporate human
resources office that a group of consultants would be calling on them later in
the week. The purpose of the consultants’ visit would be to analyze
interfunctional relations throughout the firm. The consultants had been very
effective in using an OD intervention called team building. Their particular
approach used six steps. When their approach was explained to the
managers, a great deal of tension was relieved. They had initially thought that
team building was a lot of hocus-pocus, like sensitivity training, where people
attack each other and let out their aggressions by heaping abuse on those
they dislike. By the same token, these managers generally felt that perhaps
the consultants were not needed. One of them put it this way : “Now that we
understand what is involved in team building, we can go ahead and conduct
the sessions ourselves. All we have to do is to choose a manager who is liked
by everyone and put him or her in the role of the change agent/consultant.
After all, you really don’t need a high priced consultant to do this team-building
stuff. You just have to have a good feel for human nature.” The other
managers generally agreed. However, the corporate human resources
director turned down their suggestion. He hired the OD consultants to do the
team building.

Questions:

(a) Bring out the main features of this case.

(b) What is a team building approach to organization development? Do you

think the managers had an accurate view of this OD technique?

(c) Do you think that the managers had an accurate view of the role of
external consultants?

(d) What will be your plan of action in the situation?

SECTION B

7. Read the case given below and answer the questions given at the end.

Mr. Krishna Rao was utterly baffled. He took over office four months ago and
has since initiated several changes all of which are good. His main intentions
in making the changes were that the office should look more professional and
the employees should be facilitated to become productive without making
them work too hard. The office now indeed looks more spacious with new
layout, and in fact, his colleagues from the other departments who pass by,
comment on how nice and professional the office looked! Mr. Rao had put the
secretaries’ desks close to their bosses’ cabins so that they did not have to
walk up and down all the time. Previously, they were huddled together in the
secretaries’ pool, and whenever they had to take dictation - which was several
times a day - they had to walk quite a bit. He also purchased new calculating
machines for the department which are quick, efficient, and accurate, so that
the assistants now do their calculations without making mistakes. In fact, he
had just placed an order for a high-speed computer which would take away
the boredom and monotony of all the laborious human calculations and would
be a boon to all. Actually, once the computer is installed, the managers will
not have to be dependant on the lower level staff. Whatever statistics or
information the managers need, the computer will generate the data in no time
at all. And the computer manufacturer was going to offer free programming
sessions for all those who wanted to attend them. Manuals will also be made
available to all the staff. It was the best of all possible worlds for the entire
department and Mr. Rao could not understand why the staff were not more
enthusiastic and some actually seemed rather unhappy.

Questions:

(a) Identify the problems in this case.

(b) What kind of changes were prescribed by Mr. Rao and why?

(c) Discuss why the changes did not produce the desired results in this
situation.

(d) If you were Mr. Rao, how you would have handled the situation?

MS-11 Strategic Management Question

Papers
Read the case given below and answer the questions given at the end of the
case.

We are shivering in our paints, as we grope against new competition from

firms from USA and Korea. - A very senior L&T executive to the author at a
Management Development Programme at IIM (Ahmedabad) in 1993 The
competition we have faced till now is nothing is compared to what lies in store
for us. Till now, the period (post-liberalisotion) was one of learning and
assessment for the big global competitors

- Sudhakar Divokar Kulkarni, CEO. to the case author in April 1997.

In 1997 Larsen and Tubro (L&T), one of the largest engineering companies in
India (and one of the top five private sector companies) posted yet again a
growth rate of over 20 per cent. This happened for the fourth consecutive year
despite acute liquidity crisis in the market, political instability, and uncertainty
about execution of power projects of foreign companies (e.g. Enron), and so
no. Since last few years, L&T was becoming a lesson for companies
worldwide in managing explosive growth and developing internal capabilities
on a continuous basis. Simultaneously, it was setting new challenges for the
academics in defining core competencies and core capabilities. An
independent survey named L&T to be one of the best managed companies in
Asia and another by Business Toda, showed that the company was one of the
most transparent and a leader on the issue of corporate governance. During
1995-96 and 1996-97, the company achieved an incredible growth in sales of
nearly Rs. 1,000 crore per annum over the previous years, crossing the
landmark turnover of Rs. 5,000 crore in the process.

The Evolution
L & T was set up in 1938 as a partnership trading firm by two Danish
engineers, Henning Holck Larsen and Soren kristian Toubro, who had quit
their jobs. In 1946, it became a private limited company and by 1950 reached
the status of a public limited company. Table 1 gives the evolutionary picture
in brief. L&T presently has a shareholder base of nearly 1 million and
employee strength of over 24,000 As a company, this multi-dimensional
engineering giant is actually the nucleus of a group of companies involved in
building complexes, worksheets, offices and service outlets at different
locations all over India and abroad. Over the years, L&T has acquired a
commendable reputation for capabilities for executing engineering related
projects.

Table 1 L&T Business History: The Milestones

 1938 - Incorporation as a partnership firm

 1946 - Incorporation as a Private Ltd Co.
 I950 - L&T goes public Powai Works set up
 1961 - Audco India incorporated for manufacturing valves
 1962 - Retirement of Soren Toubro; EWAC Ltd. set up for manufacture
of welding alloys
 1963 - TENGL founded to manufacture crawler undercarriage parts for
caterpillars
 1969 - Agency business abolished, formation of L&T Bottle Closure
division
 1971 - L&T McNeil set up for manufacturing Presses for tyre industry
 1974 - Management Organization Structure and Management Planning
and Control System introduced
 L&T Bangalore Works commences production of hydraulic excavators
 1978 - Larsen retires. L&T Faridabad commences production of
switchgear
  1982 - ECC merged with L&T; L&T enters shipping business with two
ships
 1983 – L&T enters cement manufacturing with Awarpur plant
commencing production
 1987 – L&T enters computer hardware with floppy discs and printers;
L&T Gould for electronic test and measured instruments
 1988 – Cement capacity enhanced to 2.2 m tons per annum
 1989 – 90 L&T under DH Ambani (as chairman)
 1990 - 93 - Repeated takeover attempts by RIL
 1993 - 95 Series of strategic alliances and tie-ups resulting in formation
of L&T-Niro. L&T-Chiyoda, L&T Sargent & Lund9, L&T Finance, and so
on.

The Takeover Attempt

During 1991 - 93, as the country progressed towards liberalisation, the
company just emerged from a not-so-welcome takeover threat from the
powerful Ambanis of Reliance. The Ambanis were themselves embarking
upon massive expansion in chemicals and petrochemicals business, and L&T
would have provided a real and logical synergy in terms of executing turnkey
projects for construction, engineering, supplying machinery and of course,
offering suppliers credit (to the tune of Rs. 1.000 crore). Through protracted
investigation and litigation (in which the Reliance Industries Ltd. was found to
have collected forged proxies), the company somehow remained in the hands
of 'professionals'. The big question mark as posed by an article in the
Economic and Political weekly was "Where does L&T go from where it has
reached now?"

However, it was obvious that a total new mindset and working culture would
be required if L&T was to grow and remain competitive. In 1993 94, the
company started adopting the principles of Total Quality Management (TQM)
by becoming customer focused, reducing the costs and wastage, and adding
value at all stages for maximising customer satisfaction.

In 1994, Mr. S.D. Kulkarni took over as the CEO of L&T and confidently
promised that the company would reach its mission of being a Rs. 10,000
crore ($3 bn.) - company by the end of the century. He also declared that the
company would strive to maintain and develop leadership positions in all its
businesses or else it will quit. Simultaneously, zero retrenchment was
promised. The philosophy of TQM was embraced with added emphasis on
'customer delight', that is, delivering more value than expected by the
customer.
Vision, Core Values, and TQM
Infrastructure - being a key bottleneck for Indian industry - was identified as
the engine of Growth for the company's ambitious plans. But before that, the
company needed an ambition statement, which every employee could own
and share. A massive companywide exercise for finding out what the
company stood for and what its core values were was embarked upon. The
emergent statement though not sounding much different from several other
organisations vision, however, came to be owned and understood by almost
every employee because of the process of identifying the mission and peoples
involvement. The key elements of L&Ts vision f focussed towards a world
class company dedicated to:

 excellence and professionalism

 customer delight through service
 entrepreneurial leadership and creation of an organisation that is on the
path of continuously learning by fostering teamwork, trust, and care
 Community service and environmental protection.

Core Competencies
According to a senior executive, today the core competence of L&T lies in its
ability to synthesise, integrate and harmonise its diverse world-class
engineering, manufacturing, procurement, construction and fabrication skills
around turnkey projects (in core economic sectors) and people. This is made
possible through a world class vendor base and quality technological
alliances, excellent IT infrastructure (CAD,/CAM systems, PMIS etc.)
sophisticated fabrication facilities for plant and machinery in the core sector.

Business Leadership
L&T holds a leadership position in India in most of the areas in which it
operates. The first company to introduce hydraulic excavators in the country, it
still maintains its leadership status in this and in the vibratory compactor
segments. L&T's switchgear products enjoy a dominant position in Indian as
well as the international markets. It continues to be a leader in the
manufacture of Z-Line petrol pumps and its cement is considered to be of high
quality. L&T has pioneered the manufacture and supply of critical nuclear
reactors and space vehicles hardware in the country. It has to its credit many
firsts in the Indian industry - from the indigenously manufactured hydrocracker
reactor, naptha - run power plants, the world's largest curing press, to the first
vertical dairy in the country and so on.
With the Project and Construction business in the country growing at a fast
pace and expected to continue to do so with the country s emphasis on
infrastructure, both L&T ECC (Construction Group) and L&T s Projects (EPC)
businesses are being treated as thrust areas. The ECC construction group
has been responsible for construction landmarks both in India and abroad, for
instance, the Bahai house of worship in Delhi, an international airport terminal
in Abu Dhabi, bridges in Malaysia, hotels in Uzbekistan, and so on. Its major
projects have been building of cement plants for Grasim Industries, Gujarat
Ambuja Cements, and ACC Ltd., construction of bridges and railway tunnels
for the Konkan Railway project. In projects business, L&T EPC group
successfully executed orders from ONCC (for piping and oil platforms), Tata
Chemicals {for captive co generation power plant) and Gandhinagar Dairy. In
shipping and international business too, the company has made significant
progress to become one of the leading players in their line of business.

L&T has a long and enviable record of high-tech fabrication. The workshops in
Powai with CNC precision machines house large-size precision fabrication
facilities. Its major heavy engineering complex at Hazira also caters to such
needs. L&T's units and its links with globally reputed organisations have
contributed much in developing manufacturing excellence.

Decision-making at L&T
Over the years, the company has implemented its vision through various
approaches. Foremost is the emphasis on empowerment, teamwork, and
continuous training of employees. In terms of structure, the company has
decentralised decision-making, and according to Mr. Kulkarni, CEO, the
concept of Strategic Business Units (SBUs) is being actively encouraged. The
company is decentralised for all practical purposes. Budgets and allocations
are made at the beginning of the year and SBUs undertake the responsibility
for achieving the targets. Only in major decisions involving capacity
augmentation, business divestment, diversification, and so on does the CEO
personally involve himself. According to Mr. Kulkarni, "only through
empowerment and decentralised decision making can a highly diversified
company like L&T be managed". For example, though the decision to divest
the Dot Matrix Printers (DMPs) business was first proposed by the concerned
department, yet the decision was taken ai the MD/Board level as it agreed that
product and technological obsolescence and synergy of DMPs with other
businesses was indeed low.

The Culture of TQM

The TQM journey, initiated in 1993, has now taken firm roots in L&T. The
efforts put in training a large number of employees has resulted in the launch
of many quality improvement initiatives. A large number of employees have
participated in continuous improvement (Kaizen) and small group activities.
Several cross-functional teams regularly function in the areas of
manufacturing, design, marketing and services. L&T has created an
environment for increased empowerment to further improve customer
services. The TQM Awareness Programmes have also been extended to the
stockists and vendors to achieve improvement in the operations and customer
service. L&T strongly believe in the concept of internal customers. With TQM
knowledge spreading widely inside the company, employees have realised
that everybody in every department is a supplier to somebody in the
organisation if not directly to an outside customer. One employee says, "even
though it is difficult to oblige everybody, I believe that we should go a step
forward to understand the real requirements of the customer, which he himself
may not be fully aware of, and delight the customer through total quality and
service. Such an attitude should be our guiding force". A value strongly sought
to be inculcated in the employees is that people can confront competition
better by moving from a product-oriented philosophy to a customer-oriented
philosophy. For this, employees are being trained in multi skills, including
quality transactions and market engineering, besides product engineering.

With people being regarded as the 'prime movers', a strong HRD culture
pervades the organisation's personnel policies, and HRD systems are
designed to sustain motivation, encourage learning, and achieve higher levels
of quality and productivity through job involvement. The embracing of TQM
philosophy.and implementation of ISO 9000 systems by almost all divisions
has led people to work towards common goals with a customer oriented
approach.

Social Commitments
Corporate Citizenship The Mumbai Chamber presented the Good Corporate
Citizen Award for the year 1994 -95 to Larsen and Toubro Limited for its
contribution to Larsen and Toubro Limited for its contribution to the corporate
world, but more importantly for its conspicuous achievements in improving the
quality of life in the community.

Award for most Outstanding Concrete Structure

The ECC Division of L&T received the ICI-Mc-Bauchemie Award presented by
The Indian Concrete Institute for the most outstanding concrete structure for
the year 1995 - 96 for Sree Kanteerava Indoor Sports Complex is Bangalore.
The structure is considered to be an engineering marvel. The citation for the
award reads 'Sree Lanteerava Indoor Sports Complex is designed in the
shape of an ellipse using 120 'V' shaped precast folded plate elements. Each
element is 43 m long and weighs 55. t. The thickness of the plate is just 40
mm, but strengthened by ribs throughout its length. Since the folded plate
springs from the ring beam along the outer periphery and connected by the
compression ring at the crown, the entire roof is self supporting, providing an
unobstructed column-fee space of 119 m x 91 m with a playing arena of 65 m
x 45 min the centre.'

Environment Upgradation L&T has been showing its commitment towards

corporate citizenship. As one goes around the works and offices of L&T. one
experiences a soothing and refreshing ambience because of the rich foliage
and delightful floral blooms around these structures. L&T has undertaken
extensive tree plantation programme. Over three lakh trees were planted in
and around the factory in 1993-94 under the programme 'Trees for Life. The
villagers have been given grafted saplings of fruit-bearing trees and
encouraged to plant them. The success of this ongoing effort led to L&T being
selected by the Government of Maharashtra for the prestigious Vanashree
Award in 1990.

Contribution to Academics L&T set up L&T Institute of Technology, a

polytechnic in Mumbai. In a short period, it has come to be widely regarded as
one of the best training institutions of its kind in the country, particularly for the
full-fledged workshops and laboratories that provide a strong practical
orientation to theoretical inputs. There is a good demand in engineering
companies for the students passing out from this Institute. L&T also contribute
financially towards Upgradation of facilities in several polytechnics. It regularly
interfaces with academic institutions to promote quality education and has
established research chairs for faculty in several institutions including ai IIM,
Ahmedabad. Within the company, one of the most invaluable and lasting
investments made by L&T is the establishment of a Management
Development Programme Centre at Lonavala (near Mumbai). According to
Mr. CM Srivastava, Joint General Manager (JGM) (HRD), the management
development centre has been visualized as a 'temple of learning where
people would come with the sole purpose of enhancing knowledge, learning
through experience, self-study, and introspection. The emphasis, therefore, is
on providing an ambience for learning rather than training'. The centre has
modern learning facilities like computer-added packages, a library, and
outdoor training facilities.
Manufacturing Facilities
Some important manufacturing facilities of L&T are shown in Table 2. Table 2
Important Manufacturing Facilities of L&T

Location Product/Plants

Powai, Madh Plant and heavy equipment switchgears, Petrol pumps, Bothell closures, control an
(Maharashtra) welding alloys, undercarriage components

Thane (Maharashtra) Electronics and Inputs for undercarriage components

Awarpur Cement
(Maharashtra)

Nashik (Maharashtra) Light–weight glass containers

Faridabad (Haryana) switchgears

Ankleshwar (Orissa) Welding Alloys

Kansbajal (Orissa) Plant and equipment for steel paper and pulp, material handling and mineral proces

Mysore (karnataka) Medical electronic equipment computer peripherals, telecommunications, test and
instruments

Bangalore (Karnataka) Earth–moving and construction equipment, hydraulic equipment and diesel engine

Hazira (MP) Heavy equipment’s

Hirmi (MP) Cement manufacturing unit

Chennai (TN) Valves, rubber and plastic processing machinery

Kandla (Gujarat) Export oriented fabrication

Pondicherry Transmission towers

Kalol (Gujarat) Export footwear

Jharsuguda (Orissa) Cement grinding unit

The Future

The financial results of L&T far the year 1996 - 97 are not too encouraging as
far as profits are concerned. The company has reported profits of Rs. 410
crore against the previous years profit of Rs. 390 crore, thereby achieving a
slim growth of five percent. However, the turnover has recorded a sharp jump
from Rs. 4249 dare to Rs. 5304 crore. From another perspective, the
performance has been commendable considering the slump and intense
competition in the cement industry and performance of other competitors
during the period. L&T is firmly consolidating itself in four major business
areas engineering, construction cement, and equipment manufacture,
Presently, cement accounts for 15 per cent of the total revenue. lt has
embarked on a major expansion programme that will double the capacity to
12 m tons per annum, which will make it the largest cement manufacturer in
India. A Euro-issue of $135 million has been planned to fund this expansion.
Having defined EPC as a thrust business for the future, it will be relevant to
take a look into the competitive structure of the EPC business. In the domestic
business, L&T has a handful of competitors among whom BHEL. Punj and
Lloyd, and RITES are the major ones. The peculiar nature of EPC business is
that it is not a sector specific industry. The core infrastructure activities such
as power, telecom, and roads will become key focus areas for the country.
Most players in this industry have specific competencies which cater to
specialised areas, L&T is perhaps the only company which competes in
almost every sector by virtue of its diversified technical competence and
expertise. L&T's EPC business takes the form of competitive bidding for
executing projects from start to finish for third parties, part execution of
projects as sub contractors to other bidders, and autonomous bidding for
setting up its own projects in the core sectors.

In the global EPC business, however the company faces stiff competition from
the global construction and engineering giants like Hyundai, Saipern,
Mcdermoft, Caterpiller, to name a few. In such a highly competitive
environment with technology being a handicap (that most Indian companies
suffer from), the logical step is to enter into strategic and technological
alliances. Most Indian EPC players follow this route and L&T is no exception.
Some of its alliances are with its competitors, for instance, Caterpillar,
Marubeni. Like most Indian EPC players going global, L&T s overseas EPC
operations are concentrated in the developing and developed countries of
South-and Middle-East Asia such as Thailand and Malaysia, Vietnam, Burma,
Bangladesh, Sri Lanka, and Gulf countries like Qatar, Saudi Arabia. Bahrain,
Oman, and so on.

Though L&T has attained impressive achievements, the productivity of several

businesses are alarmingly low on the international benchmark level. In an
environment of high interest rates and tight liquidity position, the efficient
management of working capital will form the key to future L&T successes.
Some of the areas of concern for L&T in the short-term would be: the need to
attain faster delivery standards, customer satisfaction, continuous cost
reduction, productivity improvement and operating with low working capital,
and aiming at least to be a regional player of repute and recognition.

Questions:

(a) Carry out a SWOT Analysis of L&T.

(b) Explain the Decision-making process at L&T and how does it contribute to
performance of the company.
(c) What are the various strategies that you recommend for L&T's EPC
division in domestic and foreign markets?

Rupbani Beverage Limited

Rupbani Beverage Limited entered the Indian wine industry in 1975 by

acquiring the Mastana Wine Company of Shimla and two other smaller wine
companies at Kalka for Rs. 50 lakh. Despite hostility expressed by other wine
makers and predictions that Rupbani would very soon fail as other outsiders
such as Parminder Wine Company had, the entry succeeded. Rupbani
Limited performed the unheard of feat of establishing a volume of 30 lakh
cases within two years and taking the market share away from premium
brands such as the National Wine Company of Bombay, Pearl Drink Limited
of Pune and Syndicate Cola Limited of Madras.

Rupbani advertised heavily and incurred Rs. 10 lakh in one year and
standardised the taste of its wines with considerable success. It also invested
Rs. 48 lakh in a large, new winery at Ahmedabad. A Rupbani Executive said,
"By 1995, consumption of wine in India will be a liter per capita, compared
with half a liter today."

The industry reacted to Rupbani's presence by doubling and tripling

advertising expenditure. ABC and Company began a costly campaign to
market premium and varied wines while reducing marketing emphasis on its
cheap wines such as Nahan Drinks and the Gola Beverage. ABC maintained
its 25 percent market share but had to resort to some heavy price discounting
to do so.

In 1982 Pearl Drinks formed a special wine unit to combine efforts for all its
brands. Mr. Sailesh Kumar former Vice President of the National Wine
Company had directed a project to coordinate Pearl's world-wide wine
business and develop a world wide strategy. The new unit was, in fact, a
result of his work.

In1983, wine consumption changed from growth at a rate of 5 per cent to no

growth. The government also lifted the ban on imports of wine. This presented
an even greater challenge because imported wines were cheaper as well as
superior in quality.

In1984 Mr. Ranganathan took over as Managing Director of Rupbani. He

reviewed the recent performance of the company and its competitive position.
He noted that the company was losing its hold over the market and it was not
getting the return as expected. He also found that the company's performance
in the syrup business was excellent. He, therefore, thought of selling out the
wine business to Pearl Drinks, He convened an executive meeting and
apprised the executives of his proposal. He also informed them that Pearl
Drinks had offered the company to recapture its investment in the wine
business which was about Rs. one crore. Mr. Arun Mehta, General Manager,
observed that Rupbani was in and out in the past six years and has joined
different organisations in trying the wine business. The finance Manager, M.
Subhash Ghai said, "The return on assets in the wine business is not the 30 to
35 per cent, which Rupbani is used to getting in the syrup business. Gaining
share and trying to compete with ABC and Company left Rupbani with,
eventually, the number two position in the wine industry with profits of Rs. 60
lakh on Rs. 220 lakh in sales. The stockholders wanted immediate return and
hence, the company could not afford to make long-term investments
necessary to popularise the brands. Had they stayed for five more years, they
would have been a key leader in a large and profitable industry."

Pearl Drinks immediately went from the sixth position in the industry to a
strong second place with an 11 per cent market share. The Chairman of Pearl
Drinks stated: "We believe you can make money in this business in two ways
-- remain a small boutique winery or become large and achieve economies of
scale."

Mr. Harish, Marketing Manager of Rupbani said, "It is no use selling out our
business to Pearl Drink and get back what we have invested. We can
compete with our competitors successfully and improve our market share if
we manufacture wines of varying qualities to suit the varied preferences and
pockets of diverse sections of society. We should also offer price discounts to
attract the consumers. There should be wide publicity of our brands
throughout the country."
Questions:

(a) Perform SWOT analysis of Rupbani.

(b) In the light of opportunities and threats of Rupbani Beverage and its
strengths and weaknesses, what strategy should it formulate to improve its
performance and strengthen its competitive position?
(c) Should Rupbani spend on advertising in line with its competitors? Discuss.
(d) What other strategies would you suggest for Rupbani for increasing their
share of the market?

SECTION B

NEECO LIMITED

At the end of the recent five-year plan, it was estimated that there would be a
considerable demand in the manufacturing capacity of power transformers in
the country. It was further projected that the gap between demand and the
manufacturing capacity would be even larger in the subsequent plans. Thus,
anticipating the country's demand in future, Neeco Limited decided to set up a
new unit for manufacturing transformers. This was in addition to the
manufacturing capacity already built up at one of the existing factories.

Formal Planning Process

Formal planning was introduced in the very first year of the commencement of
activities at the new unit. The planning process at Neeco Limited included the
setting up of broad objectives and the preparation of the three-year forecast.
In a letter addressed to departmental heads, the General Manager, Mr. S.K.
Patel said, "The time has come to put down on paper the objectives and goals
of our organisation and to develop a proper framework whereby we can take a
more systematic look at the future we are heading for. This, I believe, can be
achieved by involvement and cooperation of all the departmental heads in
putting into practice a culture of planning." The responsibility for developing a
three-year plan was entrusted to the planning cell, which reported directly to
the General Manager. There was a separate controller's office, which looked
after budget preparation and the subsequent monitoring of actual
performance.

Goal Setting
Process Planning began each year in the month of April with the
establishment of goals by the top management. The top management group
consisted of the General Manager and his various functional heads. The goals
were set both in qualitative as well as quantitative terms. The quantitative
goals were in terms of growth in sales and profits. Commenting on the
quantitative goals, Mr. Patel observed that: "Profit is the primary goal".

The planning cell, after collecting dl the information, consolidated and

integrated the data and prepared operating results and cash flow projections
for the three-year period.

Exhibit-I
NEECO LIMITED

Date Steps in planning

1st Week Planning call sends relevant formats to departmental heads, with detailed explanatio
of April

4th Week By the fourth week, the various departmental send the formats back to the planning cell, d
of April

1st Week Planning officer compiles all the data and puts it in an integrated form.
of May

2nd Week The first draft of the plan is discussed in a management group meeting, wherein several sugge
of May and the draft is thoroughly revised by resolving the conflicting objectives of various depa

1st Week The final draft of the plan is ready and is sent to corporate headquarters.
of June

(b) Responsibility for Plan Preparation

Segment of the Plan Responsibility

Sale Plan (Order Book Position) Manager Marketing

Production Plan Manager (Production

Materials Plan Materials Manager

Manpower Plan Personnel Manager

 Township Development Plan Manager (Projects)

Plan and Final Plan Document Planning Officer

Before finalising the plans as prepared by the various functional/department

heads, a detailed discussion was held. During these discussion was held.
During these discussions various departmental heads explained the basis of
their respective plans. The final plan was arrived after resolving the conflicting
objectives of various departments.

The Planning-Budgeting Linkage

Immediately after the plan was approved b9 the Management Group, the
process of preparing a detailed budget for the next year was initiated. The
three-year plan set out the broad objectives for the first year and projections
for the next two years. A detailed exercise had already been conducted in
preparing the broad objectives, which served as a basis for the preparation of
a detailed budget for the ensuing year. Thus the first year of the plan
document, with necessary modifications, became the budget for the next year.
The three - year plan document and the budget were, therefore, closely inter-
related. It was said that the preparation of a three - year plan was, in a way, a
process of creating an organisational climate for a rigorous and time
consuming process of budgeting.

Reactions of Executives

A few executives from the production department had the following comments
to make with regard to the formal plan: "The forms are lime-consuming and
tiresome. Here, when we are already overburdened with our daily routine, who
has got time to fill in figures in these lengthy forms. We are more worried
about day-to-day problems, rather than about the 3rd year from now."

Executives from other departments commented: "Planning has led to greater

participation in the management process and thus, has created a culture of
management by participation. The involvement of all of us in the planning
process has given us an opportunity to take a wider perspective and has
broadened our horizon. Some of us now understand each other's problems in
a better way. This has paved the way for better mutual coordination."
"Some of us now feel more confident of taking up higher responsibilities in
future. Planning has helped to groom leaders. It has turned us from
technocrats to managers and has prevented us from becoming bureaucrats.''

"Figures by themselves are not very important. Figures without understanding

the process of how to obtain them are irrelevant. What is important is the
process of planning, rather than filling the figures in prescribed formats. This
process had led to greater management participation in shaping the future.
Planning has become a frame of mind and a way of thinking. It has become
part of our management process,"

Questions:

(a) Evaluate the formal planning process at Neeco Limited.

(b) Critically examine the reactions of the various executives as stated in the
case.
(c) Discuss the importance of a three - year plan.

MS-91 Advanced Strategic Management

Question Papers
Read the case given below and answer the questions given at the end of the
case.

MYSORE FOODS LMITED

Mysore Foods Limited produces and distributes packaged food products such
as cereals, biscuits, spices, jams and jellies, syrups, etc. The company has a
national market and also exports small quantities to neighboring countries. It
conducts a large national advertising campaign. It has 75 plants located all
over the country and markets 70 different products, each under its own trade -
mark. Though its products are all food products, they are not otherwise closely
related. They vary from long margin specialties with comparatively small
volume to large-volume items with small profit margins. Different raw materials
and other articles are used in their processing and packing. All products are,
however, sold through the same channel. i.e retail and provision stores. Gross
sales are Rs- 25 crore and total assets exceed Rs. 12 crore.

The management of Mysore Foods Limited is centralized. The Chairman of

the Board, the President and four Vice-Presidents who are responsible for
sales, production, purchasing and law make up the topmost executive level of
the company and operate as a committee on all general policy matters.

Sales, advertising and sales promotions come under the Sales Vice-
President. Ali plant operations as well as the research and engineering
department report to the Production Vice President. Purchasing is the
responsibility of its Vice-President who also governs traffic. Public relations,
law and corporate functions fall under the General Counsel. Financial
responsibilities are handed by the President and employee relations are
covered by each Vice-President in his own area of responsibility.

The company was set up by combining several food products organisations

and it bas acquired others since. One of the theories of the organisers was
that there would be great advantage in wholesale distribution if one salesman
could cover an entire line on one call as against a number of salesmen, each
calling to sell a single line. Saving in time alone would be of great value to the
distributor. This principle has teen retained and has proved successful as the
company has grown One sales organisation handles all the products. Each
product is given specific time and attention by the sales organisation in
accordance with its demands.

The head of the field sales organisation reports to the Vice-President. The
Advertising Manager and the Sales Promotion Manager take care of
advertising and sales promotion for the entire line but each product has its
own advertising campaign and appropriation The Sales Promotion Manager is
in-charge of the missionary salesman who contacts retailers.

To avoid neglect or error, single product or a group of products are assigned

to one of the 20 Product Managers. Each Product Manager is responsible for
seeing that his product receives due attention from the sales organisation, the
production department, and the advertising and promotion departments. He
specialists in the pricing and sales appeal questions of his product. He
reports, however, to the Sales Vice President, who has the overall control.
The Sales Vice-President can curtail any efforts of the Product Managers if he
is using his sales force for special efforts on some other product or products.
There is no institutional advertising. AII advertising is coordinated and placed
by the Advertising Manager while the final authority rests with Sales Vice-
President.

Each plant is operated by a superintendent who is in-charge of wages,

maintenance, cost, output, quality, hiring, inspection and other normal plant
operation responsibilities. Superintendents report to eight Regional Production
Managers who are responsible to the Production Vice-President. The volume
of production in each plant is scheduled by the production control group
reporting to the Operating Vice President. Final schedules are set after
consulting the Sales Vice-President.

The business has more than doubled in the last ten years and profits, both
gross and net, have increased. The number of plants has also more than
doubled. Purchases have increased proportionately. New taxes and new
reports to the government have added to the complexity. The management
feels that certain problems are potentially dangerous and should be solved
before they become serious.

There have been periods in which a product has got into difficulty because of
loss of favour with public, bad management or even neglect. Attention of the
Sales Vice President to the problems of some products has caused him, at
times, to fail to recognise difficulties in other products even though the Product
Manager of such products had recognised them and brought them to his
attention. The burden on the present officers is becoming too heavy to ensure
proper attention to all their responsibilities. Employment of assistants erodes
the personal touch of the top group that is necessary for successful
management.

Opportunities for increasing product lines and expanding the business are
being lost because of lack of executives' time to study them or to manage new
products. In any business where specialties are sold under trade marks and
brands are the major business of a company, it is necessary for the company
to continually bring out new products and to study old ones to determine the
point of no return regarding promotion and advertising expenses.

Once the top executives group has approved the idea of a new product, it is
put under one of the Vice Presidents. He develops an organisation and brings
it along. At first, the advertising appropriation for a new product is not the
responsibility of the Sales Vice President but of the Developing Vice
President. Eventually, if the product proves to be successful it is turned over
to the regular line of organisation. With new products and growth in the old
ones, the weight, complexity and number of decisions that have to be taken
by the very few men at the top, mean a heavier burden for them.

The management feels that in addition to the lost opportunities, market

potential and the need for development of present products are not being fully
recognised. The business may have grown too big for the form of
management. Executives require more responsible attention for each product.
At the same time they wish to retain the advantages of central management in
purchasing, traffic, institutional reputation and minimum sales approach and to
maintain the high-calibre advice and experience now present in law,
advertising, accounting and public relations.

Questions

(i) How far is the existing organisational structure effective in the changed
conditions of the company?
(ii) Indicate: (a) How the desired product responsibility can be achieved? (b)
Any changes in line authority, and (c) The use, if any, of staff, functional
authority or committees.
(iii) What policy and organisational structure changes do You recommend,
and why?

ASIAN PAINTS (INDIA) LIMITED

The siege is over, and the time has come for the leader to sally forth into
greener pasture. Even as the paints industry is emerging from the shadow of
recession, the Rs. 560 crore Asian Paints (India) Limited (APIL), is mixing new
shades to emerge with winning colour.

Says managing director Atul Choksey: "With proper planning and a

comprehensive approach to issues, we intend to keep pace with the growth of
the industry".

APIL is actually targeting a growth rate that is higher than the 9 to 10 per cent
that the industry has been averaging recently. In the year to March 1994, the
company notched up a gross sales turnover of Rs. 559.96 crore (net sales:
Rs. 401.96 crore), a growth of 10.8 per cent over the previous year. Net profit
also registered a healthy growth of 31 5 percent to Rs. 25 61 crore. The
results have tidied up the company's balance sheet, which had begun to look
a bit ragged.

APIL's approach is multipronged: expansion of its product range and

introduction of value added, niche products in the industrial paints area; line
extensions of existing products to target lower income market segments both
in rural and urban areas; expansions of production capacity and continuous
modernization to keep pace with the growing demand and diversification into
the unrelated but synergistic area of ceramics.
AII these strategies are part of what the company's top management terms
"harnessing our full potential" for the challenges that lie ahead. They are also
aimed at retaining leadership in a recession - free industry over the next few
years.

APIL is the leader in the entire industry, comprising both organised as well as
unorganised players, with a market share of about 19 per cent. The company
is confident of the fact that its share of industry sales is twice as much as that
of its nearest competitor, Goodlass Nerolac. APIL also dwarfs the others in
size, its net sales nearly twice that of Goodlass Nerolac, well over twice that of
third-placed Berger Paints, and nearly lour times that of fourth-placed Jenson
and Nicholson (see Exhibit-I).

It is only wary of the expanding unorganised sector, which seems to be eating

up the share of firms in the organised senior. Nevertheless, given the
multiplicity of shades it is capable of, APIL reckons it can look forward to a
compound growth in its market share.

Exhibit I
How They Compare (Figures in Rs. crore for 1993 - 94)

Company Net Sale Net Profit Net Profit

(%)

Asian Paints 401.96 25.62 6.36

Goodlass Nerolac 205.88 8.05 3.91

Berger Paints 174.95 3.24 1.85

Jenson & Nicholson 110.33 1.91 1.72

Garware Paints* 106 2.57 2.33

Shalimar Paints* 102.59 1.60 1.56

Bombay Paints** 37.81 0.03 0.08

*18 months to September 1993

**12 months to March 1993

But though the good times are back, the company is not content to sit back
and relax. The last three years, during which the paints industry went through
a trough, saw APIL taking a beating (though it remained the market leader all
through), with its paints division showing a negative growth of 3.5 per cent in
terms of volume.

With the rupee having been progressively devalued during the years 1989-92,
and with high rates of inflation also rampant over this period, excise duties
and other levies too exerted upward ressure on paint prices, and this served
to depress demand. An additional complication, reinforcing this trend was
created by the difference in the selling prices of paints made by the organised
and unorganized sectors.

The first signs of recovery came with the Union Budget o! 7993 which cut
excise and custom duties, Excise duties were reduced to 30 per cent and
customs duties were cut from 85 to 65 per cent- This provided a respite to the
industry by facilitating a rolling back of prices, and it began to grow at about 2
per cent a year.In spite of intermittent social disturbances in 1993, the industry
gradually responded and so did the demand for its products. Simultaneously,
the automobile industry, which is a major user industry for paints, also began
to emerge from the two-year recession.

A gradual revival of the industry brought along a new threat for the seven
major players from the organised segment. Uneven prices during the
recession years had the unorganised competitors grabbing at a significant
chunk of the market.

Budget concessions brought relief to the orsanised sector, but its constituents
also found themselves having to compete with an unorganised sector that had
grown to become a significant threat, seen as the prospect of competition
from imports began to worry the organised sector.

APIL's largest new venture will be a diversification into ceramics, though the
project is still at the planning stage. The decision to enter a new field is fuelled
by the management's perception that the ceramics industry has tremendous
potential for growth.

Even though the company has no experience in the production and

technology aspects of ceramic tiles manufacture, it has opted for ceramics
because the marketing will involve utilisation of its existing distribution network
for paints. The rationale is that since paints and ceramics are both building
materials, APIL'S existing customer base (which can serve as a ready-made
market) will be targeted for its ceramics products.
"With our extensive distribution network and stocking points, we can reach
even the remote markets. So marketing ceramics is not likely to be a
problem," says Choksey. The plan is to penetrate the market as quickly as
possible, and grab a substantial chunk of industry sales. The company will
initially start with ceramic tiles, but these is no plan to restrict itself to any
specific market segment.

The project involves a Rs. 70 crore initial investment in the first phase, which
involves installation of a capacity of 23,000 tonnes per year. This will be
followed in a couple of years by the second phase, which will see an increase
in the capacity to 50,000 tonnes. The new project is scheduled for completion
by the end of 1996, and it will, in all probability, be located in Gujarat. This is
because any location in that state will have the advantage of proximity to the
raw material supplying areas in Gujarat and Rajasthan. APIL is currently
negotiating with foreign collaborators for the technology, which will have to be
imported. The technology will also have to be adapted to Indian conditions.

While putting a few eggs in a new basket to ensure that fluctuating fortunes in
the paint industry do not have the effect of hurting the company's bottomline
yet again, APIL is not ignoring its bread-and-butter business - that of paints.
Over the past year, a variety of new brands have been added to its product
range. The company has made an attempt to extend its marketing and
distribution beyond the country's major towns, to which its activities were
hitherto confined. 'Utsav', an economically priced brand, was launched last
gear and is targeted at small households with limited budgets. This project
concentrated mainly on consumers in Tamil Nadu, Maharashtra and Gujarat,
thus widening the accessibility of its products to all consumer levels. General
Manager Mr. P.M. Murthy says that "the degree of penetration concentrates
on how economical it is to do business." He says that though this new product
has performed favourably, lt has not contributed much to the profits of the
year. "Of course, it promises to be a very good and attractive segment for
future business," he adds, when asked about its future growth and profit
potential.

Other new products also include powder paints to be used for both auto and
non-auto appliances. There are other products like wood finishings (Touch -
wood) that takes care of refinishings on furniture. To strengthen its industrial
product base, APIL has collaborated with PPG Industries, an American firm,
and thus enjoys the use of cathode Electro deposition primer (CED). The
company has concluded a tie-up with Nippon Paints for original equipment
paint products and with Sigma Coatings of Holland for corrosion coatings. The
technology that has been brought home as a result of these ventures is
modified at the company's plant at Bhandup, so as to make it suitable for the
Indian climate.

With a better product range on offer now, APIL is just waiting for a greater
awareness of industrial paint applications to develop in the Indian market; the
presumption is that the demand for this particular product is still latent. For its
decorative paints, the company has gone in for differential pricing to
encourage all segments of the market. The company is intent on a continuous
modernisation and upgradation of its technology and its assets, so as to keep
in tune with the changing requirements of the marketplace. In addition, ii is
also working on plans to increase production capacity over the next few years.

Besides the activity on the domestic front, APIL is increasing its overseas
presence as well. One of the few Indian companies with overseas subsidiaries
in the South-Pacific region, APIL is now setting up a new subsidiary in
Australia. Its existing ventures abroad too have reported healthy results: Asian
Paints (South Pacific) has registered a 12 per cent growth, Asian Paints
(Tonga) grew at a rate of five per cent, Asian Paints (Solomon Islands) at over
10 per cent and Asian Paints (Nepal) at over 18 per cent. With a new
subsidiary at Vanuatu (New Hebrides) and a joint venture unit in Townsville
(Australia), APIL has established at least a foothold in the international
markets. When asked about the threats facing the company, Choksey
chuckles and says he prefers to call them challenges. "We need to meet the
demands of this growing organisation - of our workforce, our technology and
our assets. A major point to be tackled is to be able to meet the growing
demand for our product and to create a greater awareness for our newer
products," he says.

Over the first few months of the current financial year, sales volume has been
growing at a rate of 14 per cent, well above the industry average. With the
recession firmly behind it and government levies no longer inflating its prices,
the paint industry seems to be on an uptrend. But the APIL management has
its work cut out for it: it will not merely have to gear up to meet the burgeoning
demand, but will also have to work hard at retaining and then increasing its
market share.

Questions

(a) What corporate goal has the company adopted for the next few years and
with what strategies does the company propose to realise the above goal?
(b) What threat is the company facing or/and might face in future? What has it
done and/or what could it further do to safeguard itself from threat(s)?
(c) Evaluate the new strategies of Asian Paints (India) Limited, particularly its
proposed foray into ceramics.
(d) What action plans has the company proposed to strengthen its product
base?
(e) Classify all the strategic plans or proposed strategic actions of the
company for achieving growth against suitable headings, e.g. Diversification,
Joint Ventures, etc.

MS-92 Management of Public Enterprises

Question Papers
Read the following case and answer the questions that follow.

ARRIVING TO LAND ANYWHERE

As the taxi screeched to a halt, Mr. D'Souza for the umpteenth time, cursed
the Monday morning traffic and his Inability to do anything about it Mr.
D'Souza was the Marketing Director of Indian Aviation Company and was on
his way to attend one of his several pre–lunch strategic meetings. This
meeting had a special importance as it was to open the marketing plans of his
company for a new helicopter the first from a private sector company in India
in this category of products On consulting his watch, he reclined that he would
be delayed by at least 25 minutes. Hence, he decided to use the time by
reviewing the salient points of his presentation.

The Company
The Indian Aviation Company (IAC) was set up in the Export Processing Zone
of one of the four metropolitan cities of India. The formation of the Company
was noteworthy for the fact that it was the first in the private sector to have
been given the license to manufacture helicopters so far only Hindustan
Aeronautics Ltd (HAL)' a public sector company, had the license to
manufacture the helicopters.
IAC was an Indo –Us Joint venture with Brantly Helicopters, USA- The joint
venture was initiated by Mr. Rangnant a former technician in the Indian Air
Force who had settled in the US. The project was in response to the Indian
Government’s initiative and liberalization in inviting non-resident Indians
(NRIs) to bring home their expertise, and promote a new industrial culture in
India. The company was set up with Rs. 1 crore as the project capital in 1986.
As per the terms of joint venture, the helicopter was to be designed originally
by the US partner and assembled in India under the supervision of the US
experts. As per the export regulations of the Government of India, 75% of the
output was to be exported out of the country while the remaining could be sold
in India.

The Products
The Company decided to manufacture in the beginning two models - one with
a carrying capacity of to passengers, while the other with five, including the
pilot in both the cases. The machine for both models was a four stroke piston,
as against turbo propelled "Chetak' of HAL, the only competitive offering in the
market.
Among other vital uses and service benefits, these helicopters could land
anywhere without requiring helipad. Further, the fuel efficiency and
maintenance was amazingly low, working out at Rs. 1,000/- per hour of flying
as against Rs. 8,000/- for the Chetak. Mr. D'Souza had thought of using these
for benefits for creating distinctive competence in the market. The quality
standards of the manufacturer were very high as was expected from the
industry where "technical excellence was the name of the game". Besides
operational quality checks, the US experts
would supervise the assembly in Indian plant and the US Federal Aviation
officials would visit to certify the quality performance.
In addition to the above, the prices of the two models were considerably lower
as compared to the competing offerings. While the two–seater model was
priced at Rs. 10 lakhs, the five-seater model was priced at Rs. 25 lakhs a
piece. The helicopter was due to come in the market in June
1988.

The Market Demand

The company had developed annual demand projection upto 1990. Based on
its assessment of market needs and competitive offerings, the company had
projected an annual demand of 60 machines. The plant had a production
capacity of turning out 120 helicopters per annum, As the concept of using
helicopters as an 'executive transport’ was still to gain momentum, Mr.
D'Souza expected an upward revision in its demand projections. It being the
first private sector to manufacture choppers, he did envisage the problems of
market confidence and credibility. However, he thought that the alliance with a
proven US manufacturer and strict quality management could mollify market
resistance. In its task of achieving the export stipulation of 75%, the company
had received encouraging enquiries from several international market centres.
Besides the United States, where the Company had a natural entry
advantage, it had been
receiving enquiries from Thailand, Japan, Singapore, Turkey, Italy, Australia
and Britain about the product and delivery.

As for the Indian component of sales, Mr. D'Souza had been trying to identify
probable users for both the models. Keeping in view the features, i.e. low
price, low operating cost and facility to land anywhere, he thought that the
two-seater helicopter would be an ideal purchase for the police in traffic
control, disaster relief, hospitals and even news coverage. Already, Delhi
Doordarshan and police departments of two states had evinced their interest
in the product. As for the five-seater model. Mr. D'Souza pinned hopes on
company executives who needed to shuttle between factories and
headquarters in different places, and other business trips.

The Concerns
During the meeting, Mr. D’Souza thought of sharing his immediate marketing
concerns and a long-term perspective plan. He was aware, with his
background of marketing highly technical industrial products, that such
products were sold on the benefits rather than product features. Also, he felt
that organizational buying behaviour posed the first major barrier to be
tackled. Among other immediate concerns, he included organization of
competent salesforce and promotion mix, such as, publicity and word-of
mouth. He needed to test the market reaction of his pricing plan as well.

Finally, he felt that the company had to tackle some strategic questions such
as:
(1) How should the chopper be positioned among the existing alternatives for
the product?
(2) How could the company draw the demand from competing offerings such
as light aircrafts already in market? What U.S.P. should be used?
(3) How could the company prepare itself for applying for a full–fledged
license to produce choppers entirely for the Indian market? What
arrangements are needed for indigenization of components?
(4) How should they approach and persuade the organizational buyers?
(5) How could it create and maintain a long-term strategic advantage in the
market, which was far from developed?
As Mrs. D'Souza diverted his chain of thoughts to the alternatives, the taxi
suddenly came to life and resumed its crawling in the traffic.

 "Administrative reforms are urgently needed in the public sector to make it

viable and compete effectively with the private sector on a long term basis,
otherwise it would remain a burden on the public exchequer, which the nation
can ill–afford."
What kind of administrative reforms are needed in the public sector to
increase its effectiveness? Discuss.

7. Public enterprises have enjoyed a special place in the Indian economy

since Independence. While analysing the rationale for PEs, discuss the
changing Government policy towards public enterprises.

Read the passages and answer the questions that follow:

(a) Bharat Bharti Udyog Nigam Ltd,

It is holding company comprising seven subsidiaries in the eastern region

including well known names like Burn Standard Co. Ltd., Jessop & Co. Ltd.,
and Braithwate & Co. Lid. Its 1990 - 91 sales turnover was Rs. 410 crores with
a loss for the year of Rs. 10.90 crores
The company's objective as given in its 1991 – 92 MOU inter alia “is to
achieve a high degree of customer satisfaction through timely supply of quality
products and services". This was to be measured with reference to
delivery/erection commitments of various products and services on a five-
point scale with a weight of 10%.

Do you think that the company's objective is appropriate in the present

context? Comment.

(b) Andrew Yule & Co. Ltd.

This old British Managing Agency house became a government company in
1979. It is a multi-unit, multi–product conglomerate with five subsidiaries and a
gross turnover of Rs. 325 crores in 1990 - 91.

The company's MOU attached 5% weight to customer satisfaction measured

with reference to liquidated damages and free rectification and replacement
colt as a percentage of turnover. The
Company’s aim was to reduce it from 40% in 1990-91 to 36% in 1991-92. The
company wanted its marketing efforts to be judged with reference to (i) total
orders booked during the year, selling and marketing cost, and (iii) number of
products launched, with an overall weight of 8%.

Comment on the marketing efforts of the company keeping in mind the

customers’ perspective.

MS-93 Management of Small and New

Enterprises Question Papers
 Read the case carefully and answer the questions at the end:

FACING GLOBAL COMPETITION

To promote the growth of small-scale industry in India, the Government has

followed for the last several decades a comprehensive policy of providing
protection to the domestic industry. To insulate the small-scale sector from the
competition from the large corporate sector-, a policy of reservation of certain
categories of products for the small-scale sector was introduce. This policy
effectively barred the entry of large - scale units in the manufacture of the
reserved items. To provide protection from the cheap imports, the
Government had imposed rigorous controls on imports through quantitative
restrictions as well as tariffs.

The Uruguay Round negotiations under the WTO which India is a member
has put obligations on the Government to eliminate all quantitative controls on
imports. Most of all the items which India controls on imports. Most of the
items which India currently imports have been made free from quota
restrictions w.e.f. 1 April 2000. The few remaining items will be made free
from 1 April 2000. Imports of many small - scale sectors products are already
allowed quota free. Starting from April 2000, the Government has allowed
import of completely built bicycles under Open general License almost after
50 years. Earlier, only import of bicycle parts were allowed under the Open
General License.

India is one of the largest producers of bicycles in the world, the number one
producer being China. While the industry has many large players, there are
also many smaller manufacturers. Taking advantages of this change in import
policy, Chinese companies are looking at the Indian market. This is especially
true for bicycles for children. The Chinese bicycles for this market segment is
cheaper, attractive and easier to handle compared to what is being
manufactured in India. Chinese bicycles are made of nylon and plastic, while
Indian bicycles for children are made of steel and therefore, heavy. Chinese
bicycles cost between Rs. 500 and 600 in India while the Indian kid bicycle
cost approximately Rs. 1100 for branded models and approx Rs. 900/- for
unbranded products. Between January-April 2000 about 10,000 Chinese
bicycles have been imported into India. This is very insignificant now as India
has manufactured more than 27 lakh bicycles during that period. However, the
industry feels that since the Chinese bicycles are cheap, attractive and
lightweight their demand in the Indian market is expected to go up
substantially.

The Chinese bicycle imports certainly pose a challenge to the Indian

manufacturers.

(1) You are a small-scale manufacturers of bicycles. Prepare a complete plan

to face this competition from cheaper imports.

(2) What advice would you give a small entrepreneur producing bicycle parts,
under these circumstances. Give reasons for your answers.

Read the case given below and answer the questions at the end of the case.

Women's Apparel Shop

Urmila Mathur was very excited today. Six months back when her husband
joined LML Ltd. As Vendor Development Manager, she shifted from Delhi to
Lucknow. Urmila did her graduation in Fashion Technology and had worked
as a merchandiser with a leading garment exporter and had been a visiting
faculty at the National Institute of Fashion Technology.

After shifting to Lucknow, Urmilae spent first three months in arranging her
house and setting down in the new city. For the last three months she had
surveyed the city and had been an idea of opening a boutique in an up-market
area. For the last three months, she had not been able to find a suitable
location for her boutique. A few days back she was told by an agent that a
womer's apparel shop in Hazratganj area was up for sale. She had visited the
shop a couple of times and on each occasion. She did buy a dress for herself.
She was impressed by its location and considered it very suitable for her
boutique. She felt it was an ideal opportunity to buy this running garment shop
and convert it into her dream boutique.
Urmila knew the garment business inside out. However, buying a business if a
complex matter. Last night she discussed the matter with her husband. They
listed the main problems in buying the business as --- evaluating the business,
fixing the fair price the same and closing the deal in a safe, legal and
equitable way. They decided to work on the project.

Mr. Lajwani, the owner of the women's apparel shop told Urmila that he was
selling the unit as he wanted to help son who had set up a yarn mill at Kanpur
and needed his assistance. Mr. Lalwani also told her that the business had
provided his family as good living and he felt that with her knowledge and
experience in fashion the business would make a good progress. He told her
that he expected Rs. 22 lakhs for his business and gave her the largest
financial statement of his business for review.

She had returned home very excited and was eagerly waiting for her husband
to analyse the financial statements thereby evaluating the prospective
business and fixing a price for the business to be bought.

Balance Sheet as on 31st March 2000

Assets   Liabilities

Fixed Assets 3,52,000 Owners Equity 8

Stocks 11,36,000 Accounts Payable 3

    Other Liabilities 3

Total Assets 14,88,000 Total Liabilities 14

Profit and loss Account for the tear 1999–2000

Sales Income 57,12,000

Cost of Goods sold 33,76,000

Gross Profit 23,36,000

Expenses 12,96,000

Operating Profit 10,40,000

She was of the opinion that a shop of the same size in any good market is
going to cost her not less than Rs. 5-5 lakhs and she would have to spend at
least Rs. 2.5 lakhs on the interiors. She had carefully examined the
inventories, and had liked the range, not more than 5 per cent of the stocks
were old or slow moving. Even these could be easily disposed in a sale at
their cost price. The business was having an average growth rate of ten
percent for the last three years and she was confident of achieving a growth
rate of fifteen percent.

Questions

1. What information should Mrs. Mathur gather and analyse before raking the
decision to buy this business?

2. What do you recommend as a fair price for Mrs Mathur to pay, in case she
decides to buy the garment shop? Give reasons for your answer.

Read the given case and analyse the questions given at the end:

DR. LAL'S PATH LABS

Try getting a relatively complicated virus test in any non - metro town in India.
Chances are you won't find a lab, which can do it. That's because other than
in metropolitan towns, such facilities are simply not available.

Now, that would seem like a great business opportunity -- especially for Dr.
Lal's Path Labs, Delhi's oldest pathological lab. But expanding the network is
fraught with great risk. Even if one test-tube gets exchanged, there is every
danger of getting a wrong diagnostic result. So, the question is how do you
expand without impairing the quality of service?

The key is the degree of control, Lal's national pathological grid, which is in
the process of being rolled out in the ear future, has found a way to do just
that. Dr. Lal's appointing master franchisees in large towns. These will act as
collection centres, where patient's can walk in to deposit their samples. With
the help of global management consultants Arthur Andersen, Lal has invested
a Rs.2 crores in diagnostic software. So, when a patient walks into one of his
franchised collections, say in Patna, the software generates a bar code, which
is affixed to the sample and also registers him at Delhi lab. As soon as the
sample arrives in a special-temperature container, it is read by the lab's
computers. Then it is sent to the diagnostic machine where it is tested and
revalidated. Following this, the data is transferred to Patna all in less then 24
hours. A large franchise network allows Lal the necessary economies of scale
to invest in expensive equipment to carry a battery of specialised tests, which
are normally available in select hospitals.

To carry his business idea forward. Lal is enlisting the support of his
community of pathologies. Dr. Praful Amin, a successful pathologist in
Mumbai, is already a part of the pathological grid, and a partner. The way it
works; Lal invites experienced doctors to be franchisees. They must have a
minimum turnover of Rs. 2 crore, and also Rs. 500 lakh to invest in the
software. Once they sign on, Lal and the franchisee will together invest in an
electronic network to pass on data. With the infrastructure in place, the
franchisee then looks at expanding his network. For instance, Amin is talking
to doctors with pathology labs in towns like Surat, Vadodara, Kolapur and
Sholapur.

But would a successful doctors fancy himself as a mere franchisee? Lal

realises the gravity of the issue. So, he envisages that two-three years down
the line, most of his franchisees will be offered a stake in his company. "Once
we have developed a good working relationship and got used to his kind of
business operation. I expect most franchisees to own small stakes in the
company," says Lal, Once a pathologist evinces interest, Lal will carry out a
due diligence of the franchisee's organisations. The stake he is offered will
depend on the kind of value he generates and service he provides.

Questions:

(a) Evaluate the business concept in terms of available opportunities.

(b) How do you assess the organisational set-up being planned by Dr. Lal?
What are the barriers that are likely to arise?

Read the case given below and answer the given questions:

DR. LAL'S PATH LABS

Business concept: national pathological grid
No. Of labs planned: 10-15 every year
Company investments: Rs. 2 crore
Franchisee investments: minimum Rs, 50 lakh
Franchisee's ROI: 25-30 per cent
Try getting a relatively complicated virus test in any non - metro town in India.
Chances are you won't find a lab, which can do it. That's because other than
in metropolitan towns such facilities are simply not available.

Now, that would seem like a great business opportunity -- especially for Dr.
Lal's path Labs, Delhi's oldest pathological lab. But expanding the network is
fraught with great risk. Even if one test-tube gets exchanged, there is every
danger of getting a wrong diagnostic result. So, the question is how do you
expand without impairing the quality of service?

The key is the degree of control. Lal's national pathological grid --- which is in
the process of being rolled out in the near future --- has found a way to do just
that. Dr. Lal is appointing master franchisees in large towns. These will act as
collection centres where patients can walk in to deposit there samples. With
the help of global management consultants Arthur Andersen. Lal has invested
Rs. 2 crore in a diagnostic software. So, when a patient walks into one of his
franchised collection centres, say in Patna, the software generates a bar
code, which is affixed to the sample and also registers him at the Delhi lab. As
soon as the sample arrives in a special0temperature container, it is read by
the lab's computers. Then it is sent to the diagnostic machine where it us
tested and revalidated. Following this, the data is transferred to Patna -- all in
less than 24 hours. A large franchise network allows Lal the necessary
economies of scale to invest in expensive equipment to carry a battery of
specialised tests, which are normally available in select hospitals.

To carry his business idea forward, Lal is enlisting the support of his
community of pathologists. Dr, Praful Amin, a successful pathologist in
Mumbai is already a part of the pathological grid, and a partner. The way it
works: Lal invites experienced doctors to be franchisees. They must have a
minimum turnover of Rs. 2 crore, and also Rs. 50 lakh to invest in the
software. Once they sign on Lal and the franchisee will together invest in an
electronic network to pass on data. With the infrastructure in place, the
franchisee then looks at expanding with pathology labs in towns like Suratm
Vadodara, Kolapur and Sholapur.

To carry his business idea forward, Lal is enlisting the support of his
community of pathologists. Dr, Praful Amin, a successful pathologist in
Mumbai is already a part of the pathological grid, and a partner. The way it
works: Lal invites experienced doctors to be franchisees. They must have a
minimum turnover of Rs. 2 crore, and also Rs. 50 lakh to invest in the
software. Once they sign on Lal and the franchisee will together invest in an
electronic network to pass on data. With the infrastructure in place, the
franchisee then looks at expanding with pathology labs in towns like Suratm
Vadodara, Kolapur and Sholapur.

But would a successful doctors fancy himself as a mere franchisee? Lal

realises the gravity of the issue. So, he envisages that two-three years down
the line, most of his franchisees will be offered a stake in his company. "Once
we have developed a good working relationship and got used to this kind of
business operation, I expect most franchisees to own small stakes in the
company," says Lal. Once a pathologist evinces interest, Lal will carry out a
due diligence of the franchisee's operations, The stake, he is offered, will
depend on the kind of value he generates and service he provides.

Questions:

1) Critically evaluate the business opportunity outlined above.

2) What are the problems that you foresee for this idea? Explain.
3) What kind of quality control measures would need to be used in this case?
Briefly describe.

Read the case carefully and answer the questions at the end:

Anita Roddick, Founder of Body Shop

The Body, Shop International, named, Company of the Year at the 1987
Business Enterprise Awards has 300 branches in 31 countries around the
world. It has created almost 300 new jobs --- and 98 per cent of its products
are made in Britain. The inspiration for it all has been its livelier founder and
managing director.

"Unemployable" is how Anita Roddick describes herself --- but as head of the
largest British-owned retail chain overseas, she needn't worry. A former
student teacher and United Nations employee in Geneva. She is now the
supreme entrepreneur --- with a highly unorthodox view of what that means.

"I believe people are confusing entrepreneurship with opportunities," She said
in a lecture at the City University Business School. "They measure success by
the profit and lost sheet."

"In reality, entrepreneurship consists of three things: First the idea one wants
to get across; second, oneself -- the person promoting it, third, the money
that's necessary to make it happen. The third is the least important of all; the
first is what matters --- the integrity of the idea. You just have to believe in
what you're doing so strongly that it becomes a reality."

"Logically anybody who starts a small business with no money (As I did) can't
succeed. But sometimes you do. Because you know if you don't succeed, you
don't eat."

Anita Roddick started her first shop in Brighton 21 years ago , with a loan of
4,000 and some revolutionary ideas. She wanted to sell simple herbal and
plant-based cosmetics, many of which she had seen used to great effect
during her travels abroad. She intended to use the minimum amount of
packaging and advertising; and she was determined to sell products that were
developed with concern for the environment and were not tested on animals.

She now has a range of clear 300 products. The Body Shop still uses the
cheapest bottles. "The Sunday Times called them unine sample bottles, and
perhaps they are," Mrs. Roddick said, There are now five sizes of each
product. "Because we had so few products at first, we originated the idea of
five sizes; they can try the small one first, before splashing out on the more
expensive sizes.

Today Body Shop is a franchise operation, each individual shop being "almost
a licence to print money' in Mrs Roddick's words. The franchising came about
almost by accident.

"All our unique' marketing features happened because we had no money.

Because it cost 3,000 --- 4,000 to open up a shop about two decades ago, my
husband Gordon and I dreamed up. What we called the 'self-financing' idea;
we didn't even know the word 'franchising'. Now we have a network of
marvelous franchisees."

She selects her franchisees with extreme care. She looks for franchisees who
share her aims and ideals --- and insists that each should undertake some
kind of community project.

"This is not only altruism --- it's survival. We have community projects, which
are riveting. They range from running drug dependency groups and visiting
elderly and handicapped people, to setting up street theatre. Most of our
shops are run by women, who are enthusiastic about community work. And
it's all done during working hours, not in their own time."
Anita Roddick has an enormous fund of ideas --- "drawers full of them," she
says.

And she's an expect communicator. The Body Shop publishes a bi-monthly.

"Talksheet" for all members of staff, which contains --- amongst others -- a
swap-a-job feature; staff are encourage jobs for a few months, so a girl
working in Bondi Beach can sample life in Aberdeen, and vice-versa.

Every month a video magazine. "Talk Shop" is produced by the Body Shop's
own video and film Production Company, and distributed to the franchisees
worldwide. If includes reports on the various community projects and on Mrs.
Roddick's overseas trips; she travels for two months of every year, to find out
how people in other cultures take care of their skin and hair, and to visit the
various third world projects which produce products -- for example, cosmetic
sponges --- for her shops.

There is also a series of leaflets published for individual customers and for
schools, containing detailed product information and newsletters posted up in
the ships. Customer's opinions are actively sought. "Can you imagine," said
Anita Roddick, "that we are the only high street retailer which has suggestion
boxes in its ships? Why spend billions of pounds on market research if you
can do it yourself?"

She sees customer education as a major role. "We reckon that about 25
million people must pass our shops at one time or another, so we use our
windows to promote environmental community issues. Every one of our shops
is like a major poster site."

She is super-confident about the future, predicting "We will become a major
communications company and within two years we plan to have a magazine."

"We think following the route of promoting health is vital for the cosmetic
industry --- \it will not succeed by any other route. In the past it has often tried
to create needs that don't really exist. We do things differently. It's so easy to
break rules."

Her advice to young potential entrepreneurs is simple. 'Never stop annoying

people, and never stop asking questions; it is knowledge that gives you
strength."

Questions:
(a) Is Anita Raddick an entrepreneur? Explain your answer.
(b) Discuss the innovative ways adapted by Body Shop.
(c) Will this recipe for success work? Justify your answer.

MS-94 Technology Management Question

Papers
1. "Every technology eventually reaches a decline phase." Discuss the
reasons for such decline and suggest measures that could be helpful in
arresting or postponing such decline.

OR

(a) Distinguish between 'incremental' and 'radical' innovations.

(b) "Developing countries are fending to lose their traditional competitive

advantage." Why and how?

2. (a) Distinguish between "Pearl curve" and "Gompertz curve" techniques of

technology forecasting.

(b) What are the objectives of corporate R&D and what stages do R&G
projects usually go through?

OR

Explain the various steps involved in technology development cycle. Discuss

the different approaches to technology development.

3. What different phases are involved from project formulation to technology

improvement and upgradation? What are the requirements of know-why
exercises and what consequences do such exercises lead to? Discuss.

OR

a) Distinguish between Technology assessment and Technology Evaluation.

b) What criteria in general could be used by a manufacturing firm for

technology evaluation before it makes a final section? Discuss.
4. (a) Describe some of the major Science and Technology achievements in
India. What contributed to such achievements?

(b) Write a note on the industrial research in Indian industry and give your
comments.

OR

Describe the salient features of India's Technology Policy Statement of 1983.

How is technology policy related to industrial and trade policies?

5. Explain the following:

(a) Science and Technology entrepreneur's parks

(b) Technology business incubators
(c) Factoring

OR

Explain the following:

(a) Technology Information, Forecasting and Assessment Council (TIFAC)

(b) National Informatics Centre (NIC)
(c) Institutional sources for technical manpower in India

MS-95 Research Methodology for

Management Decisions Question Papers

 The credit manager of Plaza stores obtained the data of a random sample of
credit customers and recorded the data given below in table. The times for
credit collection are divided into three categories: 15 days, 15 to 30 days and
above 30 days. The sampling is done in three regions: urban, suburban and
rural region. Perform a chi-square test, at 5 % level, of the hypothesis that
time to pay is independent of residence region. State both the null and
alternate hypothesis.

  Customer Residence Region

 Payment of last bill (days) Urban Suburban

Under 15 35 60

15-30 75 90

Over 30 30 35

The chi-square value at 5% significance level and 4 degrees of freedom is

9.488.

6. a) What is the purpose of statistical hypothesis? Discuss null and

alternative hypothesis with appropriate examples.

b) A professor is trying to show new students the importance of the quizzes

even though 90% of the final grade is determined by exams. He believes that
the higher the quiz grades, the higher the final grade. A random sample of 15
students in his class was selected with the data given below:

Quiz average Final average

59 65

92 84

72 77

90 80

95 77

87 81

89 80

77 84

76 80

65 69

97 83

42 40
 94 78

62 65

91 90

i) Fit a linear regression model of Y (dependent) on X (independent)

ii) Test the validity of the equation
iii) Calculate the co-efficient of determination

Read the case carefully and anser the question at the end:

Loveland computers was running its production line more often to assemble
computers from readily available components as the demand for high-end
computers grew. Walter Azko was very clear that this was just assembly, not
"real manufacturing." He often joked that the only part that was unique to
Loveland computers was the plastic base to the keyboard- it was
distinguished by the Loveland logo (an outline of the front range of the Rocky
Mountains, just as it was visible from the window in Walt's office). The base
came in two parts that snapped together. Now that was the next problem
referred to Lee Azko. Nancy Rainwater, the production supervisor, explained
her frustrations to LEE.

"When we started assembling this model last summer, the keyboard bases
seemed to go together just fine. Now we have to reject a lot of them because
of little bugs that hold the top to the bottom break off when the operator tries
to snap them together. When that happens, we have to throw out both pieces.
We don't have any way to recycle that kind of plastic, and it doesn't seem right
to e sending all that to the landfill- not to mention what it must be doing to our
costs.

"I've talked to purchasing and I had Tyronza Wilson inspect the bases when
they're delivered. The lugs measure exactly within specs, and the plastics
company tat makes them for us did some lab work. They say there's nothing
wrong with the plastics they are using.

"I noticed that we ad more breakages early in the morning - so I wondered it

just happened because people were being careless on the line. I even
wondered if it was because the employees weren't properly trained; but the
fact is these people are more experienced now than they were last summer-
we really haven't had much turnover.
"Tyronza wondered if it isn't happening because the plastic's too cold. That
might fit with more defects in the winter. But the warehouse has a couple of
heaters, so I'm not sure if that's right. And I can hardly walk around with a
thermometer and check out the temperatures of each set of base parts before
sending them down the line, can I?"

"May be there's another way to figure this out." Lee said, remembering that it
had been quite simple to get weather statistics from the National Weather
Service." You did record the number of bases thrown away for each day you
ran the production line, didn't you?"

Question

How should Lee investigate the relationship between the weather and the
problem with the plastic bases?

MS 95 Research Methodology for

Management Decisions Previous Exam
Paper
MBA - Master of Business Administration
Note: Answer all questions.

1. Explain the difference between primary and secondary data

i) What are the advantages of secondary data over primary data? Explain
three different methods for primary data collection.

ii) What would be the best source for the following data:

a) Weekly earnings of full-time salaried workers for the range 1995-2000 in an

estanlished software firm.
b) Annual sales of the top ten fast food companies.

2. i) A manager notices the number of grievances in the organization is

increasing. The manager wishes to investigate this occurence. What research
design seems appropriate for the study? Give appropriate explanation.
ii) Give research process to be followed for conducting this study.

3. The arrival pattern of customers at a supermarket occurs sequentially. The

manager noted down the arrival sequence of customers sex-wise (M and W
denote man and woman).

WWW MM WW MMM WWW M W MMM WWW MM WWW MMM W MM WW

MM W MM

Test the hypothesis that the arrivalpattern of the customers is random. The
critical value of Z at a (alpha) = 0.05 is 1.96

4. How would you use Likert scale to ascertain the brand preferences of
washing machine among the various customers? Develop five questions for
brand preferences using Likert scale. How would you make use of these
information for decision making?

5. Under what circumstances would you recommend:

a) Convenient sampling
b) Mutlistage sampling
c) Quota sampling

Give an example of each one.

b) Differentiate between stratified sampling and cluster sampling, giving

examples of each.

MS-96 Total Quality Management

Question Papers
Read the following case study carefully and answer the questions given at the
end.

Liberty Paint Works

ANANT SESHACHAR, THE 47-YEAR OLD CEO OF Liberty Paint Works

(Liberty), took out a checklist from his pocket and simultaneously looked at his
watch. It was 3.20 p.m. There were still 10 minutes to go for the meeting with
Govardhan Patel, 43, executive director, Patel Consultants Inc… joining them
would be Jagat Khurana, 42, Liberty's vice-president (operations) and the
company's designated TQM coordinator. Having joined Liberty only three
years ago as its CEO, Seshachar, who earlier headed the marketing
operations of a transnational FMCG company's -- was still in the process of
getting a grip on the company's business. The check-list contained brief notes
on his conversations with Liberty's senior executives during the past few
weeks.

TRILOK ROY, GENERAL MANAGER (MARKETING): "Until recently, most of

my time was spent listening to customers, It was a great way of keeping in
touch. I enjoyed it, but now, with cycle times being progressively shortened in
the company, I find myself listening most of the time to subordinates."

LOPA MUDRA REGIONAL SALES MANAGER (WEST): "I met five key
industrial customers in the western region during the past fortnight. I made a
presentation to each on how we have cut down our delivery cycles as part of
improving the quality of customer service. I pointed out how we now deliver in
four weeks, instead of six, and that it is only appropriate that they should
allocate a higher share of business to Liberty. After listening to me, all of them
said that they would be reducing their order sizes. Is thus a precursor to our
losing them to our competitions? Ask TQM."

SANTOSH CHATURAN, SALES COORDINATIO (EASTERN REGION): "In

view of the declining time-cycles; the number of sales orders should have
gone up. But, actually, they are coming down. As a result, I can't meet my
annual targets which will affect my appraisal, due in March next. What is
responsible? TQM."

MURUGAN SWAMINATHAN GENERAL MANAGER (PRODUCTION): "We

have, no doubt, made progress in reducing out time cycle ever since we
started implementing TQM. Labour Productivity has gone up by 20 per cent
and machine productivity by 15 per cent. Considering that our direct labour
cost is 8 per cent and depreciation id 7 per cent, respectively, of our sales, we
should see an overall gain of 3 per cent in sales this year. But what we gain in
the swings, we lose in the roundabouts. Since order bookings are down by
nearly 30 per cent, we will have no close a shift and lay off people. Under
utilisation of capacity will only add to rising costs, Reason? TQM."

ANIL SUD, GENERAL MANAGER (MATERIALS): "With a reduction in cycle

times, we have to place purchase indents only seven weeks in advance as
compared to 12 weeks earlier. But our suppliers insist on the earlier lead
times since their internal planning is pegged to a 12 weeks cycle. I located
alternative suppliers for binders and additives who fit in with our revised cycle
times. But they are all based in the North. Our procurement costs will go up.
Reason? TQM."

Liberty had been manufacturing and marketing for the last three decades. It
led the decorative paints market with a 35 per cent marketshare in 1996-97,
and was among the front-rankers in the industrial paints market with a 14 per
cent marketshare. Its state-of-the-art manufacturing facilities at Hosur, near
Chennai, were running at an 80 per cent capacity utilisation level. It was
among the few paint companies to integrate backwards fully to manufacturer
even titanium dioxide a key input which was in short supply and imported by
most companies. Two years ago, Liberty --- then headed by Rajeshwar
Mangal -- had commissioned Patel Consultants to implement a TQM
programme. The decision had been triggered off by several factors. First, the
industry structure was changing. The demand for decorative paints --- once
taxed heavily by the government in the mistaken belief that paints were luxury
items - was picking up because of a progressive reduction in the excise
duties, And the entry of global players in the automobile and white goods
sectors had spurred the demand for industrial paints.
Even as the industry was becoming competitive, there was an urgent need to
improve quality, cut costs, and move closer to the customer. "TQM is only just
beginning to deliver although there are a number of Grey areas," Mangal had
told Seshachar before leaving Liberty in early 1997, to take up a job in
Nigeria. The two had known each other for quite some time. :I believe in
TQM," said Seshachar. "But I also believe in doing it my way," he added
politely. As the meeting began, Seshachar set the tone by saying. "Before we
get into details, let me tell you my own understanding of TQM, and what it
means when implemented. To me, it means one of three trends. First, it could
be a case of things getting worse before, they begin to get better. I have seen
this happen with TQM in some companies. There is no need for concern here,
All you need to do is to monitor the various indicated closely."

"Second, it could be a case of relapse. This again is common in companies

undergoing change. But, it means trouble. Unless we move in quickly now, all
the good work done will come instruct. And, third, there could be flaws in the
way TQM is being implemented at Liberty. In which case, we need to go back
to the basic and get our mornings right." "Your analysis -- and the areas of
concern that you have raised --- just about sum up the roadblocks in
implementing TQM." Said Patel. "It is, however, likely that the three trends
could be happening simultaneously at different levels. Incidentally, all the
problems relate to the concept of Total Cycle Time (TCT), which is under
implementation."

"TCT, as it is called, "intervened Khurana, "is only a part of TQM. It would help
if you get a part of TQM. It would help if you get a background of how it all
started, and look at these problems in their right context, Goverdhan, why
don't you begin at the beginning?" "TCT is defined broadly as the time taken
from the expression of a customer need until the need is satisfied," said Patel,
"Within that period, of course, lie thousands of activities each with its own time
cycle. When you look at TCT as part of a TQM movement, you start
examining each one of those cycles in detail. In the process, you would
recognize numerous obstacles to productivity, which you never thought
existed. "Once you eliminate these snags, the time cycle of that activity is
shortened. And when a reduction in time cycle pervades every single activity,
and becomes an integral part of your operations on a regular basis, you can
respond to customer needs faster than competitors. That becomes a
formidable weapon in the corporate arsenal. Business then becomes a
seamless process instead of series of disjointed functions."

"Response time is a critical element of competitiveness for any business,"

said Seshachar, "but perhaps it is more so far a paints business."

"Yes," said Khurana. "As you know, the paints business is working capital-
intensive. Net working capital represents over 50 per cent of the funds
employed. The main reason is that we produce a number of shades in a
variety of colour. This blocks a large part of our money. It must, however, be
said that technology has been of great help here during the last few years."

"Instead of a standard shade-card, as in the old days, a computer screen

provides a master palette containing over 500 shades, and you can actually
see how the paint looks on the wall before deciding to buy it. Today, a
customer can have any colour, any shade of his choice, on the spot. The
desired shade is arrived at by mixing a base colour shade is arrived at by
mixing a base colour -- usually, white-with appropriate stainers in an
automatic machine. This automatically eliminates the need to stock pre-mixed
colour shades with the dealers which, in any case, may not get sold. All one
needs to do is maintain a stock of only the basic colour. While this cuts
inventory-carrying costs, the problem of high working capital remains since
one has to stock a vast range of pigments to produce a shade required by the
customer."

"Beside, the manufacture of paints involves around 500 different types of raw
materials contributing to 55 percent of the cost of sales. It is thus common to
see 25 per cent of the sales blocked in raw material inventories alone.
Moreover, we sell our decorative paints brands through 13,000 dealers who
need to stock over 150 shades. As a result the speed of delivery and precision
of product-mix are central to our commercial success. That's what makes the
concept of TCT critical to our operations."

"Fine, How did you go about it?" asked Seshachar.

"We carved up operations ar Liberty into three broad time cycles: the Make-
Market Cycle, Design-Development Cycle, and Strategic Thrust Cycle. The
Make-Market Cycle covers the complete operating business cycle from the
time a customer request a quotation until the receivables are collected. It has
several sub-cycles like customer service and cash-flow, each with its own
numerous mini-cycles such as order entry, forecasting, manufacturing,
purchasing, warehousing shipping." The Design-development Cycle covers
the entire process of developing new combinations of paints -- from identifying
the market needs to the realisation of cost - effective production, And the
Strategic Thrust Cycle covers activities from sighting a new business
opportunity to the stage when the Design Development cycle can take over.

"My experience has been that, in most businesses, the biggest bang for the
buck on the short run comes from tightening the Make-Market cycle. That is
where the impact is immediate, and dramatic. In fact, bringing the Make-
Market Cycle under control is a prerequisite to acting upon the other two. I
may mention that although we started focusing on TCT in early - 1996, we are
still on the Make-Market Cycle at Liberty. And the impact is just beginning to
be felt. But the real impact on corporate results will be felt only when we
complete all the three cycles. We are talking here of a five-year span." "That,
in my view, is fairly long." Said Seshachar." We need to cut that cycle first. So,
what happened, next?"

"Once we identified the sub-cycles and the mini-cycles in the Make-Market

Cycle," continued Patel, "We established the time theoretically required for the
completion of all the stages of a task in each mini-cycle. This we called a
baseline. We already had data on most of the baseline in our Time and Motion
Studies manuals. Once we had a grip on the thousands of baselines in a
company, we established a new benchmark for each baseline after eliminating
the redundant steps in the cycle." "The revised measure was called
Entitlement. The gap between the two measures was called the
Competitiveness Gap. People had to make the shift from the Baseline to
Entitlement without seeking extra resources. In a year or two, this will become
yet another parameter of performance appraisal."

"I can see why everybody is experiencing discomfort, as Trilok Roy told me
during my meeting with him, even as we are halfway through TCT," said
Seshachar looking at the check-list once again. "The brunt of the problem is
being faced by Sud, I am sure," he went on/ "His fears of material costs going
up are well-founded. Evidently, it is only when our suppliers also adopt TQM
practices that the quality loop will be complete. Should we take the initiative in
that direction? Indeed, why not? I also find this bit about shop-floor fears
interesting. It must be handled carefully. People must know that security lies
not in inventory but in competitiveness."

Questions:

(i) The management of Liberty funds that TQM has become is disenchanted
with quality movement and even loyal customers are shifting away. How
should Seshachar ensure that quality movement remains on course? Is the
situation a cause for alarm?

(ii) How should the management of Liberty deal with the apprehension
expressed by employees our TQM? Support your answers with reasons.

Bharat Engineering Industries Ltd. (BEIL)

The somber mood inside the 12th floor room mirrored the dark greedy clouds
that hung low over the city. Most of the employees in the Bharat Engineering
Industries Ltd. (BEIL) headquarters in south Bombay had left early that
evening in order to avoid the impending rains and the inevitable dislocation in
traffic. But there was no respite for the company's senior management team,
which had assembled in the cabin of the president and managing director,
Ramesh Ratnakar. Topping the agenda was a discussion on a report
submitted by customer Pulse --- a premier market research agency --- which
had been commissioned three months earlier to undertake a customer
satisfaction survey.

Under Ratnakar's instructions this secretary had also circulated copies tof two
fax messages received earlier on the afternoon from two key customers for
discussion at the meeting Present, besides Ratnakar, were" vice-president
(marketing), Anil Pandey, vice-president (contracts) Amit Nayak; vice -
president (contracts) Amit Nayak; vice-president (finance), K. Sririvasan
general manager (HRD), Mahesh Chand, who was also the designated
coordinator for TQM; and general manager (production), Mukesh Kumbat.
Also attending, as a special invited was Vinod Mathur, the company's
marketing advisor.

As coffee was served, Ratnakar picked up the blue-bound volume. "I am sure
you have all gone through this. We now seem to have tangible evidence of
how customers perceive us, where we stand in relation to the completition,
and where we are slipping up. It beats me, though, that we needed this
research report to tell us what we ourselves should have recognized. It also
vindicates my constant attempt at drawing your attention to the fact that we
need to be more customer-focused in order to survive in this business," he
began.

That's how it had all begun, BEIL had been incorporated two decades ago as
a subsidiary of a European company. A decade later, the overseas parent had
divested its entire shareholding, and BEIL, became a wholly Indian company,
owned and managed by professional managers and technocrats. Its product-
mix consisted of turnkey projects, engineering products, and capital
equipment by companies in the continuous process industry. And BEIL had
successfully executed more than 300 major contracts in West Asia, Africa,
and Asia.

Tailor-made to the specifications of clients and consultants, some of these

contracts had been funded by multinational lending agencies, including the
World Bank, which laid down stringent norms. Over the years, the company
had acquired the expertise to plan and execute projects for industries as
diverse as nuclear and thermal power, fertilizers, chemicals, refineries, and
petrochemicals. Its high level of technological competence had been attained
through affiliations with some of the foremost engineering companies and
consultants in the world as through sustained in-house R&D, on which BEIL
spent an average of two per cent of turnover every year.

BEIL's R&D centre had, in fact, been recognized by the Department of

Science and Technology as a premier research centre. And the company also
had a well-trained and experiences team of engineers, who operated as
trouble-shooters, ensuring minimum downtimes. The team was also
responsible for executing annual service contracts and supplying essential
spares. Having built quite a formidable reputation in the rehabilitation of sick
plants and streamlining operations, BEIL even services units set up by its
competitors.

Despite that recognition, Ratnakar said: "This report points out, quite
conclusively, that BEIL scores poorly on various parameters of customer
satisfaction. Gentleman, I want you to understand the gravity of the situation.
New players like Alpha Projects, Mhatre & Co., and even Cosmic Engineering
--- companies no one had heard of six years ago --- are now taking large bites
out of our market-shares." Turning to one of his colleagues, he said: "Pandey,
you were the one to suggest a survey. What do you think of the report?
Pandey had jointed BEIL, as a sales engineer 10 years earlier, and had risen
to become the head of marketing in June 1995. "There is one major difference
between the way we do business and the way our competitors like. Cosmic
engineering cope: we want customers on our terms; they accept customers on
the customers' terms. Secondly, I don't agree with you when you say that we
were not aware of the fact that the customer perceptions of BEIL were not
positive. My department has brought up the fact that customer complaints
have been rising for quite some time now. Unfortunately, nobody listened to
us," he said.

Added Pandey: "The contracts division has often reneged on project

deadlines. We delay the submission of our designs and plans. In fact,
probably my biggest worry since I took charge of the department has been the
steady deterioration in our customer-orientation. The findings of this report not
to mention these two fax messages only prove …." He was interrupted at this
juncture by Nayak: "Just a minute, Anil You know as well as I do that projects
are often delayed for reasons which have a lot to do with the customers
themselves. I can cite a number of instances in this regard. Whenever they
have a resource crunch on can't extend the credit line with their bankers, the
first thing they do is to ask us to hold back supplies."

"This throws our day-to-day planning out of gear and in turn-, impacts on the
production schedules. It also affects our cash-flows, a fact which, I am sure,
Sririvasan will bear out. Once their short-term financial problems have been
started our customers then expect us to resume supplies at short notice. This
also creates its own distortions. It has happened frequently," said Nayak.

Kumbat sought the chair's permission to speak. "Anil, you made a very valid
point why our competitors are getting the better of us. It is true that the only
way to win customers and ensure regular business from them is to comply
with their terms. But there is a difference between complying with their terms
and dancing to their tune. I have pointed out to you often, in the past, that we
can't allow a customer to become whimsical. We should not let this business
of the customer always being right upset own schedules."

Nayak supported this point: "I should also mention that a number of our
customers do not give us their specifications on time, but expect us to submit
our designs according to the original schedule. And I think that marketing
seems to feel that we should get business at any cost. How else does one
explain those huge discounts that keep popping up in our receivables?"

"I was discussing the issue of discounts with Sririvasan only yesterday," said
Pandey. "I can assure you that they are not being given indiscriminately. I
have given strict instructions that no discount should be offered unless they
are duly authorised by me and certified by the finance department. But let me
also tell you" whenever there is a delay in delivery, we have no alternative but
to mollify the customer by shaving a bit off the price."

Ratnakar interceded: "Coordination among our various departments appears

to leave a lot to be desired. But before we deal with that issue, let us address
ourselves to the salient findings of this report." Customer Pulse had measured
the competitive image of BEIL's products and brands on the following
parameters:

 Reputation of manufacturer/supplier
 Quality and speed of response
 Proximity of the supplier
 Technical back-up from the supplier
 Speed of delivery
 Product quality
 Price.
 Discounts offered
 Credit Period offered
 After-sales service.

Customers were asked to assess each of these parameters on a five-point

scale. The interpretation of the scale used to measure the importance of each
parameter and customer satisfaction on each variable was as follows:

For purchase parameters

Very Important ………… 1
Important ……………….. 2
Not so important ………… 3
Not at all important ……….4
Can't say ………………… 5

For brand satisfaction

Very satisfied ………. 1
Satisfied ……………. 2
Not so satisfied ……… 3
Not at all satisfied …… 4
Can't say …………… 5

It was observed that for engineering contracts quality was the most critical
factor in customer's decision making. Other important factors in descending
order of importance in the customer's decision-making process were:

 Technical back-up
 Quality and speed of response
 Speed of delivery
 After-sales service.
 Image of the supplier
 Price

The following factors were found to be of secondary importance to the

customers: proximity of the supplier; discounts offered; and credit period. After
ascertaining the relative importance of various parameters, the competitive
image of BEIL was evaluated vis-a-vis three competitors" Alpha Projects,
Mercury, and Cosmic Engineering. It was found that while BEIL satisfied the
secondary needs of customers more than their core needs, its competitors
satisfied the core needs of customers more than their secondary needs.

The report revealed that in the case in engineering contracts, BEIL fared
average on factors like reputation; credit period; proximity to the customer;
and discounts. The major areas of dissatisfaction -- in descending order of
importance --- among customers were: quality and speed of response; speed
of delivery; price; and after-sales service. The quality of BEIL's product was
not perceived to be satisfactory. Compared to that of Cosmic Engineering, it
was rated poorly as there was a wide gap between the desired and the actual
quality delivered by BEIL. Cosmic Engineering's customers rated the quality of
its products highly and its performance more than met their expectations.

As far as spare parts and components were concerned, BEIL was perceived
by customers as satisfying their on the following parameters: reputation of the
supplier; proximity to the customer; and credit period. BEIL was found to be
weak on product quality technical back-up; price, and after-sales service. BEIL
and Cosmic Engineering were seen as close competitors and, by and large,
the customer was indifferent to the source of his spare parts and components.

The most significant factors were price and off-the-shelf availability of the
product. The frequency of salespersons contacts was also an important
consideration BEIL was found wanting on technical back-up; quality and
speed of response; product quality; after-sales- service; and speed of delivery.
Then, Ratnakar asked the assembled group to turn their attention to the
facsimile transactions received from two of the company's major customers.
They read:

Fax 1:
The above mentioned to be developed a crack on May 25. After detailed
discussions with your manager (QC), S. Ramachandran, the boiler was
dispatched from our site at Pune to your fabrication vendor in Nashik on June
10 for repairs. Since then, there has been no progress in rectifying the same.
We have called your concerned managers on the telephone on several
occasions requesting expeditious action. Finally, I personally visited your vice-
president (contracts), Amit Nayak, at his office in Bombay on July 10. He
promised to look into the problem.

As per the minutes of the meeting that day, where your senior manager
(contracts), Anil Dhawan, and your manager (QC), S. Ramachandran, were
also present, the final inspection was to be scheduled for July 25. But
considering that little-progress has been made so far, we are constrained to
think that there is little possibility that our boiler will be returned to us in proper
working condition before the end of October. We must express our serious
concern over the casual and cavalier manner with which the problem is being
attended to. Needless to say, the capacity utilisation of our plant has suffered
considerable due to the delay in the repair to the boiler ……

Fax 2:
We had, with some hesitation, placed an order with BEIL for the supply of
equipment for our food processing unit near Delhi. We experienced difficulty in
getting all the specifications in time and the civil were help up for several
weeks for want of details. Thereafter, despite several reminders to your Delhi
and Bombay offices, simple requests for drawings were not attended to for
weeks.
We haa problems getting your engineers to visit our site, resulting in further
delays. Now, we have been waiting for three weeks for your commissioning
personnel to arrive. Would you please look into the matter and let us know
when we can commission the equipment….. "I don't mean to blame the
contracts, Amit," said Pardey, "but it is obvious that it is the execution
personnel who are responsible for these two days." There was silence in the
room for a few moments. "Anil, may I go back briefly to the issue of
discounts?" interjected Srinivasan. "We have problems in recovery even
where discounts have been offered. Remember the Madras Synthetics case,
where you reduced the price by almost 30 per cent and the customer still
reneged on his payment? We recovered the amount after a lot of delay and
that too, in instalments."

"Well, I agree with your assertion that we have to be competitive and that we
must do our homework well," said Pandey, "I have told my boys to get the
costs right and keep margins in mind when bidding. In fact, Mathur, who is
present here, will conduct a training programme on competitive bidding for the
marketing staff next week. At the same time," continued Pandey, "I must
mention that there is always pressure from finance to keep booking orders so
that the bottomline looks attractive. The boys go all the way and, in their
enthusiasm to close a deal, they often forget to consider the profitability of
each transaction in an individual deal. The new training programme should of
course, set right that lacuna."

"BEIL has been a trend-setter and a pioneer in project-management for the

last decades. But, during the last three years, the competition has been
getting hotter," said Ratnakar, "While our competitors have all been growing at
the rate of 40 per cent per annum, our growth last year, as you are all aware,
ahs been 15 per cent. We cannot afford to rest on our reputation of we have
to move from last year's turnover of Rs. 350 crore to the targeted turnover of
Rs, 500 crore this year. Therefore, I think we need to train our people in
quality service, customer orientation, and marketing," he continued.

"Anilm, why don't you and Mathur sit together and plan the training
intervention? Mahesh Chand will coordinate with both of you. If we do not take
the right steps immediately, we could be heading for trouble," he added,
looking at his watch and glacing at the weather outside. He brought the
meeting to a conclusion by saying. "I only hope that this dark night doesn't last
too long. Mathur, I suggest that you examine this report and all other
communications received from customers more closely and develop a
marketing intervention plan."
As they all rose to leave, Ratnakar said: "Let's us meet next week with your
customer locus plan, Mathur," As he walked towards the door, questions were
flooding Mathur's mind. How could BEIL be made more customer-focused?
Could training and retraining alone help? If so, who should be included in such
a programme? What about marketing systems and management information
systems? Could BEIL regain the service advantage it had before its rivals
overlook it?

Questions:

1. Identify the main issue(s) the company is faced with.

2. How can BEIL regain its competitive service edge? How can the company
become more customers-focused?
3. Do other systems like marketing system and management information
system need to be modified/improves? Give reasons.

Please read the following case study carefully and answer the questions given
at the end:

TQM Implementation

Occasion: A 4-day seminar on TQM: Concepts & Practices, orhanised by

Quality & Productivity Services (QPS), Mumbai.
Date: August 14, 1998
Time: 2 p.m.
Venue: The Orchid Room, The Grand Holiday Hotel, Mumbai.
Present: S.P. Kumar, CEO, QPS; Mahavir Shah, Guest Speaker, Participant.

Kumar: Welcome to the Day 3 post-lunch session. We have had a beneficial

interaction during the last two-and-a-half days. It is evident from the feedback
that I have gathered that you are raring to get back to your workplaces to
implement Total Quality Managaemnt (TQM). But therein lies the crux of the
issue: implementation is never easy. One has to be careful and cautions; it is
the first few months that make all the difference to the success of an
organisational transformation like TQM. Unloading the damage would take a
larger portion of managerial time than actual implementation. Therefore, I
thought it necessary to focus half a day of this seminar on this critical aspect.
The best way to go about it is to listen to the experiences of a company -- and
an individual --- who has just gone through that phase. Ladies and
Gentlemen, please welcome Mahavir Shah.
Mahavir is a well-known Human Resources (HR) professionals; he has
illustrious track0record. He has been Vice-President (HR) at the Rs. 380-crore
Madhusudan Chemicals Ltd. (MCL) for the last 5 years. Last year, when his
company decided to go in for TQM, he was given an additional responsibility
by his managing director, and appointed the company's TQM Co-ordinator. He
has been rather reluctant to speak about TQM. In fact, when I invited him
over, he requested me to permit him to speak about the birth-pangs of TQM,
rather than its impact. That, he said, was far more important since it was
relevant to the Indian context. So, Mahavir will talk about his experiences in
implementing TQM. Mahavir, the floor is yours.

Shah: Thanks, Kumar, Let me mention at the outset ladies and gentleman,
that I would like this to be an interactive session. Please feel free to interrupt
me with your questions and comments. I am glad to know that you're all keen
on implementing what you have learnt here. But let me warn you; things may
look rosy in a seminar hall, but reality is different. You have to deal with too
many variables and contingencies. What makes the task even more
challenging is the fact that there is no tired-and-tested TQM formula, which
can be uniformly applied to all the companies. The experience of each
company is unique since the TQM route-map is different. But why is that so?
Because the context is dissimilar. Yes?

I would beg to differ with you. My organisation is embarking on a TQM

programme, and we are putting together the common factors necessary to
drive such a change initiative. We have identified them after visiting quite a
few organisations in the country……..

There may be certain fundamental issues, but the context on which a change
is effected is crucial. You are bound to experience that when you actually
begin implementing TQM in your organisation. We could discuss that as we
go along, but let me mention 4 common factors straightway, First, TQM
should have a link with corporate strategy. It should be rooted in at least 2 or 3
of the company's satisfaction and product differentiation. When it operates in a
vacuum --- as a standalone activity --- you can never achieve improvements in
business results, which is the raisan d'etre of TQM.

Second, TQM is a team effort --- not an individual initiative. A co-ordinator, by

himself, would not be able to achieve anything. This is where his skills in
directing disparate individuals in an organisation towards a common cause
come handy. Third, TQM must link value-addition to the customer. Without the
linkage, it will only yield incremental improvements in the company's
processes. It would not lead to geometric leaps in business results that a well-
designed TQM can invariably provide. And, final, TQM needs the personal
involvement and support of the CEO. Without that, it can never gain credibility
in the entire organisation In fact, this is the most importance issue, which
should be addressed night at the beginning of the implementation phase.

I mentioned business context earlier, Let me, therefore, spend a few minutes
discussing the nature of our business at MCL so that we understand TQM in
the right perspective. For decades, MCL has been known as a caustic soda
company --- a perception that's bound as a change soon. The imperatives of
value addition and the nature of our production processes are forcing us to
change tack. Today, our 13 per cent marketshare makes us the second-
largest producer of caustic soda in our country. Our manufacturing facilities
are located at Vadodara, a city located in our main market. Gujrat which
consumers over 60 per cent of our production.

I wouldn't like to brother you with technical details but caustic soda, as some
of you may be aware, is obtained by the electrolysis of salt --- a process which
also yields chlorine as a by-product. The ratio of caustic soda is usually 1:5:1,
the combination is termed as an Electro-Chemical Unit(ECU), Caustic Soda
and chlorine, incidentally, have separate markets. Paper, Aluminum, Textiles,
and Soaps & Detergents are caustic soda's primary user-industries; chlorine is
sold mostly to petrochemical units. They convert chlorine into ethylene
dichloride or a vinyl chloride monomer, which us used to produce Poly-Vinyl
Chloride (PVC) which, in turn, is used in the manufacturer of plastics. As you
see, the scope for value-addition lies in the chlorine component of an ECU.
Surely, the price-realisation of an ECU is higher when there is greater
emphasis on chlorination. But an increase in demand for chloride leads to glut
in caustic soda. Yes, sir?

Isn't there a glut in the caustic soda capacity in the country? Did that compel
you to embrace a TQM programme?

There is an oversupply of caustic soda. Against a demand of 1:10 million

tonnes per annum (tpa), the current capacity in the country stands at 2.20
million tpa --- not to mention the licenses issued for another 1 million tpa. With
most producers operating at a 50 per cent capacity, the situation is bad. For,
caustic soda is a commodity business, where volumes are crucial; so,
capacity utilisation is a critical parameter of profitability and cost-effieciency.
Of course, MCL has some advantages. It has captive salt words, which meet
75 per cent of its requirements of sodium chloride, the main raw material, And
it has an in-house power generation facility which offers power at Rs. 2.60 per
unit against Rs. 4.70 from the state power grid. Naturally, since power
constitutes 67 per cent of the cost of production, we are able to save a lot of
money….

MCL's FINANCIAL

Did you find it difficult to get accepted within the organisation? How can a co -
ordinator elicit the support of the entire organisation?

I will come back to cost savings later. The question raised by the gentleman to
my left, I think, is far more important. The immediate priority for a TQM Co-
ordinator is to establish his personal credentials in the organisation. Self-
evaluation through a personal SWOT marks the first step. This is necessary
even when the co-ordinator is an old band in the organisation. For instance I
had began with MCL for over a decade, and was familiar with all the people in
the organisation. But, much to my surprise, immediately after I took on the
new responsibility. I felt like a new kid on the block. It was, of course, a
momentary reaction. After all, there were new working relationships to be
forged and new expectations to be met.

I was aware that this was a splendid break for me, a wonderful learning
experience, an opportunity to make a difference to the organisation, and a
chance to become visible at a higher level in the organisation. It was also a
tough developmental assignment. I saw it more as a challenge than as a
promotion, One should quickly progress from being a novice to a valuable
member of the team. The role and responsibilities must be well understood,
and a co ordinator must command the trust and respect of the people. You
would agree that this couldn't happen overnight. At the same time, you must
heed your instincts and stick to your principles, A reputation for personnel
integrity is a TQM Co-0ordinator's main asset; it should put him on coupe right
from the start.

Establishing one's credentials is also an effective way of neutralizing the

effects of what I call Total Quality Paralysis (TQP), which is a common
phenomenon during the initial phase of TQM. Since the TQM processes are
unique to a specific context, there is usually no guidance on how to get
started. What is characteristic of TQP is that while a lot of people know
something about TQM, nobody does anything. Everyone talks about TQM, but
nobody can get the process-improvements going. This happens even as the
co-ordinator is trying to establish clear guidelines on how to get the process
off the ground and how to sustain the momentum thereafter….

STRENGTHS WEAKNESSES

Formidable Market Presence Captive Power Plant Limited Product Portfolio Oversupply In Ind
Proximity To Customers Backward Integration Capacity Utilisation Little scope For Bra

OPPORTUNITIES THREATS

Product Differentiation Brand Building Entry Into FMCG Investments In New Capacities Quality–Consci
Marketing Higher Price Realisations Product Substitutes Cost–Conscious Cus

Isn't it prudent to appoint an outside consultant who can give TQM initiatives
the necessary focus and set the ball rolling in the right direction? That was
what we learnt yesterday…

Essentially, an outside consultant helps to sell TQM to senior management.

That is a formidable contribution to the implementation phase, and a great
help to the in-house co-ordinator. But MCL did not appoint an outsider, we
enlisted the services of several trainers who, in turn, were assisted by in
house facilitators. It is not unusual for people to go off the track, resulting in
hiccups of various kinds, in the early phases. A TQM Co-ordinator must
structure his quality initiatives in such a way that they run simultaneously, not
sequentially

Phase I consists of organisational self-evaluation. This can be done either by

the co-ordinator personally if he feels that the top management needs to be
enlightened on TQM, or he could involve senior managers in several
brainstorming sessions. Basically, you must seek answers to the following
questions:
  Where are we now as on organisation?
 Where do we want to go from here?
 How do we get there?
 How will get us closer to our goals?
 How will TQM get us closer to our goals?
 How will we know when we get there?

The last question, in my view, is vital because it will provide you with the
necessary yardsticks to evaluate performance. It is the co-ordinator's
responsibilities to ensure that systematic procedures for determining and
fulfilling quality goals are down in a manner which is understood by all.
Transparency is importance. The objectives of Phase I are two fold:
constructing a Quality Model: and identifying the opportunities For
Improvements (OFI).

Phase II, which runs parallel to phase I, consists of educating the members of
the senior and middle management about TQM. This is best achieved by
having 2 one-day seminars for small groups of managers with a month's gap
between each. The gap is necessary so that manager's come prepared with
proposals for quality goals and policies. It is important to have no more than
25 senior and middle managers in each group. In my organisation, which has
as many as 750 managers, Phase II ran for 3 months. An important exercise
that must be conducted during this phase is to classify quality improvements
into internal and external changes. Initial improvements should deal with
internal changes because the results would be tangible and evident.

Phase III is a critical phase because it is here that the management has to
decide whether drastic changes ---- we called them breakthroughs --- are
required. It is important to hear in mind that all revolutions originate in a crisis.
A crisis is an unacceptable gap between the current and the desired situation.
It takes a crisis for the top management methods even though they had
served well in the past.

Let me mention a related issue here. TQM often snaps the various
established linkages in a business system, For instance, let us suppose that,
through TQM, you are able to reduce your inventory lead-time from 8 weeks
to say, 6. This will impact raw-material delivery, whose frequency will now
increase. So will the number of purchase-orders made during a particular
period. If purchase costs are being allocated on the number of orders raised
the new development might place the system of cost appointment out of gear.
If people do not understand these linkages, they are bound to attribute all
kinds of distortions to TQM even when they have no bearing on it, Yes, sir?

During the last 2 days of the seminar, speakers emphasized on the necessity
to have a change-drive within the organisation. Did you feel the need for a
change-driver?

Yes, I TQM initiative can succeed only when it is rooted in a change-driver,

which provides a compelling, need for change. It could be a vision that is just
out of radically new thinking is applied. It could be some signs of decline
within the company; it could be the fact that competition is closing in on you;
or it could be dictated by the market-leader's extra ordinary performance. If
people do not see a fundamental reason for change, the TQM Co-ordinator's
commitment, however genuine, may be discounted by them as one person's
eccentricity. The change-driver must outweigh the costs of transition and the
uncertaintly, that will set in….

Can you will us what the change-driver was at MCL?

For decades, MCL has been in the commodity business. But the supply
overhang in the caustic soda industry has forced us to look for alternative
growth routes. We have taken 2 critical measures: consumer marketing and
value-addition. We are increasing our salt-works capacity not only to meet 100
per cent of our raw material requirements from within, but to market branded
salt to domestic consumers as well. This is a new area for us, and a paradigm
shift in our conventional approach to marketing. Historically, we have always
looked at chlorine as a byproduct. With opportunities for value addition
opening up in the chlorine segment --- thanks to massive additions to
petrochemical capacities in the country --- our new thrust is to look for ways in
which MCL can add value to our customers supply chain. That calls for a
different marketing approach in which customer requirements, both current
and future, become the focal point of all that we do. We asked overselves:
what would happen if we did not venture into these 2 areas? The answer was
that, sooner or later we would be wiped out of business. That was the change-
driver.

At the same time, we had ascertained the factors crucial to the success of the
organisation. These vary from one company to another. For instance, in our
case, it was the make-to -market time which was important. Unless we
address that, we will fail in our efforts to serve the customer. So, we have
benchmarked the make-to-market time with the industry leader. At 3 weeks, it
is well ahead of our own cycle-time of 6 weeks. We have a lot of catching up
to do….

TQM entails bringing disparate individuals together. But how do you handle
opposition --- which is bound to exist at various levels ---- to a change
initiative?

For a co-ordinator, the change process is his world. It is his reason for being.
But to everyone else in the organisation, TQM is just one of the many issues,
They will support the change process if he helps them to achieve their goals.
A co-ordinator should link the change process to his colleagues' larger
concerns so that it becomes a means for achieving their goals and enables
them to perceive TQM as an initiative that not only helps the entire
organisation, but also benefits them individually. This is the most difficult part
of the work of a co-ordinator. Staying focused often becomes difficult.

In my experience, people fall into 3 categories as far as their response to

change is concerned. You have those who declare their opposition to the
programme. It is easier to deal with them once you identify, and proceed to
address, their concerns. If someone says, "This quality programme is similar
to what we have done before. They are just feel-good exercises that take us
nowhere," don't jump to the defence of your programme. Don't interpret it as a
personal attack. You need to find out why he feels that way, and what he
really means. It is very likely that he understands the magnitude of the change
programme but fears that everyone wants only a cosmetic exercise. They
become convinced of the compelling need for chance once you address
What-is-IT-For-Me? Factor, And you have those who offer instant support,
which is a façade. It is this category you should be wary of. To be successful
in his pursuit, a TQM Co-ordinator should never be afraid of, nor feel
apologetic about, asking something that he does not know. An honest and
open approach usually neutralises potential opposition. Handholding makes
the journey together worthwhile. What can consume a co-ordinator's time is
his search for volunteers. I found that candid people make food candidates. I
particularly targeted the champions of previous improvement programmes at
MCL. They are the people with courage, motivation, and exercise, who can
make a TQM initiative a success. They love to have another chance at making
change happen with management support and proper tools and training. My
experiences with people have taught me not be attribute past failure to
individuals and their shortcomings.

How about the CEO's support? How do you secure it?

The TQM Co-Ordinator's primary task is to sustain the CEO's sponsorship of
the change process. It should be possible, in time, to secure the collective
sponsorship of the entire organisation, but everything hinges upon the leader's
personal resolve. It is the co-ordinator's job to protect the CEO from needles
surprises and embarrassments even as he struggles with they TQM concepts.
You should ensure that the president personally chairs all meetings of the
Quality Council…

What should be the structure of a TQM Council? Should it be headed by the

CEO or the co-ordinator?

The Central Council should be headed by the CEO. Even when the CEO
delegates most of the day-to-day activities pertaining to TQM to the co-
ordinator, he should personally chair the meeting of the Council. The CEO
may be unable to devote much time to TQM not only because of other
demands on his time, but because he is unsure of what is expected of him.
This is a common failing in most companies. In fact, a CEO could be as
unfamiliar with the concepts of TQM as others in the organisation. The co-
ordinator should secure the CEO's total commitment and ensure that the latter
does not lose interest in TQM. So, it is necessary to establish a proper
working relationship with the CEO. The Central Council must be supported by
Functional of Departmental Councils. Their composition --- which, like the
Central Council, should ideally be cross--functional ---- must be linked to the
specific requirements of the OFI.

Questions:

(a) What are the majors issues that a TQM co-ordinator must deal with during
the implementation phase? What pitfalls should be guard against? Are there
certain ground rules he should establish in his relationship with colleagues
and subordinates to set the momentum for change?
(b) What are the value activity he should monitor to ensure that his quality
initiative is working? How should be link TQM to the employees larger
concepts and customer satisfaction?

Read the following case carefully, analyse it, and answer the questions at the
end:

ORIENT LTD
Rahul Verma, Vice President (Operations), Orient Ltd., was confronted by a
terrible dilimma. He had met CEO Abhay Shukla a few hours ago, and had
been offered an additional responsibility: of co-ordinatinf\d Orient's Total
Quality Management (TQM) programme. But, instead of being enthused,
Verma seemed a little hesitant. Nothing his reluctance, Shukla gave him a
week to make up his mind.

Verma's attitude was understandable. The TQM project had been co-
ordinated by Bharat Saxena, vice-president, human resources management
(HRM), until his recent exit from Orient. It was Saxena who had introduced
TQM in the organisation a year-and-half ago, and, as a member of the apex
committee which was piloting the project, Verma was fully aware of its
chequered progress. A change of guard at this juncture could make or break
his career. He decided to call Varun Mitra, who had taught him HRM and
organisational development in college. For, Mitra, who was now a TQM
consultant, would give him an outsider's perspective.

"It is an oppurtunity that I would have jumped at." Verma told Mitra as they
met later. "There are several positive elements. The company is young; the
people are enthusiastic; and the rank and file are receptive to chage.The CEO
has assured me of his personel support.But I have an uneasy feeling the
whole thing. It could be something to do with the false starts we have had in
implementing TQM." Mitra became after alert. "False starts?" he asked. "They
mean trouble. They often turn the clock backwards. But let us start at the
beginning. Tell me about Orient. And why the company thought of TQM."

"We make paper-insulated cables, polyvinyl chlorine cables and cross-linked

polyethylene (XLPE) cables. They come in a varied range --- low-voltage
cables of upto 11 kilovolts (KV), medium-voltage cables of 33 KV, and high-
voltage cables of 230 KV. We are, in fact, the only company oin India to make
400 KV cables. Orient has a technical collaboration with Jigucji of Japan,
which has given us access to their quality manuals. We have kaizens and
quality circle in place, and obtained an ISO 9000 certification. With a 17 per
cent marketshare, we rank second in the cable industry."

"That is quite impressive. You have the right ambience for TQM," said Mitra.
"Now tell me about the motivation. Who are your customers?" "We are largely
dependent on the State Electricity Boards (SEBs) for the offtake of our
products. The main problem with SEBs has been the collection of receivables,
which takes anywhere between six months and one year. There is little on
prices, which are negotiated annually, We are compelled to absorb hikes in
input prices since there is no provision for an escalation clause in the
agreement. But the biggest constraint is the fluctuation in the prices of raw
materials like copper and aluminum, 70 per cent of which are imported.
Evidently, the only way to get a grip on the costs-revenues-margins chain is to
tighten up production processes and secure efficiencies in internal operations.
That was why we thought of TQM."

"That is the classic trap that most companies fall into," said Mitra
disapprovingly. "There is no link with the customer. The raison d'etre of a
TQM movement is customer satisfaction. Without the linkage it becomes
merely process oriented. Without the big picture, you would only be pursuing
incremental improvements in operational efficiencies. You would not be
aiming for geometric leaps in business results."

"I stand corrected," said Verma instantly. "I must mention that the decision to
go for TQM was also influenced by the emergence of a new marked category
--- industrial power cables --- in the last three years. We have been selling
nearly 30 per cent of our output to the industrial sector through a dealer
network. The share of industrial power cables in our turnover is likely to go up
to 50 per cent in two years. The specialised TQM requirements of industrial
users have ensured higher margins. Although the dealer happens to be our
customer, we are now talking directly to end-users to ascertain their needs.
We have developed customized products for several of our customers. So,
the TQM movement did have its origin in the needs of a growing customer
segment."

THE CHALLENGES OF TQM

CHANGE DRIVER: Orient dearly needs to provide a compelling need for

transforming the organisation.
LEADERSHIP: The change initiative needs the backing - and personal
investment -- of its CEO.
CUSTOMER FOCUS: Orient needs to shift to a customer-oriented mindset
from a process-oriented one.
EMPLOYEE INVOLVEMENT: To drive TQM, it needs to secure the buy in of
middle managers first.
TEAM CULTURE: A quality transformation like TQM is primarily a team effort,
not an individual initiative.
EXTERNAL INTERVENTION: An external agent is extremely important to
prepare Orient for change.
OVERALL OBJECTIVE: Orient should synergise its subordinate goal with
various operating goals.
"The link is still not wholesome," said Mitra. "But tell me, how did you go about
implementing TQM processes?"

"We began ny asking ourselves several questions," said Verma. "What does
the customer want? The answer was self-evident: a high-quality output a
competitive price. What drives prices? Raw material costs, interest, and
employee costs. What is the most critical issue that merits management
attention? Reducing the lead-time of the production cycle by bringing down
the downtime for imports of copper and aluminum. All that was part of an
attempt to identify processes that would give us a tight control over costs.
Simultaneously, we started looking at the key result areas: commodity-trading
skills that would enables to make timely purchases of copper and aluminum
and inventory and receivables management."

"Good start," said an enthused Mitra. "Tell me how TQM was co-ordinated."
"We did not enlist any external consultants except for some of the training
programmes," continued Verma "The vice-president, HRD, had some
experience in TQM in his earlier job. He was also a qualified trainer. That
helped we formed an apex committee, headed by Saxena."

"A basic mistake," intervened Mitra. "The apex committee should have been
headed by the managing director with the vice-president HRD action as the
convener."

"On hindsight, yes," said Verma. "The committee would meet once a month
with a structured agenda. The idea was to examine the feedback on some of
the internal training programmes we had initiated on team-building, of
continuous improvement programmes, and experiential workshops. We had
also started computing the cost of poor quality, and some of the tasks of the
apex committee was to keep track of such costs regularly. We had a
cascading organisation structure for TQM, wherein the vice-president, HRD,
was the head of the apex committee, and each member of the apex
committee was the head of a sub-committee pertaining tohis department. For
example, I headed the Operations sub-committee for TQM."

"You seem to be, by and large, on the right track"said Mitra," But why are you
in two minds about accepting the offer?"

"You know, the CEO's intentions are right, But I don't think about the kind of
change he wants. TQM needs he is clear sustained backing of the CEO. The
change initiative must be the personal responsibility of the CEO; the role of
the co-ordinator is merely to facilitate change Shukla has not spelt out the
factors thaat drive him personally towards TQM. If he withdraws the mandate
at a later stage, overtly or covertly, the change process would collapse. That
is my biggest concern."

"Secondly, as I said earlier, we have had some false starts. Let me give two
examples. After some initial hesitation, which was quite natural, people at
Orient were enthused with the team concept. Everybody plunged into the new
style of working and a number of small-improvement projects took off. Once
the team members got to the root of a problem that they were asked to solve,
they became confident. They believed that any problem at any level in the
organisation, however formidable, could indeed, be tackled. Surprisingly,
Orient's line managers started feeling uncomfortable. When teams were
uncovering major problems and people went around seeking information from
sources they had no access to earlier, the line managers felt that the situation
was getting out of control. Lone used to screening information before it went
outside their departments, they found the new openness quite daunting. The
result? Departmental heads started pulling out their subordinated from various
cross-functional teams on seemingly-valid grounds. This cross-functional
teams on seemingly-valid grounds. This led up to a backlash. Employees felt
bitter at having their hopes raised only to be let down. Perhaps the mistake lay
in not securing the buy in of line managers right at the beginning of the
programme.

"Another example is with regard to our capacity utilisation. As we started

developing custimised products, Orient's capacity utilisation level started
falling. It fell from 80 to 45 per cent within the first five months. When you
eater to customised demand, an increase in cross-sectional area and voltage
requirements of finished cables become the new value drivers, not output as
measured by cable length. The overall output measured by tonnage of metal
drawn would increase, but the output in terms of kilometers of cables --- the
conventional measure of capacity utilisation --- would decrease. It took time
for indicator of the productivity of fixed assets in customised manufacturer. But
the decline in plant capacity was attributed to TQM.

The third reason for my apprehension: TQM co-ordination is, essentially, a

staff role --- and not a line function. And I am a line manager. In my 20 -year-
long career, I have been used to issuing instructions and commanding action
by allocating responsibility and ensuring accountability from people on the
Shopfloor. I am used to chasing results on a day-to-day basis. It is a mindset
unsuited to a staff function like TQM, where the role of a co-ordinator is not to
hand out instructions, but into facilitate change through a slow and steady
process of individual transformation. I have seen it happen in many
companies: any attempt by a staff functionary to chase results is doomed to
fail."

"Perhaps you are over-reacting," said Mitra. "Let me address each of your
concerns. The best way to ensure the continuing support of your CEO is to
make him the sponsor of the apex committee. The false starts are, of course,
alarming. You should have factored in these changes right at the beginning.
The only way of undoing the damege is through training. Your line managers,
in particular, must be put through development sessions. And there is no
reason why you can't hold on to two contradictory roles simultaneously. It
depends on the kind of person you are. Three issues are relevant here: are
you likely to be biased towards your own traditional function? You should
avoid giving too much attention to Operations in implementing TQM. Can you
build trust among your people easily and establish your credibility with them
without the backing of the authority? And, if the change process details for
some reason do you still have a job at Orient? My own feeling is that you have
a good opportunity to add value to the company."

"Thanks for your confidence in me," said Verma. "If I decide to accept the
offer, are there any other specific issues that I should look at?"

"Yes," said Mitra. "I think what Orient needs is a change driver. Something
that provides a compelling need for change in the company. It could be a
vision that is just our of reach unless a radically new thinking is applied, it
could be some signs of decline within the company. It could be the fact that
competition is closing in on you. If people do not see a fundamental reason for
change, the leader's commitment, however genuine, may be discounted by
them as one person's eccentricity.

"I think it is also important for you to realise that TQM is not an employee
motivation programme. Nor is it a panacea or a guarantee of success. In its
very nature, a quality transformation is a team effort, and not everyone starts
off with the same enthusiasm. Unless someone takes responsibility for
masterminding the whole affair, either nothing gets done or there is complete
chaos. This is where the skill and dedication of the change agent is a key
success factor. You cannot succeed as a TQM co-ordinatos if you are inclined
to hogging the limelight. You have your priorities cut out at Orient. But the
choice is entirely yours. All the best,."
Questions:

(a) Has Orient Ltd. Identified the objectives of TQM? If yes, what are they?
(b) How can Orient CEO galvanize the organisation to bolster of quality and
overall performance? What kind of approach would it need?
(c) How can Verma ensure that the quality movement will not be drailed in the
company? Should TQM be a stuff function? What roads map should Verma
choose and why?

 Read the following case study carefully and answer the questions given at
the end:

AKASH ELECTRICALS LTD. (AEL)

Minutes of the meeting of the Executive Committee, Akash Electrical Ltd

(AEL).

Date: May 3, 1997

Time: 5 P.M.
Venue: AEL House, Bangalore
PARTICIPANTS: Gaurav Sarin, managing Director, Chrisropher David,
director (Marketing); Satindra Goel, director (operations); Rajesh kapoor,
coordinator (total quality management) and vice-president (human resources);
and Satish Mehta, director (finance)

Gaurav Sarin: Good Evening Gentleman. As you all are aware we have an
important item. AEL's customer teams, on our agenda today. You are also
aware that this is a problem area I have been talking to a number of people in
the organisation --- including of course each of you ---- on AEL's customer
teams. From what I could gather, the problems are four-fold. Customer teams
are inflating our overheads, fragmenting our competencies, driving everyone
to think small and ops sight of the big picture and generating, pun intended,
inadequate attention to long-term planning, even within individual teams.

We need to examine why, and how, these problems have come up, and what
we intend to do about them. I am sure you have a number of suggestions, but,
let me provide a recap. Our company has been manufacturing and marketing
a variety of electrical equipment for over two decades now. For many years,
we had been growing at par with the industry rate of around eight per cent
Then came the watershed in 1992-93. At a time when the industry was
becoming competitive, margins were under pressure, and customer focus was
becoming a critical factor for survival, we took several initiatives.

Setting up dedicated customer teams was one of the, Over the next two
years, customers teams became the sheet-anchor of our business growth.
Each of our products --- generators, turbines, boilers, motors, transformers (all
part of AEL's Power Generation Division) and, brakers, tapchangers,
signalling relays, substation equipment, and remote control systems (all part
of our Transportation Division) --- was supported by several cross-functional
teams. Today we have 53 customer teams at AEL, each serving a large
customer or set of customers, Rajesh, would you like to explain the origins?

Rajesh Kapoor: Thanks, Gaurav. The beginning can be traced to the Total
Quality Management (TQM) drive we started in late-1991 and more
specifically, to the Special Group Activities (SGAs) we set up to deal with
ongoing shift on the Shopfloor, much to the surprise of AEL's senior
managers. To most of us, manufacturing meant breaking down a process to
its lowest repetitive components. The worker was no more than c dog in the
manufacturing wheel. SGAs proved otherwise.

They showed us that employees could be a vital resources in the new value
chain. When grouped together they could be far more productive than the sum
of their individual initiatives. Soon we were able to step up productivity, reduce
time-cycles, boost quality, and improve labour-management relation. Today,
we have about 30 SGAs at any given point of time, and they are doing a great
job. The members of an SGA get straight to the core of a problem, resolve it
without delay, and disband to find their individual ways to another SGA and
another problem. In fact, a large part of the success of an SGA lies in its
amoebic structure.

Sarin: It was the demonstrative effect of SGAs that egged us on towards

setting up customer teams. These teams were designed as small and variable
units that could expand, contract, and adapt quickly to the changing nature of
customer needs. The objectives were threefold: serve the customer better;
build resilience in the organisation; and maintain a balance between different
functions. Otherwise, it was entirely possible that areas like R&D would have
taken precedence in the management priorities of a technology intensive
business like ours.

SGAs VERSUS CUSTOMER TEAMS

  ACTIVITY Structure Parameters of assessment

Special Group Activities Manufacturing Shoplift workers Productivity

      Time cycles

      Quality

      Labour management relations

      Customer Satisfaction

Customer teams Customer service Cross–finctional Revenue Growth

      Costs

      Profits

Notwithstanding the fact that problems have now surfaced, customer teams
have enabled AEL to institutionalize a decentralized responsibility for turnover
end profits. Our unaudited financial results for the year ending March 31, 1997
are now available. We've recorded profits of Rs. 60 crore on a turnover of RS.
750 crore. That translates into a 12 per cent compounded growth in turnover
for three years in a row. Frankly, if there is one factor responsible for beating
the industry average of 10 per cent during the period, it is the dedication that
our customer teams have brought to bear on the job. Now for the bad news
Rajesh?

Kapoor: Yes, I'm afraid that we have not been able to replicate the success of
SGAs in our customer teams. Both are cross-funtional in their composition.
But a customer team, unlike an SGA, is a revenue centre. The performance of
its members is assessed annually on the turnover and profits that the team
has generated. By contrast, an SGA has no responsibility for either margins or
cross. Besides, an SGA has a short tenure of a few weeks. A customer team
is, by and large, dedicated and permanent, It allows for mobility of members,
but, the generally enduring nature of a customer teams has often led to he
growth of vested interests.

Satindra Goel: All the problems that Rajesh has mentioned have to do with
the sheet-anchor of our business. In other words, their dynamic, competitive,
small spectrum, short-tange approach. Consider the increase in overheads.
Over the last three years, we have gradually pushed autonomy so far down
the line that it has encouraged customer teams to acquire specialists for
various functions regarded of whatever the team is large enough to require
their full time services. For instance, the need for moreprocessor technology is
common to all our products but each team is souring it independently. Satish
has just done a study, which indicates that we can save up to 6 per cent on
product costs if we could have single-point access for requirements cutting
across product boundaries. Isn't that right, Satish?

Satish Mehta: Exactly, another area that is inflating overheads is quality

checks. Take the overload relays, which we supply as part of our industrial
motors. A relay trips the power supply and disconnects the motor when the
stock of electricity exceeds certain levels. Customers are more demanding
today and what stringent compliance with tripping bands. This necessitates
quality checks on each and every relay. And all the teams in motors are every
relay. And all the teams in motors are going overboard pilling up costs like
additional testing equipment, more people to do the calibration, and as a
result, assembly line hold-ups.

Christopher David: Rajesh, Forgive me, but one might ask, what TQM is doing
to reduce this problem?

Kapoor: True, But TQM requires fundamental changes in mindset and that
takes time. We are on track but….
David: Sorry, but I'm not sure if the gains of customer teams are sustainable in
the long run. Sure they differentiated us from the competition. In fact, at one
stage, it appeared to me that customer orientation could be our competence.
But today, every competitor has caught up with teams in some form on the
other. Besides, customer teams are so strongly turned to the present that they
do not look beyond meeting the revenue targets of a particular financial year:
Gaurav talked about inadequate attention to long-term planning within a
customer team members is linked to annual team results. Imagine all the 53
customer teams looking inward with no external a one-year time-span. Think
also of all those spaces between teams and each team fighting over territory.

Goel: But David, the reason for the gains not being sustainable is more
fundamental. We are pointing all our strategies towards the customer. We are
developing technical expertise only with reference to a set of customers. Our
strategies should be tied to our products, to our technologies, and to our
competencies, not to customers. The risk is obvious: the business potential
from an existing customer may change over time and no customer is likely to
be with us forever. If, however customer teams have delivered in the past, it is
due to four factors. First, our level of operations has been low. Second, the
number of teams has been small. Third, the number of teams has been small.
Third, the number of customers is small. Lastly, our existing product range is
not volume-led. AEL is planning diversification into power transmission
products, like switchgears and contractors, which are high-colume and dealer-
driven products. Customer teams make no sense there.

David: What we need are product teams. That would not only provide the right
strategies focus across the board, but would also ensure that our technical
competencies are consolidated and not fragmented. Perhaps we should
disband customer teams. Instead we should go in for a judicious mix of both
product teams and customer teams. The product teams should focus on
developing markets, technologies and core competencies, and serve as an
umbrella within which customer teams could function, focused strictly on sales
efforts,

Sarin: Gentleman, I think the problems have surfaced because our operations
have reached a critical mass. But disbanding teams is hardly a solution. Our
customer teams are not failure. They ate incomplete. Their inadequacies did
not matter so far because a few TQM facilitators could personally guide the
efforts, question the assumptions, and coordinate the activities of various
teams. But now we need to integrate their diversity in order to drive AEL
towards a common future. One way of doing it would be through a vision
statement. We will be working towards it in our annual retreat scheduled next
month and I think we should perhaps call overselves an electrical engineering
solutions company, rather than an electrical equipment company. That would
reinforce our long-tern strategic positioning in the industry.

David: That would indeed be a good starting point Gaurav. It will provide the
preliminary linkage between short-range goals and long-term goals. The
problems with the customer teams will be taken care of this linkage is pushed
all the way down.

THE SWOT

STRENGTHS WEAKNESSES

Three consecutive years of above industry growth rates Existing structures not coping with rap

Strong wel–established, customer orientation Strategy not driver by core compe

Dynamic and forward–thinking management Absence of long–term plannin

OPPURTUNITIES THREATS

Leveraging goo customer relations for growth Emergence of new competitive pr

New consumers for power transmission products Risk of collapsing under high–cost s

Increase of demand in existing lines of business Inability to develop product compe

The vision statement should be followed by divisional objectives for each of

the two --- and, very soon, three --- business divisions. Covering a long
timespan of 10 to 15 years, the divisional objectives will provide both the
frameworks for directing ongoing objectives and an indication of priorities to
accomplish these objectives. We must have product goals --- on revenues
and costs --- meeting which should be the responsibility if cross-functional
product teams. Each product team would work at two levels: establish a five-
year objective, state the premises, explore the contingencies and identify key
success factors. It would also evolve current action programmes, short-range
operational programmes laying out a detailed schedule identifying responsible
people, and the measures with which to monitor their progress.
Mehta: you know, there is a tendency among operating managers to
economies on long-range programmes that do not have an impact on the
current year's results. This is where we need to segregate the funding for
strategic and operational tasks. That will eleminate the tension between long
and short term priorities, the root cause of the trouble with our customer
teams.

Sarin: Thankyou, gentleman.

Questions:

(a) Does AEL have to worry about its customer teams? Should the company
disband them? Will product-centred teams give AEL a better strategic focus?

(b) Can AEL incorporate the success elements of SGAs into the proposed
product teams even while eliminating the problems of customer teams?

MS-97 International Business Question

Papers
Please read the following case carefully and answer the questions given at
the end.

Benefit from export competitiveness

Improving export competitiveness is important and challenging but it is not an

end in itself. It is only a means to an end: the promotion of development. This
raises the question of the benefits resulting from TNC associated trade,
beginning with improving the trade balance, and continuing with upgrading
export operations and sustaining them over time. In each case, the issue is
how host developing countries can most benefit from the assets that TNCs
command. Much depends on the strategies pursued by TNCs within their
international production systems, on the one hand, and local infrastructure
and technological, institutional and supplier capabilities as well as the policies
purchased by Governments on the other.

A first approximation for assessing benefits and costs although not the most
important one --- involves the trade balance. Even though export-oriented FDI
helps to increase exports, foreign affiliates also import, and imports may
increase significantly along with exports. In such cases, net foreign exchange
earnings may be negligible. Moreover, high export values may co-exist with
low levels of local value added. This is typically the case, for example, when
foreign affiliates mainly assemble imported components, reflecting and
relatively unimportant role assigned to them in production systems. Measuring
the trade balance of export-oriented foreign affiliates as well as their value
added, is fraught with difficulties. The data typically lump together export-
oriented FDI and domestically-oriented FDI, making it difficult to determine the
trade balance of export-oriented foreign affiliates separately. (personably, the
trade balance of domestic market-oriented FDI would be negative.)
Furthermore, no systematic data exist on the composition of imports by
foreign affiliates, which is relevant for understanding the implications for host
economies. Scattered information suggests that the imports of parts and
components were high in certain industries, such as telecommunications,
electric machinery and vehicles especially in countries that hosted labour-
intensive activities of international production systems. Furthermore, in
developing countries, one would expert that newly established affiliates (or
affiliates that intend to extend their capacities) would typically need to import
capital goods (just as many domestic firms do) in order to expand local
productive nature more likely to be indispensable for the production of the
goods or services in question to take place--- than imports of components for
assembly or other inputs (for which domestic alternatives may be available or
capable of being developed), yet both types of imports would be counted
simply as affiliate imports.

Moreover, imports would be particularly high when production facilities are

being set up and reliance on home-country or other foreign suppliers of inputs
tends to be high, and then personably decline (partly as a result of the growth
of local linkages). The imports of foreign affiliates China are an instructive
example (although one that cannot necessarily be generalized in this respect),
in that the data show that a sustained part of imports by foreign affiliates
consists of capital goods. Although the trade balance effects of foreign
affiliates consists of capital goods. Although the trade balance effects of
foreign affiliates activities remain the same when the composition of imports is
taken into account, the overall economic implications for China are different as
imports of capital goods add significantly to the capital stock and productive
capacity of the country.

In any event, as far as the impact on a country's balance of payments position

--- often a major underlying concern for developing countries (although
somewhat diminished in importance as countries' exchange rate policies have
become more flexible) --- is concerned, focussing on the trade balance
captures only a part of the impact of TNC activities. Additional factors that
need to be taken into account are capital inflows, the repatriation of earnings
and capital, and other long-term impacts on the foreign exchange earnings
affiliates and associated local companies. Such an analysis of the balance of-
payments impact, which would also have to be weighed against their other
(structural) effects on a country's development and welfare, falls outside the
scope of the present export.

The question of upgrading exports relates to the extent to which FDI involves
higher technological content and domestic value added in host country export
production and a restructuring of exports from those based on static
comparative advantage to those based on dynamic comparative advantage.
The starting point is that specialization in different segments of international
production systems may imply different benefits and competitive prospects.
There is therefore some concern that specialization in labour-intensive
segments, even of high-technology exports, may in some ways be
undesirable as it may provide few benefits in training or technology and
meagre spillovers to the local economy. Besides the competitive edge of low-
cost labour may disappear as wages rise. Still, labour intensive exports are
economically beneficial as long as local value added is positive at world
prices, even if it does not rise at the same pace as the total value of exports.
In fact, where surplus labour is unlikely to be used in more remunerative or
economically desirable activities, it is in the interest of the countries concerned
that it be used in production for export. Any theory of comparative advantage
would suggest that such countries should specialize in simple labour-intensive
processes at the beginning of their export drive; the question is whether they
can subsequently upgrade and sustain their exports.

TNCs can contribute to the upgrading of a country's competitiveness by either

investing in higher-value added activities in industries in which they have not
invested before or by shifting within an industry from low-productivity, low
technology, labour intensive activities to high-productivity, high-technology,
knowledge-based ones. The first of these processes is illustrated by a number
of the winners discussed in this Part, especially those that experienced a
notable shift --- as a result of substantial new FDI inflows and new roles in
supplier networks --- from low to medium -- to high technology industries and
sectors. Also rising significance is the growth of FDI associated service
exports from developing countries. Intra-industry upgrading occurs in several
ways. There is, first of all, the situation in which TNCs locate production
facilities aimed at serving highly competitive national regional and global
markets in a developing country, many of the dynamic products identified in
chapter VI fall into this category. TNCs need to upgrade these production
facilities continually just to survive, let alone capture higher-value products
within the same industry. The success of countries such as China, Ireland,
Malaysia, the Philippines and Singapore in upgrading the export
competitiveness of their electronic industries in a case in point. Thus for
example, Motorola, in its own interest substantially upgraded its facilities in
China (box-VI.9); Ireland convinced Intel to upgrade beyond assembling and
testing to water fabrication; and Malaysia established long-term relationships
with Matsushita Electric and Sony working with them to upgrade their export
operations for colour televisions into regional manufacturing operations. But
even where strong corporate self-interest is involved government policy (often
in close cooperation with TNCs) can play a role in encouraging upgrading in
particular by ensuring that the production environment allows such upgrading
and that it extends to more value-added functions such as R&D. The case of
Motorola in China, is case in point.

Sometimes similar tends to take place in the case of foreign affiliates hitherto
protected by import barriers. Under pressure from trade liberalization and
competition, many TNCs restructure --- in their own interest --- import
substitution activities into export-oriented operations, at least in countries in
which a competitive base exists, or can be created. Some outstanding
examples are the automotive industry in Maxico and the colour television
industry in Malaysia and Thailand. Here, policies played an important role, In
Mexico, it was the launch of the maquiladora scheme, combined with the need
of the automobile industry to find low-cost production sites and the further
liberalization of NAFTA with its rules of origin for the automobile industry that
had a profound effect on the country's export competitiveness. The rules of
origin were initially established to help United States automobile TNCs to
complete better in their home market against Asian, specifically Japanese,
TNCs. This worked very much in Mexico's favour as Ford, General Motors
and Chrysler (now Daimler Chrysler) and their suppliers set up world-class
plants there to export to the United Stated market. Then, Volkswagen, a
German automobile TNC, established an export in Mexico and was obliged to
bring its global suppliers into Mexico to meet the NAFTA rules of origin. The
overall result was a complete restructuring of the Mexican automobile industry
from a protected and inefficient import substitution activity to highly
competitive export platform.

These are examples from some of the most dynamic export products of how
the self-interest of TNCs combined with appropriate government policy, can
produce major improvements in the export competitiveness of fast countries.
In other situations, however, considerably stronger government efforts are
required to capitalize the assets of TNCs and what, in the absence of such
efforts, may only be temporary advantages. The garment industry exemplifies
why simply attracting export-oriented activities in and itself might not be
enough to move up the value - added ladder and increase national benefits.

Branded manufacturers of garments like Sara Lee and Fruit of the Loom
made use of the United States' production sharing mechanism to gain
competitive advantage vis-à-vis Asian producers by establishing assembly
operations in the Caribbean basin. In the context of the Multifibre
Arrangement quotas, this mechanism allowed these assemblers to remain
competitive in the United States market in spite of the fact that wage levels in
the Caribbean basin were higher than many other garment production sites.
Contrary to the experience of Mexico in respect of the rules of origin of
NAFTA, this mechanism did not allow host countries to progress by increasing
local content, raising value added or upgrading the industry. This is because
the tariffs applied to value added outside the United Stated discourage the
use of local inputs For that reason, Costa Rica, for example, chose to focus
on electronics and other industries. With the impending implementation of
theWTO Clothing and Textile Agreement, many host countries specializing in
garment exports will have great difficulties in facing competition from Asia,
especially from China. In anticipation of this, some of these branded
manufacturers are cutting back on their international production systems and
relying more on full-package suppliers and contract manufacturers. The
nature of the production-sharing mechanism that restricted the upgrading of
the local operations beyond low-wage assembly has left these export
platforms in difficult circumstances. Corrective national policy action is urgent
in cases like this.

This underline the importance of ensuring the sustainability of export-oriented

foreign affiliates. For such affiliates not to be ephemeral, they need not only to
upgrade, but to be progressively embedded in host economies through strong
backward linkages. This requires policies aimed at fastening local capabilities,
and, in particular technological capabilities, human resources and a
competitive domestic enterprise sector. Where these policies are successful,
they are likely not only to make the export involved more sustainable and
beneficial for the host countries involved, but also to increase the
competitiveness, but also to increase the competitiveness of the domestic
enterprise sector, the bedrock of economic development. In the end, some of
these domestic enterprises may become TNCs in their own right and
contribute to the development of their home countries through their own global
activities. The success of a number of (mainly Asian) countries in attracting
export-oriented TNC activities as part of a broader national industrialization
strategy offers a model for others.

TNCs play an important role in the exports of many developing countries and
economies in transition. Indeed for the most dynamic products in world trade.
TNCs are central for enabling these countries to reach world markets, and
they provide some of the 'missing elements'' that developing countries need to
upgrade their competitiveness in export markets. The potential benefits in
TNCs export activity are still far from fully exploited and they are growing.
Technologies are changing. Processes and functions are increasingly
divisible, and the boundaries of what is internal and external to firms are
shifting. The 'death' of distance -or its diminishing cost --- is stretching location
maps. New activities are likely to join the globalization surge, including many
from developing economies, The challenge for countries that would like to
improve their export competitiveness in association with TNCs is how to link
up with the international production systems of these firms and how to benefit
from them.

The spread of TNC activity offers host countries oppurtunities to expand and
move into higher value-added activities. Capitalizing fully on static benefits
and transforming them into dynamic and sustainable advantages requires pro-
active government support. To benefit most from TNC associated export
competitiveness developing countries must make continuous efforts to root
TNC activities in host economies raise the level of local content, increase the
value added by these activities, upgrade them into more sophisticated areas
and make them sustainable. TNCs, in a number of circumstances, will take
initiatives of their own, in their own self-interest. But national policy efforts and
the policy pace to pursue them ---- are critical for both attracting export
oriented FDI and ensuring its sustainability in order to advance development.

Questions:

(a) What are the areas of concern for low exports from developing countries?
(b) Do you agree that the flow of FDI to developing countries can augment
their export potential? How?
(c) What is the role of transnational corporations in upgrading a country's
competitiveness?
(d) Suggest measures to increase the competitiveness of the domestic
enterprise sector in a developing country.
Please read the following case study carefully and answer the questions given
at the end.

SEN-SCHWITZ

To the Florid-faced German at Frankfurt Airport's immigration-counter, he

appeared to be just another business traveller. True, but a bit of an
understatement. The man under scrutiny was Binoy Sen, whom the Indian
media referred to as the Boom-Box king.

At 14, he had assembled, from parts scavenged from the local dump, a spool-
recorder that had fitted nicely into a suitcase. By the time he time he was 37,
in 1979, Sen & Sen (S&S), a company he had promoted with his elder
brother, Sanjoy --- who made up for his lack of technical expertise with a razor
sharp business brain --- was Asia's largest manufacturer of radios and
cassette-recorders. Now, at 56, he presided over India's largest audio-
Products Company. Sen-Schwitz, a joint venture with the Frankfurt-based
consumer electronics giant, Schwitz GMBH.

S&S association with Schwitz had actually begun in 1984. Music had become
a movement in Europe at that time, with immigrant labour of all colour and
teenagers of all sizes constituting market-segments that no company could
afford to ignore. But their means were slender, and intensity of output, rather
than nuances of pitch and tone, was what they were concerned about. Since
assembling was a labour and cost intensive process, at least in Europe,
Schwitz could not manufacture low-end boom-boxes cheaply.

So, the company turned to Asia, where it was certain some Chinese or
Taiwanese company could meet its requirements. None could. However, on a
reach of Taiwan, one of the company's managers had spotted a couple of
S&S products at a retail outlet. While this Indo-German relationship had
begun as a vendor-buyer one, Helmut Schwitz, 51, the CEO of Schwitz --- no
relation of Adolf Schwitz, who had founded the company just after the end of
World War II --- took an instant liking to the Sen brothers. Two years after
S&S started supplying it products, in 1986, the German company acquired a
10 per cent stake in its Indian supplier.

IN 1992, when Schwitz released that he could no longer ignore the Indian
market and the Sens accepted the fact that they couldn't survive the threat
from global competition without technology and marketing support from their
German Partner, they formed a formal joint venture. The Sens and the
German company both held 26 per cent stakes in Sen-Schwitz, with the rest
being divided between the financial institutions and the investing.

The joint venture did well right from its inception. The transnational's superior
quality standards and S&S strong distribution network worked wonders. Within
2 years, the company had managed to carve out a 45 per cent share of the
Rs. 795-crore market. The Sens were happy and so was Schwitz. By 1998,
Sen Schwitz's share had increased to 65 per cent in a market that had grown
to Rs. 1,150 crore, And when Sen reached Frankfurt for the annual review of
the joint venture that Schwitz GMBH insisted on --- the company had 7 joint
ventures across Asia and Latin America --- he could not but help feeling that
all was well with the world of music and money.

Sen's feelings were only amplified during the review. After the preliminary
greetings, Helmut Schwiz took the oais. The room darkened, and a series of
PowerPoint images flashed on the screen behind Schwiz as he spoke. Sen
caught only fragments of the German's heavily accented voice, his attention
was focused on the images and the bullets of text they contained. Sen
scrawled a few of them on his notepad

 A turnover of $ 100 billion by 2005

 AQ growth - rate of 20 per cent a year.
 35 per cent of the growth coming from India and China Then. Schwiz
started speaking about India and Sen's attention moved from the screen
to the man. What he heard pleased him. "Sen-Schwiz has a
marketshare of 65 per cent in a market that is growing at the rate of 30
per cent a year. As far as our targets for 2005 go, we believe that it is
our most promising joint venture."

The blow fell later, during the break for lunch. Sen and Chris Liu who headed
the company's joint venture in Taiwan, were exchanging notes when Schwiz
butted in and, in his characteristic overbearing fashion, quickly monoeuvrec
Sen to one corner of the room.

"India is, clearly, the market of the future, Binoy," he said, biting into a roll.
"You're doing a great job, and can expect support from me for all your
endeavours. But I'm worried about your margins." Here it comes, thought Sen,
the twist in the tall. "A post tax margin of 8 per cent doesn't look too good,"
continued Schwiz, "especially when seen in the light of rising volumes. We
should take a fresh look at our Indian operations, Why don't you meet with
Andrew?"
Suddenly, Sen was on guard. The 55 year old Andrew Fotheringay was
Schwiz's President (International Operations). Sen liked him; they had worked
together when the joint venture was being set up, and had been impressed by
his eye for detail. But he also knew that Fotheringay was Schwiz's
hatchetman. "What's on your mind, Helmut ?" he asked point-blank "oh,
nothing yet," replied Schwiz, "but we have to find a way to introduce more
products into the Indian market without stretching Sen-Schwitz, Talk to
Andrew."

That wasn't to be Fotheringay, whose wife was 9 months pregnant, had to

suddenly leave for London, but promised to fly down to Calcutta, where Sen-
Schwitz was based as soon as the baby was born. Now, Sen was sure that
something was up : Fotheringay wasn't the kind of manager to do something
like that for nothing. Sen voiced his fears at a meeting of the Sen-Schwitz
board, which had been scheduled on the day of his return. One of the board
members, R. Raghavan, 53 a professor of corporate strategy at the Indian
Institute of Management, Gauhati, felt that Sen was over reaching I don't think
it is quite what you think, Sanjoy he started although Sen hadn't put any
specifics to his fears. "Sen-Schwitz is, as BUSINESS TODAY keeps
reminding us, evidence that there is, indeed, scope for a win-win joint venture
even in the Indian context."

He was wrong. Sure, the joint venture has benefited from the German parent's
technical expertise. In turn Schwitz GMBH had profited substantially from Sen
Schwitz's dividend pay-outs : more than 25 per cent every year. Werner Kohl,
48 Sen Schwitz's Technical Director, seemed to agree with the professor.
Kohl was a Schwitz nominee on the board, and had been a Vice-president
(Operations) at the transnational's Hamburg plant before being seconded to
Sen-Schwitz for a 5 year period. But Kohl Sen knew was not likely to know
what was happening back home.

The one person who agred with Sen was Rajesh Jain 44, the IDBI nominee
on the board, who expressed the opinion that Schwiz GMBH could possiibly,
be planning another joint venture with some other company. That sounded
far-fetched even to Sen. Sen-Schwitz's closest per cent. Besides, no company
could match Sen-Schwitz;'s distribution network. So, he decided to let his
fears abate till Fotneringay could either dispet them --- or make them come
alive.

True to his word, Fotheringay, now the proud father of his first daughter
landed up in Calcutta a week later. He first met the company's functional
heads, and gave them a pep talk: " Sen-Schwitz's volumes-thrust should be
backed by a profitability focus. Once we ensure margins of 13 to 15 per cent,
we will be on our way."

Alone with Sen, though, Fotheringay quickly laid his cards on the table.
Schwitz, he informed Sen, wished to set up a 100 per cent subsidiary in the
country. Sen's mind was, suddenly, clear. He had been a fool not to see it
coming. All that talk about restructuring the joint venture, introducing newer
models, and the need for higher margins led up to just one thing: a fully-
owned Schwiz subsidiary." So what does this mean for us, Andrew," he
asked, "Is this advance warning about a parting of ways?"

Fotheringay was quick to dispel this notion. "The subsidiary will not
compromise the interests of the joint venture. Schwitz has a long-term
commitment to the India market, and this subsidiary is just a step in that
director."

All this talk-about commitment, realized Sen, was taking them nowhere. He
sounded just a little imitated when he spoke: "I just can't understand why you
people are even considering a subsidiary when the joint venture has been so
successful. We have a great brand, good products, the finest distribution
network in the business, and an excellent supply chain Together, we have
created a matrix that has delivered. Why does Schwitz want to reinvent the
wheel?"

Fotheringay's answers didn't satisfy him. He made some noises about the
subsidiary taking upon itself a large portion of the expenses involved in
building the Sen-Schwitz brand, thereby reducing its operational expenses,
and improving its margins. Sen was quick to point out that the Government of
India did not view proposals for fully-owned marketing subsidiaries favourably.
"Besides, does this mean that we transfer our marketing and distribution
network to the subsidiary?" he asked incredulously.

Fotheringay side-stepped the issue: "No, no, the subsidiary will only
manufacturer products." Reading the look on Sen's face, he hastened to
enumerate Schwitz's gameplan: 'Of course, none of our offerings will
complete directly with Sen-Schwitz As you are aware,the audio systems
market is fairly segmented, so there is a great deal of potential for new
offerings. We want to set up a committee from Sen-Schwitz and Schwitz to
decide on the respective roadmaps of the joint venture and the subsidiary so
as to avoid any conflict."
"That apart," he smiled, here comes the carrot, thought Sen and he wasn't
wrong,"the Sens will have the option to buy upto 49 per cent of the
subsidiary's equity when it goes in for an IPO." The subsidiary is not even off
the ground, thought Sen and Andrew is already speaking in terms of US and
THEM

Fotheringay took Sen's silence to mean acceptance."The other reason," he

continued, "is that we cam use the subsidiary to introduce our premium
brands into the country. There is evidence that the market for premium audio-
systems is all set to boom. Think about it, Binoy. The subsidiary will only
strengthen the strategic relationship between the Sens and Schwitz GMBH."

The Sens aren't involved, thought Sen; this is an issue that concern Sen-
Schwiz andSchqitz. But he didn't want to split hairs, and promised, instead, to
think about it.

Sen-Schwitz's Executive Committee thought about it for 3 months. And it still

didn't make sense to them. Schwitz GMBH operated through joint ventures in
every part of the developing world. Only in the US, UK, and France did it have
fully-owned subsidiaries, using the subsidiary as a sink that would absorb the
joint venture's marketing expenses didn't make sense too.

"It sounds altruistic," said V.K. Kapur, 44, the company's head of marketing. "If
launching more products is the only behind the subsidiary, there is no reason
why the joint venture cannot serve that purpose." Sen and the rest of the
Committee had to agree. "There's also no reason why we cannot improve our
margins by focusing on our operational efficiencies," argued Ajay Singh, 46,
Sen Schwitz Director, operations, and Sen had to agree.

He decided to discuss the matter with Sanjoy, who had retired from the
business, and was involved in managing a charity. But Sen didn't get a
chance. News-agency had picked up a report that had appeared in the
Financial Times Schwitz's decision to set up a 100 per cent subsidiary in
India. The report created a major stir in the Bombay stock Exchange, with the
price of Sen-Schwitz's stock falling by 30 per cent a day.

It was evident to Sen that no matter what Fotheringay and Schwitz thought,
the stock-market perceived the subsidiary as a threat to the joint venture. It
was also evident that the stock-market viewed Schwitz as the more valuable
brand."I understand,"Sanjoy told Binoy, when the situation had been
explained to him. The technology is Schwitz's. The brand, at least the more
powerful one, is theirs. And they have access to our distribution network. Face
it, we don't have a plank to fight on."

Questions:

(a) Identify the sequence of events that has led to the current problem.
(b) Analyse the problem in the context of the process of globalization that has
been increasingly witnesses over the past decade or so.
(c) Examine the "fairness" of establishing a 100% subsidiary by Schwitz
GMBH when the alliance is on.
(d) What future course of action would you suggest to S&S? Give reasons for
your answer.

 Please read the following case study carefully and answer the questions
given at the end.

Sunlight Chemicals

Starting at the vast expanse of the Arabian Sea from his comer office at
Bombay's Nariman Point, Ramcharan Shukla the 53-year old executive vice-
chairman and managing Director of the 500-crore Sunlight Chemicals.
(Sunlight felt both adventurous and apprehensive. He knew he had to quicken
the global strides Sunlight had made in the last four years if the company was
to benefit from its early gains in the world markets. However, he was also
shaken by a doubt: would his strategy of prising open international markets by
leveraging the talents of a breed of managers with transnational competencies
succeed?

Globalisation had been an integral part of Sunlight's business plans ever since
Shukla took over as managing director in 1990 with the aim of making it the
country's first international chemicals major Since then Sunlight --- the
country's third-largest chemicals maker --- had developed export markets in
as many as 40 markets, with international revenues contributing 40 per cent of
its Rs. 500 crore turnover in 1994-95. The company also set up manufacturing
bases in eight countries --- most recently in China's Shenzhen free trade zone
--- manned by a mix of local and Indian employees.

These efforts at going global first took shape in December 1991 when Shukla,
after months of deliberations with his senior management team, outlined
Sunlight's Vision 2001 statement. It read " "We will achieve a turnover of $ 1
billion by 2001 by tapping global markets and developing new products." The
statement was well-received both within and outside the company. The former
CEO of a competitor had said in a newspaper report: "Shukla has nearly
sensed the pressures of operating in a new trade with a tough patents
regime."

But Shukla also realised that global expertise could not be developed
overnight. Accordingly, to force the company out of an India-centric mindset,
he started a process of business restructuring. So, the company's business
earlier divided into domestic and export divisions, was now split into five
areas: Are I (India and China), Area 2 (Europe and Russia), Area 3 (Asia
Pacific), Area 4 (US) and Area 5 (Africa and South America). Initially
managers were incredulous, with one senior manager saying: "This is crazy. It
lacks a sense of proportion."

The Cynicism was not misplaced. After all, the domestic market --- which then
contributed over 90 per cent of the company's turnover --- had not only been
dubbed with the Chinese market, but had also been brought at par with the
areas whose collective contributions to the turnover was below 10 per cent
Shukla's explanation, presented in an interview to a business magazine:
"Actually, the rationale is quite simple and logical. We took a look at how the
market mix would evolve a decade from now and then created a matrix to suit
that mix. Of course, we will also set up manufacturing facilities in each of
these areas to change the sales-mix altogether."
He wasn't wrong. Two years later, even as the first manufacturing facility in
Vietnam was about to go on stream, the overseas areas' contribution to
revenues rose to 20 per cent. And the mood of the management changed with
the growing conviction that export income would spoon surpass domestic
turnover. Almost simultaneously, Shukla told his senior managers that the
process of building global markets could materialise only if the organisation
became fat flexible, and fleet-footed. Avinash Dwivedi, am management
consultant brought in to oversee Sunlight's restructuring exercise, told the
board of directors: "Hierachies built up over the years have blunted the
company's reflexes, and this is a disadvantage while working in the
competitive global markets."

The selection of vice-president for the newly-constituted regions posed no

immediate problem. For Sunlight had several general managers --- from both
arms of marketing and manufacturing -- whose thinking had been shaped by
the company's long exposure to the export markets. For obvicus reasons, the
ability to build markets was the primary criterion for selection. The second
criterion was a broad business perspective with a multi-functional, multi-
market exposure. That was because Shukla felt it did not make good business
sense to send a battalion of functional managers to foreign markets when two
or three business managers could suffice.

But Specific markets also needed specific competencies. That was how
Sunlight chose to appoint a South African national to head Area 5. The logic"
only a local CEO could keep track of changes in regulations and gauge the
potential of the booming chemicals market in the US. However, the effort was
always focused on using in-house talent. Shukla put it to his management
team: "We should groom managerial talent --- whether local or expatriate ---
for all our overseas operations from within the company and should rotate this
expertise worldwide. In essence, we should develop global managers within
the company."

While doing the personnel planning for each area and fixing the compensation
packages for overseas Assignment. Sunlight realised the importance of
human resource (HR) initiatives. The HR division headed by vice president
Hoseph Negi, had been hobbled for years with industrial relations problems
caused by the unionisation of the salesforce, " You have to move in step with
the company's global strategy." Shukla had told his HR managers at a training
session organised by Dwivedi who was spearheading the task of grooming
global managers.
Four years down the line, Shukla felt that Sunlight was still finding its way
around the task Sure, a system was in place. Depending on the requirements
of each of the four areas, Sunlight had started recruiting between 25 and 30
MBAs every year from the country's leading management institutes. During
the first six months, these young managers were given cross-functional
training, including classroom and on-the-job inputs. The training was then
followed by a placement dialogue to determine the manager -area fit. If a
candidate were to land, for instance, on the Asia-Pacific desk at the head
office, he would be assigned a small region, say, Singapore, and would be
responsible for the entire gamut of brand-building for a period of one year in
coordination with the regional vice-president.

The success with which he would complete his task would decide his next job:
the first full-time overseas posting. He could be appointed as the area head of,
say, Vietnam, which was equivalent to an area sales manager in the home
market. After a couple of years, he would return to base for a placement in
brand management or finance. A couple of years later, the same manager
could well be in charge of a region in a particular area. Over the past four
years. Sunlight had developed 30 odd potential global managers in the
company spanning various regions using this system.

But, considering that the grooming programme was only three years old,
Shukla felt that it would take some time for the company's homespun
managers to handle larger markets like China on their own. The real problem
in this programme was in matching the manager to the market. Dwivedi
suggested a triangular approach to get the right fit: define the business target
for a market in an area. Look at the candidiate's past Performance in the
market, And identify the key individual characteristics for that market. Dwivedi
also identified another criterion: a good performance rating at home during the
previous two years. Once selected for an overseas posting, the candidate
would be given cross-cultural training: a course in foreign languages,
interactive programmes with repatriated managers on the nature of the
assignment and, often, personality development programmes on the nuances
of country business etiquette.

Further, an overseas manager would be appraised on two factors: the degree

to which he had met his business plan targets for the market, and the extent
to which he had developed his team. After all, he had to cachet the posting
within three years to make place for his replacement. Achievements were
weighed quarterly and annually against sales targets set at the beginning of
the year by the vice-president of the region. The appraisal would then be sent
to the corporate headquarters in Bombay for review by the senior
management committee. Shukla had often heard his senior managers talk
appreciatively of the benefits of transrepatriation. "The first batch of returnees
are more patient tolerant and manure than when they left home," said
Manohar Vishwas, vice-president (finance),"and they handle people better."

But the litmus test for the company, Shukla felt would be in managing a
foreign workforce --- across diverse cultures --- at the manufacturing facilities
in six countries outside India. The Shenzhen unit, for instance had 220
employees, out of which only 10 were expatriate Indians. Further, the six-
member top management team had only two Indians. Of course, the mix had
been dictated by the country's laws and language considerations.

Some of the African markets had their own peculiarities. The entire team of
medical representatives, for example, comprised fully-quilifies, professional
doctors. Sharad Saxena, vice-president, Area 5, told Shukla: "As there is
heavy unemployment in Africa doctors are attracted to field sales work for
higher earnings." There were other problems too: as both Chinese and
Russian had been brought up on a diet of socialism, they were not used to
displaying initiative at the workplace. Dwivedi had suggested that regular
training was one of the ways of transforming the workforce. So, Shukla hired a
training group from Delhi's Institute of Human Resource Management training
to spend a month at Shenzhen. This was later incorporated as an annual
exercise.

Observing that interpersonal conflicts were common in situation where with

single-country background were working together, a new organisational
structure was introduced. Here, Sunlight positioned local managers was
introduced. Here, Sunlight positioned local managers between an Indian boss
and subordinate. Similarly, some Indian managers were positioned between a
local boss and subordinate. Says Avishek Acharya vice-president, Area 3:
"There were some uncomfortable moments, but it led to a better integration or
management principles, work practices, and ethics."

Obviously, reflected Shukla, Dwivedi was doing a great job. As he watched

the setting sun, however, he found his thoughts turning to a more fundamental
question. However immaculate his HR planning had been, had he made a
mistake by not developing his strategies first? Was he mixing up his priorities
by putting people management" ahead of issues like marketing, technology,
and global trade? Even the HR strategy he had chosen worried Shukla.
Should he have opted for more locals in each country? If expatriate managers
failed more often than they succeeded in India wasn't the same true for other
countries?

Questions:

1. Is Sunlight on the right track in going global without trying to consolidate its
position further in the home market?
2. Can Sunlight realise its global vision with its current mix of strategies?
However fine the company's HR planning had been, had Shukla made a
mistake by not developing his strategies first?
3. Are there any gaps in Shukla's game plan to conquer the globe?
4. What are the learnings that you can derive from the "Sunlight" case so far
as the internationalization of business is concerned?

SECTION B

6. Please read the following case study carefully and answer the questions
given at the end:

Electrolux is Sweden's largest manufacturer of electrical household

appliances and was one of the world's pioneers in the marketing of vacuum
cleaners. However, not all the products the Electrolux name are controlled by
the Swedish firm. Electrolux vacuum cleaner sold and manufacturer in the
United States, for example, have not been connected with the Swedish Firm
since the U.S subsidiaries were sold in the 1960s. The Swedish Firm
reentered the U.S. market in 1974 by purchasing National Union Electric,
which manufacturers Eureka vacuum cleaners.

Electrolux pursued its early international expansion largely to gain economies

of scale through additional sales. The Swedish market was simply too small to
absorb fixed costs as much as the home markets for competitive firms from
larger countries. When additional sales were not possible by exporting,
Electrolux was still able to gain certain scale economies through the
establishment of foreign production. Research and development expenditures
and certain administrative costs could thus be spread out over the additional
sales made possible by foreign operations. Additionally, Electrolux
concentrated on standardized production to achieve further scale economies
and rationalization of parts.

Until the late 1960s, Electrolux concentrated primarily on vacuum cleaners

and the building of its own facilities in order to effect expansion. Throughout
the 1970s, though, the firm expanded largely by acquiring existing firms
whose product lines differed from those of Electrolux. The compelling force
was to add appliances lines to complement those developed internally. Its
recent profits ($220 million in 1983) have enabled Electrolux to go an
acquisitions binge. Electrolux acquired two Swedish firms that made home
appliances and washing machines. Electrolux management felt that it could
use its existing foreign sales networks to increase the sales of those firms in
1973, Electrolux acquired another Swedish firm, Facit, which already had
extensive foreign sales and facilities. Vacuum cleaner producers were
acquired in the United States and in France; and to gain captive sales for
vacuum cleaner. Electrolux acquired commercial cleaning service firms in
Sweden and in the United States. A French Kitchen equipment producer,
Arthur Martin, was bought, as was a Swiss home appliance firm. Therma, and
a U.S. cooking equipment manufacturer, Tappan.

Except the Facit purchase, the above acquisitions all involved firms that
produced complementary lines that would enable the new parent to gain
certain scale economies, However, not all the products of acquired firms were
related, and Electrolux sought to sell off unrelated businesses. In 1978 for
example, a Swedish firm, Husgvarna, was bought because of its kitchen
equipment lines. Electrolux was able to sell Husqvarna's motorcycle line but
could not get a good price for the chain saw facility. Reconciled to being in the
chain saw business. Electrolux then acquired chain saw manufacturers in
Canada and Norway, thus becoming one of the world's largest chain saw
producers. The above are merely the most significant. Electrolux acquisitions:
the firm made approximately fifty acquisitions in the 1970s.

In 1980, Electrolux announced a takeover that was very different from those of
the 1970s. It offered $175 million, the biggest Electrolux acquisition, for
Granges Sweden's leading metal producer and fabrication Granges was itself
a multinational firm (1979 sales of $ 1.2 billion) and made about 50 percent of
its sales outside of Sweden. The managing Directors of the two firms
indicated that the major advantage of the takeover would be the integration of
Granges aluminum, copper plastic, and other materials into Electrolux
production of appliances. Many analysts felt that the timing of Electrolux's bid
was based on indications that Baijerinvest, a large Swedish conglomerate,
wished to acquire a non--ferrous matels mining company. Other analysis felt
that Elctrolux would be better off to continue international horizontal expansion
as it had in the 1970s. The analysts pointed to large appliance makers such
as AEG Telefunken of West Germany that were likely candidates for takeover
because of recent poor performance.
Questions:

1. What are Electrlox's reasons for direct investment?

2. How has Electrolux's strategy changed over time? How has this affected its
direct investment activities?
3. Which of Electrolux's foreign investments would be horizontal and which
would be vertical? What are the advantages of each?
4. What do you see as the main advantages and possible problems of
expanding internationally primarily through acquisitions as opposed to building
one's own facilities?
5. Should Electrolux take over Granges?

WESTINGHOUSE

In 1969, Westinghouse's top management noted with concern that its chief
rival, General Electric, gained 25 percent of its sales abroad compared to only
& percent by Westinghouse. Top management was determined to compete
more vigorously against GE in foreign markets. At that time, Westinghouse
had a separate operation, Westinghouse Electric International Company,
which was located in New York, away from corporate headquarters in
Pittsburgh Between 1969 and 1971, overseas volume increased to 15 percent
of sales; and the chairman, Donald C. Burnham, said, "I've set a goal that 30
percent of our business will be outside the U.S. I hope to get there and then
set a bigger goal." The spurt in foreign sales was largely the result of the
aggressive pursuit of overseas acquisitions. This marked a substantial change
in foreign operating practice, an as much as Westinghouse had depended
almost entirely on exports and licensing agreements for its foreign sales since
World War I, when its three European subsidiaries were confiscated.

From 1969 to 1971, the International Company operated alongside four other
Westinghouse divisions. These were operated as companies that were each
in charge of a group of diverse products. A major complaint of the
International Company was that the four other companies tended to view
foreign operations as marely an appendage to which they were unwilling to
give sufficient technical or even product assistance. Since the International
Company had to depend on the product groups for anything that it was going
to export, there were problems of gaining continued assured supplies. The
product companies were quite willing to divert output abroad when they had
surplus production but were reluctant when there were shortages. This was
largely because the International Company rather than the Product Company
got credit for the sales and profits. Likewise, the products groups were
reluctant to lend their best personnel to the International Company to assist in
exportation of highly technical orders or to lend support to production from
foreign licensing and subsidiaries.

As a partial result of these complaints, Westinghouse eliminated the

international division of 1971, The four product0based companies were than
put in charge of worldwide control of production and sale of their goods.
(Westinghouse produces more than 8000 different products). The philosophy
was that the people in those divisions would have a greater capability of
selling (because of their access to product technology) than the disbanded
company. Second, since they would now be evaluated on their foreign
successes, they would be willing to divert resources to international
development. Another factor that affected the decision to move to a worldwide
product organization from that of an international division was that GE had
made a similar move with apparent success a few years earlier.

At the time that responsibilities were shifted to the domestic division many of
the managers from the formerly New York - based International Company did
not conceal their belief that "those unsophisticated hicks back in Steeltown
couldn't be trusted to fins U.S. consulates abroad let alone customers."
Although management in each of the four product companies was free to
pursue foreign business or not, each chose to do so. Between 1971 and 1976,
foreign sales grew to 31 percent of the Westinghouse total. During this five-
year period, product diversity continued to grow. The product emphasis was
further accentuated in 1976, when the company was recognized into thirty-
seven operating groups known as great deal of autonomy, including a free
hand abroad.

From 1976 through 1978, foreign sales of Westinghouse fell to 24 percent of

its total. The extension of responsibility by product units further complicated
cooperation among units and created problems of duplication in foreign
markets, Many horror stories surfaced, For instance, a company salesperson
called on a Saudi businessman who pulled out business cards from sales
people. Who had visited him from twenty-four other business units.

His question was "Who speaks for Westinghouse?" In another situation

different units had established subsidiaries in the same country. One had
excess cash while another was borrowing locally at an exorbitant rate. In
many cases, large projects would require the ultimate cooperation among
business units to carry out different parts. Art times, units could not agree in
time to put together a package and lost out of foreign competition such as
Brown Boveri from Switzerland and Hitachi from Japan. In a case in Brazil,
three different sales groups were calling on the same customer for the same
job.

By 1978 the vice-chairman and chief operating officer of Westinghouse was

Douglas Danforth. He was highly interested in international expansion not only
because he expected greater he had previously worked in the Mexican and
Canadian subsidiaries. In early 1979 he enlisted a Westinghouse executive to
head an exhaustive study of the firm's international operations and to make a
recommendation within ninety days. The study group interviewed
Westinghouse personnel in the United States and abroad. It also determined
how other firms were handling their international operations. The
recommendations wad to move to a matrix system with a head of international
operations. The international operations were then to be organized along
geographic lines including three regions. This was adopted. To get a
consensus among the people in charge of product and geographic areas was
a major departure from Westinghouse's product orientation. Danforth told the
company's top 220 managers that "some of you will adjust and survive and
some of you won't.

Dabforth announced that he wanted 35 percent of Westinghouse's sales to be

coming from abroad by 1984. Seventeen countries were identified as having
the highest potential, and these were examined in detail. To carry out the
planned growth, it has been necessary to much country unit plans with
product unit plans. In other words, if a product unit wants switch gear in Brazil
increased by 40 percent and the Brazilian country manager wants to inquiries
it by 50 percent they must either work out an agreement or refer the decision
upward in the organisation to the next higher product and geographic heads.
Disagreement can effectively go as high as the top-level operating committee,
which consists of the chairman, vice-chairman, three presidents of product
groups, the top financial officer and the president of the international group.
The 1980 annual report showed export sales of $ 1.2 billion and sales from
foreign production of $1.1 billion. The combination comprised 27 percent of
Westinghouse's total.

Questions:

(i) What have been the organizational problems inhibiting the international
growth of Westinghouse?
(ii) What organizational characteristics may affect the successful
implementation of the matrix management at Westinghouse?
(iii) How can a firm such as Westinghouse go about implementing a goal to
increase the percentage of its sales accounted for by foreign operations