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Business Strategy
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Case – 1 Marks-16
Leisure and entertainment usually gain prominence in an economy that is growing; fast and provides leeway
to the consumer to spend on things other than necessities India’s entertainment and media industry is one
of the sunrise industries, growing at a Compound annual growth rate of 18 per cent, much faster than the 9
per cent national economic growth rate. According to a study conducted by the Federation of Indian
Chambers of Commerce and Industry and PricewaterhouseCoopers the industry size is Rs. 437 billion
presently and is projected to grow to Rs. 1 trillion by 2010. Positive measures taken by the government,
technological advancement and entry of large corporate houses in all the segments of the industry are
fuelling the impressive growth.
Among the various segments of the industry, there, are radio, television, films, out-of-home advertising arid
live entertainment While radio and television make up the fastest growing segments, film entertainment
growing at 16 per cent annually, is another potential segment. The film entertainment segment of the
entertainment and media industry has several strategic groups that could be roughly categorized along the
value chain of film making and distribution These strategic groups could be production, distribution, retail,
music and home video. While many of the companies operate in more than one activity area on the value
chain, such as Yash Raj Films operating in all activity areas except retail, there are a few that concentrate
on just one or two activity areas, such as RGV Film Factory that operates only in production of films. Size
based on revenue could be another basis for categorization of the film entertainment companies in India.
Among the large size companies are Adlabs, Sahara, Percept, Yash Raj Films and UTV, that could touch or
exceed Rs. 1000 revenues by 2010. The middle-rung is of companies of revenue size of Rs. 300 — 500
crore, such as pure retail distribution companies such as lnox Leisure, P’SR Cinemas, Pyramid Saimira and
Valuable Group pure content companies such as Pritish Nan Communications Vishesh Films or RGV F
Factory. The third category is of emerging companies in the revenue size range of Rs. 1OC — 300 crore,
such as Real Image, Red Ice and Seven Entertainment Major investments in the media and entertainment
industry in recent years have been ploughed into infrastructure, largely into multiplex chains and digital
theatre chains. These investments are made by companies that are pure retail and distribution companies.
Among the major ones in this strategic group is the Chennai-based Pyramid Saimira Theatre Limited (PSTL)
- India’s largest theatre chain company with over 29 multiplexes operation, with over 371 screens in 2007,
project to increase to 2000 screens by 2010. It was incorporated in 1997 as Pyramid Films international
Private Limited and has gone through severe changes of name to emerge as Pyramid Saimira Theatre
Limited, reflecting its concentration on the theatre business, though it operated in film production and TV
content production in the past Film making and distribution in India has been traditionally an unorganized
and fragmented industry, managed through experience rather than systems. In recent years, one trend in
the film industry is corporatization Under corporatization the traditional organizations dealing with the
various aspects of film making’ and distribution. Become formal organizations registered under the legal
process, such as the Companies Act, 1956. Along with corporatization comes increasing professionalization
in the management of organizations. Technology, especially information and communication technology, has
played its part in heightening the chances of making corporatization and professionalization successful A
new breed of organization has emerged on the horizon that deals with the various activities in an organized
and Systematic manner. Pyramid Saimira intends to be of such organizations. The people behind Pyramid
Saimira include Mr. V. Natarajan, a Gemini-studio’s veteran of the Tamil film industry, Mr. P. S.
Saminathan, the finance and technology brain behind the flagship project and Mr. N.Narayanan, the
management man. The financials for the year 2006-2007, show net sales of Rs 1661.52 crore and net profit
of Rs. 158.82 crore on equity capital of Rs. 282.76 crore.
The flagship project of the Pyramid Saimira is the mega digital. Theatre chain project being implemented in
two phases, with a total cost of Rs. 414.5 crore. This is an information technology driven venture that is a
first-mover in the film industry in India. The basic idea is to have a chain of theatres for exhibition of films
that have been encrypted in the digital medium. The theatres are linked through a satellite-based
communication network. The films are released in the digital format and simultaneously exhibited in the
digitally- enabled theatres through the satellite network. The one-stroke release and exhibition of films is
claimed to reduce the chances of films being pirated, which is the Achilles’ heel of the film
industry in the world. It also avoids the use of costly film rolls and reels now used to photograph and
distribute films. The digitized theatres also offer the potential of developing them as value-added service
providers, enlarging their role from that of entertainment providers to commercial infrastructure providers
such as shopping malls, exhibition spaces and education and training venues.
The business model of the digital theatre concept is based on a vertically-integrated theatre chain on longterm
lease, where the revenue streams emanate mainly from the ticket sales at the individual theatres at
the demand end, much like it does now. The critical difference is on the supply side where the distribution,
retailing and exhibition of films are done in an integrated manner through digital means connected through
a communication network. This effectively eliminates the film distributor and tries to achieve economies of
scale through volume sales. The centralized network operating centre is the nodal supply point.
A standardized delivery process makes the process operationally low-cost, albeit at a high initial investment.
Additional revenue streams, generated through exploitation of the theatre infrastructure to provide other
services than entertainment, help to recoup the high initial investment. Creating a franchise system for a
long-term lease enables sharing of the initial high costs7 of realty by engaging partners who own the
theatre space but use Pyramid Saimira’s digital distribution and exhibition facilities at a price. There are
additional possibilities of creating content library of films, extending networks abroad and building
integrated family entertainment centers.
The digital theatre is a compact model, having various elements such as digital projectors, servers,
connectivity equipments, high-definition recorder and telecine, system integration and software solution
providers. For each of these, there are in-house and external agencies in partnership. For instance,
connectivity equipments are being provided by Tata Net while servers are arranged by a partnership of
Saimira Access Technologies with Real Image Media.
Pyramid Saimira’s SWOT analysis indicates the following factors:
• Strengths Established organization, experienced promoters and networking with financially strong and
capable partners.
• Weaknesses Lack of in-depth technological experience, risks of being the first-mover and limited financial
capability.
• Opportunities Favorable demographics, increasing spending on entertainment, potential expatriate
demand, availability of technological infrastructure such as broadband and digitized films a regenerative
asset that has multiple uses.
• Threats Unorganized film industry, fickle nature of demand for films, powerful industry bodies with political
lobbying capabilities, high entertainment taxes, piracy, high cost of infrastructure and faulty governmental
policy implementation.
Pyramid Saimira’s global ambitions are reflected in its vision statement, which is ‘to be the largest vertically
integrated theatre chain in the world carving a unique space in mass access using theatre infrastructure to
deliver education, entertainment and information at affordable cost to all sections of society’. The digital
theatre project is being implemented in Tamil Nadu and is planned to be expanded throughout India and
abroad in areas where there are a large number of Indian expatriates such as South East Asia, Europe and
the U.S. The acquisition of the Texas-based Fun Asia made through the subsidiary Pyramid Saimira
Entertainment America, targeting the Asian film market, marked the entry of Pyramid Sairnira in the U.S.
and Canada. There are subsidiaries operating in Singapore and Malaysia, where there is a substantial
number of people of Indian origin.
Questions:- (Any Two)
1. Attempt a Porter’s five- forces analysis for the Indian film industry, highlighting the factors relevant for
Pyramid Saimira’s strategic planning.
2. Attempt a strategic groups analysis highlighting the factors relevant for Pyramid Saimira’s strategic
planning.
3. Identify the subjective factors that may have an impact on the strategic choice made Pyramid Saimira.
Case –2 Marks-16
The origins of Deepak Nitrite—the flagship comp any of the Deepak group of industries-go back to 1970
when Chimanlal K. Mehta, an entrepreneur, sensing an opportunity in India’s drive towards self- sufficiency
and import substitution and relying on his trading and manufacturing experience, ventured into the
chemicals industry. The Company was originally incorporated as Deepak Nitrite Private Limited in 1970,
under the Companies Act, 1956 and was subsequently converted into a public limited company in the name
of Deepak Nitrite Limited in 1971. The company’s registered office is at Vadodara and its corporate office is
at Pune with manufacturing plants in Gujarat and Maharashtra. Net sales for the year ending March 2007
are about Rs. 4172 million and net profit is Rs. 357 million. Exports constitute nearly half of the sales.
Overt he years, Deepak Nitrite has grown impressively through a judicious use of integration, related
diversification and internationalization strategies, using the means of acquisition and restructuring. In 1983,
adopting a horizontal integration strategy, the company used foreign collaboration to start commercial
production of ammonia. In 1989, the group employed ammonia-based forward integration and also
diversified into the chemicals related area of methanol. In 1992 came the commercial production of lowdensity
ammonium nitrate, nitro phosphate and nitric acid, resulting in a multi-product portfolio consisting
of organic, inorganic, fine and specialty chemicals. Deepak Nitrite has made tremendous progress over the
years and has posted impressive financial results as well as excellent export performance. It (the growth of
the company), was born out of a process of deep thinking, strategy and planning,’ said the managing
director Deepak Mehta, who claims that planned strategy has led to growth. Environmental scanning led to
foreseeing the threats coming from a dismantled duty regime. Anticipating this, the company went about
implementing strategies that would convert these threats into opportunities. The strategic approach was to
build on its strengths in niche areas of the chemicals market, leverage strong R & D and a robust lab to
product ion skills, bring the strengths up to global levels and work towards a leadership position.
The success of Deepak Nitrite could be attributed to its focused strategy. Implementation capabilities. A
series of plans, programmes and project have been initiated and implemented over the years, in alignment
with its corporate and business strategies. For instance, it has worked on a number of R&D projects over
the years to develop its skills to swiftly transfer products from the labs through production to the markets.
It has effectively developed differentiating capabilities by planning and implementing projects for handling
bulk products to handling batch products, transforming from a commodity supplier to a value-added,
branded product supplier with customization skills. Projects in supply chain management have helped the
company in extending its ability to source its own raw material to tracking customers’ delivery and
inventory scheduling. Cost control has been attempted through wider sourcing; including international vend
ors, and investing in energy-saving equipments.
In the course of strategy implementation, Deepak Nitrite has to deal with a host of government agencies for
procedural implementation. For example, raising finance has taken it to SEBI. A continual interaction takes
place with the export and import regulatory authorities. For instance, anti-dumping duties have been levied
on the comp any for sourcing cheap materials from China. Being in the chemical processing industry, the
company is under the scrutiny of environmental protection agencies. It has been a signatory to the
‘Responsible Care’ initiative of the global chemical industry. It has also achieved the ISO 14001 certification.
Dealing with explosives, the company has to seek licenses from the Department of Explosives, Industrial
Safety and Health Departments and State Pollution Boards of Gujarat and Maharashtra. Apart from these
are the regulatory requirements dealing with taxation purposes. Resource generation has been through
raising money in the capital markets on the basis of its good reputation, internal accruals, loans from
commercial banks and financial institutions and sale of factory land at Pune.28
Questions:-
1. Identify and discuss briefly, the three themes of strategy implementation of activating strategies,
managing change and achieving effectiveness in the case of Deepak Nitrite.
2. picking up data from the case, demonstrate how formulation and implementation of strategy are
interdependent.
Case –3 Marks-16
Synergos# is a young management and strategy consulting firm based at Mumbai. It was established in
1992 at a time when there were a lot of expectations among the industry people from the liberalization
policies that were started the previous year by the Government of India.
The consulting firm is an entrepreneurial venture started by Urmish Patel, a dynamic person who worked
with a multinational consulting-firm at the He left his comfortable position there to venture into the
management consultancy industry the motivation was to be ‘the master of his own destiny’ rather than
being an employee working for others. Urmish comes from an upper middle-class Gujarati family, settled in
a small town in Rajasthan. His father was a government servant who retired with a meagre pension. His
mother is a housewife. His other siblings are all educated and well-settled in their respective careers and
professions. Urmish is a creative individual, uncomfortable with the status-quo. During his student days at a
college at Jaipur, he was continually coming up with bright ideas that some of his friends found to be
preposterous. To him, however, these were perfectly achievable ideas. He studied biotechnology and then
went to the US on a scholarship to do his Masters. After a semester at a well-known university there, he lost
interest and switched to pursue an MBA. He liked it and soon settled down to work with n American
consultancy firm and toured several countries on varied assignments during the seven years he worked
there. In 1992 came the urge to Urmish to chuck his job and be on his own. It was a risky, yet an exciting
step to take. His accumulated capital was limited— just enough to rent office space, buy a few computers
and hire an assistant. There were no consultancy assignments for the first three months. But an
acquaintance soon came to his aid, introducing him to the CFO of a major family business group who
needed advice on a performance improvement project they wanted to launch. The opportunity came in
handy though the returns were nothing to write home about. That project was the first step to many more
that came gradually. Synergos started gaining presence in the competitive management consultancy
industry and attracting attention from the people whom they worked for. Word-of-mouth publicity led them
from one project lo another for the first three years till 1995. Synergos took up whatever came its way,
delivering a cost-effective solution to its clients. A team of four had formed by now, each member of the
team specializing in services rendered to the clients. For instance, one of the members is a specialist in
engineering projects, while another has expertise in finance. The third one is a service sector specialist, also
having experience in dealing with government matters.
The phase of rapid growth started some time in 1995 when the Synergos team decided to focus on the
small and medium enterprises (SMEs). These were firms that realized they had problems needing specialist
advice; but were apprehensive to app roach the big firms on account of their limited outlay and
inexperience of dealing with such firms. Synergos came to their aid by tailoring their services as near as
possible to their needs. Another differentiation platform Synergos offered to its client was a fully-integrated
consultancy service where it got involved right from the stage of planning down to its implementation and
monitoring.
Presently, Synergos has grown to be a medium- sized consultancy firm, serving clients in India and abroad,
working for industries ranging from auto components to financial services and for manufacturing
organizations to service providers. Somehow, nearly half of the assignments it has worked on have been for
mid-sized, upcoming family- owned businesses, a niche it has served well. These organizations typically
need a boutique sort of consultancy that can offer customized services dealing with a broad range of
practices related to strategy, organization design, mergers and acquisitions and operational matters such as
logistics and supply-chain management. Synergos fits in with their requirements owing to its personalised
service and reasonable-commission structure. The organizational structure at Synergos has a board at the
top, consisting of seven people, including the four founding members and three independent directors. One
of the independent directors is the chairman of the board. Urmish, as the founder CEO, also heads an
executive management committee with each of the founding. Members, leading three other top-level
committees dealing with business portfolio, service management and executive recruitment.
The management team is called the professional group. The rest of the employees are ref erred to as the -
staff. -The professional group has young women and men who are graduates from some of the best
institutions in India and abroad. They are assigned to taskforces based on their qualifications, experience
and interests. The departmentation at Synergos is flexible, based on -an interplay of the three categories:
skill, service and specialty. For instance, a professional may have IT skills, may have worked to provide
supply- chain management services and developed expertise in handling operational assignments for
medium-sized food and beverage firms. There is a lot of multi-tasking however, to utilise the wide - range
of skills and special expertise that the professionals have For administrative matters the professionals are
assigned to client-service departments of industry solutions, enterprise solutions and technology solutions.
The flexibility that such an organisational arrangement affords seems to have been the major reason for the
evolution of the organization structure at Synergos over the years.
The staff group of employees consists of the support people who provide a variety of services to the
professionals. Among these are research assistants, industry analysts, documentation experts and
secretarial staff. There is no set pattern for assignment of staff to the administrative departments and
generally, a need-based approach is followed, depending on the workload at a particular time.
Recruitment for professionals is stringent. Synergos typically looks for a good combination of education and
experience and lays much emphasis on the compatibility of the prospective employee with the shared
values. Creativity, broad range of professional interests, intellectual acumen, team- working and physical
fitness to undertake demanding tasks and work for long hours are the criteria for hiring. There are not many
training opportunities except the on-the-job learning. New professionals are assigned to a mentor for some
time till they a ready to handle assignments autonomously. The staff members are usually recruited from
fresh graduates, with good degrees from reputed institutions, in arts, sciences and commerce. The staff
positions are also open for persons wanting to work on part-time or project-bases. Emphasis is given to the
ability of the prospective staff to undertake multi-tasking and work with documentation and word processing
and presentation software packages.
The compensation system consists of a base salary with commission and bonus depending on performance.
There are other usual elements such as medical reimbursement, loan facility and gratuity and retirement
benefits. The performance appraisal is informal, with at least one of the four founding members being part
of the evaluation committee for a professional. Usually, the found-c member closest to the work area of the
employee is involved in determining the rewards to be give’. The time-cycle for appraisal is one year.
Management control is discreet and performance-based rather than behavior-based. The means for control
are informal, such as direct supervision. Urmish is a strong proponent of the emergent strategy and is not in
favor of tying Synergos to a fixed strategic posture. So are the other founder members, though at times
they do talk about deciding on a niche such as the SME organizations as clients and enterprise solutions as
the core competence. In the highly fragmented consultancy industry where it is possible for even one
person to s up an office in a commercial area and leverage corrections to secure projects, Synergos is open
opportunities as they emerge, while trying to maintain the flexibility that has made it successful till no
Questions :- (Any Two)
1. Identify the type of organization structure being used at Synergos and explain how t works. What are the
benefits of using this type of structure? What are the pitfalls?
2. Express your opinion about whether the structure is in line with the requirements of the strategy that
Synergos is implementing.
3. Based on the information related to the information, control and reward systems available in the case,
examine whether these systems are appropriate for the type of strategy being implemented.
Case – 4 Marks-16
‘In a free enterprise, the community is not just another stakeholder in business, but is in fact, the very
purpose of its existence.’ This is a statement of the founder of the Tata group of companies, Jamsetji N
Tata. The thinking behind the statement probably drives the corporate social responsibility initiatives at the
Tata group of companies.
The Tata group describes itself as ‘India’s oldest, largest and most respected business conglomerates’, a
depiction that seems to be quite justified. The group’s businesses operate globally through 98 companies—
27 of them publicly-listed—in seven business sectors. There are nearly 2,90,000
employees working in these companies that have about 3 million shareholders. The group’s turnover in
2006-2007 was about Rs. 130,000 crore .There are five core values that guide the Tata group’s business
decisions: integrity, understanding, excellence, unity and responsibility. The value of integrity means
conducting business fairly, honestly and with transparency. Understanding involves caring, showing respect,
compassion and humanity for colleagues, customers and community. Excellence denotes striving constantly
to achieve high standards in work and quality. Unity implies building strong relationships with colleagues,
customers and business partners. Responsibility signifies giving back to the community and society.
The tradition of CSR is embedded in the history of the Tata group. The J. N. Tata Endowment Scheme was
established in 1892. Over the years, individual family members have created a constellation of trusts and
endowments that contribute to a wide range of CSR activities. In the words of J. J. Irani, ex-managing
director of Tata Steel: ‘Some people consider social responsibility as an additional cost; we don’t. We see it
as part of an essential cost of business, as much as land, power, raw materials and employees.’ This is seen
in the quantum of funding that is channeled into CSR. The Tata group contributes nearly 30 per cent of its
profit after tax, which is an unusually high figure, when other companies or business groups may take pride
in putting in just one per cent of profits into CSR. The high social investment come from the Tata trusts that
have a controlling interest in the holding company, Tata Sons. This ensures that the dividends paid out are
directed to CSR, making the Tata group companies unique in ensuring that personal wealth is converted into
social capital.
The Tata group has created a formal structure to direct CSR activities. The Tata Council for Community
Initiatives is a centralized agency consisting of the Tata companies’ CEOs, charged with the responsibility of
directing and coordinating the CSR activities across the group. It is headed by a member w of the group
corporate centre, one of the two 9overnance bodies, the other being the group executive office. This is an
indication of the high priority accorded by the Tata group to CSR. In order to create accountability, the Tata
group has a 1ctive evaluation system called the Tata Index Sustainable Human Development. The Index is a
set of guidelines for Tata companies looking to their social responsibilities. In the words of G. Nadkarni, vice
president, group corporate sustainability, ‘We have adopted a business model to drive social responsibility
efforts within the group because that way, you ensure a huge network. The index helps structure our
efforts and quantify their effect on the communities and people they are aimed at.’ Of significance is the fact
that the Tata Index for Sustainable Human Development is built around the Tata Business Excellence Model
that drives business decisions of the group companies. One of the several areas of business performance in
the model is of governance and social responsibility, indicating the strategic priority given to this issue by
the Tata group. Typically, business organizations have considered social responsibility as far removed from
their mainline business activities. Not so at the Tata group where CSR is a key element in the business
model. It is the responsibility of every company in the group to make CSR a component of its strategic plan.
Despite having a centralized network and structural arrangements, the individual Tata companies are
autonomous to choose whatever CSR initiatives suit the requirements of the communities they work with.
The strategy that each company evolves is required to be focused on the needs of the communities in which
the company works in. There is a conscious effort to match the strengths and cornpetencies of the company
to the developmental needs of the communities being served. Thus, the company is left free to determine
the scope of its CSR initiatives, be it in the area of arts and culture, civic amenities, education, environment,
health or infrastructure. For instance, the Tata Steel Rural Development Society works at Tata Steel for the
rural communities around the operational units, while the Tata Chemicals Society for Rural Development
does similar work for Tata Chemicals. Voltas for Women is an exclusively female society consisting of female
employees and wives of employees, who work on health and education issues for women. The Tata family
trusts consist of the Sir Dorabji Trust and Sir Ratan Tata Trust besides the J. N. Tata Endowment. Some of
the prominent Tata-funded institutions are the Indian Institute of Science, Tata Institute for Fundamental
Research and Tata Institute of Social Sciences.
Questions: -
1. Collect evidence from the case to support the argument that social responsiveness at the Tata group is
closely aligned with its strategic management,
2. How would you respond to a critic who says that the Tata group engages in CSR activities to enhance the
reputation of the Tata brand and thereby, benefit economically from its social responsibility initiatives?
Case – 5 Marks-16
Krishak Bharati Cooperative Limited (KRIBHCO) is a cooperative society set up for fertilizer manufacturing,
registered under the Multi-State Cooperative Societies Act, 1985. It was promoted by the Government of
India, Indian Farmers Fertilizers Cooperative Ltd. and National Cooperative Development Corporation and
other agricultural cooperative societies spread all over the country. It has more than 6000 members who
have contributed nearly Rs.400 crore as capital. KRIBHCO basically operates in the three business areas of
bio-fertilizers, urea and seeds. Its fertilizer complex is located at Hazira near Surat in Gujarat, seed plants
at various locat ions in eight states of India and service centers called Krishak Bharti Seva Kendra at various
places in the country. KRIBHCO has equity participation in fertilizer companies within India and in one
company in Oman. The cooperative is managed by a board of directors, senior management headed by a
managing director and functional heads in the areas of operations, finance, marketing and vigilance.
The vision of KRIBHCO is stated as: ‘We want to be a world class organization that represents the farmer
community and maximizes returns to them through specialization in agricultural inputs and products and
other diversified businesses that maximize stakeholder value.’ The mission is ‘to act as a catalyst to
agricultural and rural development by Selecting, financing and managing projects that are both socially
desirable and commercially profitable. The objectives are: to increase the urea installed capacity while
maintaining its market share to ensure optimum utilization of existing plant machinery and to diversify into
other core sectors like power, LNG terminal/port, chemicals etc.
The equity capital has been subscribed by ‘Government of India (67.6%) and other cooperative societies
(32.4%). Its, net worth is Rs. 22Sf crore, constituting equity of Rs. 396 crore and re serves of Rs. 1892
crore. It earned a post-tax pr* of Rs. 193 crore in 2006-2007 and has declared a dividend of 20% for the
last three years. The Cooperative has the distinction of paying the highest dividend and maximum taxes in
the cooperative sector in India. KRIBHCO markets its fertilizers through an extensive marketing network
spread over 16 states of India, through cooperative and institutional agencies and through its own outlets.
The cooperatives agencies in its marketing network are located at ferent levels such as apex, district and
taluka lea. and village-level societies. The institutional agencies typically involved are the agro-industries
corporations and land reclamation agencies.
KRIBHCO is an lSO-9001: 2000 and ISO-140C” certified company. It produced and dispatched
more than 34 lakh tonnes of urea in 2006-2007. Various functions of bagging, handling and loading in the
product handling plant are performed through manual product handling processes as well as through
mechanized bagging machines. Mechanical improvements have also been affected for smooth transfer and
conveying of bags in the bagging plant. These efforts have resulted in minimizing product loss, avoiding
shortfall or excess in loading quantities, minimizing the loading time and reducing the specific bag
consumption.
KRIBHCO has formal policies in the areas of energy, environment, quality and safety. It has declared its
energy policy and has volunteered its commitment towards energy conservation. The energy policy is aimed
at an optimum utilization of the various forms of energy in a cost-effective manner to conserve energy
resources. The Cooperative has set up a quality policy and an environment policy, which have been framed
after integrating the energy saving objectives and goals as well. The safety policy of the Cooperative
emphasizes on the importance of safety and to an adherence to safe practices. A safety department
performs the functions of ensuring compliance with safety standards.
KRIBHCO has a modest human resource development set-up where it arranges in-house training and
sponsors employees to external training programmers.
The management information system at KRIBHCO covers its internal operations and the marketing network
using the relational database management system, using client/server technology. An integrated system at
plant-level comprises of financial accounting, payroll, fixed assets, purchases, stores, production,
maintenance, transport ion, personnel & administration and MIS. Administrative and marketing offices have
financial accounting, inventory management, payroll and provident fund management systems. E-mail,
intranet and Internet facilities are provided at all offices. Computer training is provided to staff on a regular
basis. Information security is done through installation and upgrading of anti-virus programmers. With the
IT infrastructure being accessed from various locations, network and data security are important concerns.
The society has an official website at http://kribhco.net/english.
Vigilance is considered important at KRIBHCO, on par with other functional areas. It is aimed at preventive
as well as punitive vigilance and at en- swing transparency and accountability. The vigilance department
works for systems improvement and simplification and codification of rules and procedures for the smooth
functioning of the Society. There is a chief vigilance officer at the head office and vigilance officers at plant
and zone levels. There is a three-pronged vigilance policy in place, aimed at creating awareness, preventing
unethical activities and punishing misdemeanors. The board of directors oversees vigilance through sixmonthly
reviews. An internal enquiry was recently instituted to investigate allegations against the serving
marketing director, indicating the efficacy of the vigilance function.
KRIBHCO is exploring the possibility of setting up a joint venture fertilizer project in Algeria. KRIBHCO is in
the process of signing a memorandum of understanding with the Chhattisgarh State Electricity Board
(CSEB) to set up a 2000 MW power project. It is planning to enter the DAP mark et in India. KRIBHCO had
put in Rs. 50 crore for an all-India rail operations license for railway container operations. International
consultant KPMG is reported to have submitted a business plan to KRIBHCO for running container trains in
the area of Gujarat, Northern Maharashtra and Western Madhya Pradesh. KRIBHCO had signed a deal with
the Railways in 2007 for the operation of container trains for 20 years. It would tie up with other operators
to run the depot. KRIBHCO is keen on a roll out for the procurement of wagons. There have been problems
in the past between KRIBHCO and IFFCO as rivals in the fertilizer industry. Equity investment of Rs. 97
crore was retired by KRIBHCO to IFFCO which had equity participation. There have also been issues related
to the alleged interference of the Department of Fertilizer, Government of India, in the internal affairs of
KRIBHCO.
Questions:-
1. Keeping in view the status of KRIBHCO as an organization in the governmental cooperative sector,
comment on the adequacy of the functional policies in the light of what you have studied in this chapter.
2. Suggest directions for KRIBHCO’s top management regarding functional policies, in view of its ambitious
future Plans.
______________________________________________________________________________________
Case – 1 Marks-16
Leisure and entertainment usually gain prominence in an economy that is growing; fast and provides leeway
to the consumer to spend on things other than necessities India’s entertainment and media industry is one
of the sunrise industries, growing at a Compound annual growth rate of 18 per cent, much faster than the 9
per cent national economic growth rate. According to a study conducted by the Federation of Indian
Chambers of Commerce and Industry and PricewaterhouseCoopers the industry size is Rs. 437 billion
presently and is projected to grow to Rs. 1 trillion by 2010. Positive measures taken by the government,
technological advancement and entry of large corporate houses in all the segments of the industry are
fuelling the impressive growth.
Among the various segments of the industry, there, are radio, television, films, out-of-home advertising arid
live entertainment While radio and television make up the fastest growing segments, film entertainment
growing at 16 per cent annually, is another potential segment. The film entertainment segment of the
entertainment and media industry has several strategic groups that could be roughly categorized along the
value chain of film making and distribution These strategic groups could be production, distribution, retail,
music and home video. While many of the companies operate in more than one activity area on the value
chain, such as Yash Raj Films operating in all activity areas except retail, there are a few that concentrate
on just one or two activity areas, such as RGV Film Factory that operates only in production of films. Size
based on revenue could be another basis for categorization of the film entertainment companies in India.
Among the large size companies are Adlabs, Sahara, Percept, Yash Raj Films and UTV, that could touch or
exceed Rs. 1000 revenues by 2010. The middle-rung is of companies of revenue size of Rs. 300 — 500
crore, such as pure retail distribution companies such as lnox Leisure, P’SR Cinemas, Pyramid Saimira and
Valuable Group pure content companies such as Pritish Nan Communications Vishesh Films or RGV F
Factory. The third category is of emerging companies in the revenue size range of Rs. 1OC — 300 crore,
such as Real Image, Red Ice and Seven Entertainment Major investments in the media and entertainment
industry in recent years have been ploughed into infrastructure, largely into multiplex chains and digital
theatre chains. These investments are made by companies that are pure retail and distribution companies.
Among the major ones in this strategic group is the Chennai-based Pyramid Saimira Theatre Limited (PSTL)
- India’s largest theatre chain company with over 29 multiplexes operation, with over 371 screens in 2007,
project to increase to 2000 screens by 2010. It was incorporated in 1997 as Pyramid Films international
Private Limited and has gone through severe changes of name to emerge as Pyramid Saimira Theatre
Limited, reflecting its concentration on the theatre business, though it operated in film production and TV
content production in the past Film making and distribution in India has been traditionally an unorganized
and fragmented industry, managed through experience rather than systems. In recent years, one trend in
the film industry is corporatization Under corporatization the traditional organizations dealing with the
various aspects of film making’ and distribution. Become formal organizations registered under the legal
process, such as the Companies Act, 1956. Along with corporatization comes increasing professionalization
in the management of organizations. Technology, especially information and communication technology, has
played its part in heightening the chances of making corporatization and professionalization successful A
new breed of organization has emerged on the horizon that deals with the various activities in an organized
and Systematic manner. Pyramid Saimira intends to be of such organizations. The people behind Pyramid
Saimira include Mr. V. Natarajan, a Gemini-studio’s veteran of the Tamil film industry, Mr. P. S.
Saminathan, the finance and technology brain behind the flagship project and Mr. N.Narayanan, the
management man. The financials for the year 2006-2007, show net sales of Rs 1661.52 crore and net profit
of Rs. 158.82 crore on equity capital of Rs. 282.76 crore.
The flagship project of the Pyramid Saimira is the mega digital. Theatre chain project being implemented in
two phases, with a total cost of Rs. 414.5 crore. This is an information technology driven venture that is a
first-mover in the film industry in India. The basic idea is to have a chain of theatres for exhibition of films
that have been encrypted in the digital medium. The theatres are linked through a satellite-based
communication network. The films are released in the digital format and simultaneously exhibited in the
digitally- enabled theatres through the satellite network. The one-stroke release and exhibition of films is
claimed to reduce the chances of films being pirated, which is the Achilles’ heel of the film
industry in the world. It also avoids the use of costly film rolls and reels now used to photograph and
distribute films. The digitized theatres also offer the potential of developing them as value-added service
providers, enlarging their role from that of entertainment providers to commercial infrastructure providers
such as shopping malls, exhibition spaces and education and training venues.
The business model of the digital theatre concept is based on a vertically-integrated theatre chain on longterm
lease, where the revenue streams emanate mainly from the ticket sales at the individual theatres at
the demand end, much like it does now. The critical difference is on the supply side where the distribution,
retailing and exhibition of films are done in an integrated manner through digital means connected through
a communication network. This effectively eliminates the film distributor and tries to achieve economies of
scale through volume sales. The centralized network operating centre is the nodal supply point.
A standardized delivery process makes the process operationally low-cost, albeit at a high initial investment.
Additional revenue streams, generated through exploitation of the theatre infrastructure to provide other
services than entertainment, help to recoup the high initial investment. Creating a franchise system for a
long-term lease enables sharing of the initial high costs7 of realty by engaging partners who own the
theatre space but use Pyramid Saimira’s digital distribution and exhibition facilities at a price. There are
additional possibilities of creating content library of films, extending networks abroad and building
integrated family entertainment centers.
The digital theatre is a compact model, having various elements such as digital projectors, servers,
connectivity equipments, high-definition recorder and telecine, system integration and software solution
providers. For each of these, there are in-house and external agencies in partnership. For instance,
connectivity equipments are being provided by Tata Net while servers are arranged by a partnership of
Saimira Access Technologies with Real Image Media.
Pyramid Saimira’s SWOT analysis indicates the following factors:
• Strengths Established organization, experienced promoters and networking with financially strong and
capable partners.
• Weaknesses Lack of in-depth technological experience, risks of being the first-mover and limited financial
capability.
• Opportunities Favorable demographics, increasing spending on entertainment, potential expatriate
demand, availability of technological infrastructure such as broadband and digitized films a regenerative
asset that has multiple uses.
• Threats Unorganized film industry, fickle nature of demand for films, powerful industry bodies with political
lobbying capabilities, high entertainment taxes, piracy, high cost of infrastructure and faulty governmental
policy implementation.
Pyramid Saimira’s global ambitions are reflected in its vision statement, which is ‘to be the largest vertically
integrated theatre chain in the world carving a unique space in mass access using theatre infrastructure to
deliver education, entertainment and information at affordable cost to all sections of society’. The digital
theatre project is being implemented in Tamil Nadu and is planned to be expanded throughout India and
abroad in areas where there are a large number of Indian expatriates such as South East Asia, Europe and
the U.S. The acquisition of the Texas-based Fun Asia made through the subsidiary Pyramid Saimira
Entertainment America, targeting the Asian film market, marked the entry of Pyramid Sairnira in the U.S.
and Canada. There are subsidiaries operating in Singapore and Malaysia, where there is a substantial
number of people of Indian origin.
Questions:- (Any Two)
1. Attempt a Porter’s five- forces analysis for the Indian film industry, highlighting the factors relevant for
Pyramid Saimira’s strategic planning.
2. Attempt a strategic groups analysis highlighting the factors relevant for Pyramid Saimira’s strategic
planning.
3. Identify the subjective factors that may have an impact on the strategic choice made Pyramid Saimira.
Case –2 Marks-16
The origins of Deepak Nitrite—the flagship comp any of the Deepak group of industries-go back to 1970
when Chimanlal K. Mehta, an entrepreneur, sensing an opportunity in India’s drive towards self- sufficiency
and import substitution and relying on his trading and manufacturing experience, ventured into the
chemicals industry. The Company was originally incorporated as Deepak Nitrite Private Limited in 1970,
under the Companies Act, 1956 and was subsequently converted into a public limited company in the name
of Deepak Nitrite Limited in 1971. The company’s registered office is at Vadodara and its corporate office is
at Pune with manufacturing plants in Gujarat and Maharashtra. Net sales for the year ending March 2007
are about Rs. 4172 million and net profit is Rs. 357 million. Exports constitute nearly half of the sales.
Overt he years, Deepak Nitrite has grown impressively through a judicious use of integration, related
diversification and internationalization strategies, using the means of acquisition and restructuring. In 1983,
adopting a horizontal integration strategy, the company used foreign collaboration to start commercial
production of ammonia. In 1989, the group employed ammonia-based forward integration and also
diversified into the chemicals related area of methanol. In 1992 came the commercial production of lowdensity
ammonium nitrate, nitro phosphate and nitric acid, resulting in a multi-product portfolio consisting
of organic, inorganic, fine and specialty chemicals. Deepak Nitrite has made tremendous progress over the
years and has posted impressive financial results as well as excellent export performance. It (the growth of
the company), was born out of a process of deep thinking, strategy and planning,’ said the managing
director Deepak Mehta, who claims that planned strategy has led to growth. Environmental scanning led to
foreseeing the threats coming from a dismantled duty regime. Anticipating this, the company went about
implementing strategies that would convert these threats into opportunities. The strategic approach was to
build on its strengths in niche areas of the chemicals market, leverage strong R & D and a robust lab to
product ion skills, bring the strengths up to global levels and work towards a leadership position.
The success of Deepak Nitrite could be attributed to its focused strategy. Implementation capabilities. A
series of plans, programmes and project have been initiated and implemented over the years, in alignment
with its corporate and business strategies. For instance, it has worked on a number of R&D projects over
the years to develop its skills to swiftly transfer products from the labs through production to the markets.
It has effectively developed differentiating capabilities by planning and implementing projects for handling
bulk products to handling batch products, transforming from a commodity supplier to a value-added,
branded product supplier with customization skills. Projects in supply chain management have helped the
company in extending its ability to source its own raw material to tracking customers’ delivery and
inventory scheduling. Cost control has been attempted through wider sourcing; including international vend
ors, and investing in energy-saving equipments.
In the course of strategy implementation, Deepak Nitrite has to deal with a host of government agencies for
procedural implementation. For example, raising finance has taken it to SEBI. A continual interaction takes
place with the export and import regulatory authorities. For instance, anti-dumping duties have been levied
on the comp any for sourcing cheap materials from China. Being in the chemical processing industry, the
company is under the scrutiny of environmental protection agencies. It has been a signatory to the
‘Responsible Care’ initiative of the global chemical industry. It has also achieved the ISO 14001 certification.
Dealing with explosives, the company has to seek licenses from the Department of Explosives, Industrial
Safety and Health Departments and State Pollution Boards of Gujarat and Maharashtra. Apart from these
are the regulatory requirements dealing with taxation purposes. Resource generation has been through
raising money in the capital markets on the basis of its good reputation, internal accruals, loans from
commercial banks and financial institutions and sale of factory land at Pune.28
Questions:-
1. Identify and discuss briefly, the three themes of strategy implementation of activating strategies,
managing change and achieving effectiveness in the case of Deepak Nitrite.
2. picking up data from the case, demonstrate how formulation and implementation of strategy are
interdependent.
Case –3 Marks-16
Synergos# is a young management and strategy consulting firm based at Mumbai. It was established in
1992 at a time when there were a lot of expectations among the industry people from the liberalization
policies that were started the previous year by the Government of India.
The consulting firm is an entrepreneurial venture started by Urmish Patel, a dynamic person who worked
with a multinational consulting-firm at the He left his comfortable position there to venture into the
management consultancy industry the motivation was to be ‘the master of his own destiny’ rather than
being an employee working for others. Urmish comes from an upper middle-class Gujarati family, settled in
a small town in Rajasthan. His father was a government servant who retired with a meagre pension. His
mother is a housewife. His other siblings are all educated and well-settled in their respective careers and
professions. Urmish is a creative individual, uncomfortable with the status-quo. During his student days at a
college at Jaipur, he was continually coming up with bright ideas that some of his friends found to be
preposterous. To him, however, these were perfectly achievable ideas. He studied biotechnology and then
went to the US on a scholarship to do his Masters. After a semester at a well-known university there, he lost
interest and switched to pursue an MBA. He liked it and soon settled down to work with n American
consultancy firm and toured several countries on varied assignments during the seven years he worked
there. In 1992 came the urge to Urmish to chuck his job and be on his own. It was a risky, yet an exciting
step to take. His accumulated capital was limited— just enough to rent office space, buy a few computers
and hire an assistant. There were no consultancy assignments for the first three months. But an
acquaintance soon came to his aid, introducing him to the CFO of a major family business group who
needed advice on a performance improvement project they wanted to launch. The opportunity came in
handy though the returns were nothing to write home about. That project was the first step to many more
that came gradually. Synergos started gaining presence in the competitive management consultancy
industry and attracting attention from the people whom they worked for. Word-of-mouth publicity led them
from one project lo another for the first three years till 1995. Synergos took up whatever came its way,
delivering a cost-effective solution to its clients. A team of four had formed by now, each member of the
team specializing in services rendered to the clients. For instance, one of the members is a specialist in
engineering projects, while another has expertise in finance. The third one is a service sector specialist, also
having experience in dealing with government matters.
The phase of rapid growth started some time in 1995 when the Synergos team decided to focus on the
small and medium enterprises (SMEs). These were firms that realized they had problems needing specialist
advice; but were apprehensive to app roach the big firms on account of their limited outlay and
inexperience of dealing with such firms. Synergos came to their aid by tailoring their services as near as
possible to their needs. Another differentiation platform Synergos offered to its client was a fully-integrated
consultancy service where it got involved right from the stage of planning down to its implementation and
monitoring.
Presently, Synergos has grown to be a medium- sized consultancy firm, serving clients in India and abroad,
working for industries ranging from auto components to financial services and for manufacturing
organizations to service providers. Somehow, nearly half of the assignments it has worked on have been for
mid-sized, upcoming family- owned businesses, a niche it has served well. These organizations typically
need a boutique sort of consultancy that can offer customized services dealing with a broad range of
practices related to strategy, organization design, mergers and acquisitions and operational matters such as
logistics and supply-chain management. Synergos fits in with their requirements owing to its personalised
service and reasonable-commission structure. The organizational structure at Synergos has a board at the
top, consisting of seven people, including the four founding members and three independent directors. One
of the independent directors is the chairman of the board. Urmish, as the founder CEO, also heads an
executive management committee with each of the founding. Members, leading three other top-level
committees dealing with business portfolio, service management and executive recruitment.
The management team is called the professional group. The rest of the employees are ref erred to as the -
staff. -The professional group has young women and men who are graduates from some of the best
institutions in India and abroad. They are assigned to taskforces based on their qualifications, experience
and interests. The departmentation at Synergos is flexible, based on -an interplay of the three categories:
skill, service and specialty. For instance, a professional may have IT skills, may have worked to provide
supply- chain management services and developed expertise in handling operational assignments for
medium-sized food and beverage firms. There is a lot of multi-tasking however, to utilise the wide - range
of skills and special expertise that the professionals have For administrative matters the professionals are
assigned to client-service departments of industry solutions, enterprise solutions and technology solutions.
The flexibility that such an organisational arrangement affords seems to have been the major reason for the
evolution of the organization structure at Synergos over the years.
The staff group of employees consists of the support people who provide a variety of services to the
professionals. Among these are research assistants, industry analysts, documentation experts and
secretarial staff. There is no set pattern for assignment of staff to the administrative departments and
generally, a need-based approach is followed, depending on the workload at a particular time.
Recruitment for professionals is stringent. Synergos typically looks for a good combination of education and
experience and lays much emphasis on the compatibility of the prospective employee with the shared
values. Creativity, broad range of professional interests, intellectual acumen, team- working and physical
fitness to undertake demanding tasks and work for long hours are the criteria for hiring. There are not many
training opportunities except the on-the-job learning. New professionals are assigned to a mentor for some
time till they a ready to handle assignments autonomously. The staff members are usually recruited from
fresh graduates, with good degrees from reputed institutions, in arts, sciences and commerce. The staff
positions are also open for persons wanting to work on part-time or project-bases. Emphasis is given to the
ability of the prospective staff to undertake multi-tasking and work with documentation and word processing
and presentation software packages.
The compensation system consists of a base salary with commission and bonus depending on performance.
There are other usual elements such as medical reimbursement, loan facility and gratuity and retirement
benefits. The performance appraisal is informal, with at least one of the four founding members being part
of the evaluation committee for a professional. Usually, the found-c member closest to the work area of the
employee is involved in determining the rewards to be give’. The time-cycle for appraisal is one year.
Management control is discreet and performance-based rather than behavior-based. The means for control
are informal, such as direct supervision. Urmish is a strong proponent of the emergent strategy and is not in
favor of tying Synergos to a fixed strategic posture. So are the other founder members, though at times
they do talk about deciding on a niche such as the SME organizations as clients and enterprise solutions as
the core competence. In the highly fragmented consultancy industry where it is possible for even one
person to s up an office in a commercial area and leverage corrections to secure projects, Synergos is open
opportunities as they emerge, while trying to maintain the flexibility that has made it successful till no
Questions :- (Any Two)
1. Identify the type of organization structure being used at Synergos and explain how t works. What are the
benefits of using this type of structure? What are the pitfalls?
2. Express your opinion about whether the structure is in line with the requirements of the strategy that
Synergos is implementing.
3. Based on the information related to the information, control and reward systems available in the case,
examine whether these systems are appropriate for the type of strategy being implemented.
Case – 4 Marks-16
‘In a free enterprise, the community is not just another stakeholder in business, but is in fact, the very
purpose of its existence.’ This is a statement of the founder of the Tata group of companies, Jamsetji N
Tata. The thinking behind the statement probably drives the corporate social responsibility initiatives at the
Tata group of companies.
The Tata group describes itself as ‘India’s oldest, largest and most respected business conglomerates’, a
depiction that seems to be quite justified. The group’s businesses operate globally through 98 companies—
27 of them publicly-listed—in seven business sectors. There are nearly 2,90,000
employees working in these companies that have about 3 million shareholders. The group’s turnover in
2006-2007 was about Rs. 130,000 crore .There are five core values that guide the Tata group’s business
decisions: integrity, understanding, excellence, unity and responsibility. The value of integrity means
conducting business fairly, honestly and with transparency. Understanding involves caring, showing respect,
compassion and humanity for colleagues, customers and community. Excellence denotes striving constantly
to achieve high standards in work and quality. Unity implies building strong relationships with colleagues,
customers and business partners. Responsibility signifies giving back to the community and society.
The tradition of CSR is embedded in the history of the Tata group. The J. N. Tata Endowment Scheme was
established in 1892. Over the years, individual family members have created a constellation of trusts and
endowments that contribute to a wide range of CSR activities. In the words of J. J. Irani, ex-managing
director of Tata Steel: ‘Some people consider social responsibility as an additional cost; we don’t. We see it
as part of an essential cost of business, as much as land, power, raw materials and employees.’ This is seen
in the quantum of funding that is channeled into CSR. The Tata group contributes nearly 30 per cent of its
profit after tax, which is an unusually high figure, when other companies or business groups may take pride
in putting in just one per cent of profits into CSR. The high social investment come from the Tata trusts that
have a controlling interest in the holding company, Tata Sons. This ensures that the dividends paid out are
directed to CSR, making the Tata group companies unique in ensuring that personal wealth is converted into
social capital.
The Tata group has created a formal structure to direct CSR activities. The Tata Council for Community
Initiatives is a centralized agency consisting of the Tata companies’ CEOs, charged with the responsibility of
directing and coordinating the CSR activities across the group. It is headed by a member w of the group
corporate centre, one of the two 9overnance bodies, the other being the group executive office. This is an
indication of the high priority accorded by the Tata group to CSR. In order to create accountability, the Tata
group has a 1ctive evaluation system called the Tata Index Sustainable Human Development. The Index is a
set of guidelines for Tata companies looking to their social responsibilities. In the words of G. Nadkarni, vice
president, group corporate sustainability, ‘We have adopted a business model to drive social responsibility
efforts within the group because that way, you ensure a huge network. The index helps structure our
efforts and quantify their effect on the communities and people they are aimed at.’ Of significance is the fact
that the Tata Index for Sustainable Human Development is built around the Tata Business Excellence Model
that drives business decisions of the group companies. One of the several areas of business performance in
the model is of governance and social responsibility, indicating the strategic priority given to this issue by
the Tata group. Typically, business organizations have considered social responsibility as far removed from
their mainline business activities. Not so at the Tata group where CSR is a key element in the business
model. It is the responsibility of every company in the group to make CSR a component of its strategic plan.
Despite having a centralized network and structural arrangements, the individual Tata companies are
autonomous to choose whatever CSR initiatives suit the requirements of the communities they work with.
The strategy that each company evolves is required to be focused on the needs of the communities in which
the company works in. There is a conscious effort to match the strengths and cornpetencies of the company
to the developmental needs of the communities being served. Thus, the company is left free to determine
the scope of its CSR initiatives, be it in the area of arts and culture, civic amenities, education, environment,
health or infrastructure. For instance, the Tata Steel Rural Development Society works at Tata Steel for the
rural communities around the operational units, while the Tata Chemicals Society for Rural Development
does similar work for Tata Chemicals. Voltas for Women is an exclusively female society consisting of female
employees and wives of employees, who work on health and education issues for women. The Tata family
trusts consist of the Sir Dorabji Trust and Sir Ratan Tata Trust besides the J. N. Tata Endowment. Some of
the prominent Tata-funded institutions are the Indian Institute of Science, Tata Institute for Fundamental
Research and Tata Institute of Social Sciences.
Questions: -
1. Collect evidence from the case to support the argument that social responsiveness at the Tata group is
closely aligned with its strategic management,
2. How would you respond to a critic who says that the Tata group engages in CSR activities to enhance the
reputation of the Tata brand and thereby, benefit economically from its social responsibility initiatives?
Case – 5 Marks-16
Krishak Bharati Cooperative Limited (KRIBHCO) is a cooperative society set up for fertilizer manufacturing,
registered under the Multi-State Cooperative Societies Act, 1985. It was promoted by the Government of
India, Indian Farmers Fertilizers Cooperative Ltd. and National Cooperative Development Corporation and
other agricultural cooperative societies spread all over the country. It has more than 6000 members who
have contributed nearly Rs.400 crore as capital. KRIBHCO basically operates in the three business areas of
bio-fertilizers, urea and seeds. Its fertilizer complex is located at Hazira near Surat in Gujarat, seed plants
at various locat ions in eight states of India and service centers called Krishak Bharti Seva Kendra at various
places in the country. KRIBHCO has equity participation in fertilizer companies within India and in one
company in Oman. The cooperative is managed by a board of directors, senior management headed by a
managing director and functional heads in the areas of operations, finance, marketing and vigilance.
The vision of KRIBHCO is stated as: ‘We want to be a world class organization that represents the farmer
community and maximizes returns to them through specialization in agricultural inputs and products and
other diversified businesses that maximize stakeholder value.’ The mission is ‘to act as a catalyst to
agricultural and rural development by Selecting, financing and managing projects that are both socially
desirable and commercially profitable. The objectives are: to increase the urea installed capacity while
maintaining its market share to ensure optimum utilization of existing plant machinery and to diversify into
other core sectors like power, LNG terminal/port, chemicals etc.
The equity capital has been subscribed by ‘Government of India (67.6%) and other cooperative societies
(32.4%). Its, net worth is Rs. 22Sf crore, constituting equity of Rs. 396 crore and re serves of Rs. 1892
crore. It earned a post-tax pr* of Rs. 193 crore in 2006-2007 and has declared a dividend of 20% for the
last three years. The Cooperative has the distinction of paying the highest dividend and maximum taxes in
the cooperative sector in India. KRIBHCO markets its fertilizers through an extensive marketing network
spread over 16 states of India, through cooperative and institutional agencies and through its own outlets.
The cooperatives agencies in its marketing network are located at ferent levels such as apex, district and
taluka lea. and village-level societies. The institutional agencies typically involved are the agro-industries
corporations and land reclamation agencies.
KRIBHCO is an lSO-9001: 2000 and ISO-140C” certified company. It produced and dispatched
more than 34 lakh tonnes of urea in 2006-2007. Various functions of bagging, handling and loading in the
product handling plant are performed through manual product handling processes as well as through
mechanized bagging machines. Mechanical improvements have also been affected for smooth transfer and
conveying of bags in the bagging plant. These efforts have resulted in minimizing product loss, avoiding
shortfall or excess in loading quantities, minimizing the loading time and reducing the specific bag
consumption.
KRIBHCO has formal policies in the areas of energy, environment, quality and safety. It has declared its
energy policy and has volunteered its commitment towards energy conservation. The energy policy is aimed
at an optimum utilization of the various forms of energy in a cost-effective manner to conserve energy
resources. The Cooperative has set up a quality policy and an environment policy, which have been framed
after integrating the energy saving objectives and goals as well. The safety policy of the Cooperative
emphasizes on the importance of safety and to an adherence to safe practices. A safety department
performs the functions of ensuring compliance with safety standards.
KRIBHCO has a modest human resource development set-up where it arranges in-house training and
sponsors employees to external training programmers.
The management information system at KRIBHCO covers its internal operations and the marketing network
using the relational database management system, using client/server technology. An integrated system at
plant-level comprises of financial accounting, payroll, fixed assets, purchases, stores, production,
maintenance, transport ion, personnel & administration and MIS. Administrative and marketing offices have
financial accounting, inventory management, payroll and provident fund management systems. E-mail,
intranet and Internet facilities are provided at all offices. Computer training is provided to staff on a regular
basis. Information security is done through installation and upgrading of anti-virus programmers. With the
IT infrastructure being accessed from various locations, network and data security are important concerns.
The society has an official website at http://kribhco.net/english.
Vigilance is considered important at KRIBHCO, on par with other functional areas. It is aimed at preventive
as well as punitive vigilance and at en- swing transparency and accountability. The vigilance department
works for systems improvement and simplification and codification of rules and procedures for the smooth
functioning of the Society. There is a chief vigilance officer at the head office and vigilance officers at plant
and zone levels. There is a three-pronged vigilance policy in place, aimed at creating awareness, preventing
unethical activities and punishing misdemeanors. The board of directors oversees vigilance through sixmonthly
reviews. An internal enquiry was recently instituted to investigate allegations against the serving
marketing director, indicating the efficacy of the vigilance function.
KRIBHCO is exploring the possibility of setting up a joint venture fertilizer project in Algeria. KRIBHCO is in
the process of signing a memorandum of understanding with the Chhattisgarh State Electricity Board
(CSEB) to set up a 2000 MW power project. It is planning to enter the DAP mark et in India. KRIBHCO had
put in Rs. 50 crore for an all-India rail operations license for railway container operations. International
consultant KPMG is reported to have submitted a business plan to KRIBHCO for running container trains in
the area of Gujarat, Northern Maharashtra and Western Madhya Pradesh. KRIBHCO had signed a deal with
the Railways in 2007 for the operation of container trains for 20 years. It would tie up with other operators
to run the depot. KRIBHCO is keen on a roll out for the procurement of wagons. There have been problems
in the past between KRIBHCO and IFFCO as rivals in the fertilizer industry. Equity investment of Rs. 97
crore was retired by KRIBHCO to IFFCO which had equity participation. There have also been issues related
to the alleged interference of the Department of Fertilizer, Government of India, in the internal affairs of
KRIBHCO.
Questions:-
1. Keeping in view the status of KRIBHCO as an organization in the governmental cooperative sector,
comment on the adequacy of the functional policies in the light of what you have studied in this chapter.
2. Suggest directions for KRIBHCO’s top management regarding functional policies, in view of its ambitious
future Plans.
Business Ethics
____________________________________________________________________________
1.} Define business ethics. Why do we need to study business ethics?
2.} Define morality. Discuss some characteristics of morality?
3.} Briefly discuss utilitarianism. Discuss the problems of measurement.
4.} Make a presentation about two male and two female corporate executives that you admire?
5.} Define ecological ethics. Distinguish between private and social costs?
6.} Discuss the types of job discrimination. How can we determine job discrimination?
7.} What is affirmative action? Discuss some of the major arguments for and against affirmative action.
8.} Discuss why values are important for an organization. Discuss the importance of trans-cultural values.
Find out some cultural/business values of different countries.
9.} Discuss the characteristics of high-performing teams.
10.} Write a few paragraphs about an Indian organization that you admire. What are its values?
Managerial Economics
____________________________________________________________________________
Case 1: Where is the Fair Play? (Marks-16)
In most countries in Europe, and primarily America, they don’t prefer the leg meat – it is waste matter
for them so they look for nations where they can dump this meat. They did in the Philippines, Sri Lanka
and Russia. They might deny it in the US but everybody knows that they are sitting on stocks for at
least 2-3 years. They have succeeded in doing that because of their good freezing techniques. Now it’s
becoming a major problem for them. They’re not used to eating leg meat and are in a fix. In the US
they actually load the price of the entire chicken on the breast meat, and the rest of the bird is like a
carcass to them. Due to environmental reasons they can’t dump it in the sea so they have to dump it
somewhere. It can be any underdeveloped country, may be India!
It’s wrong notion that supply of this meat to underdeveloped countries will be good for the consumers
there. It is not. Can the Americans guarantee anything – how long will they be able to supply the
chicken? How long will they supply subsidized eggs to such a large country? We could end up destroying
our industry base and that will be very sad. As far as chicken is concerned, they can only supply the
legs – they can never supply the whole bird. The white meat costs US $3 to 3.5 per pound, so it’s out of
range. May be the consumer gets the advantage of subsidized supply of the white meat in the short run
but over time the consumers’ interests are likely to suffer because such a supply will result only in
destroying the chicken and egg industry in India. Once their surplus stock gets exhausted they can
charge you any price – can they guarantee the price? They can’t and they won’t.
The chicken/egg business deals with livestock. It is not possible for people to stop producing for a year
and come back – they will be finished. Once they are out of the cycle they are out of the industry. It
would be very said if that happened to this industry that has grown over the past 25 years.
For many people it provides a day-to-day livelihood. Once the foreign players come in and are allowed
to sell their products at very low rates, the industry could collapse as it has in other countries.
India is a the cheapest egg producer in the world – about Re.1 a piece. But now we are very worried. In
European countries, eggs cost between Rs.3-5 but they are able to deliver the same egg to the Middle
East at Re 1-1.50. This is because in Western countries they have so many subsidies. When it comes to
agriculture, they are very sensitive and protective. If they bring it to the Middle East, then why can’t
they do it here as well? The government knows that the Western countries are not going to remove
subsidies – they know when it comes to agriculture, neither the Europeans nor the Americans are going
to do anything. They are going to protect them forever- so where is the fair play?
Questions:
i. What would you recommend to the government to create a level playing field for the local firms
and the western exporters of meat to India?
ii. Can you cite any other typical product where India’s advantage turns into disadvantages as a
result of WTO agreement?
Case: 2 (Marks -16)
One of the most notable things about consumer behaviour is that the demand in the short run is always
less elastic (or more inelastic) than the demand in the medium or long term. Petroleum, which is one of
the most essential commodities of modern life is a classic example of this phenomenon. Petroleum, also
known as a luxurious necessity because of its steep price, is the greatest cause for our Balance of
Payment being perennially in deficit. Despite all its disadvantages, life is literally and figuratively
`immobile’ without petroleum.
Our country faced two oil shocks during the 1970s. The shock of 1973-74 was a severe one and was felt
by many other countries, while the oil shock of 1979 was mild and pertained only to India. In order to
combat the sudden fall in supply, resulting in excess demand for it, the price of petrol was hiked (in
India, petroleum prices are always administered, and not market-driven) assuming that consumer
demand for petrol will go down. There was some reduction in the consumption of petrol as people
limited their pleasure trips and joy rides. The concept of `car pool’ to go to offices started and the
middle class started depending heavily on diesel-run public transport (diesel although a by-product of
crude oil is a cheaper and readily available product).
Besides this, there was no perceptible change in the demand for petrol and people continued to buy
petrol at a higher price. As a result, although the prices went up by 25 to 30 percent, the demand
decreased by only 5 to 6 percent between the 1970s and the early 1980s.
However, analysts and planners observed phenomenon, believed to be related to the hike in the price of
petrol. People, especially in the urban areas, started to stay near the workplace (even if it meant a
higher rent), showing a preference for fuel-efficient vehicles when compared to steady, stable but not
such fuel-efficient vehicles.
The phenomenal success of Maruti 800 cars launched in the mid-1980s was because of its single
attribute of fuel-efficiency, despite other disadvantages of a light body (which made it easy for the car to
topple over and get dented or damaged on Indian roads), costly parts (when compared to the
Ambassador or Fiat). Consumes preferred Maruti for its excellent fuel-efficient technology and hence a
lower running cost, than for any other reason. So much was the popularity of Maruti cars that
automobile associations discovered that the demand for other vehicles had falled by 30 to 40 percent in
favour of Maruti 800. a permanent change in the demand pattern for small, fuel-efficient cars had been
achieved.
For most commodities, economists found that in the long term (the concept of long term varies from
commodity to commodity) the absolute value of the demand elasticity is higher than in the short run. A
few of these are given in the following Table:
The value of demand elasticity for certain goods and services in India
(This includes urban, semi-urban and small town area)
Goods + Services Short-Run
Demand Elasticity
Long-Run
Demand
Elasticity
Expenditure on food 0.35 0.36
Expenditure on clothing 0.68 1.22
Consumption of electricity 0.54 0.90
House rent 0.75 1.82
Transportation 0.40 1.60
Source: Calculated on the basis of Government of India published reports.
Questions:
i Why do you think the absolute value of demand elasticity is less in the short run than in the long
run?
ii. Do you think jewellery as a commodity, can also be categorized in the same group as others in
the given table? In other words, will it also exhibit change in the demand elasticity between the
short and long run? Explain why?
iii. The change in the value of demand elasticity between short and long run is much smaller in case
of food than in clothing, what does this reflect about the consumer behaviour?
Case :3 (Marks -16)
TAKE THE BULL BY THE HORN
Through its relatively brief history, the Reliance group has specialised in taking gambles, sometimes
huge ones. A pattern repeated time and again - such as when it set up capacities for Polyester Staple
Fibre (PSF) which was the same size as the domestic market or when it put up a 27 million tonne
refinery in Jamnagar, which is close to a third of India's demand for petroleum products.
There's no gamble quite so audacious as the one that's underway. The Rs. 25,000 crore Reliance
Infocom project that's currently taking shape aims at no less than a complete remake of India's telecom
landscape to emerge as India's number one telecommunications company, ahead of the state-owned
behemoth Bharat Sanchar Nigam l td.
It's also an attempt to realign Reliance's revenues and profits - which today originate entirely from
manufacturing - with India's economic profile, in which services account for over 40 per cent of GDP.
"Reliance's revenues will have to become diversified with a larger proportion originating from services
which would be in keeping with the
changing structure of India's economy," says Mukesh Ambani, vice chairman of Reliance Industries.
Rs. 8000 crore will be invested over a three - year period. As of now, it's full steam ahead for Reliance's
Infocom plans. As it had done earlier in oil and gas. Reliance plans to emerge as an integrated player,
focusing on the entire range of telecom services ranging from high - speed internet access for business
and consumers, call centres,
data centres, cellular phone services and domestic and international long distance telephony. Apart from
the gamut of telecom services, Reliance's integration plans are in one respect unique in the telecom
industry. If senior group officials are to be believed, the company has plans to assemble cellular phones
and set-top boxes.
At the core of the Infocom project is a 115,000 km fibre optic backbone covering 115 cities across 12
States, accounting for over 50 per of India's GDP. The company plans to become what the industry
jargon refers to as a carriers' carrier, where it hires out infrastructure to other telecom operations. Here
Reliance, along with the Bharti group, has obtained a licence for providing domestic long-distance
services. In fact, these are the only two companies to do so. The total domestic long-distance market is
worth Rs. 6,000 crore. Of this, the market available to the long
distance operator is likely to be Rs. 2,400 crore, according to a December 2000 Merrill Lynch report. This
is based on a 30 : 40 : 30 revenue share between the originator, the carrier and the last-mile access
provider. However, Reliance would hope for a larger share since it plans to fill all the three roles. Merrill
Lynch estimates that the domestic long-distance revenues accruing to the carrier would amount to Rs.
2760 crore in 2002 - 03, of which Reliance is expected to garner 20 per cent - or Rs. 620 crore.
As part of its plans to enter international long-distance telecommunication, Reliance has already
submitted an expression of interest for international long-distance operator VSNL. The total international
long-distance market in India right now is Rs. 4,900 crore. Reliance's own estimates for revenue and
profitability have not been made publicly available. However, internal estimates reportedly project
revenues of Rs. 30,000 crore, which is roughly a third of the total telecommunication market of around
Rs. 1,00,000 crore estimated for fiscal year 2004 - 05. The annual total telecommunications market is
around Rs. 42,000 crore. These estimates are of course based on the assumptions of a rapid take-off in
traffic, particularly data traffic. Check out some figures: out of the 30 million households that have an
income over Rs. 4000, an estimated 20 million are in the urban market and 10 million in the rural
market. Out of the urban people, 13 million already have fixed-line connections. And out of the 10
million rural customers, 6.5 million already have fixed lines.
In the light of the above: "what kind of growth can one really expect" for the telecommunication sector
in India as such and Reliance lnfocom in particular ?
Questions :
(a) Is there such a market in India for all the huge plans that they have ?
(b) Can you support it as a case of economies of scope ?
(c) Does it not lend to monopolistic conditions ? Give reasons.
Case : 4 (Marks-16)
The Industry
The automotive sector is one of the core industries of the Indian economy, whose prospect is reflective
of the economic resilience of the country. The automobile industry witnessed a growth of 19.35 percent
in April-July 2006 when compared to April-July 2005. As per Davos Report 2006, Indian is largest three
wheeler market in the world; 2nd largest two wheeler market; 4th largest tractor market; 5th largest
commercial vehicle market and 11th largest passenger car market in the world and expected to the
seventh largest by 2016. India is among few countries that are showing a growth rate of 30 per cent in
demand for passenger cars. The industry currently accounts for nearly 4% of the GNP and 17% of the
indirect tax revenue. The well developed India automotive industry produces a wide variety of vehicles
including passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles, scooters,
motorcycles, mopeds, three wheelers, tractors etc. Economic liberalization over the years made India as
one of the prime business destination for many global automotive players, including international giants
like Ford, Toyota, GM and Hyundai have also made their also made their presence with a mark.
As per another report, every commercial vehicle manufacture, create 13.31jobs, while every
passenger car creates 5.31 jobs, and every two-wheeler create 0.49 jobs, in the country. Beside, the
automobile industry has as output multiplier of 2.24, i.e., for every additional rupee of output in the auto
industry, the overall output of the India economy increases by Rs. 2.24.
The India automotive sector has a presence across all vehicle segments and key components. In
terms of volume, two wheelers dominate the sector, with nearly 80 percent share, followed by passenger
vehicles with 13 percent. At present, there are 12 manufactures of passenger cars, 5 manufactures of
multi utility vehicles (MUVs), 9 manufactures of commercial vehicles (CVs), 12 of two wheelers and 4 of
three wheelers, besides 5 manufactures of engines.
Table 1 Vehicle Segment-wise Market Share (2005-06)
Items Percent Share
Commercial Vehicles
Passenger Vehicles
Two Wheelers
Three Wheelers
Total
3.94
12.83
79.19
4.04
100.00
Source: Report of Society of Indian Automobile Manufactures (SIAM), 2006.
Although the automotive industry in India is nearly six decades old, until 1982, there were only three
manufactures – M/s. Hindustan Motors, M/s. Premier Automobiles and M/s. Standard Motors in the
motorcar sector. In 1982, Maruti Udyog Ltd. (MUL) came up as a government initiative in collaboration
with Suzuki of Japan to establish volume production of contemporary models.
The Company
Maruti Udyog Limited (MUL) has become Suzuki Motor Corporation’s R&D hub for Asia outside Japan.
Maruti introduced upgraded versions of the Esteem, Maruti 800 and Omni, completely designed and style
in house. This followed the up gradation of WagonR and Zen models, done in house only a year before.
Maruti engineer also worked with their counterparts in Suzuki Motor Corporation in the design and
development of its new model, Swift.
The company launched superior Bharat Stage III version of most of its models, well before the
Government deadline. Maruti also set up a Center for Excellence with a corpus of Rs. 100 million. This
was done in collaboration with suppliers, who contributed an additional Rs. 50 million. The Center
provides consultancy and training support to Maruti’s Suppliers and Sales Network to enable them to
achieve standards in Quality, Cost, Service and Technology Orientation.
Maruti has embarked upon this new project in collaboration with SMC for the manufacture of diesel
engines, petrol engines and transmission assemblies for four wheeled vehicles. The project is being
implemented in the existing Joint Venture Company viz. Suzuki Metal India Limited (renamed Suzuki
Power train India Limited).
Questions:-
1. Identify the most important factors of production in case of automobile industry. Also attempt to
explain the relative significance of each of these factors.
2. What more information would you like to obtain in order to draw a production function for Maruti
Udyog? Explain with logic.
3. Automobile industry is a good example of capital augmenting technical progress. Discuss.
Case :5 (Marks-16)
By almost any measure, David Galbenski’s company Contract Counsel was a success. It was a company
Galbenski and a law school buddy, Mark Adams, started in 1993; it helps companies find lawyers on a
temporary contact basis. The growth over the past five years has been furious. Revenue went from less
than $200,000 to some $6,5 million at the end of 2003, and the company was placing thousands of
lawyers a year.
And then revenue growth began to flatten; the company grew just 8% in 2004 despite a robust
market for legal services estimated at about $250 billion in the United States alone. Frustrated and
concerned, Galbenski stepped back and began taking a hard look at his business. Could he get it back on
the fast track? “Most business books say that the hardest threshold to cross is that $10 million sales
mark,” he says. “I knew we couldn’t afford to grow only 10% a year. We needed to blow right through
that number.”
For that a happen, Galbenski knew he has to expand his customer base beyond the Midwest into
large legal supermarkets such as Boston, New York, and Washington, D.C. He also knew that in doing so,
he would run into stiff competition from large publicly traded rivals. Contract Counsel’s edge had always
been its low prices. Clients called when dealing with large-scale litigation or complicated merger and
acquisition deals, either of which can require as many 100 lawyers to manage the discovery process and
the piles of documents associated with it. Contract Counsel’s temps cost about $75 an hour, roughly half
of what a law firm would charge, which allowed the company to be competitive despite its relatively
small size. Galbenski was counting on using the same strategy as he expanded into new cities. But would
that be enough to spur the hyper growth that he craved for?
At the time, Galbenski had been reading quite a bit about the growing use of offshore employees.
He knew companies like General Electric, Microsoft and Cisco were saving bundles by setting up call and
data centers in India. Could law firms offshore their work? Galbenski’s mind raced with possibilities. He
imagined tapping into an army of discount-priced legal minds that would mesh with his existing talent
pool in the U.S. The two work forces could collaborate over the Web and be productive on a 24-7 basis.
And the cost saving could be massive.
Using offshore workers was a risk, but the payoff was potentially huge. Incidentally Galbenski and
his eight-person management team were preparing to meet for their semiannual strategic review
meeting. The purpose of the two-day event was to decide the company’s goals for the coming year.
Driving to the meeting, Galbenski struggled to figure out exactly what he was going to say. He was sill
undecided about whether to pursue an incremental and conservation national expansion or take a big
gamble on overseas contractors.
The Decision
The next morning Galbenski kicked off the management meeting. Galbenski laid out the facts as he saw
them. Rather than look at just the next five years of growth, look at the next 20, he said. He cited a
Forrester Research prediction that some 79,000 legal jobs, totaling $5.8 billion in wages, would be dent
offshore by 2015. He challenged his team to be pioneers in creating a new industry, rather than
stragglers racing to catch up. His team applauded. Returning to the office after the meeting, Galbenski
announced the change in strategy to his 20 full-timers.
Then he and his team began plotting a global action plan. The first step was to hire a company
out of Indianapolis, Analysts International, to start compiling a list of the best legal services providers in
countries where people had comparatively strong English skills. The next phase was vetting the
companies in person. In February 2005, just three months after the meeting in Port Huron, Galbenski
found himself jetting off on a three-month trip to scout potential contractors in India, Dubai, and Sri
Lanka. Traveling to cities like Bangalore, Chennai, and Hyderabad, he interviewed executive from more
than a dozen companies, investigating their day-to-say operation firsthand.
India seemed like the best bet. With more than 500 law schools and about 200,000 law students
graduating each year, it had no shortage of attorneys. What amazed Galbenski, however, was that
thanks to the Web, lawyers in India had access to the same research tools and case summaries as any
associate in the U.S. Sure they didn’t speak American English. “But they were also eager to tackle the
kinds of tasks that most new associates at law firms look down upon” such as poring over perfect for the
kind of document-review work he had in mind.
After a retune visit to India in August 2005, Galbenski signed a contract with two legal service
companies: QuisLex, in Hyderabad, and Manthan Services, in Bangalore. Using their lawyers and
Paralegals, Galbenski figured he could cut his document-review rates to $50 an hours. He also
outsourced the maintenance of the database used to store the contact information for his thousands of
contractors. In all, he spent about 12 months and $250,000 readying his newly global company.
Convincing U.S. based clients to take a chance on the new service hasn’t been easy. In November,
Galbenski lined up pilot programs with four clients (none of which are ready to publicise their use of
offshore resources). To help get the word out, he launched a website (offshore-legal-services.com),
which includes a cache of white papers and case studies to serve as a resource guide for companies
interested in outsourcing.
Questions:-
1. As money costs will decrease due to decision to outsource human resource, some real costs and
opportunity cost may surface. What could these be?
2. Elaborate the external and internal economies of scale as occurring to Contract Counsel.
3. Can you see some possibility of economies of scope from the information given in the case?
Discuss.
____________________________________________________________________________
Case 1: Where is the Fair Play? (Marks-16)
In most countries in Europe, and primarily America, they don’t prefer the leg meat – it is waste matter
for them so they look for nations where they can dump this meat. They did in the Philippines, Sri Lanka
and Russia. They might deny it in the US but everybody knows that they are sitting on stocks for at
least 2-3 years. They have succeeded in doing that because of their good freezing techniques. Now it’s
becoming a major problem for them. They’re not used to eating leg meat and are in a fix. In the US
they actually load the price of the entire chicken on the breast meat, and the rest of the bird is like a
carcass to them. Due to environmental reasons they can’t dump it in the sea so they have to dump it
somewhere. It can be any underdeveloped country, may be India!
It’s wrong notion that supply of this meat to underdeveloped countries will be good for the consumers
there. It is not. Can the Americans guarantee anything – how long will they be able to supply the
chicken? How long will they supply subsidized eggs to such a large country? We could end up destroying
our industry base and that will be very sad. As far as chicken is concerned, they can only supply the
legs – they can never supply the whole bird. The white meat costs US $3 to 3.5 per pound, so it’s out of
range. May be the consumer gets the advantage of subsidized supply of the white meat in the short run
but over time the consumers’ interests are likely to suffer because such a supply will result only in
destroying the chicken and egg industry in India. Once their surplus stock gets exhausted they can
charge you any price – can they guarantee the price? They can’t and they won’t.
The chicken/egg business deals with livestock. It is not possible for people to stop producing for a year
and come back – they will be finished. Once they are out of the cycle they are out of the industry. It
would be very said if that happened to this industry that has grown over the past 25 years.
For many people it provides a day-to-day livelihood. Once the foreign players come in and are allowed
to sell their products at very low rates, the industry could collapse as it has in other countries.
India is a the cheapest egg producer in the world – about Re.1 a piece. But now we are very worried. In
European countries, eggs cost between Rs.3-5 but they are able to deliver the same egg to the Middle
East at Re 1-1.50. This is because in Western countries they have so many subsidies. When it comes to
agriculture, they are very sensitive and protective. If they bring it to the Middle East, then why can’t
they do it here as well? The government knows that the Western countries are not going to remove
subsidies – they know when it comes to agriculture, neither the Europeans nor the Americans are going
to do anything. They are going to protect them forever- so where is the fair play?
Questions:
i. What would you recommend to the government to create a level playing field for the local firms
and the western exporters of meat to India?
ii. Can you cite any other typical product where India’s advantage turns into disadvantages as a
result of WTO agreement?
Case: 2 (Marks -16)
One of the most notable things about consumer behaviour is that the demand in the short run is always
less elastic (or more inelastic) than the demand in the medium or long term. Petroleum, which is one of
the most essential commodities of modern life is a classic example of this phenomenon. Petroleum, also
known as a luxurious necessity because of its steep price, is the greatest cause for our Balance of
Payment being perennially in deficit. Despite all its disadvantages, life is literally and figuratively
`immobile’ without petroleum.
Our country faced two oil shocks during the 1970s. The shock of 1973-74 was a severe one and was felt
by many other countries, while the oil shock of 1979 was mild and pertained only to India. In order to
combat the sudden fall in supply, resulting in excess demand for it, the price of petrol was hiked (in
India, petroleum prices are always administered, and not market-driven) assuming that consumer
demand for petrol will go down. There was some reduction in the consumption of petrol as people
limited their pleasure trips and joy rides. The concept of `car pool’ to go to offices started and the
middle class started depending heavily on diesel-run public transport (diesel although a by-product of
crude oil is a cheaper and readily available product).
Besides this, there was no perceptible change in the demand for petrol and people continued to buy
petrol at a higher price. As a result, although the prices went up by 25 to 30 percent, the demand
decreased by only 5 to 6 percent between the 1970s and the early 1980s.
However, analysts and planners observed phenomenon, believed to be related to the hike in the price of
petrol. People, especially in the urban areas, started to stay near the workplace (even if it meant a
higher rent), showing a preference for fuel-efficient vehicles when compared to steady, stable but not
such fuel-efficient vehicles.
The phenomenal success of Maruti 800 cars launched in the mid-1980s was because of its single
attribute of fuel-efficiency, despite other disadvantages of a light body (which made it easy for the car to
topple over and get dented or damaged on Indian roads), costly parts (when compared to the
Ambassador or Fiat). Consumes preferred Maruti for its excellent fuel-efficient technology and hence a
lower running cost, than for any other reason. So much was the popularity of Maruti cars that
automobile associations discovered that the demand for other vehicles had falled by 30 to 40 percent in
favour of Maruti 800. a permanent change in the demand pattern for small, fuel-efficient cars had been
achieved.
For most commodities, economists found that in the long term (the concept of long term varies from
commodity to commodity) the absolute value of the demand elasticity is higher than in the short run. A
few of these are given in the following Table:
The value of demand elasticity for certain goods and services in India
(This includes urban, semi-urban and small town area)
Goods + Services Short-Run
Demand Elasticity
Long-Run
Demand
Elasticity
Expenditure on food 0.35 0.36
Expenditure on clothing 0.68 1.22
Consumption of electricity 0.54 0.90
House rent 0.75 1.82
Transportation 0.40 1.60
Source: Calculated on the basis of Government of India published reports.
Questions:
i Why do you think the absolute value of demand elasticity is less in the short run than in the long
run?
ii. Do you think jewellery as a commodity, can also be categorized in the same group as others in
the given table? In other words, will it also exhibit change in the demand elasticity between the
short and long run? Explain why?
iii. The change in the value of demand elasticity between short and long run is much smaller in case
of food than in clothing, what does this reflect about the consumer behaviour?
Case :3 (Marks -16)
TAKE THE BULL BY THE HORN
Through its relatively brief history, the Reliance group has specialised in taking gambles, sometimes
huge ones. A pattern repeated time and again - such as when it set up capacities for Polyester Staple
Fibre (PSF) which was the same size as the domestic market or when it put up a 27 million tonne
refinery in Jamnagar, which is close to a third of India's demand for petroleum products.
There's no gamble quite so audacious as the one that's underway. The Rs. 25,000 crore Reliance
Infocom project that's currently taking shape aims at no less than a complete remake of India's telecom
landscape to emerge as India's number one telecommunications company, ahead of the state-owned
behemoth Bharat Sanchar Nigam l td.
It's also an attempt to realign Reliance's revenues and profits - which today originate entirely from
manufacturing - with India's economic profile, in which services account for over 40 per cent of GDP.
"Reliance's revenues will have to become diversified with a larger proportion originating from services
which would be in keeping with the
changing structure of India's economy," says Mukesh Ambani, vice chairman of Reliance Industries.
Rs. 8000 crore will be invested over a three - year period. As of now, it's full steam ahead for Reliance's
Infocom plans. As it had done earlier in oil and gas. Reliance plans to emerge as an integrated player,
focusing on the entire range of telecom services ranging from high - speed internet access for business
and consumers, call centres,
data centres, cellular phone services and domestic and international long distance telephony. Apart from
the gamut of telecom services, Reliance's integration plans are in one respect unique in the telecom
industry. If senior group officials are to be believed, the company has plans to assemble cellular phones
and set-top boxes.
At the core of the Infocom project is a 115,000 km fibre optic backbone covering 115 cities across 12
States, accounting for over 50 per of India's GDP. The company plans to become what the industry
jargon refers to as a carriers' carrier, where it hires out infrastructure to other telecom operations. Here
Reliance, along with the Bharti group, has obtained a licence for providing domestic long-distance
services. In fact, these are the only two companies to do so. The total domestic long-distance market is
worth Rs. 6,000 crore. Of this, the market available to the long
distance operator is likely to be Rs. 2,400 crore, according to a December 2000 Merrill Lynch report. This
is based on a 30 : 40 : 30 revenue share between the originator, the carrier and the last-mile access
provider. However, Reliance would hope for a larger share since it plans to fill all the three roles. Merrill
Lynch estimates that the domestic long-distance revenues accruing to the carrier would amount to Rs.
2760 crore in 2002 - 03, of which Reliance is expected to garner 20 per cent - or Rs. 620 crore.
As part of its plans to enter international long-distance telecommunication, Reliance has already
submitted an expression of interest for international long-distance operator VSNL. The total international
long-distance market in India right now is Rs. 4,900 crore. Reliance's own estimates for revenue and
profitability have not been made publicly available. However, internal estimates reportedly project
revenues of Rs. 30,000 crore, which is roughly a third of the total telecommunication market of around
Rs. 1,00,000 crore estimated for fiscal year 2004 - 05. The annual total telecommunications market is
around Rs. 42,000 crore. These estimates are of course based on the assumptions of a rapid take-off in
traffic, particularly data traffic. Check out some figures: out of the 30 million households that have an
income over Rs. 4000, an estimated 20 million are in the urban market and 10 million in the rural
market. Out of the urban people, 13 million already have fixed-line connections. And out of the 10
million rural customers, 6.5 million already have fixed lines.
In the light of the above: "what kind of growth can one really expect" for the telecommunication sector
in India as such and Reliance lnfocom in particular ?
Questions :
(a) Is there such a market in India for all the huge plans that they have ?
(b) Can you support it as a case of economies of scope ?
(c) Does it not lend to monopolistic conditions ? Give reasons.
Case : 4 (Marks-16)
The Industry
The automotive sector is one of the core industries of the Indian economy, whose prospect is reflective
of the economic resilience of the country. The automobile industry witnessed a growth of 19.35 percent
in April-July 2006 when compared to April-July 2005. As per Davos Report 2006, Indian is largest three
wheeler market in the world; 2nd largest two wheeler market; 4th largest tractor market; 5th largest
commercial vehicle market and 11th largest passenger car market in the world and expected to the
seventh largest by 2016. India is among few countries that are showing a growth rate of 30 per cent in
demand for passenger cars. The industry currently accounts for nearly 4% of the GNP and 17% of the
indirect tax revenue. The well developed India automotive industry produces a wide variety of vehicles
including passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles, scooters,
motorcycles, mopeds, three wheelers, tractors etc. Economic liberalization over the years made India as
one of the prime business destination for many global automotive players, including international giants
like Ford, Toyota, GM and Hyundai have also made their also made their presence with a mark.
As per another report, every commercial vehicle manufacture, create 13.31jobs, while every
passenger car creates 5.31 jobs, and every two-wheeler create 0.49 jobs, in the country. Beside, the
automobile industry has as output multiplier of 2.24, i.e., for every additional rupee of output in the auto
industry, the overall output of the India economy increases by Rs. 2.24.
The India automotive sector has a presence across all vehicle segments and key components. In
terms of volume, two wheelers dominate the sector, with nearly 80 percent share, followed by passenger
vehicles with 13 percent. At present, there are 12 manufactures of passenger cars, 5 manufactures of
multi utility vehicles (MUVs), 9 manufactures of commercial vehicles (CVs), 12 of two wheelers and 4 of
three wheelers, besides 5 manufactures of engines.
Table 1 Vehicle Segment-wise Market Share (2005-06)
Items Percent Share
Commercial Vehicles
Passenger Vehicles
Two Wheelers
Three Wheelers
Total
3.94
12.83
79.19
4.04
100.00
Source: Report of Society of Indian Automobile Manufactures (SIAM), 2006.
Although the automotive industry in India is nearly six decades old, until 1982, there were only three
manufactures – M/s. Hindustan Motors, M/s. Premier Automobiles and M/s. Standard Motors in the
motorcar sector. In 1982, Maruti Udyog Ltd. (MUL) came up as a government initiative in collaboration
with Suzuki of Japan to establish volume production of contemporary models.
The Company
Maruti Udyog Limited (MUL) has become Suzuki Motor Corporation’s R&D hub for Asia outside Japan.
Maruti introduced upgraded versions of the Esteem, Maruti 800 and Omni, completely designed and style
in house. This followed the up gradation of WagonR and Zen models, done in house only a year before.
Maruti engineer also worked with their counterparts in Suzuki Motor Corporation in the design and
development of its new model, Swift.
The company launched superior Bharat Stage III version of most of its models, well before the
Government deadline. Maruti also set up a Center for Excellence with a corpus of Rs. 100 million. This
was done in collaboration with suppliers, who contributed an additional Rs. 50 million. The Center
provides consultancy and training support to Maruti’s Suppliers and Sales Network to enable them to
achieve standards in Quality, Cost, Service and Technology Orientation.
Maruti has embarked upon this new project in collaboration with SMC for the manufacture of diesel
engines, petrol engines and transmission assemblies for four wheeled vehicles. The project is being
implemented in the existing Joint Venture Company viz. Suzuki Metal India Limited (renamed Suzuki
Power train India Limited).
Questions:-
1. Identify the most important factors of production in case of automobile industry. Also attempt to
explain the relative significance of each of these factors.
2. What more information would you like to obtain in order to draw a production function for Maruti
Udyog? Explain with logic.
3. Automobile industry is a good example of capital augmenting technical progress. Discuss.
Case :5 (Marks-16)
By almost any measure, David Galbenski’s company Contract Counsel was a success. It was a company
Galbenski and a law school buddy, Mark Adams, started in 1993; it helps companies find lawyers on a
temporary contact basis. The growth over the past five years has been furious. Revenue went from less
than $200,000 to some $6,5 million at the end of 2003, and the company was placing thousands of
lawyers a year.
And then revenue growth began to flatten; the company grew just 8% in 2004 despite a robust
market for legal services estimated at about $250 billion in the United States alone. Frustrated and
concerned, Galbenski stepped back and began taking a hard look at his business. Could he get it back on
the fast track? “Most business books say that the hardest threshold to cross is that $10 million sales
mark,” he says. “I knew we couldn’t afford to grow only 10% a year. We needed to blow right through
that number.”
For that a happen, Galbenski knew he has to expand his customer base beyond the Midwest into
large legal supermarkets such as Boston, New York, and Washington, D.C. He also knew that in doing so,
he would run into stiff competition from large publicly traded rivals. Contract Counsel’s edge had always
been its low prices. Clients called when dealing with large-scale litigation or complicated merger and
acquisition deals, either of which can require as many 100 lawyers to manage the discovery process and
the piles of documents associated with it. Contract Counsel’s temps cost about $75 an hour, roughly half
of what a law firm would charge, which allowed the company to be competitive despite its relatively
small size. Galbenski was counting on using the same strategy as he expanded into new cities. But would
that be enough to spur the hyper growth that he craved for?
At the time, Galbenski had been reading quite a bit about the growing use of offshore employees.
He knew companies like General Electric, Microsoft and Cisco were saving bundles by setting up call and
data centers in India. Could law firms offshore their work? Galbenski’s mind raced with possibilities. He
imagined tapping into an army of discount-priced legal minds that would mesh with his existing talent
pool in the U.S. The two work forces could collaborate over the Web and be productive on a 24-7 basis.
And the cost saving could be massive.
Using offshore workers was a risk, but the payoff was potentially huge. Incidentally Galbenski and
his eight-person management team were preparing to meet for their semiannual strategic review
meeting. The purpose of the two-day event was to decide the company’s goals for the coming year.
Driving to the meeting, Galbenski struggled to figure out exactly what he was going to say. He was sill
undecided about whether to pursue an incremental and conservation national expansion or take a big
gamble on overseas contractors.
The Decision
The next morning Galbenski kicked off the management meeting. Galbenski laid out the facts as he saw
them. Rather than look at just the next five years of growth, look at the next 20, he said. He cited a
Forrester Research prediction that some 79,000 legal jobs, totaling $5.8 billion in wages, would be dent
offshore by 2015. He challenged his team to be pioneers in creating a new industry, rather than
stragglers racing to catch up. His team applauded. Returning to the office after the meeting, Galbenski
announced the change in strategy to his 20 full-timers.
Then he and his team began plotting a global action plan. The first step was to hire a company
out of Indianapolis, Analysts International, to start compiling a list of the best legal services providers in
countries where people had comparatively strong English skills. The next phase was vetting the
companies in person. In February 2005, just three months after the meeting in Port Huron, Galbenski
found himself jetting off on a three-month trip to scout potential contractors in India, Dubai, and Sri
Lanka. Traveling to cities like Bangalore, Chennai, and Hyderabad, he interviewed executive from more
than a dozen companies, investigating their day-to-say operation firsthand.
India seemed like the best bet. With more than 500 law schools and about 200,000 law students
graduating each year, it had no shortage of attorneys. What amazed Galbenski, however, was that
thanks to the Web, lawyers in India had access to the same research tools and case summaries as any
associate in the U.S. Sure they didn’t speak American English. “But they were also eager to tackle the
kinds of tasks that most new associates at law firms look down upon” such as poring over perfect for the
kind of document-review work he had in mind.
After a retune visit to India in August 2005, Galbenski signed a contract with two legal service
companies: QuisLex, in Hyderabad, and Manthan Services, in Bangalore. Using their lawyers and
Paralegals, Galbenski figured he could cut his document-review rates to $50 an hours. He also
outsourced the maintenance of the database used to store the contact information for his thousands of
contractors. In all, he spent about 12 months and $250,000 readying his newly global company.
Convincing U.S. based clients to take a chance on the new service hasn’t been easy. In November,
Galbenski lined up pilot programs with four clients (none of which are ready to publicise their use of
offshore resources). To help get the word out, he launched a website (offshore-legal-services.com),
which includes a cache of white papers and case studies to serve as a resource guide for companies
interested in outsourcing.
Questions:-
1. As money costs will decrease due to decision to outsource human resource, some real costs and
opportunity cost may surface. What could these be?
2. Elaborate the external and internal economies of scale as occurring to Contract Counsel.
3. Can you see some possibility of economies of scope from the information given in the case?
Discuss.
Health Care Management (spz)
_____________________________________________________________________________
1) List the common models of Public Private Parhaership in Health Sector. Explain contracting in
detail.
2) How medical System is responsible in promoting the spread of HIV transmission? Explain.
3) Write short notes on the following :
(u) National policy for empowerment of women
(b) National Commission of Women
4) How do the socio-cultural factors influence the gender health ? Explain.
5) Explain the initiatives taken by United Nations to prevent and control HIV/AIDS in India.
6) Discuss in brief the following strategic themes of National Fopulation Policy :
(i) Decentralized Planning and programme implementation
(ii) Empowering women for improved health and nutrition
7) Why is there an increased attack of Coronary Heart diseases in youth of India? Explain.
8) Why is yoga becoming a popular system of medicine across the world? State reasons
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