MBA EXAM CASE STUDY ANSWERS PROVIDED WHATSAPP 91 9924764558

MBA EXAM CASE STUDY ANSWERS PROVIDED WHATSAPP 91 9924764558

Master’s Program in Business Administration (MBA)


Note:
(i) Attempt all four Cases
(ii) All Cases carry equal marks.


CASE I
A Reply Sent to an Erring Customer
Dear Sir,
Your letter of the 23rd, with a cheque for Rs. 25,000/- on account, is to hand.
We note what you say as to the difficulty you experience in collecting your outstanding accounts, but we are compelled to remark that we do not think you are treating us with the consideration we have a right to expect.
It is true that small remittances have been forwarded from time to time, but the debit balance against you has been steadily increasing during the past twelve months until it now stands at the considerable total of Rs. 85,000/-
Having regard to the many years during which you have been a customer of this house and the, generally speaking, satisfactory character of your account, we are reluctant to resort to harsh measures.
We must, however, insist that the existing balance should be cleared off by regular installments of say Rs. 10,000/- per month, the first installment to reach us by the 7th.  In the meantime you shall pay cash for all further goods; we are allowing you an extra 3% discount in lieu of credit.
We shall be glad to hear from you about this arrangement, as otherwise we shall have no alternative but definitely to close your account and place the matter in other hands.
Yours truly, 


Questions:
1. Comment on the appropriateness of the sender’s tone to a customer.
2. Point out the old – fashioned phrases and expressions.
3. Rewrite the reply according to the principles of effective writing in business.


















Case II
Advertising Radio FM Brand
A young, gorgeous woman is standing in front of her apartment window dancing to the 1970s tune, “All Right Now” by the one – hit band free.  Across the street a young man looks out of his apartment window and notices her.  He moves closer to the window, taking interest.  She cranks up the volume and continues dancing, looking out the window at the fellow, who smiles hopefully and waves meekly.  He holds up a bottle of wine and waves it, apparently inviting her over for a drink.  The lady waves back.  He kisses the bottle and excitedly says, “Yesss.”  Then, he gazes around his apartment and realizes that it is a mess. “No!” he exclaims in a worried tone of voice. 
Frantically, he does his best to quickly clean up the place, stuffing papers under the sofa and putting old food back in the refrigerator, He slips on a black shirt, slicks  back his hair, sniffs his armpit, and lets out an excited , “Yeahhh!” in eager anticipation of entertaining the young lady.  He goes back to the window and sees the woman still dancing away.  He points to his watch, as if to say “Come on.  It is getting late.”   As she just continues dancing, he looks confused.  Then a look of sudden insight appears on his face, “Five,” he says to himself.  He turns on his radio, and it too is playing “All Right Now.”  The man goes to his window and starts dancing as he watches his lady friend continue stepping.  “Five, yeah,” he says as he makes the “okay” sign with his thumb and forefinger.  He waves again.  Everyone in the apartment building is dancing by their window to “All Right Now.”  A super appears on the screen: “Are you on the right wavelength?” 

Questions:
1. What is non – verbal communication?  Why do you suppose that this commercial relies primarily on non-verbal communication between a young man and a gorgeous woman?  What types of non – verbal communication are being used in this case?
2. Would any of the non-verbal communications in this spot (ad) not work well in another culture?
3. What role does music play in this spot? Who is the target market?
4. Is the music at all distracting from the message?
5. How else are radio stations advertised on TV?













CASE III
Arvind Pandey Caught in Business Web
Arvind Pandey is a project manager at Al Saba Construction Company in Muscat.   It s a flourishing company with several construction projects in Muscat and abroad.  It is known for completing projects on time and with high quantity construction.  The company’s Chairman is a rich and a highly educated Omani.  A German engineer is Arvind’s Vice – President for urban and foreign construction projects.
Three months ago, Al Saba had submitted a tender for a major construction project in Kuwait.  Its quotation was for $ 25 million.  In Kuwait the project was sponsored and announced by a US – based construction company called Fuma.  According to Al Saba, their bid of $ 25 million was modest but had included a high margin of profit.
On 25 April, Arvind was asked to go to Kuwait to find out from the Fuma project manager the status of their construction proposal.  Arvind was delighted to know that Fuma had decided to give his company, (Al Saba) the construction project work.  The project meant a lot of effort and money in planning the proposed construction in Kuwait.
But before Arvind could tank the Fuma project manager, he was told that their bird should be raised to $ 28 million.  Arvind was surprised. He tried to convince the Fuma project manager that his (Arvind company had the bast reputation for doing construction work in a cost effective way.  However, he could always raise the bid by $ 3 million. But he wanted to know why he was required to do so.
The Fuma manager’s reply was, “That’s the way we do our business in this part of the world, $ 1 million will go to our Managing Director in the US, I shall get $ 1 million, you, Mr. Pandey, will get $ 1 million in a specified account in Swiss Bank.
Arvind asked, “But why me?”
“So that you never talk about it to any one.”  The Fuma Project Manager said.
Arvind promised never to leak it out to any one else.  And he tried to bargain to raise the bid by $ 2 million.  For Arvind was familiar with the practice of “pay – offs” involved in any such thing.  He thought it was against his loyalty to his company and his personal ethics.  Arvind promised the Fuma project manager that the bid would be raised to $ 28 million and fresh papers would be put in. He did not want to lose the job.
He came back to Muscat and kept trying to figure out how he should place the whole thing before his German Vice President.  He obviously was at a loss. 

Questions:
1. Analyse the reasons for Arvind Pandey’s dilemma.
2. Does Arvind Pandey really face a dilemma?
3. In your view what should Arvind Pandey do? Should he disclose it to his  German Vice President? 







CASE IV
Company Accepting a Contract
A computer company was negotiating a very large order with a large size corporation.  They had a very good track record with this client.
In this corporation, five different departments had pooled their requirements and budgets.  A committee was formed which had representation from all the departments.  The corporation wanted the equipment on a long lease and not outright purchase.  Further, they wanted the entire hardware and software form one supplier.  This meant that there should be bought – out items from many suppliers since no one supplier could meet all the requirements of supply from its range of products.
The corporation provided an exhaustive list of very difficult terms and conditions and pressurized the vendors to accept.  The computer company who was finally awarded the contract had agreed to overall terms that were fine as far as their own products were concerned but had also accepted the same terms for the brought – out items.  In this case, the bought – out items were to be imported through a letter of credit. The percentage of the bought – out items versus their own manufacture was also very high.  One of the terms accepted was that the “system” would be accepted over a period of 10 days after all the hardware had been linked up and software loaded.
The computer company started facing trouble immediately on supply.  There were over 100 computers over a distance connected with one another with software on it.  For the acceptance tests, it had been agreed that the computer company would demonstrate as a pre-requisite the features they had claimed during technical discussions.
Now, as you are aware, if a Hero Honda motorcycle claims 80 km to a litre of petrol, it is under ideal test conditions and if a motorcycle from the showroom were to be tried for this test before being accepted, it would never pass the test.  In corporation’s case, due to internal politics, the corporation persons from one department – who insisted on going exactly by the contract – did not sign acceptance since the “system” could not meet the ideal test conditions.
Further, in a classic case of, “for want of a horse – shoe, payment for the horse was held up”, the computer company tried to get the system accepted and payment released.  The system was so large that at any point of time over a period of 10 days something small or the other always gave problems.  But the corporation took the stand that as far as they were concerned the contracts clearly were concerned the contract clearly mentioned that the “system” had to be tested as a whole and not module by module.

Questions:
1. Comment on the terms and conditions placed by the corporation.
2. What factors influenced the computer company’s decision to accept the contract?
3. Was it a win – win agreement?  Discuss?



Masters Program in Business Administration (MBA)

Note: 1) Attempt any Five Cases.
         2) All Cases carry equal marks.






























Case No. 1
ZIP ZAP ZOOM CAR COMPANY
Zip Zap Zoom Company Ltd is into manufacturing cars in the small car (800 cc) segment.  It was set up 15 years back and since its establishment it has seen a phenomenal growth in both its market and profitability.  Its financial statements are shown in Exhibits 1 and 2 respectively.
The company enjoys the confidence of its shareholders who have been rewarded with growing dividends year after year.  Last year, the company had announced 20 per cent dividend, which was the highest in the automobile sector.  The company has never defaulted on its loan payments and enjoys a favourable face with its lenders, which include financial institutions, commercial banks and debenture holders.
The competition in the car industry has increased in the past few years and the company foresees further intensification of competition with the entry of several foreign car manufactures many of them being market leaders in their respective countries.  The small car segment especially, will witness entry of foreign majors in the near future, with latest technology being offered to the Indian customer.  The Zip Zap Zoom’s senior management realizes the need for large scale investment in up gradation of technology and improvement of manufacturing facilities to pre-empt competition.
Whereas on the one hand, the competition in the car industry has been intensifying, on the other hand, there has been a slowdown in the Indian economy, which has not only reduced the demand for cars, but has also led to adoption of price cutting strategies by various car manufactures.   The industry indicators predict that the economy is gradually slipping into recession.

Exhibit 1 Balance sheet as at March 31,200 x
(Amount in Rs. Crore)

Source of Funds
Share capital 350
Reserves and surplus 250 600
Loans :
Debentures (@ 14%)   50
Institutional borrowing (@ 10%) 100
Commercial loans (@ 12%) 250
Total debt 400
Current liabilities 200
1,200

Application of Funds
Fixed Assets 
Gross block 1,000
Less : Depreciation    250
Net block    750
Capital WIP    190
Total Fixed Assets 940
Current assets :
Inventory    200
Sundry debtors      40
Cash and bank balance      10
Other current assets      10
Total current assets 260
-1200

Exhibit 2 Profit and Loss Account for the year ended March 31, 200x
(Amount in Rs. Crore)
Sales revenue (80,000 units x Rs. 2,50,000) 2,000.0
Operating expenditure :
Variable cost :
Raw material and manufacturing expenses 1,300.0
Variable overheads    100.0
Total 1,400.0
Fixed cost :
R & D      20.0
Marketing and advertising      25.0
Depreciation    250.0
Personnel      70.0
Total    365.0
Total operating expenditure 1,765.0
Operating profits (EBIT)    235.0
Financial expense :
Interest on debentures 7.7
Interest on institutional borrowings         11.0
Interest on commercial loan         33.0 51.7
Earnings before tax (EBT) 183.3
Tax (@ 35%)   64.2
Earnings after tax (EAT) 119.1
Dividends   70.0
Debt redemption (sinking fund obligation)**   40.0
Contribution to reserves and surplus     9.1
* Includes the cost of inventory and work in process (W.P) which is dependent on demand (sales).
** The loans have to be retired in the next ten years and the firm redeems Rs. 40 crore every year.
The company is faced with the problem of deciding how much to invest in up
gradation of its plans and technology.  Capital investment up to a maximum of Rs. 100
crore is required.  The problem areas are three-fold.
• The company cannot forgo the capital investment as that could lead to reduction in its market share as technological competence in this industry is a must and customers would shift to manufactures providing latest in car technology.
• The company does not want to issue new equity shares and its retained earning are not enough for such a large investment.  Thus, the only option is raising debt.
• The company wants to limit its additional debt to a level that it can service without taking undue risks.  With the looming recession and uncertain market conditions, the company perceives that additional fixed obligations could become a cause of financial distress, and thus, wants to determine its additional debt capacity to meet the investment requirements.
Mr. Shortsighted, the company’s Finance Manager, is given the task of determining the additional debt that the firm can raise.  He thinks that the firm can raise Rs. 100 crore worth debt and service it even in years of recession.  The company can raise debt at 15 per cent from a financial institution.  While working out the debt capacity.  Mr. Shortsighted takes the following assumptions for the recession years.
a) A maximum of 10 percent reduction in sales volume will take place.
b) A maximum of 6 percent reduction in sales price of cars will take place.
Mr. Shorsighted prepares a projected income statement which is representative of the recession years.  While doing so, he determines what he thinks are the “irreducible minimum” expenditures under recessionary conditions.  For him, risk of insolvency is the main concern while designing the capital structure.  To support his view, he presents the income statement as shown in Exhibit 3.
Exhibit 3 projected Profit and Loss account
(Amount in Rs. Crore)
Sales revenue (72,000 units x Rs. 2,35,000) 1,692.0
Operating expenditure
Variable cost :
Raw material and manufacturing expenses 1,170.0
Variable overheads      90.0
Total 1,260.0
Fixed cost :
R & D      ---
Marketing and advertising      15.0
Depreciation    187.5
Personnel      70.0
Total    272.5
Total operating expenditure 1,532.5
EBIT    159.5
Financial expenses :
Interest on existing Debentures       7.0
Interest on existing institutional borrowings     10.0
Interest on commercial loan     30.0
Interest on additional debt     15.0      62.0
EBT      97.5
Tax (@ 35%)      34.1
EAT      63.4
Dividends          --
Debt redemption (sinking fund obligation)      50.0*
Contribution to reserves and surplus      13.4

* Rs. 40 crore (existing debt) + Rs. 10 crore (additional debt)
Assumptions of Mr. Shorsighted
• R & D expenditure can be done away with till the economy picks up.
• Marketing and advertising expenditure can be reduced by 40 per cent.
• Keeping in mind the investor confidence that the company enjoys, he feels that the company can forgo paying dividends in the recession period.
He goes with his worked out statement to the Director Finance, Mr. Arthashatra, and advocates raising Rs. 100 crore of debt to finance the intended capital investment.  Mr. Arthashatra  does not feel comfortable with the statements and calls for the company’s financial analyst, Mr. Longsighted.
Mr. Longsighted carefully analyses Mr. Shortsighted’s assumptions and points out that insolvency should not be the sole criterion while determining the debt capacity of the firm.  He points out the following :
• Apart from debt servicing, there are certain expenditures like those on R & D and marketing that need to be continued to ensure the long-term health of the firm.
• Certain management policies like those relating to dividend payout, send out important signals to the investors.  The Zip Zap Zoom’s management has been paying regular dividends and discontinuing this practice (even though just for the recession phase) could raise serious doubts in the investor’s mind about the health of the firm.  The firm should pay at least 10 per cent dividend in the recession years.
• Mr. Shortsighted has used the accounting profits to determine the amount available each year for servicing the debt obligations.  This does not give the true picture.  Net cash inflows should be used to determine the amount available for servicing the debt.
• Net Cash inflows are determined by an interplay of many variables and such a simplistic view should not be taken while determining the cash flows in recession.  It is not possible to accurately predict the fall in any of the factors such as sales volume, sales price, marketing expenditure and so on.  Probability distribution of variation of each of the factors that affect net cash inflow should be analyzed.  From  this analysis, the probability distribution of variation in net cash inflow should be analysed (the net cash inflows follow a normal probability distribution).  This will give a true picture of how the company’s cash flows will behave in recession conditions.


The management recognizes that the alternative suggested by Mr. Longsighted rests on data, which are complex and require expenditure of time and effort to obtain and interpret.  Considering the importance of capital structure design, the Finance Director asks Mr. Longsighted to carry out his analysis.  Information on the behaviour of cash flows during the recession periods is taken into account.
The methodology undertaken is as follows:
(a) Important factors that affect cash flows (especially contraction of cash flows), like sales volume, sales price, raw materials expenditure, and so on, are identified and the analysis is carried out in terms of cash receipts and cash expenditures.
(b) Each factor’s behavior (variation behavior) in adverse conditions in the past is studied and future expectations are combined with past data, to describe limits (maximum favorable), most probable and maximum adverse) for all the factors.
(c) Once this information is generated for all the factors affecting the cash flows, Mr. Longsighted comes up with a range of estimates of the cash flow in future recession periods based on all possible combinations of the several factors.  He also estimates the probability of occurrence of each estimate of cash flow.
Assuming a normal distribution of the expected behavior, the mean expected
Value of net cash inflow in adverse conditions came out to be Rs. 220.27 crore with standard deviation of Rs. 110 crore.
Keeping in mind the looming recession and the uncertainty of the recession behavior, Mr. Arthashastra feels that the firm should factor a risk of cash inadequacy of around 5 per cent even in the most adverse industry conditions.  Thus, the firm should take up only that amount of additional debt that it can service 95 per cent of the times, while maintaining cash adequacy.
To maintain an annual dividend of 10 per cent, an additional Rs. 35 crore has to be kept aside.  Hence, the expected available net cash inflow is Rs. 185.27 crore (i.e. Rs. 220.27 – Rs. 35 crore)
Analyze the debt capacity of the company? 










Case NO. 2

COOKING LPG LTD
DETERMINATION OF WORKING CAPTIAL

Introduction:-

Cooking LPG Ltd, Gurgaon, is a private sector firm dealing in the bottling and supply of domestic LPG for household consumption since 1995. The firm has a network of distributors in the districts of Gurgaon and Faridabad. The bottling plant of the firm is located on National Highway – 8 (New Delhi – Jaipur), approx. 12 kms from Gurgaon.  The firm has been consistently performing we.”  and plans to expand its market to include the whole National Capital Region.
The production process of the plant consists of receipt of the bulk LPG through tank trucks, storage in tanks, bottling operations and distribution to dealers.   During the bottling process, the cylinders are subjected to pressurized filling of LPG followed by quality control and safety checks such as weight, leakage and other defects.  The cylinders passing through this process are sealed and dispatched to dealers through trucks.  The supply and distribution section of the plant prepares the invoice which goes along with the truck to the distributor.
Statement of the Problem :
Mr. I. M. Smart, DGM(Finance) of the company, was analyzing the financial performance of the company during the current year.  The various profitability ratios and parameters of the company indicated a very satisfactory performance.  Still, Mr. Smart was not fully content-specially with the management of the working capital by the company.  He could recall that during the past year, in spite of stable demand pattern, they had to, time and again, resort to bank overdrafts due to non-availability of cash for making various payments.  He is aware that such aberrations in the finances have a cost and adversely affects the performance of the company.  However, he was unable to pinpoint the cause of the problem.
He discussed the problem with Mr. U.R. Keenkumar, the new manager (Finance).  After critically examining the details, Mr. Keenkumar realized that the working capital was hitherto estimated only as approximation by some rule of thumb without any proper computation based on sound financial policies and, therefore, suggested a reworking of the working capital (WC) requirement.  Mr. Smart assigned the task of determination of WC to him.
Profile of Cooking LPG Ltd.
1) Purchases : The company purchases LPG in bulk from various importers ex-Mumbai and Kandla, @ Rs. 11,000 per MT.  This is transported to its Bottling Plant at Gurgaon through 15 MT capacity tank trucks (called bullets), hired on annual contract basis.  The average transportation cost per bullet ex-either location is Rs. 30,000.  Normally, 2 bullets per day are received at the plant.  The company make payments for bulk supplies once in a month, resulting in average time-lag of 15 days.
2) Storage and Bottling : The bulk storage capacity at the plant is 150 MT (2 x 75 MT storage tanks)  and the plant is capable of filling 30 MT LPG in cylinders per day.  The plant operates for 25 days per month on an average.  The desired level of inventory at various stages is as under.
• LPG in bulk (tanks and pipeline quantity in the plant) – three days average production / sales.
• Filled Cylinders – 2 days average sales.
• Work-in Process inventory – zero.
3) Marketing : The LPG is supplied by the company in 12 kg cylinders, invoiced @ Rs. 250 per cylinder.  The rate of applicable sales tax on the invoice is 4 per cent.  A commission of Rs. 15 per cylinder is paid to the distributor on the invoice itself.  The filled cylinders are delivered on company’s expense at the distributor’s godown, in exchange of equal number of empty cylinders.  The deliveries are made in truck-loads only, the capacity of each truck being 250 cylinders.  The distributors are required to pay for deliveries through bank draft.  On receipt of the draft, the cylinders are normally dispatched on the same day.  However, for every truck purchased on pre-paid basis, the company extends a credit of 7 days to the distributors on one truck-load.
4) Salaries and Wages : The following payments are made :
• Direct labour – Re. 0.75 per cylinder (Bottling expenses) – paid on last day of the month.
• Security agency – Rs. 30,000 per month paid on 10th of subsequent month.
• Administrative staff and managers – Rs. 3.75 lakh per annum, paid on monthly basis on the last working day.
5) Overheads:
• Administrative (staff, car, communication etc) – Rs. 25,000 per month – paid on the 10th of subsequent month.
• Power (including on DG set) – Rs. 1,00,000 per month paid on the 7th Subsequent month.
• Renewal of various licenses (pollution, factory, labour CCE etc.) – Rs. 15,000 per annum paid at the beginning of the year.
• Insurance – Rs. 5,00,000 per annum to be paid at the beginning of the year.
• Housekeeping etc – Rs. 10,000 per month paid on the 10th of the subsequent month.
• Regular maintenance of plant – Rs. 50,000 per month paid on the 10th of every month to the vendors.  This includes expenditure on account of lubricants, spares and other stores.
• Regular maintenance of cylinders (statutory testing) – Rs. 5 lakh per annum – paid on monthly basis on the 15th of the subsequent month.
• All transportation charges as per contracts – paid on the 10th subsequent month.
• Sales tax as per applicable rates is deposited on the 7th of the subsequent month.
6) Sales : Average sales are 2,500 cylinders per day during the year.  However, during the winter months (December to February), there is an incremental demand of 20 per cent.
7) Average Inventories : The average stocks maintained by the company as per its policy guidelines :
• Consumables (caps, ceiling material, valves etc) – Rs. 2 lakh.  This amounts to 15 days consumption.
• Maintenance spares – Rs. 1 lakh
• Lubricants – Rs. 20,000
• Diesel (for DG sets and fire engines) – Rs. 15,000
• Other stores (stationary, safety items) – Rs. 20,000
8) Minimum cash balance including bank balance required is Rs. 5 lakh.
9) Additional Information for Calculating Incremental Working Capital During Winter.
• No increase in any inventories take place except in the inventory of bulk LPG, which increases in the same proportion as the increase of the demand.  The actual requirements of LPG  for additional supplies are procured under the same terms and conditions from the suppliers.
• The labour cost for additional production is paid at double the rate during wintes.
• No changes in other administrative overheads.
• The expenditure on power consumption during winter increased by 10 per cent.  However, during other months the power consumption remains the same as the decrease owing to reduced production is offset by increased consumption on account of compressors /Acs.
• Additional amount of Rs. 3 lakh is kept as cash balance to meet exigencies during winter.
• No change in time schedules for any payables / receivables.
• The storage of finished goods inventory is restricted to a maximum 5,000 cylinders due to statutory requirements. 

Q ) DETERMINE THE WORKING CAPTIAL ?
















Case NO. 3
M/S HI-TECH ELECTRONICS
M/s. Hi – tech Electronics, a consumer electronics outlet, was opened two years ago in Dwarka, New Delhi. Hard work and personal attention shown by the proprietor, Mr. Sony, has brought success.  However, because of insufficient funds to finance credit sales, the outlet accepted only cash and bank credit cards.  Mr. Sony is now considering a new policy of offering installment sales on terms of 25 per cent down payment and 25 per cent per month for three months as well as continuing to accept cash and bank credit cards.
Mr. Sony feels this policy will boost sales by 50 percent.  All the increases in sales will  be credit sales.  But to follow through a new policy, he will need a bank loan at the rate of 12 percent.  The sales projections for this year without the new policy are given in Exhibit 1.
Exhibit 1 Sales Projections and Fixed costs
Month Projected sales without instalment option Projected sales with instalment option
January Rs. 6,00,000 Rs. 9,00,000
February       4,00,000       6,00,000
March       3,00,000       4,50,000
April      2,00,000     3,00,000
May      2,00,000      3,00,000
June      1,50,000      2,25,000
July      1,50,000      2,25,000
August      2,00,000      3,00,000
September      3,00,000      4,50,000
October      5,00,000      7,50,000
November      5,00,000      15,00,000
December      8,00,000      12,00,000
Total Sales    48,00,000    72,00,000
Fixed cost      2,40,000      2,40,000

He further expects 26.67 per cent of the sales to be cash, 40 per cent bank credit card sales on which a 2 per cent fee is paid, and 33.33 per cent on instalment sales.  Also, for short term seasonal requirements, the film takes loan from chit fund to which Mr. Sony subscribes @ 1.8 per cent per month.
Their success has been due to their policy of selling at discount price.  The purchase per unit is 90 per cent of selling price.  The fixed costs are Rs. 20,000 per month.  The proprietor believes that the new policy will increase miscellaneous cost by Rs. 25,000.
The business being cyclical in nature, the working capital finance is done on trade – off basis.  The proprietor feels that the new policy will lead to bad debts of 1 per cent.
(a) As a financial consultant, advise the proprietor whether he should go for the extension of credit facilities.?
(b) Also prepare cash budget for one year of operation of the firm, ignoring interest.  The minimum desired cash balance & Rs. 30,000, which is also the amount the firm has on January 1.  Borrowings are possible which are made at the beginning of a month and repaid at the end when cash is available. ?






















Case NO.4

SMOOTHDRIVE TYRE LTD
Smoothdrive Tyre Ltd manufacturers tyres under the brand name “Super Tread’ for the domestic car market.  It is presently using 7 machines acquired 3 years ago at a cost of Rs. 15 lakh each having a useful life of 7 years, with no salvage value.
After extensive research and development, Smoothdrive Tyre Ltd has recently developed a new tyre, the ‘Hyper Tread’ and must decide whether to make the investments necessary to produce and market the Hyper Tread.  The Hyper Tread would be ideal for drivers doing a large amount of wet weather and off road driving in addition to normal highway usage.  The research and development costs so far total Rs. 1,00,00,000.  The Hyper Tread would be put on the market beginning this year and Smoothdrive Tyrs expects it to stay on the market for a total of three years. Test marketing costing Rs. 50,00,000, shows that there is significant market for a Hyper Tread type tyre.
As a financial analyst at Smoothdrive Tyre, Mr. Mani asked by the Chief Financial Officer (CFO), Mr. Tyrewala to evaluate the Hyper-Tread project and to provide a recommendation or whether or not to proceed with the investment.  He has been informed that all previous investments in the Hyper Tread project are sunk costs are only future cash flows should be considered.  Except for the initial investments, which occur immediately, assume all cash flows occur at the year-end.
Smoothedrive Tyre must initially invest Rs. 72,00,00,000 in production equipments to make the Hyper Tread.  They would be depreciated at a rate of 25 per cent as per the written down value (WDV) method for tax purposes.  The new production equipments will allow the company to follow flexible manufacturing technique, that is both the brands of tyres can be produced using the same equipments.  The equipments is expected to have a 7-year useful life and can be sold for Rs. 10,00,000 during the fourth year.  The company does not have any other machines in the block of 25 per cent depreciation.  The existing machines can be sold off at Rs. 8 lakh per machine with an estimated removal cost of one machine for Rs. 50,000.
Operating Requirements
The operating requirements of the existing machines and the new equipment are detailed in Exhibits 11.1 and 11.2 respectively.
Exhibit 11.1 Existing Machines
• Labour costs (expected to increase 10 per cent annually to account for inflation) :
(a) 20 unskilled labour @ Rs. 4,000 per month
(b) 20 skilled personnel @ Rs. 6,000 per month.
(c) 2 supervising executives @ Rs. 7,000 per month.
(d) 2 maintenance personnel @ Rs. 5,000 per month.
• Maintenance cost :
Years 1-5 : Rs. 25 lakh
Years 6-7 : Rs. 65 lakh
• Operating expenses : Rs. 50 lakh expected to increase at 5 per cent annually.
• Insurance cost / premium :
Year 1 : 2 per cent of the original cost of machine
After year 1 : Discounted by 10 per cent.

Exhibit 11.2 New production Equipment
• Savings in cost of utilities : Rs. 2.5 lakh
• Maintenance costs :
Year 1 – 2 :  Rs. 8 lakh
Year 3 – 4 :  Rs. 30 lakh
• Labour costs :
9 skilled personnel @ Rs. 7,000 per month
1 maintenance personnel @ Rs. 7,000 per month.
• Cost of retrenchment of 34 personnel : (20 unskilled, 11 skilled, 2 supervisors and 1 maintenance personnel) : Rs. 9,90,000, that is equivalent to six months salary.
• Insurance premium
Year 1 : 2 per cent of the purchase cost of machine
After year 1 : Discounted by 10 per cent.

The opening expenses do not change to any considerable extent for the new equipment and the difference is negligible compared to the scale of operations.
Smoothdrive Tyre intends to sell Hyper Tread of two distinct markets :
1. The original equipment manufacturer (OEM) market : The OEM market consists primarily of the large automobile companies who buy tyres for new cars.  In the OEM market, the Hyper Tread is expected to sell for Rs. 1,200 per tyre. The variable cost to produce each Hyper Tread is Rs. 600.
2. The replacement market : The replacement market consists of all tyres purchased after the automobile has left the factory.  This markets allows higher margins and Smoothdrive Tyre expects to sell the Hyper Tread for Rs. 1.500 per tyre.  The variable costs are the same as in the OEM market.
Smoothdrive Tyre expects to raise prices by 1 percent above the inflation rate. 
The variable costs will also increase by 1 per cent above the  inflation rate.  In addition, the Hyper Tread project will incur Rs. 2,50,000 in marketing and general administration cost in the first year which are expected to increase at the inflation rate in subsequent years.
Smoothdrive Tyre’s corporate tax rate is 35 per cent.  Annual inflation is expected to remain constant at 3.25 per cent.  Smoothdrive Tyre uses a 15 per cent discount rate to evaluate new product decisions.
The Tyre Market
Automotive industry analysts expect automobile manufacturers to have a production of 4,00,000 new cars this year and growth in production at 2.5 per year onwards.  Each new car needs four new tyres (the spare tyres are undersized and fall in a different category) Smoothdrive Tyre expects the Hyper Tread to capture an 11  per cent share of the OEM market.
The industry analysts estimate that the replacement tyre market size will be one crore this year and that it would grow at 2 per cent annually.  Smoothdrive Tyre expects the Hyper Tread to capture an 8 per cent market share.
You also decide to consider net working capital (NWC) requirements in this scenario.  The net working capital requirement will be 15 per cent of sales.  Assume that the level of working capital is adjusted at the beginning of the year in relation to the expected sales for the year.  The working capital is to be liquidated at par, barring an estimated loss of Rs. 1.5 crore on account of bad debt. The bad debt will be a tax-deductible expenses.
As a finance analyst, prepare a report for submission to the CFO and the Board of Directors, explaining to them the feasibility of the new investment?































Case No. 5

COMPUTATION OF COST OF CAPITAL OF PALCO LTD

In October 2003, Neha Kapoor, a recent MBA graduate and newly appointed assistant to the Financial Controller of Palco Ltd, was given a list of six new investment projects proposed for the following year.  It was her job to analyse these projects and to present her findings before the Board of Directors at its annual meeting to be held in 10 days.  The new project would require an investment of Rs. 2.4 crore.
Palco Ltd was founded in 1965 by Late Shri A. V. Sinha. It gained recognition as a leading producer of high quality aluminum, with the majority of its sales being made to Japan.  During the rapid economic expansion of Japan in the 1970s, demand for aluminum boomed, and palco’s sales grew rapidly.  As a result of this rapid growth and recognition of new opportunities in the energy market, Palco began to diversify its products line.  While retaining its emphasis on aluminum production, it expanded operations to include uranium mining and the production of electric generators, and finally, it went into all phases of energy production.  By 2003, Palco’s sales had reached Rs. 14 crore level, with net profit after taxes attaining a record of Rs. 67 lakh.
As Palco expanded its products line in the early 1990s, it also formalized its caital budgeting procedure.  Until 1992, capital investment projects were selected primarily on the basis of the average return on investment calculations, with individual departments submitting these calculations for projects falling within their division.  In 1996, this procedure was replaced by one using present value as the decision making criterion. This change was made to incorporate cash flows rather than accounting profits into the decision making analysis, in addition to adjusting these flows for the time value of money.  At the time, the cost of capital for Palco was determined to be 12 per cent, which has been used as the discount rate for the past 5 years.  This rate was determined by taking a weighted average cost Palco had incurred in raising funds from the capital market over the previous 10 years.
It had originally been Neha’s assignment to update this rate over the most recent 10-year period and determine the net present value of all the proposed investment opportunities using this newly calculated figure.  However, she objected to this procedure, stating that while this calculation gave a good estimate of “the past cost” of capital, changing interest rates and stock prices made this calculation of little value in the present.  Neha suggested that current cost of raising funds in the capital market be weighted by their percentage mark-up of the capital structure.  This proposal was received enthusiastically by the Financial Controller of the Palco, and Neha was given the assignment of recalculating Palco’s cost of capital and providing a written report for the Board of Directors explaining and justifying this calculation.
To determine a weighted average cost of capital for Palco, it was necessary for Neha to examine the cost associated with each source of funding used.  In the past, the largest sources of funding had been the issuance of new equity shares and internally generated funds.  Through conversations with Financial Controller and other members of the Board of Directors, Neha learnt that the firm, in fact, wished to maintain its current financial structure as shown in Exhibit 1.
Exhibit 1 Palco Ltd Balance Sheet for Year Ending March 31, 2003
Assets Liabilities and Equity
Cash
Accounts receivable
Inventories
Total current assets
Net fixed assets
Goodwill
Total assets Rs.      90,00,000
        3,10,00,000
        1,20,00,000
        5,20,00,000
      19,30,00,000
           70,00,000
      25,20,00,000
Accounts payable
Short-term debt
Accrued taxes
Total current liabilities
Long-term debt
Preference shares
Retained earnings
Equity shares
Total liabilities and equity shareholders fund
Rs.      8,50,000
            1,00,000
           11,50,000
        1,20,00,000
        7,20,00,000
        4,80,00,000
        1,00,00,000
           11,00,000

      25,20,00,000


She further determined that the strong growth patterns that Palco had exhibited over the last ten years were expected to continue indefinitely because of the dwindling supply of US and Japanese domestic oil and the growing importance of other alternative energy resources.  Through further investigations, Neha learnt that Palco could issue additional equity share, which had a par value of Rs. 25 pre share and were selling at a current market price of Rs. 45.  The expected dividend for the next period would be Rs. 4.4 per share, with expected growth at a rate of 8 percent per year for the foreseeable future.  The flotation cost is expected to be on an average Rs. 2 per share. 

Preference shares at 11 per cent with 10 years maturity could also be issued with the help of an investment banker with an investment banker with a per value of Rs. 100 per share to be redeemed at par.  This issue would involve flotation cost of 5 per cent.
Finally, Neha learnt that it would be possible for Palco to raise an additional Rs. 20 lakh through a 7 – year loan from Punjab National Bank at 12 per cent.  Any amount raised over Rs. 20 lakh would cost 14 per cent.  Short-term debt has always been usesd by Palco to meet working capital requirements and as Palco grows, it is expected to maintain its proportion in the capital structure to support capital expansion.  Also, Rs. 60 lakh could be raised through a bond issue with 10 years maturity with a 11 percent coupon at the face value.  If it becomes necessary to raise more funds via long-term debt, Rs. 30 lakh more could be accumulated through the issuance of additional 10-year bonds sold at the face value, with the coupon rate raised to 12 per cent, while any additional funds raised via long-term debt would necessarily have a 10 – year maturity with a 14 per cent coupon yield.  The flotation cost of issue is expected to be 5 per cent.  The issue price of bond would be Rs. 100 to be redeemed at par.
In the past, Palco had calculated a weighted average of these sources of funds to determine its cost of capital.  In discussion with the current Financial Controller, the point was raised that while this served as an appropriate calculation for external funds, it did not take into account the cost of internally generated funds.  The Financial Controller agreed that there should be some cost associated with retained earnings and need to be incorporated in the calculations but didn’t have any clue as to what should be the cost.
Palco Ltd is subjected to the corporate tax rate of 40 per cent.
From the facts outlined above, what report would Neha submit to the Board of Directors of palco Ltd ? 







Case NO. 6

ARQ LTD

ARQ Ltd is an Indian company based in Greater Noida, which manufactures packaging materials for food items.  The company maintains a present fleet of five fiat cars and two Contessa Classic cars for its chairman, general manager and five senior managers.  The book value of the seven cars is Rs. 20,00,000 and their market value is estimated at Rs. 15,00,000.  All the cars fall under the same block of depreciation @ 25 per cent.
A German multinational company (MNC) BYR Ltd, has acquired ARQ Ltd in all cash deal.  The merged company called BYR India Ltd is proposing to expand the manufacturing capacity by four folds and the organization structure is reorganized from top to bottom.  The German MNC has the policy of providing transport facility to all senior executives (22) of the company because the manufacturing plant at Greater Noida was more than 10 kms outside Delhi where most of the executives were staying. 
Prices of the cars to be provided to the Executives have been as follows :
Manager (10) Santro King Rs.    3,75,000
DGM and GM (5) Honda City           6,75,000
Director (5) Toyota Corolla           9,25,000
Managing Director (1) Sonata Gold          13,50,000
Chairman (1) Mercedes benz          23,50,000
The company is evaluating two options for providing these cars to executives
Option 1 : The company will buy the cars and pay the executives fuel expenses, maintenance expenses, driver allowance and insurance (at the year – end).  In such case, the ownership of the car will lie with the company.  The details of the proposed allowances and expenditures to be paid are as follows :
a) Fuel expense and maintenance Allowances per month
Particulars Fuel expenses Maintenance allowance
Manager
DGM and GM
Director
Managing Director
Chairman Rs.    2,500
          5,000
          7,500
         12,000
         18,000 Rs.    1,000
          1,200
          1,800
          3,000
          4,000
b) Driver Allowance : Rs. 4,000 per month (Only Chairman, Managing Director and Directors are eligible for driver allowance.)
c) Insurance cost : 1 per cent of the cost of the car.

The useful life for the cars is assumed to be five years after which they can be sold at 20 per cent salvage value.  All the cars fall under the same block of depreciation @ 25 per cent using written down method of depreciation.  The company will have to borrow to finance the purchase from a bank with interest at 14 per cent repayable in five annual equal instalments payable at the end of the year.
Option 2 : ORIX, The fleet management company has offered the 22 cars of the same make at lease for the period of five years.  The monthly lease rentals for the cars are as follows (assuming that the total of monthly lease rental for the whole year paid at the end of each year.
Santro Xing    Rs.  9,125
Honda City                  16,325
Toyota Corolla        27,175
Sonata Gold        39,250
Mercedes Benz        61,250
Under this lease agreement the leasing company, ORIX will pay for the fuel, maintenance and driver expenses for all the cars.  The lessor will claim the depreciation on the cars and the lessee will claim the lease rentals against the taxable income.  BYR India Ltd will have to hire fulltime supervisor (at monthly salary of Rs. 15,000 per month) to manage the fleet of cars hired on lease. The company will have to bear additional miscellaneous expense of Rs. 5,000 per month for providing him the PC, mobile phone and so on.
The company’s effective tax rate is 40 per cent and its cost of capital is 15 per cent.
Analyze the financial viability of the two options.  Which option would you recommend?  Why?


Master’s Program in Business Administration (MBA)


Note: - Solve any 5 case study
           All case carries equal marks



























Case I

PANDIT TO AFAUZI
The case is based on an actual incident which took place in an Army unit operationally deployed in a field area just a few months before the 1971 showdown with Pakistan. The opposing forces of India and Pakistan were taking their respective positions in a pre-war scenario. The clouds of showdown were looming large over the horizons of both the countries. The rumbling of own tanks and guns, the reconnaissance, leaders of different arms and services establishing liaison with one another in the process of formulating plans for both defence and attack, digging of main and contingency positions was in progress, complete war machinery was being mobilized, camouflaged, and concealed. Ammunition and other explosives were being unloaded and dug down. Junior leaders were being briefed and rebriefed, communications were being checked, and troops were being motivated and looked after as most of them were green because of their sudden induction in the Army in post war days of 1965. Such was the scene which convinced all and sundry that war was imminent. Most of the troops looked forward to a showdown mainly because they wanted to get rid of the heavy ammunition as also for the mere thrill of it. Those who had not seen a battle, seemed excited over the prospects of a war and those who had seen the war, took everything in their stride, displaying a perfect cool, calm and confident countenance.

One Ram Bali Mishra (RBM) was a raw and green jawan of about 20 years of age and two years' service and naturally had not seen a war. He was relatively tall, well built with fair complexion. He had pleasant manners, turned himself out well and spoke well. He was a complete teetotaler, non-smoker, and a vegetarian. He was well educated and well versed in religious affairs, particularly, of the religion to which most of the unit belonged. In the absence of the religious teacher of the unit, he held religious institute (dharamsthal) and gave religious discourses at the dharamsthal to all officers, junior commissioned officers JCOs), non-commissioned officers (NCOs) and jawans. During the pre-war days, he was performing the duties of a Sahayak (assistant, formerly known as orderly) to Gun Position Officer (GPO), a young officer, of the rank of a Second Lieutenant with one year of service.

RBM's charter of duties included:
(a) attending all the training activities of his trade (telephone operator) which were being organized in the sub-unit;
(b) making arrangements to get the food from the officers' mess and water from the tube- well for the office; and
(c) attending the telephone and noting down all the messages for the office.
By virtue of the nature and timings of these duties, RBM was excused physical training in the morning and games in the evening which all other jawans of the sub-unit attended. He was generally happy with these duties and working with the officer: After a short span of a week or so, the officer noticed some changes in the behavior of RBM. He also looked pale and worried. He was less talkative, less lively and his interaction with other jawans decreased. He started keeping aloof except where his duties warranted interaction with others. The officer tried to find the reasons from RBM but nothing emerged except a shy and coy smile and “aisi to koi baat Nai, Sahib". The officer tried to probe further to find out if some guilt conscience was bothering him because of some bad habit which young man of his age is likely to fall prey to, in the absence, of even visual contact of civil life and members of the opposite sex.

This was denied vehemently. After another week or so, it was noticed that RBM had developed constipation, ate very little, felt tired after walking even a few hundred yards and had become weak. He was interviewed by the officer but nothing emerged once again. He was sent to the Regimental Medical Officer (RMO). The RMO inspected him and gave some medicines. On being contacted by the officer, the RMO mentioned that there was nothing wrong medically with RBM except that he was scared of the prospects of war. He even disclosed that after having been medically examined, RBM even started giving a discourse to the RMO on the bad effects of a war on environment, economy, costs, etc. He stated that people would be loaded with sufferings; killed, injured, maimed, and would become homeless. The children would become orphans, women widowed, and the humanity would suffer. He vehemently advised the RMO to make all attempts to stop the war and if he could, at least oppose it. After a brief conversation, the RMO was convinced that all the symptoms pointed to a fear psychosis of war. He gave some medicines to RBM and sent him to the sub-unit.

The RMO told the GPO that because of the worry about the war, RBM had developed problems of digestion and hence, ate less, became inactive and felt tired quickly. He had earlier been feeling shy of expressing his apprehensions about the war to others, lest they consider him a coward. The GPO gave a thought to the whole problem and interviewed RBM, advising him to attend• all physical activities, including physical training, weapon training, games, etc. thence on. The officer also planned to keep RBM among the persons of his trade, specially in the command post which controlled the firing of the guns, where from the officer himself was expected to control the' fire in case of breakout of war.

A small cadre (class) was organized for all ranks of the sub-unit to apprise them of the organization of all arms and services in the army, starting from the level of a sub-unit. They were explained the tactics in the battlefields, the deployment patterns of different arms, the pattern and modes of support by the Air Force, the capabilities of weapons held by them, the comparative sizes of the countries, India versus Pakistan, and the level of forces held by them. They were also explained the cause for which they were there. They were there to make their contribution towards the liberation of Bangladesh (then East Pakistan), wherefrom about a crore refugees had entered India because of the repression by Pakistan forces. These refugees had become a burden on the Indian economy and social structure which India could not afford. Thus, India, the foremost leader of peace loving nations, had to prepare for war to ensure return of these refugees to liberated Bangladesh. At times, to maintain peace, it becomes necessary to resort to war.

The participants were also told about the strength of their Army and deployment in that area, of course, within the constraints of security requirements. They were also told that none of them would remain alone even during the war and that their sub-unit and the unit would always fight together. They would always have their weapons and ammunitions with them, which they were very good at firing. The process of medical care, the claim of evacuation in case of serious injuries and the enhanced benefits and compensation to families in case of death of a soldier, then announced by the government, were also communicated to them. The reliability of India's friends on the international scene was also intimated. The tactics, capabilities of aircrafts and weapons, and reliability of Pakistan's friends were also brought out. The disadvantages and difficulties of supply to the then East Pakistan were explained to the participants. The geographical location of East Pakistan in relation to our country was also described. Everybody was convinced of the great advantages and superiority we had vis-a-vis Pakistan.

Thence on, RBM was a totally changed man. He was noticed to be more active, intermingling with others at the slightest pretext and opportunity, giving discourses about loyalty to the country and martyrdom. He took keen interest in all the training activities, including the digging of a number of contingency gun positions. He volunteered to go with night patrols too, which operated to shoot bursts of rounds with light machine guns in trees and groves close-by, whenever the guns were deployed at a new place. He volunteered to venture out with the line party which was earmarked to lay telephone lines over long distances through sugarcane fields. He started watching the slaughtering of goats in the unit. Above all, he started eating eggs, though he did not touch meat.

This transformation in RBM was a welcome sight and appreciated by all. Everyone heaved a sigh of relief on seeing RBM becoming a brave "Fauzi" from a timid "Pandit". The RMO was informed of this transformation. He too felt happy. His contribution had been no less in diagnosing the cause of sickness correctly. The cadre was conducted for the whole sub-unit with a view to eradicate any apprehensions from the minds of others too, in case there were any, and to educate all. The cadre proved to be a great success. It motivated the whole lot, made them more confident and ready to face the challenge bravely. This was subsequently apparent when the hostilities started.
QUESTIONS:
1. What was the cause of fear in RBM?
2. What were the symptoms of fear displayed by RBM?
3. How did the RMO come to know of the war phobia of RBM?
4. What actions should be taken to avoid building up of fear among the troops? Which of these steps were taken by the officer?

Case II

HE WHO RIDES A TIGER

In the Year of the Youth, the author took up a research project on young industrial workers. It involved comparing young and old workers. Two industries producing the same machines at similar technological level were selected. One belonged to the private sector and the other to the public sector. While the latter was started a decade later than the former, it had achieved greater expansion. Both were located in the same state.

After we obtained necessary permission to conduct our study, we reached the mofussil town where the private sector industry was located. Before we could launch our study, as a matter of principle, we wanted to meet the General Secretary of the workers' union. The Personnel Department was not willing for this. On our insistence they called the union official. We talked to him for about half an hour but Personnel Department people were all the time hovering around.

So we fixed a time in the evening to meet him in the union office in the town. We visited the union office in the evening. The union was having problem regarding wage deduction of some workers who did not show up for overtime. The overtime notice was short and they had not consented either, even then the management was threatening wage deduction for one week.

The union could hardly do a thing' as they in the past had burnt their hands when they had to unilaterally call off the 106 day old strike in which even their Treasurer had committed suicide. They were scared to the extent that they had productivity linked bonus agreement for even 12% bonus. Moreover, a new minuscue union was recently started in the company.

We visited the new union's office next evening and held a long discussion. They asked for' our suggestions. The union believed in legal battles more than agitations. After a visit to the industry the author visited the state headquarters of the new union. There every office bearer was surprisingly a lawyer. In the HQ we learnt that after we left, their union took out a procession and held a meeting in the temple. Perhaps this was the result of our discussion. While the older union was a prisoner of its past, the new union was free to write its own history. Workers' interests were being served perhaps by both.




QUESTIONS FOR DISCUSSION
1. Discuss merits/demerits of the role of strike, agitation and legal approach in union¬management relations.
2. What role does mutual trust play in building union-management relations?

CASE III

COMPETITION AHEAD: VSNL AT CROSS ROADS

The telecom sector had been functioning as a typical government department right from its inception. With the Department of Telephones (DoT) being under the exclusive control of the Ministry of Communications, Government of India (GO!), the system functioned more as a monopoly., With the advent of the LPG process (liberalization, privatization and globalization) in the early nineties, the telecom department went through a phase of modernization. A number of new and sophisticated electronic exchanges were installed which enhanced the capacity and lead to the disappearance of waiting list for telephone connections. In a landmark decision in 1995-96, the Government of India threw open its gates for private players in the area of cellular services. LCG and ACG were the two major players to enter this area in Karnataka region, while DoT decided to remain as an observer and continued as a provider of basic services only. Subsequently the Internet, ISD and other services were also opened to private participation.

The year 1998 saw the entry of Vikas Telenet (VTNL) as a basic service provider in the state of Karnataka. It launched its basic services in Bangalore district, the commercial capital of the state, in January 1998. The impact of this entry was felt by DoT as it resulted in a mass customer churning, challenging the market leadership of DoT in basic services. This growing challenge from VTNL made General Manager DoT Indore, R.L. Rawat realized the need for a comprehensive review of the competitive scenario. The situation faced by the Bangalore district was one of its kind. It was the only city where four companies were providing telephone services. LCG and ACG were providing cellular services while VTNL and DoT were providing basic services. To attract the customers all the providers had attractive tariff plans. DoT's market share was not affected by the entry of LCG and ACG as - they operated only as cellular service providers and their services carried a premium price. But the entry of VTNL as a basic service provider with attractive tariff plans showed a marked shift in customer base from DoT to VTNL specially in case of heavy users make it necessary for DoT to come up with similar competitive tariff plans.

General Manager Operations DoT Bangalore, S.N. Dutt, felt that improved services, customer care and proper pricing would help in winning back the heavy users who accounted for almost 60 to 65% of the total revenue. Keeping this in mind, a review of VTNL's tariff plans was done (Annexure I). The review revealed that the customers were getting a distinct price advantage in the rentals and free calls given by VTNL.

Along with this, a discount ranging from 2.5 to 16% was also announced by VTNL. S.N. Dutt formulated a comprehensive plan to guard DoT's market share. Officers were appointed as account holders and were responsible for rendering personalized customer care to commercially important customers hoping to retain them with better services. He also formulated a proposal of discounts which was forwarded to the Circle Head Office (Annexure-II) and a presentation was made by DGM - Marketing K.K. Sen, highlighting the rate at which customer churning was taking place and the need for implementation of new tariff plan. He pleaded with the senior officers that DoT needed to be at least reactive if not proactive, to sustain itself in the market. The proposal was well received and forwarded to the Ministry of Communications for approval. Responding to the need of the hour, the Ministry decided to offer a comprehensive discount of 2.5 to 16% for its heavy users. The scheme was introduced in Bangalore, which was extended first to the state of Karnataka and later on to the entire nation.

VTNL, which had so far been concentrating only on the heavy users, decided to now expand its network to get a wider customer base. With this view in mind, a number of promotional schemes were introduced e.g., web phone, a facility for internet usage where access to the net was provided at a cost of 60 paise per call only. It also announced free Internet facility for a year on every new connection. Besides this, VTNL went in for heavy promotion of its schemes. The careful wording of the schemes and enhancement of the number of free calls made the customers feel that they were gainers as far as rentals were concerned. These schemes when launched created very difficult times for VTNL during May -August 2001. By then, DoT had been Corporatised (October 1, 2000) and came to be known as VSNL. The Bangalore office was extremely hopeful that the corporatisation would facilitate. the implementation of new innovative schemes. For drafting a proposal of innovative schemes, VSNL first conducted a market research where in -the database of surrendered connections was used as sample and effort were made to identify the cause of disconnections. The survey revealed that of the total number of disconnections 30% were due to economic recession while 40% were due to customer turning in favor of VTNL while the remaining were due to a multitude of factors interplaying with one another.

To redeem the situation, VSNL, Bangalore prepared an innovative plan known as Business Special Plan - Plan 600-800, which offered 800 free calls on a monthly rental of Rs.600 only. The plan was put forward to Chief General Manager at Bangalore for approval. The persistent efforts of K.K. Sen bore fruits and the proposal was approved at the Circle level.

However, at the time of launch K. K. Sen realized that they needed TRAI's (Telecom Regulatory Authority of India) approval for going ahead. To ensure the unhindered approval of TRAI, modified tariff plans called 500-700 and an economy plan were suggested and sent for approval. While formulating these plans, an attempt was made to segment the market with an intention to target each segment with a customized/specific set of services. Plan 500-700 was targeted at high end users. Here, 700 calls were offered free on a monthly rental of Rs. 500 only. The economy plan carried a rental of just Rs.160 per month with a rate of Rs.l.20 per call. This plan was specially targeted at customers who had more of incoming calls and needed a facility for meeting their specific requirements. The rolling out of these schemes had an immediate impact with nearly 8,000 customers coming over to VSNL Bangalore. Along with these new tariff proposals a number of innovative strategies were introduced by VSNL, Bangalore.


• The initial registration amount was reduced and new subscribers were offered the facility of paying the amount in installments.
• Call centre functioning since February 2001 to deal with customer grievances was made proactive to ensure better customer care.
• Training was given to the front-end-people for updating their skills and changing the mindsets.
• Tele-shopping service was started which provided a one stop shopping facility, giving the customers the option to choose their telephone numbers, instrument and service.. Installation was assured within 48 hours.
• Phone-on-Phone facility was started wherein customers could obtain a connection installed by simply ringing up for it.
• A bill collecting facility was also introduced to further assist the customers.
• VCC Le., prepaid cards were introduced and even delivered at the doorsteps of the customers.
• Bill collection in the rural areas by mobile vans was introduced.
• Linemen were given pagers to facilitate prompt servicing of faulty telephone lines.
• Regular meetings between call centre members and maintenance staff were held to exchange information and solve grievances.
• For motivating and facilitating their employees, free telephone service was provided to all the employees.
• An advertising budget of Rs.30,00,000 (0.2% of the total sales revenue) was outlined for launching a comprehensive promotion programme using both indoor and outdoor media ensuring a good coverage of the market.


VSNL – Tariff Structure
Scheme Rental (Rs.) Free Colis Facilities
Business Plan - 500-700* 500 (Monthly) 700 Without STD
Economy Plan ** 160 (Monthly) Nil With STD
Standard Plan* 500 (Bimonthly) 150 With STD
* 0.80 Per Call ** Rs.1 .20 Per Call

VTNL – Tariff Structure
Scheme Rental (Rs.) Free Calls
Silver 300 349 (Monthly) 300
Golden – 500 499 (Monthly) 500


Questions:

1. What were the strengths and weaknesses of VSNL?
2. Do you think that VSNL should have changed its thrust from basic telephony to cellular services?
3. If you were the Deputy General Manager, what strategies would you have undertaken to deal with the competition?

Case IV
DISNEY’S DESIGN
The Walt Disney Company is heralded as the world’s largest entertainment company.  It has earned this astounding reputation through tight control over the entire operation : control over the open – ended brainstorming that takes place 24 hours a day ; control over the engineers who construct the fabulous theme – park rides; control over the animators who create and design beloved characters and adventurous scenarios ; and control over the talent that brings the many concepts and characters to life.  Although control pervades the company, it is not too strong a grip.  Employees in each department are well aware of their objectives and the parameters established to meet those objectives.  But in conjunction with the pre-determined responsibilities, managers at Disney encourage independent and innovative thinking.
People at the company have adopted the phrase “Dream as a Team” as a reminder that whimsical thoughts, adventurous ideas, and all – out dreaming are at the core of the company philosophy.  The over all control over each department is tempered by this concept.  Disney managers strive to empower their employees by leaving room for their creative juices to flow.  In fact, managers at Disney do more than encourage innovation.  They demand it.  Projects assigned to the staff “ imaginers” seem impossible at first glance.   At Disney, doing the seemingly impossible is  part of what innovation means.  Teams of imaginers gather together in a brainstorming session known as the “Blue Sky” phase.  Under the “Blue Sky”, an uninhibited exchange of wild, ludicrous, outrageous ideas, both “ good” and “ bad”, continues until solutions are found and the impossible is done.  By demanding so much of their employees, Disney managers effectively drive their employees to be creative.
Current Disney leader Michael Eisner has established the “Dream as a Team” concept.  Eisner realized that managers at Disney needed to let their employees brainstorm and create with support.  As Disney president Frank Weds says, “If a good idea is there, you know it, you feel it, you do it, no matter where it comes from.”




Questions :
1. What environmental factors influenced management style at Disney?
2. What kind(s) of organizational structure seem to be consistent with “Dream as a Team” ?
3. How and where might the informal organization be a real asset at Disney ?


Case V
 “THAT’S NOT MY JOB” – LEARNING DELEGATION AT CIN-MADE
When Robert Frey purchased Cin – Made in 1984, the company was near ruin.  The Cincinnati, Ohi-based manufacturer of paper packaging had not altered its product line in 20 years.  Labor costs had hit the ceiling, while profits were falling through the floor.  A solid quarter of the company’s shipments were late and absenteeism was high.  Management and workers were at each other’s throats.
Ten years later, Cin – Made is producing a new assortment of highly differentiated composite cans, and pre-tax profits have increased more than five times.  The Cin – Made workforce is both flexible and deeply committed to the success of the company.  On-time delivery of products has reached 98 percent, and absenteeism has virtually disappeared.  There are even plans to form two spin – off companies to be owned and operated by Cin-Made employees.  In fact, at the one day “Future of the American Workforce” conference held in July 1993, Cin-Made was recognized by President Clinton as one of the best – run companies in the United States.
“ How did we achieve this startling turnaround ?”  mused Frey.  “Employee empowerment is one part of the answer.  Profit sharing is another.”
In the late spring of 1986, relations between management and labor had reached rock bottom.  Having recently suffered a pay cut, employees at Cin- Made came to work each day, performed the duties required of their particular positions, and returned home-nothing more.  Frey could see that his company was suffering.  “To survive we needed to stop being worthy adversaries and start being worthy partners,” he realized.  Toward this end, Frey decided to call a meeting with the union.  He offered to restore worker pay to its previous level by the end of the year.  On top of that, he offered something no one expected: a 15 percent share of Cin-Made’s pre-tax profits. “I do not choose to own a company that has an adversarial relationship with its employees.” Frey proclaimed at the meeting.  He therefore proposed a new arrangement that would encourage a collaborative employee-management relationship “Employee participation will play an essential role in management.”
Managers within the company were among the first people to oppose Frey’s new idea of employee involvement.  “My three managers felt they were paid to be worthy adversaries of the unions.”  Frey recalled.  It’s what they’d been trained for.  It’s what made them good managers.  Moreover, they were not used to participation in any form, certainly not in decision making.”  The workers also resisted the idea of extending themselves beyond the written requirements of their jobs.  “ (Employees) wanted generous wages and benefits, of course, but they did not want to take responsibility for anything more than doing their own jobs the way they had always done them,” Frey noted.  Employees were therefore skeptical of Frey’s overtures toward “employee participation.”   “We thought he was trying to rip us off and shaft us,” explained Ocelia Williams, one of many Cin-Made employees who distrusted Frey’s plans.
Frey, however, did not give up, and he eventually convinced the union to agree to his terms.  “ I wouldn’t take no for an answer,” he asserted.  “Once I had made my two grand pronouncements, I was determined to press ahead and make them come true.”  But still ahead lay the considerable challenge of convincing employees to take charge  :
I made people meet with me, then instead
Of telling them what to do, I asked them.
They resisted.

“ How can we cut the waste on his run ?” I’d
say, or “How are we going to allocate the
overtime on this order ?”

“That’s not my job,” they’d say.

“But I need your input,” I’d say.  “How in the
World can we have participative management
If you won’t participate?

“I don’t know,” they’d say.  “Because that’s
not my job either.  That’s your job. ?”
Gradually, Frey made progress.  Managers began sharing more information with employees.  Frey was able slowly to expand the responsibilities workers would carry.  Managers who were unable to work with employees left, and union relations began to improve.  Empowerment began to happen.  By 1993, Cin Made employees were taking responsibility for numerous tasks.  Williams, for example, used to operate a tin-slitting machine on the company’s factory floor.  She still runs that same machine, but now is also responsible for ordering almost $ 100,000 in supplies.
Williams is just one example of how job roles and duties have been redefined throughout Cin-Made.  Joyce Bell, president of the local union, still runs the punch press she always has, but now also serves as Cin- Made’s corporate safety director.  The company’s scheduling team, composed of one manager and five lead workers from various plant areas, is charged with setting hours, designating layoffs, and deciding when temporary help is needed.  The hiring review team, staffed by three hourly employees and two managers, is responsible for interviewing applicants and deciding whom to hire.  An employee committee performs both short – and long – term planning of labor, materials, equipment, production runs, packing, and delivery.  Employees even meet daily in order to set their own production schedules.  “We empower employees to make decisions, not just have input,” Frey remarked. “I just coach.”
Under Frey’s new management regime, company secrets have virtually disappeared.  All Cin-Made employees, from entry-level employees all the way to the top, take part in running the company.  In fact, Frey has delegated so much of the company’s operations to its workers that he now feels little in the dark. “I now know very little about what’s going on, on a day-to-day basis,” he confessed.
At Cin-Made, empowerment and delegation are more than mere buzzwords; they are the way of doing business – good business. “We, as workers, have a lot of opportunities,” said Williams. “If we want to take leadership, it’s offered to us.”


Questions:
1. How were principles of delegation and decentralization incorporated into Cine – Made operations?
2. What are the sources and uses of power at Cin – Made?
3. What were some of the barriers to delegation and empowerment at Cin –Made?
4. What lessons about management in a rapidly changing marketplace can be learned from the experience of Cin – Made? 



Case VI
HIGH-TECH ANSWERS TO DISTRIBUTION PROBLEMS AT ROLLERBLADE
When a manger finds that demand exceeds inventory, the answer lies in making more goods. When a manager finds that inventory exceeds demand, the answer lies in making fewer goods.  But what if a company management finds that they just do not know which situation applies?
This is the situation that recently confronted management at Rollerblade, the popular skate manufacturer based in Minnetonka, Minnesota. Rollerblade has been one of the leading firms in the fast growing high performance roller skate marketplace, it matters a great deal for Rollerblade managers whether demand and inventory are in balance, or not.
Rollerblade was in a bind.  The product literally could not be shipped out the door.  The managers found that workers were not able to ship products because, as a result of poor storage structures, they could not find the products.  Once they were found, overcrowded aisles, in addition to other space constraints, still prevented efficient shipping because the workers could barely manage to get the products out the door.  “We were out of control because we didn’t know how to use space and didn’t have enough of it,” said Ian Ellis, director for facilities and safety.  “Basically, there was no more useable space left in the warehouse, a severe backlog of customer orders, and picking errors were clearly in the unacceptable range,” added Ram Krishnan, Principal of NRM Systems, based in St. Paul, Minnesota.
The answer for Rollerblade was found in technology.  High-tech companies have introduced a collection of computer simulations, ranging in cost roughly from $10,000 to $30,000, that assist managers in generating effective facility designs.  With the help of layout Master IV simulation software, developed by NRM, Rollerblade Management was able to implement a new distribution design.  As a result of the distribution improvement, Rollerblade was able to increase the number of customer orders processed daily from140 to 410 and eliminate order backlog.  “Now we have a different business,” says Ellis. “The new layout has taken us from being in a crunch, to being able to plan.

Questions:
1. With retailers as their primary customers, what customer competitive imperatives could be affected by Rollerblade’s inventory problems?
2. How appropriate might a just – in – time inventory system be for a product such as roller skates?”
3. What opportunities are therefore Rollerblade managers to see FOR themselves as selling services, instead of simply roller skates?




Masters Program in Business Administration (MBA)


Note: - Solve any 4 Case Study
             All Case Carry equal Marks.
































CASE I
A GLOBAL PLAYER?

This is one game that India has permanently lost to its arch-rival Pakistan - manufacturing and exporting sports goods. Historically, when India and Pakistan were one before 1947, Sialkot, now in Pakistan, used to be the world's largest production centre for badminton, hockey, football, volleyball, basketball, and cricket equipment. After the creation of Pakistan, Jalandhar became the second centre after Hindus in the trade migrated to India. Soon Jalandhar overtook Sialkot and till the early 1980s it remained so. However when the face of the trade began to change in the 1980s and import of quality leather and manufacturing equipment became a necessity for quality production, Pakistan wrested the initiative as India clung it its policies of discouraging imports through high duties and restrictions. As it was, the availability of labor and skills was a common factor in both Sialkot and Jalandhar, but with Sialkot having the advantage of easier entry, most of the world's top sports manufacture and procedures developed an association with local industry in Sialkot that continues even today. Ten years later, in the early 1990s, when Manmohan Singh liberalized the norms for importing equipment and raw material required for producing sports goods, it was too late as majority of the global majors had already shifted base to Sialkot.

In 1961 the late Narinder Mayor started the first large scale sports goods manufacturing unit, Mayor & Company, thereby laying the foundation of an organized industry. Even today, more than 70 percent of the industry functions in an unorganized manner. Starting with soccer balls, Mayor expanded to produce inflatable balls like volleyballs, basketballs, and rugby balls. Today his two sons Rajan & Rajesh have built it up into five companies engaged in a wide array of businesses, though sports goods remain the group's core business. While the parent trading company, Mayor & Company, remains the leading revenue-earner to the tune of Rs. 55 crore annually out of a total group turnover of Rs. 85 crore-plus, Mayor's second venture, the Indo-Australian Mayor International Limited, is spinning another Rs. 15 crore. Mayor International is a 100 per cent export-oriented unit (EOU) exclusively manufacturing and exporting golf and tennis balls.




The product portfolio of the company comprises the following:
Inflatable Balls
• Soccer balls and footballs (Professional, Indoor, Match and Training, leisure toy)
• Volley balls, rugby balls (Volley balls and Beach Volley Balls)
• Australian rugby, hand balls (English League, Union and touch) (Australian rules, Australian Rugby League balls with laces)
Boxing Equipment
• Boxing and punching balls (Boxing and Punching Balls, Head Gear, Gloves, Punching Mitts and Kits Punching Bags & Bag Sets)
• Gloves
• Goal keeper's gloves (Football / Soccer)
• Boxing gloves
Cricket Equipment
• Worldwide distributor for Spading Cricket Bats, Balls and Protective equipment.

HOCKEY EQUIPMENT
• Worldwide distributor for Spading Hokey Sticks, Balls & Protective equipment

Based in Delhi, Rajan Mayor, 41 is the CMD of the group, which also comprises an IT division working on B2B and B2C solutions; Voyaguer World Travels in the tourism sector; a houseware exports division specializing in stainless steel kitchenware, ceramics, and textiles; and a high school. Younger brother Rajesh, 34, is the executive director and looks after all the divisions operating in Jalandhar. Technical director Katz Nowaskowski divides his time equally between India and Australia, where he looks after the group’s interests. “While inflatable balls are our prime competence in our core business, we are presently focusing on golf balls, for which we are the sole producers in South Asia. Out of a total Rs. 300 crore of sports goods business generated in domestic market, most of which is supplied by the unorganized players, golf balls constitute a miniscule amount and therefore we came up with a 100 per cent EOU for producing golf balls. Later the same facility was utilized with little moderation for tennis balls too,” says Nowaskowaski.

Clarifying that the sports good industry in India only includes playing equipment and not apparels or shoes, D K Mittal, chairman of the Sports Goods Export Promotion Council and joint secretary in the Ministry of Commerce, has certified Mayor group as the number one exporter since 1993 till date, barring 1996. However, SGEPC secretary Tarun Dewan points out that being the number one exporter does not mean that Mayor is the number one brand being exported. “Actually we have tie ups Dunlop, Arnold Palmer, and Fila for manufacturing golf balls. For footballs and volleyballs we have association with Adidas, Mitre, Puma, Umbro, and Dunlop. We manufacture soccer World Cup and European Cup replicas for Adidas, which is a huge market. Only 400 balls used for actual play in the World Cup are manufactured in Europe & that too only for sentimental reason, otherwise we are capable of delivering products of the same, if not better quality. Now since we manufacture balls for them, we cannot antimonies them by producing balls of similar quality with our own brand name. Secondly, I agree that competing with such big quaint in the world market in terms of branding is a task that is well beyond our reach at the moment. However, we are trying to brand ourselves in the domestic market and that is one of the prime focus in the coming year,” says Rajan.

Coca-Cola, Unilever, McDonald’s, American Airlines, Disney club, and other such big brands come up with huge orders at tines for golf balls with their logos for promotional schemes. However, there is no mention of the producing country since these companies do not want to show that balls they deliver in the US are being produced in Asia, “Not only is our quality good enough; labor in India is cheap enough to churn out a much less expensive product in the end. Yet, the main threat to our industry comes from countries like Taiwan and China, who have already cornered a chunk of world markets in tennis, badminton, and squash rackets. This is primarily because of two reasons – slow response to our needs in tune with the market requirements from the government and lack of infrastructure. And most importantly, tags ‘Made in China’ or ‘Made in Taiwan’ are more acceptable in the West than ‘Made in India’ or ‘Made in Pakistan’. One of the mottos of the Mayor group has been to make ‘Made in India’ an acceptable label in the West. For that we stress quality, timely delivery, and competent rates. Yet, a lot depends on perception value, which in our case is sadly on the negative side, much owing to our government’s stance over the years. Things might be improving, but the pace is very slow and as our economy drifts towards a free market scenario supinely, it might just prove to be too little too late in the end,” says Rajesh.

Today, Mayor group is sitting pretty as its competitors, Soccer International Sakay Trades, Savi, Wasan, Cosco, Nivia and Spartan are only trying to catch up in the inflatables category. With 1.2 million dozen golf balls, Mayor is way ahead of its competitors. The company is planning to enhance its manufacturing capacity to 1.5 million dozen golf next fiscal. With approval from the world’s two top golf associations – the US PGA and RNA of Scotland, demand for its product is not a problem, the company’s senior marketing officials point out. With the markets in Mayor’s current export destinations – Europe, North America, Australia, and Nw Zealand – all set to expand in the coming years after the present slump, Mayor wants to expand its sports goods business that caters to 60 per cent of its overall exports. Though 40 per cent of exports come from house ware manufactured in Delhi and Mumbai, with export centres in the same countries for its sports goods, just about maintaining this business at its present state, and concerning entirely on sports goods is what the mayors are intent on.

With nearly 2000 skilled workforce; quality certification from ISO 9001:2000 and ISO 14001: 2004; and having spread to more than 40 countries, Mayor and Company is obviously sitting pretty.
Questions

1. What routes of globalization has the Mayor group chosen to go global? What other routes could it have taken?
2. What impediments are coming in the Mayor group’s way becoming a major and active player in international business?
3. Why is ‘Made in India’ not liked in foreign markets? What can be done to erase the perception?


CASE II
ARROW AND THE APPAREL INDUSTRY

Ten years ago, Arvind Clothing Ltd., a subsidery of Arvind Brands Ltd., a member of the Ahmedabad based Lalbhai Group, signed up with the 150-year old Arrow Company, a division of Cutlet Peabody & Co. Inc., US, for licensed manufacture of  Arrow shirts in India. What this brought to India was not just another premium dress shirt brand but new manufacturing philosophy to its garment industry which combined high productivity, stringent in-line quality control, and a conducive factory ambience.

Arrow’s first plant, with a 55,000 sq. ft. area and capacity to make 3,000 to 4,000 shirts a day, was established at Bangalore in 1993 with an investment of Rs. 18 crore. The conditions inside – with good lighting on the workbenches, high ceilings, ample elbow room for each worker, and plenty of ventilation, were a decided contrast to the poky, crowded, and confined sweatshops characterizing the usual Indian apparel factory in those days. It employed a computer system for translating the designed shirt’s dimensions to automatically mark the master pattern for initial cutting of the fabric layers. This was installed, not to save labour but to ensure cutting accuracy and low wastage of cloth.

The over two-dozen quality checkpoints during the conversion of fabric to finished shirt was unique to the industry. It is among the very few plants in the world that makes shirts with 2 ply 140s and 3 ply 100s cotton fabrics using 16 to 18 stitches per inch. In March 2003, the Bangalore plant could produce stain-repellant shirts based on nanotechnology.

The reputation of this plant has spread far and wide and now it is loaded mostly with export orders from renowned global brands such as GAR, Next, Espiri, and the like. Recently the plant was identified by Tommy Hilfiger to make its brand of shirts for the Indian market. As a result, Arvind Brands has had to take over four other factories in Bangalore on wet lease to make the Arrow brand of garments for the domestic market.

In fact, the demand pressure from global brands which want to out outscore from Arvind Brands, is so great that the company has had to set up another large for export jobs on the outskirts of Bangalore. The new unit of 75,000 sq. ft. has cost Rs. 16 crore and can turn out 8,000 to 9,000 shirts per day. The technical collaborates are the renowned C&F Italia of Italy.

Among the cutting edge technologies deployed here are a Gerber make CNC fabric cutting machine, automatic collar and cuff stitching machines, pneumatic holding for tasks like shoulder joining, threat trimming and bottom hemming, a special machine to attach and edge stitch the back yoke, foam finishers which use air and steam to remove creases in the finished garment, and many others. The stitching machines in this plant can deliver up to 25 stitches per inch. A continuous monitoring of the production process in the entire factory is done through a computerized apparel production management system, which is hooked to every machine. Because of the use of such technology, this plant will need only 800 persons for a capacity which is three that of the first plant which employs 580 persons.

Exports of garments made for global brands fetched Arvind Brands over Rs. 60 crore in 2002, and this can double in the next few years, when the new factory goes on full stream. In fact, with the lifting of the country-wise quota regime in 2005, there will be a surge in demand for high quality garments from India and Arvind is already considering setting up two more such high tech export-oriented factories.

It is not just in the area of manufacture but also retailing that the arrow brand brought a wind of change on the Indian scene. Prior to its coming, the usual Indian shirt shop used to be a clutter of racks with little by way of display. What Arvind Brands did was to set up exclusive showrooms for Arrow shirts in which the functional was combined with the aesthetic. Stuffed racks and clutter were eschewed. The products were displayed in such a manner that the customer could spot their qualities from a distance. Of course, today this has become standard practice with many other brands in the country, but Arrow showed the way. Arrow today has the largest network of 64 exclusive outlets across India. It is also present in 30 retail chains. It branched into multi-brand outlets in 2001, and is present in over 200 select outlets.

From just formal dress shirts in the beginning, the product range of Arvind Brands has expanded in the last ten years to include casual shirts, T-shirts, and trousers. In the pipeline are light jackets and jeans engineered for the middle age paunch. Arrow also tied up with the renowned Italian designer, Renato Grande, who has worked with names like Versace and Marlboro, to design its Spring / Summer Collection 2003. The company has also announced its intention to license the Arrow brand for other lifestyle accessories like footwear, watches, undergarments, fragrances, and leather goods. According to Darshan Mehta, President, Arvind Brands Ltd., the current turnover at retail price of the Arrow brand in India is about Rs. 85 crore. He expects the turnover to cross Rs. 100 crore in the next few years, of which about 15 per cent will be from the licensed non-clothing products.

In 2005, Arvind Brands launched a major retail initiative fir all its brands. Arvind Brands licensed brands (Arrow, Lee and Wrangler) had grown at a healthy 35 per cent rate in 2004 and the company planned to sustain the growth by increasing their retail presence. Arvind Brands also widened the geographical presence of its home-grown brands, such as Newport and Ruf-n-Tuf, targeting small towns across India. The company planned to increase the number of outlets where its domestic brands would be available, and draw in new customers for ready-mades. To improve its presence in the high – end market, the firm started negotiating with an international brand and is likely to launch the brand.

The company has plans to expand its retail presence of Newport Jeans, from 1200 outlets across 480 towns to 3000 outlets covering 800 towns.

For a company ranked as one of the world’s largest manufacturers of denim cloth and owners of world famous brands, the future looks bright certain for Arvind Brands Ltd.
Company Profile
Name of the Company : Arvind Mills
Year of Establishments : 1931
Promoters : Three brothers – Katurbhai, Narottam Bhai and Chimnabhai
Divisions : Arvind Mills was spilt in 1993 into three units – textiles, telecom and garments. Arvind Brands Ltd. (textile unit) is 100 per cent subsidiary of Arvind Mills.
Growth Strategy : Arvind Mills has grown through buying – up of sick units, going global and acquisition of German and US brand names.


Questions
1. Why did Arvind Mills choose globalization as major route to achieve growth when domestic market was huge?
2. Hoe does lifting of Country-wise quota regime’ help Arvind Mills?
3. What lessons can other Indain business learn from the experience of Arvind Mills?

CASE III

AT THE RECEIVING END ! 
Spread over 121 countries with 30,000 restaurants, and serving 46 million customers each day with the help of more than 400,000 employees, the reach of McDonald’s is amazing. It all started in 1948 when two brothers, Richard and Maurice ‘Mac’ McDonald, built several hamburger stands, with golden arches in southern California. One day a traveling salesman, Ray Kroc, came to sell milkshake mixers. The popularity of their $O. 15 hamburgers impressed him, so he bought the world franchise rights from them and spread the golden arches around the globe.

McDonald’s depends on its overseas restaurants for revenue. In fact, 60 percent of its revenues are generated outside of the United States. The key to the company’s success is its ability to standardize the formula of quality, service, cleanliness and value, and apply it everywhere.

The company, well known for its golden arches, is not the world’s largest company. Its system wide sales are only about one-fifth of Exxon Mobil or Wal-Mart stores. However, it owns one of the world’s best known brands, and the golden arches are familiar to more people than the Christian cross. This prominence, and its conquest of global markets, makes the company a focal point for inquiry and criticism.

McDonald is a frequent target of criticism by anti-globalization protesters. In France, a pipe-smoking sheep farmer named Jose Bove shot to fame by leading a campaign against the fast food chain. McDonald’s is a symbol of American trade hegemony and economic globalization. Jose Bove organized fellow sheep farmers in France, and the group led by him drove tractors to the construction site of a new McDonald’s restaurants and ransacked it. Bove was jailed for 20 days, and almost overnight an international anti-globalisation star was borne. Bove, who resembles the irrelevant French comic book hero Asterix, traveled to Seattle in 1999, as part of the French delegation to lead the protest against commercialization of food crops promoted by the WTO. Food, according to him, is too vital a part of life to be trusted to the vagaries of the world trade. In Seattle, he led a demonstration in which some ski-masked protestor’s transhed at McDonald’s/ As Bove explained, his movement was for small farmers against industrial farming, brought about by globalization. For them, McDonald’s was a symbol of globalization, implying the standardization of food through industrial farming. If this was allowed to go on, he said, there would no longer be need for farmers. “For us”, he declared, “McDonald’s is a symbol of what WTO and the big companies want to do with the world”. Ironically, for all of Bove’s fulminations against McDonald’s, the fast food chain counts its French operations among its most profitable in 121 countries. As employer of about 35,000 workers, in 2006, McDonald’s was also one of France’s biggest foreign employers.

Bove’s and his followers are not the only critics of McDonald’s. Leftists, anarchists, nationalists, farmers, labor unions, environmentalists, consumer advocates, protectors of animal rights, religious orders and intellectuals are equally critical of the fast food chain. For these and others, McDonald’s represents an evil America. Within hours after US bombers began to pound Afghanistan in 2001, angry Pakistanis damaged McDonald’s restaurants in Islamabad and an Indonesian mob burned an American flag.

McDonald entered India in the late 1990s. On its entry, the company encountered a unique situation.  Majority of the Indians did not eat beef but the company’s preparations contained cow’s meat nor could the company use pork as Muslims were against eating it.  This left chicken and mutton.  McDonald’s came out with ‘Maharaja Mac’, which is made from mutton and ‘McAloo Tikki Burger’ with chicken potato as the main input.  Food items were segregated into vegetarian and non-vegetarian categories.

Though it worked for sometimes, this arrangement did not last long.  In 2001, three Indian businessmen settled in Seattle sued McDonald’s for fraudulently concealing the existence of beef in its French fries.  The company admitted its guilt of mixing miniscule quantity of beef extract in the oil. The company settled the suit for $10 million and tendered an apology too.  Further, the company pledged to label the ingredients of its food items, and to find a substitute for the beef extract used in its oil.

McDonald’s succeeded in spreading American culture in the East Asian countries.  In Hong Kong and Taiwan, the company’s clean restrooms and kitchens set a new standard that elevated expectations throughout those countries.  In Hong Kong, children’s birthdays had traditionally gone unrecognized, but McDonald’s introduced the practice of birthday parties in its restaurants, and now such parties have become popular among the public.   A journalist set forth a ‘Golden Arches Theory of Conflict Prevention’ based on the notion that countries with McDonald’s restaurants do not go to war with each other.  A British magazine, The Economist, paints an yearly ‘Big Mac Index’ that uses the price of a Big Mac in different foreign currencies to access exchange rate distortions.

Questions:
1. What lessons can other MNCs learn from the experience of McDonald’s?
2. Aware of the food habits of Indians, why did McDonald’s err in mixing beef extract in the oil used for fries?
3. How far has McDonald’s succeeded in strategizing and meeting local cultures and needs?


CASE IV

BPO-BANE OR BOON ?
Several MNCs are increasingly unbundling or vertical disintegrating their activities. Put in simple language, they have begun outsourcing (also called business process outsourcing) activities formerly performed in-house and concentrating their energies on a few functions. Outsourcing involves withdrawing from certain stages/activities and relaying on outside vendors to supply the needed products, support services, or functional activities.

Take Infosys, its 250 engineers develop IT applications for BO/FA (Bank of America). Elsewhere, Infosys staffers process home loans for green point mortgage of Novato, California. At Wipro, five radiologists interpret 30 CT scans a day for Massachusetts General Hospital.

2500 college educated men and women are buzzing at midnight at Wipro Spectra mind at Delhi. They are busy processing claims for a major US insurance company and providing help-desk support for a big US Internet service provider – all at a cost up to 60 percent lower than in the US. Seven Wipro Spectra mind staff with Ph.Ds in molecular biology sift through scientific research for western pharmaceutical companies.

Another activist in BPO is Evalueserve, headquartered in Bermuda and having main operations near Delhi. It also has a US subsidiary based in New York and a marketing office in Australia to cover the European market. As Alok Aggarwal (co-founder and chairman) says, his company supplies a range of value – added services to clients that include a dozen Fortune 500 companies and seven global consulting firms, besides market research and venture capital firms. Much of its work involves dealing with CEOs, CFOs, CTOs, CLOs and other so-called C-level executives.

Evalueserve provides services like patent writing, evaluation and assessment of their commercialization potential for law firms and entrepreneurs. Its market research services are aimed at top-rung financial service firms, to which it provides analysis of investment opportunities and business plans. Another major offering is multilingual services. Evalueserve trains and qualifies employees to communicate in Chinese, Spanish, German, Japanese and Italian, among other languages. That skill set has opened market opportunities in Europe and elsewhere, especially with global corporations.

ICICI InfoTech Services in Edison, New Jersey, is another BPO services provider that is offering marketing software products and diversifying into markets outside the US. The firm has been promoted by $2-billion ICICI Bank, a large financial institution in Mumbai that is listed on the New York Stock Exchange.   

In its first year after setting up shop in March 1999, ICICI InfoTech spent $33 million acquiring two information technology services firms in New Jersy – Object Experts and ivory Consulting – and Command Systems in Connecticut. These acquisitions were to help ICICI InfoTech hit the ground in the US with a ready book of contracts. But it soon found US companies increasingly outsourcing their requirements to offshore locations, instead of hiring foreign employees to work onsite at their offices. The company found other native modes for growth. It has started marketing its products in banking, insurance and enterprise source planning among others. It has ear------- $10 million for its next US market offensive, which would go towards R & D and back-end infrastructure support, and creating new versions of its products to comply with US market requirements. It also has a joint venture – Semantik Solutions GmbH in Berlin, Germany with the Fraunhofer Institute for Software and Systems Engineering, which is based in Berlin, Germany with the Fraunhofer Institute for Software and Systems Engineering, which is based in Berlin and Dortmund, Germany, Fraunhofer is a leading institute in applied research and development with 200 experts in software engineering and evolutionary information.

A relatively late entrant to the US market, ICICI InfoTech started out with plain vanilla IT services, including operating call centers. As the market for traditional IT services started weakening around mid-2000, ICICI InfoTech repositioned itself as a “Solutions” firm offering both products and services. Today, it offers bundled packages of products and services in corporate and retail banking and insurance, among other areas. The new offerings include data center and disaster recovery management and value chain management services.

ICICI InfoTech’s expansion into new overseas markets has paid off. Its $50 million revenue for its latest financial year ending March 2003 has the US operations generating some $15 million, while the Middle East and Far East markets brought in another $9 million. It now boasts more than 700 customers in 30 countries, including Dow Jones,  Glaxo – Smith line, Panasonic and American Insurance Group.

The outsourcing industry is indeed growing from strength. Though technical support and financial services have dominated India’s outsourcing industry, newer fields are emerging which are expected to boost the industry many times over.

Outsourcing of human resource services or HR BPO is emerging as big opportunity for Indian BPOs with global market in this segment estimated at $40-60 billion per annum. HR BPO comes to about 33 percent of the outsourcing revenue and India has immense potential as more than 80 percent of Fortune 1000 companies discuss offshore BPO as a way to out costs and increase productivity.

Another potential area is ITES/BPO industry. According to a NASSCOM Survey, the global ITES/BPO industry was valued at around $773 billion during 2002 and it is expected to grow at a compounded annual growth rate of nine percent during the period 2002-06. NASSCOM lists the major indicators of the high growth potential of ITES/BPO industry in India as the following:

During 2003-04, The ITES/BPO segment is estimated to have achieved a 54 percent growth in revenues as compared to the previous year. ITES exports accounted for $3.6 billion in revenues, up from $2.5 billion in 2002-03. The ITES-BPO segment also proved to be a major opportunity for job seekers, creating employment for around 74,400 additional personnel in India during 2003-04. The number of Indians working for this sector jumped to 245,500 by March 2004. By the year 2008, the segment is expected to employ over 1.1 million Indians, according to studies conducted by NASSCOM and McKinsey & Co. Market research shows that in terms of job creation, the ITES-BPO industry is growing at over 50 percent.

Legal outsourcing sector is another area India can look for Legal transcription involves conversion of interviews with clients or witnesses by lawyers into documents which can be presented in courts. It is no different from any other transcription work carried out in India. The bottom-line here is again cheap service. There is a strong reason why India can prove to be a big legal outsourcing industry.

India, like the US, is a common-law jurisdiction rooted in the British legal tradition. Indian legal training is conducted solely in English. Appellate and Supreme Court proceedings in India take place exclusively in English. Indian legal opinions are written exclusively in English. Due to the time-zone differences, night time in the US is daytime in India which means that clients get 24 hour attention, and some projects can be completed overnight. Small and mid-sized business offices can solve staff problems as the outsourced lawyers from India take on the time consuming labor intensive legal research and writing projects. Large law firms also can solve problems of overstaffing by using the on-call lawyers.

Research firms such as Forrester Research; predict that by 2015, more than 489,000 US lawyer jobs, nearly eight percent of the field, will shift abroad.

Many more new avenues are opening up for BPO services providers. Patent writing and evaluation services are markets set to boom. Some 200,000 patent applications are written in the western world annually, making for a market size of between $5 billion and $7 billion. Outsourcing patent writing service could significantly lower the cost of each patent application, now anywhere between $12,000 and $15,000 apiece – which help expand the market.                   

Off shoring of equity research is another major growth area. Translation services are also becoming a big Indian plus. India produces some 3,000 graduates in German each year, which is more than in Switzerland.

Though going is good, the Indian BPO services providers cannot afford to be complacent; Philippines, Mexico and Hungary are emerging as potential offshore locations. Likely competitor is Russia, although the absence of English speaking people there holds the country back. But the dark horse could be South Africa and even China.

BPO is based on sound economic reasons. Outsourcing helps gain cost advantage. If an activity can be performed better or more cheaply by an outside supplier, why not outsource it ? Many PC makers, for example, have shifted from in-house assembly to utilizing contract assemblers to make their PCs. CISCO outsources all productions and assembly of its routers and switching equipment to contract manufacturers that operate 37 factories, all linked via the Internet.

Secondly, the activity (outsourced) is not crucial to the firm’s ability to gain sustainable competitive advantage and won’t hollow out its core competence, capabilities, or technical knowhow. Outsourcing of maintenance services, data processing, accounting, and other administrative support activities to companies specializing in these services has become common place. Thirdly, outsourcing reduces the company’s risk exposure to changing technology and / or changing buyer preferences.

Fourthly, BPO streamlines company operations in ways that improve organizational flexibility, cut cycle time, speedup decision making and reduce coordination costs. Finally, outsourcing allows a company to concentrate on its core businesses and do what it does best. Are Indian companies listening? If they listen, BPO is a boon them and not a bane.
Questions
1. Which of the theories of International trade can help Indian services providers gain competitive edge over their competitors?
2. Pick up some Indian services providers. With the help of Michael Porter’s diamond, analyze their strengths and weaknesses as active players in BPO.
3. Compare this case with the case given at the beginning of this chapter. What similarities and dissimilarities do you notice? Your analysis should be based on the theories explained in this chapter.


CASE V

THE SAGA CONTINUES

It was the talk of the town in Bangalore during the late 1970s and early 1980s. The plant was coming up on the Bangalore – Yelahanka Road, about 20 km from the city. Everything the people over three did became a folklore. The buildings were huge with wonderful architecture, beautifully built with wide roads and huge spaces. Should a situation demand, the entire plant could be dismantled, bundled up, loaded into trucks and ferried to other places. Lighting inside the building had to be seen to be believed. Interiors had to be seen to be believed. Washrooms, stores, reception, canteen, healthcare, had to be seen to be believed. It had never happened elsewhere. It was amazing, the boss was not addressed as Sir, he was called Mr. ---- and so ! The yellow painted buses on the city roads made a delightful sight. Legends were fold about the two gentlemen who founded the company.

An interesting story is told about how one of the surviving founders (Larsen who lived till 2003) visited the Bangalore plant once a year, he stayed in a hotel on his own, hired his own cab, went to the plant and greeted every employee, from the top brass down to the last person in the hierarchy. Story is also told about how, on one such visit Larsen went to the reception and asked for permission to enter the plant. Not knowing who he was, the young lass in reception room made him wait for half-an-hour. By luck, someone recognized him.

A budding author captured all these and many more in his first book, which became a big hit with all the teachers and students in different colleges buying and reading it.

If cannot be anything other than L & T, the huge engineering and construction multi-plant organization, founded in 1938 by two Danish engineers, Henning Holck – Larsen and Soren Kristin Toubro.

Henning Holck – Larsen and Soren Kristin Toubro, school – mates in Denmark, would not have dreamt, as they were learning about India in history classes that they would, one day, create history in that land. In 1938, the two friends decided to forgo the comforts of working in Europe and started their own operation in India. All they had was a dream. And the courage to dare. Their first office in Mumbai (Bombay) was so small that only one of the partners could use the office at a time! Today, L & T is one of India’s biggest and best known industrial organizations with reputation for technological excellence, high quality of products and services and strong customer orientation.

As on today, L & T is a 62 business conglomerate with turnover of Rs. 18,363 crore (2006-07), with the script commanding Rs. 2400 in the bourses.

No, L & T is not sitting pretty. It want to hit Rs. 30,000 crore turnover mark by 2010 and is busy restructuring, sniffing new pastures, grooming new talent and projecting the new company credo – “It’s all about Imagineering.” With the sole idea of creating several MNCs within, with footprints across nations, L & T is shedding the old economy and embracing the emergent opportunities and challenges.

Stagnant Revenues and Low Margins
Not everything went the L & T way.
In the late nineties, the macro environment was ----- inspiring with stagnant revenues and low margins, and L & T’s core strength, its engineers, were being constantly weaned away by the fast-growing software sector. So, the general comment around the bourses was about the credibility of the company, ‘L & T is a, good company but its stock price, for some reason or the other, is fixed at the Rs. 140-210 band. So the company had to change by keeping its core intact. As s senior executive remarks. “L & T was perceived to be un –sexy and we had to create a new buzz around the campuses.” The metamorphosis must echo through a whimper, not a bang. Even before the company divested its cement business in 2003, which accounted for 25% of its total sales, there were years of incremental and low visibility organizational moves towards a new L & T.

At a 52-week high of Rs. 2400, the L & T scrip today looks dapper, a far cry from the nineties when the stock price was in a state of flux. Much of the change started as a ripple way back in 1999 when Naik took over as the CEO. He visited employees at all levels across the organization and asked them what it took to transform the company. The insights were mapped and implemented. “None of our employees thought that we build shareholder value. They thought we build monuments,” the chairman reminisces. The focus on people became stronger and formed the basis of restructuring. It became the first old economy company to provide stock options to its employees.

When Naik came to the helm, he set upon himself a 90 – day transformational agenda. Portfolios were reviewed and a vision clearly chalked out. He drew up a simple, brief, “ L & T has to be a multinational company and it has to deliver shareholder value at any cost. At the end of 90 days, between July 22 and July 24, 1999, the company launched Project Blue Chip, which essentially fast – tracked projects. The moot point was to complete all projects by February of the new millennium. Strategy formation teams were formed, portfolios reviewed and structures were optimized. Young leadership was brought to the fore and the business streamlining process kicked in.

Hiving off from 1999-2001, L & T went about debottle- necking its cement plants. They were modernized and capitalized were raised from 12 million tones to 16 million tones annually, with minimum costs. The mantra really was to grow the business and then divest it as cement fell in the non-core category.

So, in September 2003, L & T sold its cement business to the Aditya Birla Group, which resulted in the company’s Economic Value Add (EVA), an important indicator of the financial health of the company, swinging from a negative Rs.350-crore to a positive Rs.50-crore immediately. The move also enabled L&T to reduce its debt-equity ratio from 1:1 to 0.2:1. Analysts took a positive view of the demerger, and re-rated L&T as AAA from AA+ in 2004. From then on, began L&T’s transformation into a lean and mean machine. In 2004, the company envisaged a growth curve for the next five years. This marked the beginning of Project Lakshya, which was centered around people, operations, capabilities and new ventures. The company set out with over 300 initiatives in hand, and also placed a rigorous risk management system. For instance, any project above Rs. 1,000-crore needed the signature of the chairman. Project Lakshya is known for targeting and selecting the right projects.

By now, the Indian economy had started witnessing unprecedented boom and despite divesting the cement business, the L&T turnover scaled the Rs. 10,000 crore mark. Alongside, the lucrative Middle East market was booming and L&T forayed into six countries in the Gulf with joint ventures. “The idea was to develop a mini L&T in the region,” observes a senior company executive. The company also set up manufacturing facilities in China to leverage the cost structure. Exports in 2007 constituted 18% of net sales. With soaring revenues and operating margins, L&T started benchmarking itself with the best in the world. Suddenly, the notion of an Indian MNC became a reality.

L&T has big plans to foray into new businesses. The new businesses are:

Ship-building: L&T is getting into ship-building by building a world-class facility, and already has a small shipyard in Hazira. Will build complex ocean going ships for the first time in India.

Power equipment: It is getting into power equipment in a big way. A JV with Mitsubishi for super critical boilers, formed another with Toshiba for turbines on the way.

Financial services: L&T is rapidly increasing its presence in infrastructure finance. It is also planning to come up with a $1 billion infrastructure fund.

Railways: A new area, L&T aims to be an end-to-end solutions provider for the railways, from track-laying to signaling to transmission, and others.

The global economic meltdown has hit L&T also, but lightly. Its order book at Rs. 71,650cr has not grown as expected. Delay in finalization of several government projects as well as the slowdown in the overseas markets are the key reasons for the lax in order inflow. The company, however, has maintained its forecast of a 25 percent growth in its order book for the fiscal 2010.

L&T’s, IT and financial subsidiaries too witnessed lackluster performance with profits remaining stagnant.

L&T’s focus areas in future would be the Middle East and China in view of the booming infrastructure market there.

Thus, for an institution that has grown to legendary proportions, there cannot and must not be an ‘end’. Unlike other stories, the L&T saga continues.

 

QUESTIONS
1. Having a strong presence in India, what drives L&T to think of emerging a strong MNC?
2. What challenges lies ahead of L&T? How does it prepare to cope with them?
3. Will the L&T Saga continue?



Masters Program in Business Administration (MBA)
Specializations: - Operation Management


N.B.: 1) Attempt any Five Questions
         2) All questions carry equal marks.


























Case Study 1 :-
Read the case carefully and answer the questions at the end of the case.
Good Shepherd Home
The Good Shepherd Home is a long-term care facility with an 80-bed capacity located in San Mateo, California. Mr. Scott, the administrator is concerned bout rising food costs. He questions whether administration is efficient as it might be and realizes that food, a "raw material" for his food services, has increases in price significantly. Mr. Scott decides to investigate food services more closely.
Analyzing last month's purchased items, Mr. Scott summarizes a random selection of items. Mr. Scott wonders what interpretation he should make about these typical items. He has looked at 100 stock items and is considering tighter controls (dozens, cases, pounds, etc.) have been ordered.
Typical Inventory Items
Number of Stock Items Quantity Ordered (in units) Total Cost (in $) Average Inventory (in $)
3 50 3,500 1,200
12 150 2,500 900
20 200 1,500 600
40 400 2,000 200
25 200 500 200
Of particular interest is a problem with a perishable good. Since the home has residents in independent living units and eating at the home irregularly, bread demand is uneven. Bread is delivered daily and is used that day for table meal service only; the day-old bread is salvaged for dressing and similar dishes. Scott estimates the cost of bread to be $0.75% loaf and the cost of day-old bread to be $0.25%loaf, Scott says, "We should not be out of fresh bread at the table. Although man cannot live by bread alone, it is very important to our residents. I put a high cost on being out of bread -- considerably more than the cost of a loaf, In fact, I think every time we run out of bread, it costs a dollar per loaf short in goodwill last from our residents."
Knowing how Mr. Scott feels, the food services supervisor has a standing order for 30 loaves/day and twice that amount on Sunday. The demand for bread for the last two weeks is shown below:
Bread Demand (in loaves)
Day Week 1 Week 2
Mon 20 19
Tue 15 27
Wed 21 20
Thu 30 32
Fri 31 27
Sat 19 16
Sun 42 39
In conversation with Mr. Scott, the supervisor says, "I recently heard about cost tradeoffs in food service inventory. I can't really see what item cost, carrying cost.ordering cost, and stockout cost have to do with proper nutrition. I try to buy good quality foods and spend less than $5/day on food for each resident. That's my objectives."
Mr. Scott has heard, too, about cost tradeoffs, but he wonders what they mean and how they apply to a nursing home environment, To try to understand this better he talked to his bookkeeper. The supervisor says that she knows with certainty that demand for hamburger over a menu cycle is 200 pounds. Furthermore, the bookkeeper estimates it costs $12 to place an order and 20 percent of the hamburger cost to carry hamburger in inventory. Hamburger costs $1.55/pound. The dietitian says a menu cycle lasts two weeks and Good Shepherd currently orders hamburger every week. Mr. Scott is puzzled by all this.
Questions:
1. What is the problem associated in the case?
2. How do you solve the bread problem, which is a perishable good? Could you find out the optimum size (EOQ) of the bread that must be ordered?




















Case 2 :-
 Read the case carefully and answer the questions at the end of the case.
Nartha Thompson, who has worked in restaurants for 20 years, opened her first short-order "Mom and Pop" café 12 years ago. She is regarded in her community as an excellent small businessperson. In 1985 she sold her small café and went to work as a professional manager for a fast-food hamburger franchise. In 1987 she resigned and opened Martha's Original Burger Queen. Martha's salary is 25 percent higher than the one she earned as a professional manager. In 1987 her Burger Queen broke even in 1988 it had a net profit after taxes of $10,000 Martha then opened two more restaurants in the same city. The results of all three restaurants are summarized in the accompanying comprehensive report (on page 5).
Martha states her strategy: "My Restaurant concept is to copy fast-food chains such as McDonalds, Burger King, and Jack-in-the-Box. I've tried patties, soybean burgers, breakfast, and larger sandwiches to increase dollar sales per customer. I believe that I should expand rapidly just as those chains seem to be doing, yet maintain a personable, local operations staff and a homey atmosphere. But I seem to have less efficient operations than we did when I managed for a chain. I think my layout is good, as is my food quality. I can't buy in buy in larger volumes, but I for try to turn over my inventory at least weekly. I believe in women employees, especially in management positions. I hire Caucasians African-Americans, and Mexican-Americans, so on one can say I/m prejudiced."
Martha's response to net income difficulties at the second and third restaurants is, "I need to open more restaurants to spread out my fixed costs. Expansion of operations is my strategy, but I'm finding financing hard to come by now."
  Martha’s Original Restaurant:MBQ1 MBQ2 MBQ3
  1989 1990 1989 1990 1989 1990
  Sales Summary
Revenues $3,30,000 $370,000 $2,10,000 $200,000 $170,000 $150,000
Number of Customers 132,000 130,000 91,000 90,000 85,000 85,000
Revenues $2.50 $2.84 $2.30 $2.22 $2.00 $1.76
  Expenses Salary
Equipment depreciation $16,500 $16,500 $10,500 $10,500 $8,500 $8,500
Building lease 33,000 33,000 21,000 21,000 17,000 17,000
Operations:Food 82,500 83,400 52,500 52,500 42,500 51,000
Labour 115,500 129,000 73,500 73,500 68,000 68,000
Suppliers 16,000 18,000 10,000 10,000 8,500 8,500
Overhead 17,00 17,000 11,000 11,000 8,500 8,500
Gross margin and administrative costs
Advertising 15,000 15,000 12,000 12,000 9,000 9,000
Administration 18,000 18,000 9,000 9,000 8,000 8,000
Advertising 15,000 15,000 12,000 12,000 9,000 9,000
Administration 18,000 18,000 9,000 9,000 8,000 8,000
Net income (loss) before taxes
  $16,500 $40,100 $10,500 $500 –0– $28,500
Case Questions:
1. Set forth what you believe is a good overall business strategy for Martha. Specify an operations strategy that is consistent with the overall strategy.
2. Examining the comprehensive report, does the data support the idea that Martha needs a change in operations strategy? If so, which data?

















Case 3  :-
Read the following carefully and answer the questions at the end:
COMPANY BACKGROUND
The Bronson Insurance Group was originally founded in 1900 in Auxvasse, Missouri, by James Bronson. The Bronson Group owns a variety of companies that underwrite and commercial insurance policies. Annual sales of the Bronson Group are $100 million. In recent years, the company sulfured operating losses. In 1990, the company was heavily invested in computer hardware and software. One of the problems the Bronson Group faced (as well as many insurance companies) was a conflict between established manual procedures and the relatively recent within the past 20 years) introduction of computer equipment. This conflict was illustrated by the fact that much information was captured on computer but paper files were still kept for practical and legal reasons.
FILE CLERKS
The file department employed 20 file clerks who pulled files from stacks, refilled used files, and delivered files to various departments including commercial lines, personal line, and claims. Once a file clerk received a request for a file, it usually tock about two hours for the requester to receive the file. Clerks delivered flies to underwriters on an hourly basis throughout the day. The average file clerk was paid &8,300 per year. One special file clerk was used full time to search for requested files that another file clerk had not been able to find in the expected place. It was estimated that 40 percent of the requested files were these 'no hit' flies requiring a search after these 'no hit' files were eventually found stacked in the requester'' office. The primary "customers" of the file clerks were underwriters and claims attorneys.
UNDERWRITING
Company management and operations analysts were consistently told the greatest problem in the company was the inability of file clerks to supply files in a speedy fashion. The entire company from top to bottom viewed the productivity and effectiveness of the flies department as unacceptable. An underwriter used 20-50 files per day. Because of their distrust of the files department, underwriters tended to hoard often uses files. A count by operations analyse found that each underwriter kept form 100-200 files in his or her office at any one time. An underwriter would request a file by computer and work on other business until the file was received. Benson employed 25 underwriters.
MANAGEMENT INFORMATION SYSTEMS
Upper management was deeply concerned about his problem. The MIS department had suggested using videodisks as possible solutions. A video disk system was found that would be sufficient for the company needs at a cost of about $12 million. It was estimated that the system would take two years to install and make compatible with existing information systems. Another, less attractive alternative was using microfilm. A microfilm system would require underwriters to go to a single keyboard to request paper copies of files. The cost of a microfilm system was $5 million.
Questions
(a) Looking at the facts of the case, which one of the new technologies
should the company implement? Give reasons for your recommendation.
(b) An operation analyst suggested that company employees shared a "dump on the clerks" mentality What in your view can be the outcome of such a mentality?
(c) How can you apply what you have learnt lot size reduction, WIP inventory reduction, and JIT to improve the files situation in this case?





















Q 4.         Consider the following two mutually exclusive projects.  The net cash flows are given below:
YEAR NET CASH FLOWS FROM PROJECT A NET CASH FLOWS FROM PROJECT B
0 -  Rs. 1,00,000 - Rs. 1,00,000/-
1 + Rs. 30,000 + Rs. 15,000/-
2 + Rs. 35,000 + Rs. 17,500/-
3 + Rs. 40,000 + Rs. 20,000/-
4 + Rs. 45,000 + Rs. 22,500/-
5 + Rs. 25,000/-
6 + Rs. 27,500/-
7 + Rs. 30,000/-
8 + Rs. 32,500/-

If the desired rate of return is 10% which project should be chosen and why?

Q 5 ) Whirlpool Company has experienced the following demand for ice during the past six months:
Months Ice coolers demanded
September 200
October 300
November 200
December 100
January 300
February 400
Forecast for March sales using six-months moving average Compare the result with three-months moving average and one-month moving average. Which result do you recommend?


Q 6 ) Give two examples (with supporting details) of the impact of technology in product and service design, in the context of service and manufacturing firms.


Q 7).         Would a project management organization be different from an organization for regular manufacturing in what ways?  Examples.
Q 8).       How project evaluation different from project appraisal?  Explain with examples.



Masters Program in Business Administration (MBA)


Note: - Solve all 5 case study
           All case carries equal marks


CASE I

A DIAMOND PERSONALITY


Ask Suraj bhai about the dot-com burst and he may grin at you as if to say, ``what burst?’’ Suraj bhai, a 38-year-old entrepreneur, owns an Internet business that sells loose diamonds to various buyers. Business is becoming for Suraj bhai. In 2004, he had sales of INR 3,500 million. Needless to say, Suraj bhai is optimistic about his business venture.
The future wasn’t always to bright for Suraj bhai, however. In 1985, Suraj bhai moved from his native town Suraj, to New Delhi, with little ability to speak English. There, he attended language courses and worked at the local mall to support himself. After graduation, his roommate’s girlfriend suggested that he work at a local jeweler. ``I thought she was crazy. I didn’t know anything about jewelry,’’ says Suraj bhai, who took her advice. Though he worked hard and received his Diamonds and Diamonds Grading certification from the Gemological Institute, he wasn’t satisfied with his progress. `I quickly realized that working there, I was just going to get a salary with a raise here and there. I would never become anything. That drove me to explore other business ventures. I also came to really known diamonds – their pricing and their quality.’’
In 1997, tired of working for someone else, Suraj bhai decided to open his own jewelry store. However, business didn’t boom. `Some of my customers were telling me they could find diamonds for less on the Interest. It blew my mind’’ Surajy bhai recognized an opportunity and began contacting well-known diamond dealers to see if they would be interested in selling their gems online. Suraj bhai recalls one conversation with a prominent dealer who told him, `You cannot sell diamonds on the Internet. You will not survive.’’ Discouraged, Suraj bhai then says that he made a mistake. ``I stopped working on it. If you have a dream, you have to keep working harder at it.’’
A year later, Suraj bhai did work harder at his dream and found a dealer who agreed to provide him with some diamonds. Says Suray bhai, ``Once I had one. I could approach others. Business started to build. The first 3 months I sold INR 20 million worth of diamonds right off the bat. And that was just me. I started to add employees and eventually closed the jewelry store and got out of retail.’’ Although Suraj bhai does have some diamonds in inventory, he primarily acts as a connection point between buyers and suppliers, giving his customers an extraordinary selection from which to choose.
Suraj bhai is now a savvy entrepreneur, and his company, Abhisaz.com, went public in October 2003.
Why is Suraj bhai successful? Just ask two people who have known Suraj bhai over the years. Yogesh bhai, a realtor who helped build Suraj bhai building, says,

``Suraj bhai is a very ambitious young man. I am not surprised at all how successful he is. He is an entrepreneur in the truest sense of the world.’’ One of Suraj bhai former real-estate instructors, Arun Jain, concurs. `I am not surprised at all at his success,’’ says Arun. ``Suraj bhai has always been an extremely motivated individual with a lot of resources. He has a wonderful personality and pays close attention to detail. He also has an ability to stick to things. You could tell from the beginning that he was going to persevere, and I am proud of him.’’
Suraj bhai is keeping his success in perspective, but he also realizes his business’ potential: ``I take a very small salary, and our overhead in INR 25 million a year. I am not in debt, and the business is breaking ever. I care about the company. I want to keep everything even until we take off, and then it may be another ball game.’’

Questions:

1. What factors do you think attributed to Suraj bhai’s success? Was he merely ``in the right place at the right time’’, or are there characteristics about him that contribute to his success?
2. How do you believe Suraj bhai would score on the Big Five dimensions of personality (extroversion, agreeableness, conscientiousness, emotional stability, openness to experience)? Which ones would he score high on? Which ones might he score low on?
3. Do you believe that Suraj bhai is high or low on core self-evaluations? On what information did you base your decision?
4. What information about Suraj bhai suggests that he has a proactive personality?






CASE II

BULLYING BOSSES

It got to where I was twitching, literally, on the way into work,’’ states Carrie Clark, a 52-year-old retired teacher and administrator. After enduring 10 months of repeated insults and mistreatment from her supervisor, she finally quit her job. ``I had to take care of my health.’’
Though many individuals recall bullies from their elementary school days, some are realizing that bullies can exist in the workplace as well. And these bullies do not just pick on the weakest in the group, rather, any subordinate in their path may fall prey to their torment, according to Dr. Gary Namie, director of the Workplace Bullying and Trauma Institute. Dr. Namie further says workplace bullies are not limited to men-women are at least as likely to be bullies. However, gender discrepancies are found in victims of bullying, as women are more likely to be targets.
What motivates a boss to be a bully? Dr. Harvey Hornstein, a retired professor from Teachers College at Columbia University, suggests that supervisors may use bullying as a means to subdue a subordinate that poses a threat to the supervisor’s status. Additionally, supervisors may bully individuals to vent frustrations. Many times however, the sheer desire to wield power may be the primary reason for bullying.
What is the impact of bullying on employee motivation and behavior? Surprisingly, even though victims of workplace bullies may feel less motivated to go to work every day, it does not appear that they discontinue performing their required job duties. However, it does appear that victims of bullies are less motivated to perform extra-role or citizenship behaviors. Helping others, speaking positively about the organization, and going beyond the call of duty are behaviors that are reduced as a result of bullying. According to Dr. Bennett Tepper of the University of North Carolina, fear may be the reason that many workers continue to perform their job duties. And not all individuals reduce their citizenship behaviors. Some continue to engage in extra-role behaviors to make themselves look better than their colleagues.

What should you do if your boss is bullying you? Don’t necessarily expect help from coworkers. As Emelise Aleandri, an actress and producer from New York who left her job after being bullied, stated, ``Some people were afraid to do anything. But others didn’t mind what was happening at all, because they wanted my job.’’ Moreover, according to Dr. Michelle Duffy of the University of Kentucky, coworkers often blame victims of bullying in order to resolve their guilt. ``they do this by wondering whether maybe the person deserved the treatment, that he or she has been annoying, or lazy, they did something to earn it,’’ states Dr. Duffy. One example of an employee who observed this phenomenon firsthand is Sherry Hamby, who was frequently verbally abused by her boss and then eventually fired. She stated, ``This was a man who insulted me, who insulted by family, who would lay into me while everyone else in the office just sat there and let it happen. The people in my office eventually started blaming me.’’
What can a bullied employee do? Dr. Hornstein suggests that employees try to ignore the insults and respond only to the substance of the bully’s grip. `stick with the substance, not the process, and often it won’t escalate,’’ he states. Of course, that is easier said than done. 

Questions:
1) Of the three types of organizational justice, which one does workplace bullying most closely resemble?
2) What aspects of motivation might workplace bullying reduce? For example, are there likely to be effects on an employee’s self-efficacy? If so, what might those effects be?
3) If you were a victim of workplace bullying, what steps would you take to try to reduce its occurrence? What strategies would be most effective? What strategies might be ineffective? What would you do if one of your colleagues was a victim of an abusive supervisor?
4) What factors do you believe contribute to workplace bullying? Are bullies a product of the situation, or are they flawed personalities? What situations and what personality factors might contribute to the presence of bullies?




CASE III

THANKS FOR NOTHING


Thought it may seem fairly obvious that receiving praise and recognition from one’s company is a motivating experience, sadly many companies are failing miserably when it comes to saying ``thanks’’ to their employees. According to curt Coffman global practice leader at Gallup, 71 percent of U.S. workers are ``disengaged’’, essentially meaning that they could care less about their organization. Coffman states. ``We’re operating at one-quarter of the capacity in terms of managing human capital. It’s alarming.’’ Employee recognition programs, which became more popular as the U.S. economy shifted from industrial to knowledge-based, can be an effective way to motivate employees and make them feel valued. In many cases, however, recognition programs are doing ``more harm than good’’ according to Coffman.
Take Ko, a 50-year-old former employee of a dot-com in California. Her company proudly instituted a rewards program designed to motivate employees. What were the rewards for a job well-done? Employees would receive a badge which read ``U Done Good’’ and, each year, would receive a T-shirt as a means of annual recognition. Once an employee received 10 ``U Done Good’’ badges, he or she could trade them in for something bigger and better—a paperweight. Ko states that she would have preferred a raise. ``It was patronizing. There wasn’t any deep thought involved in any of this.’’ To make matters worse, she says the badges were handed out arbitrarily and were not tied to performance. And what about those T-shirts? Ko states that the company instilled a strict dress code, so employees couldn’t even wear the shirts if they wanted to. Needless to say, the employee recognition program seemed like an empty gesture rather than a motivation.
Even programs that provide employees with more expensive rewards can backfire, especially if the rewards are given insincerely. Eric Lange, an employee of a trucking company, recalls the time when one of the company’s vice presidents achieved a major financial goal for the company. The vice president, who worked in an office best of Lange, received a Cadillac Seville as his company car and a new Rolex wristwatch that cost the company $10,000. Both were lavish gifts, but the way they were distributed left a sour taste in the vice president’s mouth. He entered his office to find the Rolex in a cheap cardboard box sitting on his desk, along with a brief letter explaining that he would be receiving a 1099 tax form in order to pay taxes on the watch. Lange state of the vice president, ``He came into my office, which was right next door, and said, `can you believe this?’’ A mere 2 months later, the vice president pawned the watch. Lange explains. ``It had absolutely no meaning for him.


Such experiences resonate with employees who may find more value in a sincere pat on the back than gifts from management that either are meaningless or aren’t conveyed with respect or sincerity. However, sincere pats on the back may be hard to come by. Gallup’s poll found that 61 percent of employees stated that they haven’t received a sincere, ``thank you’’ from management in the past year. Finding such as these are troubling, as verbal rewards are not only inexpensive for companies to hand out but also are quick and easy to distribute. Of course, verbal rewards do need to be paired sometimes with tangible benefits that employees value – after all, money talks. In addition, when praising employees for a job well-done, managers need to ensure that the praise is given in conjunction with the specific accomplishment. In this way, employees may not only feel valued by their organization but will also know what actions to take to be rewarded in the future.

Questions
1) If praising employees for doing a good job seems to be a fairly easy and obvious motivational tools, why do you think companies and managers don’t often do it?
2) As a manager, what steps would you take to motivate your employees after observing them perform well?
3) Are there any downsides to giving employees too much verbal praise? What might these downsides be and how could you alleviate them as a manager?
4) As a manager, how would you ensure that recognition given to employees is distributed fairly and justly?




CASE IV

WILL GEORGE W. BUSH BE A GREAT PRESIDENT?

What does it take to be a great U.S. president? A survey of 78 history, political science, and law scholars rated the U.S. presidents from George Washington to Bill Clinton. Here are the presidents who were rated ``Great’’ and ``Near Great.’’
Great
George Washington
Abraham Lincoln
Franklin D. Roosevelt (FDR)

Near Great
Thomas Jefferson
Andrew Jackson
James Polk
Theodore Roosevelt
Harry Truman
Dwight Eisenhower
Ronald Reagan
Among recent presidents, Presidents Nixon, Ford, and Carter were ranked ``Below Average’’ and Presidents G. H. W. Bush (the first President Bush) and Clinton were ranked ``Average’’.
So what explains these ratings? The following are some qualities of presidents who have stood the test of time.
1. Great presidents are transformational leaders who engender strong emotions – that is, you either love them or you hate them (it’s hard to hate someone who made little difference). And great presidents enact a vision that may not respond to popular opinion. Lincoln and FDR were beloved, and hated, by millions.
2. Great presidents are bold and take risks, and almost all great presidents emerge successfully from a crisis. A great president is perceived as ``being there’’ when a crisis emerges and taking bold action to lead the nation out of the crisis – for example, Lincoln in the Civil War and Roosevelt in WWII.
3. Great presidents are associated with a vision. Most people, for example, are able to associate the great presidents with defining moment where a clear set of principles was articulated – for example, FDR’s speech to Congress after the attacks on Pearl Harbor, and Lincoln’s Gettysburg Address.
4. Great presidents are charismatic. They are engaging, articulate, and expressive, which helps capture the public’s attention and rallies people around a president’s cause. One leadership expert argues that the best presidents create colorful personas with their language by using words with basic emotions – for example, good versus evil or love versus hate.
So what about President George W. Bush (the second President Bush)? Shortly after his second inauguration, President Bush embarked on an ambitious agenda of legal reform, transforming the Social Security system, tax reform, and revising immigration laws. One writer commented, ``Bush has always thought big, and always believed you earn political capital by expending it.’’ However, the closeness of the 2004 election (Bush received 51 percent of the vote and Kerry received 48 percent) suggests that Bush may not have overwhelming support.

Questions
1. How would you rate President George W. Bush on the four characteristics outlined at the beginning of the case? How would you contrast his reaction to Hurricane Katrina with his reaction to the terrorist attacks of September 11, 2001? What do you think his handling of these two events says about his leadership?
2. Do you think leaders in other contexts (business’, sports, religious) exhibit the same qualities of great or near-great U.S. presidents?
3. Do you think being in the right place at the right time could influence presidential greatness?



Case V

A UNIQUE TRAINING PROGRAM AT UPS


Mark Colvard, a United Parcel manager in San Ramon, California, recently faced a difficult decision. One of his drivers asked for 2 weeks off  to help an ailing family member. But company rules said this driver wasn’t eligible. If Colvard went by the book, the driver would probably take the days off anyway and be fired. On the other hand, Colvard was likely to be criticized by other drivers if he bent the rules. Colvard chose to give the driver the time off. Although he took some heat for the decision, he also kept a valuable employee.
Had Colvard been faced with this decision 6 months earlier, he says he would have gone the other way. What changed his thinking was a month he spent living in McAllen, Texas. It was part of a UPS management training experience called the Community Internship Program (CIP). During his month in McAllen, Colvard built housing for the poor, collected clothing for the Salvation Army, and worked in a drug rehab center. Colvard gives the program credit for helping him empathize with employees facing cries back home. And he says that CIP has made him a better manager. ``My goal was to make the numbers, and in some cases that meant not looking at the individual but looking the bottom line. After that 1-month stay, I immediately started reaching out to people in a different way.’’
CIP was established by UPS in the late 1960s to help open the eyes of the company’s predominantly white managers to the poverty and inequality in many cities. Today, the program takes 50 of the company’s most promising executives each summer and brings them to cities around the country. There they deal with a variety of problems- from transportation to housing, education, and health care. The company’s goal is to awaken these managers to the challenges that many of their employees face, bridging the cultural divide that separates a white manager from an African American driver or an upper-income suburbanite from a worker raised in the rural South.


Questions
1. Do you think individuals can learn empathy from something like a 1-month CIP experience? Explain why or why not.
2. How could UPS’s CIP help the organization better manage work-life conflicts?
3. How could UPS’s CIP help the organization improve its response to diversity?
4. What negatives, if any, can you envision resulting from CIP?
5. UPS has 2,400 managers. CIP includes only 50 each year. How can the program make a difference if it includes only 2 percent of all managers? Does this suggest that the program is more public relations than management training?
6. How can UPS justify the cost of a program like CIP if competitors like FedEx, DHL, and the U.S. Postal Service don’t offer such programs? Does the program increase costs or reduce UPS profits?





Master’s Program in Business Administration (MBA)


Note: - Solve any 5 case study
           All case carries equal marks



CASE I
NAVEEN FISHERIES LTD.

The managing director of Naveen Fisheries Ltd. (NFL) received a message from one of the members of the crew that their mechanized boats had sunk at sea off Paradeep Port Trust due to unfavorable weather. The other directors of NFL ascertained the detailed information regarding the incident. All the promoters were fresh graduates.

Naveem, Praveen, Nagain, Ravi and Chandra were the promoters of the organization (NFL at Vishakhapattanam) with a capital contribution of Rs. 25 lakh each. Three of them had an engineering background. The other two were commerce graduates. They had thought of designing the vessels themselves so that the cost each mechanized boat would be reduced from Rs. 30 lakhs (if they bought them) to Rs. 22 Lakh. They designed three boats and these were sent out with a newly – appointed crew. Two vessels were sent to Paradeep and the third to Kakinada. Unfortunately, the weather was unfavourable. All the vessels sank. The crew also did not have experience. Two workers were injured and the rest arrived sagely. There was significant damage to the vessels and the residue was considered scrap. The cost of scrap of the vessels was nominal. As their working capital was scarce, and they were unable to invest more capital, they were in a dilemma whether to continue the business or not.

Case I Questions:
1. What were the reasons for the sinking of the vessels?
2. How could they reorganize the businesses?



CASE II

MNC CORPORATION
At MNC Corporation, a foreman of inspection noticed a mistake in the assembly of transmitter cases. The foreman, a shy man when speaking to his immediate superiors, mentioned this matter to the senior supervisor in a weak, ineffectual manner. The senior supervisor nodded his head and continued to work on a report that he was writing. Later, a production slowdown occurred, and it was discovered that this flaw in the transmitter was the cause. The chief of production engineering, upset because this error had passed inspection unnoticed, reproved the senior supervisor in a brusque manner.
The senior supervisor called in the foreman of inspection and asked why this error had not been brought to his attention. The foreman said, “I told you the other day they were missing same of the punch-outs in those transmitter cases.” The senior supervisor said, “Yes, but you did not pound the desk when you told me!”

Case II Questions:
1. Why did the communication problem arise?
2. What do you suggest to prevent the communication problem?


CASE III

MEHTA BANK LTD

Venkataraman was an officer in a leading nationalized bank with years of service to his credit. During his long period of service, he worked in different capacities and sections. His attitude and behavior made him a trusted in the organization. Having been posted in a big branch based in a large city, he was not keen on getting further promotions.

On one occasion, when he was working as an incharge of the draft issue section, he issued bundles of drawing books from the main stock of the security forms of the branch and kept the same in his custody in an almirah provided to him. One fine morning, he removed three drawing books out of the stock of books valued below Rs. 10,000 which he had in his own custody and kept them in his house. He then started issuing drafts in various names form his house out of the aforesaid stolen drawing books by allotting correct branch serial numbers obtained from the branch register under his control. The drafts were deposited in different banks/branches of the same bank in different accouns opened in the names of the payees of the drafts. These accounts were introduced by the bank employees, and some of them were in different representations only, like Mr. Venkataraman Aiyar, Mr Venkataraman Iyengar, etc. The drafts thus deposited were presented in clearing and were passed in the normal course without any doubt or suspicion. In the evening, he would visit the concerned drawee offices and collect such paid drafts.

Having found this technique successful, he tried his hand at yet another. This time he started issuing drafts in fictitious names or in the names of his close relatives drawn on outstations without any vouchers or deposits. After a few days, he would cancel the same drafts by allowing the credits to the respective accounts in his own branch by debiting the head office accounts. He continued to do this for about three months, causing a loss of over Rs. 700,000 to the bank.




The fraud came to light thanks to the presence of mind exercised by on e of the officers at another local office. He found that on the previous day also, he had paid a similar draft with the leaf number previous to the draft presented now. In his view, it was not possible for such a big office to avoid consumption of draft leaved in this fashion. Consequently, the matter was taken up with the issuing branch. Unfortunately for Venkataraman, someone else was working as the incharge of the draft issue section on that day. On checking up the records, it transpired that no such draft was issued. This led to promt investigations and detection of the whole fraud committed by Venkataraman.

Case III Questions:
1. How do you view the present fraud case: a human failure or a system failure?
2. What are the main issues in the case, and how can our present system of control prevent such fraud?
3. How would you manage the situation on detection?


CASE IV
SHAHID FABRICS

Mr. Lateef, Chairman of Shahid Fabrics, a Hyderabad-based garments and piece goods firm which exported all its products to the USA, faced a decision in August 1985. The US government had imposed quota restrictions which reduced the exports of his firm by 40 percent. He had to find a new market for his products.

Shahid Fabrics was one of Pakistan’s major exporters of garments and piece goods. Its share was 25 percent of the exports of these goods of the whole country. It was established in 1954 as a producer of cotton cloth and later, in 1966, it extended production to include garments and piece goods. It had eight local production units and the total number of employees was 8,000. All its garments and piece goods were exported, and branded according to customer specification. All the goods were exported to the USA and the sales of the firm amounted to US$ 100 million. In 1984, the US government imposed quota restrictions. By August 1985, Shahid Fabrics exports had been reduced by 40 percent.

Mr. Lateef believed that finding new markets was the only way to survive. The possible alternatives according to him were the EEC countries, the USSR, the Middle Eastern Arab countries and the other Asian countries. The EEC was a very good potential market, but Europeans were very tough buyers. It would be necessary to segregate the EEC from other buyers because of their existing specifications with regard to style, colour and packing. The USSR too was a potential market as far as demand was concerned, but the country did not have enough money in foreign exchange.

The Middle Eastern Arab countries had money, but their requirements were small due to their smaller population. Second, these countries preferred not to buy Pakistani goods directly from Pakistan$. They would rather like to buy the same Pakistani goods, branded differently from other Western countries, say France.

Asia was a big market, but the Asian countries, including turkey, were Shahid Fabrics’ competition in the international market. Mr. Lateef was deeply concerned with the loss of 40 percent of his export goods. He was eager to determine which new market offered the highest potential. He wondered what specific information he could use to help his decision.




Case IV Questions:
1. What information should Mr. Lateef develop to evaluate foreign markets?
2. Where should he look for this information?
3. Develop a framework to help Mr. Lateef identify his best potential foreign markets.



CASE V
WESTWARD EXPORTS LTD.

Mr. Abdul Ahmed, Production Manger, Westward Exports Ltd, Karachi, faced a decision in 1984. the rejection rate of their exports of readymade garments was 20 percent of total production. He also felt that their productivity was not as high as it might have been.

Westward Exports Ltd. was a large Pakistani company exporting ladies fashion garments made of pure cotton. Their main product items were blouses, skirts, dresses, shirts, pants, etc. their main overseas markets were the USA, Europe and Japan, and production was Rs. 100 million. They had about 2,000 workers engaged in production through their various subcontractors.

Production was carried out by 138 subcontractors. They did not utilize assembly line production: each individual worker carried out all the jobs required on each garment. The machinery and equipment used by the machines had a low output, and were not suited to high technology application. Mr. Abdul knew that male workers performed 60 percent of the total production and the rest was done by females. He also knew that while male workers were always willing to work overtime, their absentee rate was greater than that of women. Abdul felt that productivity could be higher, and he wondered how he should approach this issue.

The company purchased raw material (grey cloth) from several sources and had it dyed by different concerns, which sometimes caused variation in the colors. Both dyeing and inferior stitching caused the rejection rate, to rise to 20 percent of their total production. Mr. Abdul was worried about this high rate of rejection, and wondered what sequence of steps he should take to help reduce this high rejection rate.

Case V Questions:
1. What alternatives are available to Mr Abdul?
2. Other than purchasing higher technology machinery, in what ways might Mr Abdul increase the effectiveness and efficiency of the dyeing and stitching operations?



CASE VI
BABA BEARINGS COMPANY

The quality circle Sigma was started in the heat treatment section of Baba Bearings Company with seven members.
The members prepared the following list of various factors affecting the productivity of the heat treatment section.
1. Distortion of bearing races in sealed quench furnaces.
2. Loss of productivity and energy in sealed quench furnaces.
3. Excess consumption of LPG.
4. Rejection of cages due to scaling during annealing.
5. Shrinkage in tapered roller bearing outer rings.
6. Broadly, bearing are manufactured in the following three stages: (a) Turning, (b) Heat Treatment, and (c) Grinding.

The circle members, in their brainstorming session, gave priorities to the study aspects with the help of Pareto analysis. Distortion of bearing races in sealed quench furnaces was a major factor affecting the productivity. Hence, the circle decided to take this up for study. Turned rings in the soft condition are hardened and tempered. After heat treatment, it was noted that about 30 percent of the rings were beyond the specified limits of distortion (ovality). These rings were subject to straining for rectification.

Straining is a laborious process involving extra manpower and time. It affected schedules and deliveries to customers. The cause and effect diagram was employed for analysis, and the following causes identified:

• Design of heating elements
• Mesh baskets distortion

The members collected data regarding the heating element. Rings are loaded into the furnace keeping in a mesh basket in layers. The rings are heated by corrtherm heating elements; the heat is made to circulate uniformly throughout the furnace by a circulating fan. After the hardening process, it was observed that in general, the rings arranged at the sides of the basket adjacent to the heating elements showed greater ovality (50 per cent) than those at the centre (17 percent).

The members felt that rings at the sides were directly exposed to the radiant heat of the elements, and this resulted in a temperature gradient within the cross-section of the rings, causing more distortion. The temperature adjacent to the heating elements was higher by 26 degree Celsius than at the centre of the furnace.

Case VI Questions:
1. What are the measures to be taken to avoid direct effect of heat?
2. Design a quality improvement process for the bearings company.