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Strategic Management
Marks - 100
Attempt Only 4 Case Study
CASE – 1 MANAGING HINDUSTAN UNILEVER STRATEGICALLY
Unilever is one of the world’s oldest multinational companies. Its origin goes back to the 19th century when a group of companies operating independently, produced soaps and margarine. In 1930, the companies merged to form Unilever that diversified into food products in 1940s. Through the next five decades, it emerged as a major fast-moving consumer goods (FMCG) multinational operating in several businesses. In 2004, the Unilever 2010 strategic plan was put into action with the mission to ‘bring vitality to life’ and ‘to meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good, and get more out of life’. The corporate strategy is of focusing on bore businesses of food, home care and personal care. Unilever operates in more than 100 countries, has a turnover of € 39.6 billion and net profit of € 3.685 billion in 2006 and derives 41 per cent of its income from the developing and emerging economies around the world. It has 179,000 employees and is a culturally-diverse organisation with its top management coming from 24 nations. Internationalisation is based on the principle of local roots with global scale aimed at becoming a ‘multi-local multinational’.
The genesis of Hindustan Unilever (HUL) in India, goes back to 1888 when Unilever exported Sunlight soap to India. Three Indian, subsidiaries came into existence in the period 1931-1935 that merged to form Hindustan Lever in 1956. Mergers and acquisitions of Lipton (1972), Brooke Bond (1984), Ponds (1986), TOMCO (1993), Lakme (1998) and Modern Foods (2002) have resulted in an organisation that is a conglomerate of several businesses that have been continually restructured over the years.
HUL is one of the largest FMCG company in India with total sales of Rs. 12,295 crore and net profit of 1855crore in 2006. There are over 15000 employees, including more than 1300 managers. The present corporate strategy of HUL is to focus on core businesses. These core businesses are in home and personal care and food. There are 20 different consumer categories in these two businesses. For instance, home and personal care is made up of personal wash, laundry, skin care, hair care, oral care, deodorants, colour cosmetics and ayurvedic personal and health care, while food businesses have tea, coffee, ice creams and processed food brands. Apart from the two product divisions, there are separate departments for specialty exports and new ventures.
Strategic management at HUL is the responsibility of the board of directors headed by a chairman. There are five independent and five whole-time directors. The operational management is looked after by a management committee comprising of Vice Chairman, CEO and managing director and executive directors of the two business divisions and functional areas. The divisions have a lot of autonomy with dedicated assets and resources. A divisional committee having the executive director and heads of functions of sales, commercial and manufacturing looks after the business level decision-making. The functional-level management is the responsibility of the functional head. For instance, a marketing manager has a team of brand managers looking after the individual brands. Besides the decentralised divisional structure, HUL has centralised some functions such as finance, human resource management, research, technology, information technology and corporate and legal affairs.
Unilever globally and HUL nationally, operate in the highly competitive FMCG markets. The consumer markets for FMCG products are finicky: it’s difficult to create customers and much more difficult to retain them. Price is often the central concern in a consumer purchase decision requiring producers to be on continual guard against cost increases. Sales and distribution are critical functions organisationally. HUL operates in such a milieu. It has strong competitors such as the multinationals Procter & Gamble, Nivea or L’Oreal and formidable local companies such as, Amul, Nirma or the Tata
FMCG companies to contend with. Rivals have copied HUL’s strategies and tactics, especially in the area of marketing and distribution. Its innovations such as new style packaging or distribution through women entrepreneurs are much valued but also copied relentlessly, hurting its competitive advantage.
HUL is identified closely with India. There is a ring of truth to its vision statement: ‘to earn the love and respect of India by making a real difference to every Indian’. It has an impeccable record in corporate social responsibility. There is an element of nostalgia associated with brands like Lifebuoy (introduced in 1895) and Dalda (1937) for senior citizens in India. Consequently Indians have always perceived HUL as an Indian company rather than a multinational. HUL has attempted to align its strategies in the past to the special needs of Indian business environment. Be it marketing or human resource management, HUL has experimented with new ideas suited to the local context. For instance, HUL is known for its capabilities in rural marketing, effective distribution systems and human resource development. But this focus on India seems to be changing. This might indicate a change in the strategic posture as well as recognition that Indian markets have matured to the extent that they can be dealt with by the global strategies of Unilever. At the corporate level, it could also be an attempt to leverage global scale while retaining local responsiveness to some extent.
In line with the shift in corporate strategy, the focus of strategic decision-making seems to have moved from the subsidiary to the headquarters. Unilever has formulated a new global realignment under which it will develop brands and streamline product offerings across the world and the subsidiaries will sell the products. Other subtle indications of the shift of decision-making authority could be the appointment of a British CEO after nearly forty years during which there were Indian CEOs, the changed focus on a limited number of international brands rather than a large range of local brands developed over the years and the name-change from Hindustan Lever to Hindustan Unilever.
The shift in the strategic decision-making power from the subsidiary to headquarters could however, prove to be double-edged sword. An example could be of HUL adopting Unilever’s global strategy of focussing on a limited number of products, called the 30 power brands in 2002. That seemed a perfectly sensible strategic decision aimed at focusing managerial attention to a limited set of high-potential products. But one consequence of that was the HUL’s strong position in the niche soap and detergent markets suffering owing to neglect and the competitors were quick to take advantage of the opportunity. Then there are the statistics to deal with: HUL has nearly 80 per cent of sales and 85 per cent of net profits from the home and personal care businesses. Globally, Unilever derives half its revenues from food business. HUL does not have a strong position in the food business in India though the food processing industry remains quite attractive both in terms of local consumption as well as export markets. HUL’s own strategy of offering low-price, competitive products may also suffer at the cost of Unilever’s emphasis on premium priced, high end products sold through modern outlets.
There are some dark clouds on the horizon. HUL’s latest financials are not satisfactory. Net profit is down, sales are sluggish, input costs have been rising and new food products introduced in the market have yet to pick up. All this while, in one market segment after another, a competitor pushes ahead. In a company of such a big size and over-powering presence, these might still be minor events developments in a long history that needs to be taken in stride. But, pessimistically, they could also be pointers to what may come.
Questions:
1. State the strategy of Hindustan Unilever in your own words.
2. At what different levels is strategy formulated in HUL?
3. Comment on the strategic decision-making at HUL.
4. Give your opinion on whether the shift in strategic decision-making from India to Unilever’s headquarters could prove to be advantageous to HUL or not.
CASE: 2 THE STRATEGIC ASPIRATIONS OF THE RESERVE BANK OF INDIA
The Reserve Bank of India (RBI) is India’s central bank or ‘the bank of the bankers’. It was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1935. The Central Office of the RBI, initially set up at Kolkata, is at Mumbai. The RBI is fully owned by the Government of India.
The history of RBI is closely aligned with the economic and financial history of India. Most central banks around the world were established around the beginning of the twentieth century. The Bank was established on the basis of the Hilton Young Commission. It began its operations by taking over from the Government the functions so far being performed by the Controller of Currency and from the Imperial Bank of India, the management of Government accounts and public debt. After independence, RBI gradually strengthened its institution-building capabilities and evolved in terms of functions from central banking to that of development. There have been several attempts at reorganisation, restructuring and creation of specialised institutions to cater to emerging needs.
The Preamble of the RBI describes its basic functions like this: ‘….to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.’ The vision states that the RBI ‘….aims to be a leading central bank with credible, transparent, proactive and contemporaneous policies and seeks to be a catalyst for the emergence of a globally competitive financial system that helps deliver a high quality of life to the people in the country.’ The mission states that ‘RBI seeks to develop a sound and efficient financial system with monetary stability conductive to balanced and sustained growth of the Indian economy’. The corporate values of underlining the mission statement include public interest, integrity, excellence, independence of views and responsiveness and dynamism.
The three areas in which objectives of the RBI can be stated are as below.
1. Monetary policy objectives such as containing inflation and promoting economic growth, management of foreign exchange reserves and making currency available.
2. Objectives set for managing financial sector developments such as supervision of systems and information access and assisting banking and financial institutions to become competitive globally.
3. Organisational development objectives such as development of economic research facilities, creating information system for supporting economic decision-making, financial management and human resource management.
Strategic actions taken to realise the objectives fall under four categories:
1. The thrust area of monetary policy formulation and managing financial sector;
2. Evolving the legal framework to support the thrust area;
3. Customer service for providing support and creation of positive relationship; and
4. Organisational support such as structure, systems, human resource development and adoption of modern technology.
The major functions performed by the RBI are:
• Acting as the monetary authority
• Acting as the regulator and supervisor of the financial system
• Discharging responsibilities as the manager of foreign exchange
• Issue currency
• Play as developmental role
• Related functions such as acting as the banker to the government and scheduled banks
The management of the RBI is the responsibility of the central board of directors headed by the governor and consisting of deputy governors and other directors, all of whom are appointed by the government. There are four local boards based at Chennai, Kolkata, Mumbai and New Delhi. The day-to-day management of RBI is in the hands of the executive directors, managers at various levels and the support staff. There are about 22000 employees at RBI, working in 25 departments and training colleges.
The RBI identified its strengths and weaknesses as under.
• Strengths A large body of competent officers and staff; access to key data on the economy; wide organisational network with 22 regional offices; established infrastructure; ability to attract talent; and financial self sufficiency.
• Weaknesses Structural rigidity, lack of accountability and slow decision-making; eroded specialist know-how; strong employee unions with rigid industrial relations stance; surplus staff; and weak market intelligence.
Over the years, the RBI has evolved in terms of structure and functions, in response to the role assigned to it. There have been sweeping changes in the economic, social and political environment. The RBI has had to respond to it even in the absence of a systematic strategic plan. In 1992, the RBI, with the assistance of a private consultancy firm, embarked on a massive strategic planning exercise. The objective was to establish a roadmap to redefine RBI’s role and to review internal organisational and managerial efficacy, address the changing expectations from external stakeholders and reposition the bank in the global context. The strategic planning exercise was buttressed by departmental position papers and documents on various subjects such as technology, human resources and environmental trends. The strategic plan of the RBI emerged with four sections dealing with the statement of mission, objectives and policy, a review of RBI’s strengths and weaknesses and strategic actions required with an implementation plan. The strategic plan reiterates anticipation of evolving external environment in the medium-term; revisiting strengths and weaknesses (evaluation of capabilities); and doing away with the outdated mandates for enhancing efficiency in operations in furtherance of best public interests. The results of these efforts are likely to manifest in attaining a visible focus, reinforced proficiency, realisation of shared sense of purpose, optimising resource use and build-up of momentum to achieve goals.
Historically, the RBI adopted the time-tested technique of responding to external environment in a pragmatic manner and making piecemeal changes. The dilemma in adoption of a comprehensive strategic plan was the risk of trading off the flexibility of the pragmatic approach to creating rigidity imposed by a set model of planning.
Questions:
1. Consider the vision and mission statements of the Reserve Bank of India. Comment on the quality of both these statements.
2. Should the RBI go for a systematic and comprehensive strategic plan in place of its earlier pragmatic approach of responding to environmental events as and when they occur? Why?
CASE: 3 THE INTERNATIONALISATION OF KALYANI GROUP
The Kalyani Group is a large family-business group of India, employing more than 10000 employees. It has diverse businesses in engineering, steel, forgings, auto components, non-conventional energy and specialty chemicals. The annual turnover of the Group is over US$2.1 billion. The Group is known for its impressive internationalisation achievements. It has nine manufacturing locations spread over six countries. Over the years, it has established joint ventures with many global companies such as ArvinMeritor, USA, Carpenter Technology Corporation, USA, Hayes Lemmerz, USA and FAW Corporation, China.
The flagship company of the Group is Bharat Forge Limited that is claimed to be the second largest forging company in the world and the largest nationally, with about 80 per cent share in axle and engine components. The other major companies of the Group are Kalyani Steels, Kalyani Carpenter Special Steels, Kalyani Lemmerz, Automotive Axles, Kalyani Thermal Systems, BF Utilities, Hikal Limited, Epicenter and Synise Technologies
The emphasis on internationalisation is reflected in the vision statement of the Group where two of the five points relate to the Group trying to be a world-class organisation and achieving growth aggressively by accessing global markets. The Group is led by Mr. B.N. Kalyani, who is considered to be the major force behind the Group’s aggressive internationalisation drive. Mr. Kalyani joined the Group in 1972 when it was a small-scale diesel engine component business.
The corporate strategy of the Group is a combination of concentration of its core competence in its business with efforts at building, nurturing and sustaining mutually beneficial partnerships with alliance partners and customers. The value of these partnerships essentially lies in collaborative product development with the partners who are the original equipment manufacturers. The foreign partners are not intended to provide expansion in capacity, but to enable the Kalyani Group to extend its global marketing reach.
In achieving its successful status, the Kalyani Group has followed the path of integration, extending from the upstream steel making to downstream machining for auto components such as crank-shafts, front axle beams, steering knuckles, cam-shafts, connecting rods and rocker arms. In all these products, the Group has tried to move up the value chain instead of providing just the raw forgings. In the 1990s, it undertook a restructuring exercise to trim its unrelated businesses such as television and video products and concentrate on its core business of auto components.
Four factors are supposed to have influenced the growth of the Group over the years. These are mentioned below:
• Focussing on core businesses to maximise growth potential
• Attaining aggressive cost savings
• Expanding geographically to build global capacity and establishing leading positions
• Achieving external growth through acquisitions
The Group companies are claimed to be positioned at either number one or two in their respective businesses. For instance, the Group claims to be number one in forging and machined components, axle aggregates, wheels and alloy steel. The technology used by the Group in its mainline business of auto components and other businesses, is claimed to be state-of-the-art. The Group invests in forging technology to enhance efficiency, production quality and design capabilities. The Group’s emphasis on technology can be gauged from the fact that in the 1990s, it took the risky decision of investing Rs. 100 crore in the then latest forging technology, when the total Group turnover was barely Rs. 230 crore. Information technology is applied for product development, reducing production and product development time, supply-chain management and marketing of products. The Group lays high emphasis on research and development for providing engineering support, advanced metallurgical analysis and latest testing equipment in tandem with its high-class manufacturing facilities.
Being a top-driven group, the pattern of strategic decision-making within seems to be entrepreneurial. There was an attempt to formulate a five-year strategic plan in 1997, with the participation of the company executives. But no much is mentioned in the business press about that collaborative strategic decision-making after that.
Recent strategic moves include Kalyani Steels, a Group company, entering into a joint venture agreement in may 2007, with Gerdau S.A. Brazil for installation of rolling mills. An attempt to move out of the mainstream forging business was made when the Group strengthened its position in the prospective business of wind energy through 100 per cent acquisition of RSBconsult GmbH (RSB) of Germany. Prior to the acquisition, the Group was just a wind farm operator and supplier of components.
Questions:
1. What is the motive for internationalisation by the Kalyani Group? Discuss.
2. Which type of international strategy is Kalyani Group adopting? Explain.
CASE 4: THE STORY OF SYNERGOS UNFOLDS
Synergos is a young management and strategy consulting firm based at Mumbai. It was established in 1992 at a time when there were a lot of expectations among the industry people from the liberalisation policies that were started the previous year by the Government of India.
The consulting firm is an entrepreneurial venture started by Urmish Patel, a dynamic person who worked with a multinational consulting firm at the time. He left his comfortable position there to venture into the management consultancy industry. The motivation was to be ‘the master of his own destiny’ rather than being an employee working for others. Urmish comes from an upper middle-class Gujarati family, settled in a small town in Rajasthan. His father was a government servant who retired with a meagre pension. His mother is a housewife. His other siblings are all educated and well-settled in their respective careers and professions. Urmish is a creative individual, uncomfortable with the status-quo. During his student days at a college at Jaipur, he was continually coming up with bright ideas that some of his friends found to be preposterous. To him, however, these were perfectly achievable ideas. He studied biotechnology and then went to the US on a scholarship to do his Masters. After a semester at a well-known university there, he lost interest and switched to pursue an MBA. He liked it and soon settled down to work with an American consultancy firm and toured several countries on varied assignments during the seven years he worked there.
In 1992 came the urge to Urmish to chuck his job and be on his own. It was risky, yet an exciting step to take. His accumulated capital was limited—just enough to rent office space, buy a few computers and hire an assistant. There were no consultancy assignments for the first three months. But an acquaintance soon came to his aid, introducing him to the CFO of a major family business group who needed advice on a performance improvement project they wanted to launch. The opportunity came in handy though the returns were nothing to write home about. That project was the first step to
many more that came gradually. Synergos started gaining presence in the competitive management consultancy industry and attracting attention from the people whom they worked for. Word-of-mouth publicity led them from one project to another for the first three years till 1995. Synergos took up whatever came its way, delivering a cost-effective solution to its clients. A team of four had formed by now, each member of the team specialising in services rendered to the clients. For instance, one of the members is a specialist in engineering projects, while another has expertise finance. The third one is a service sector specialist, also having experience in dealing with government matters.
The phase of rapid growth started some time in 1995 when the Synergos team decided to focus on the small and medium enterprises (SMEs). These were firms that realised they had problems needing specialist advice, but were apprehensive to approach the big firms on account of their limited outlay and inexperience of dealing with such firms. Synergos came to their aid by tailoring their services as near as possible to their needs. Another differentiation platform Synergos offered to its client was a fully-integrated consultancy service where it got involved right from the stage of planning down to its implementation and monitoring.
Presently, Synergos has grown to be a medium-sized consultancy firm, serving clients in India and abroad, working for industries ranging from auto components to financial services and for manufacturing organisations to service providers. Some-how, nearly half of the assignments it has worked on have been for mid-sized, upcoming, family-owned businesses, a niche it has served well. These organisations typically need a boutique sort of consultancy that can offer customised services dealing with a broad range of practices related to strategy, organisation design, mergers and acquisitions and operational matter such as logistics and supply-chain management. Synergos fits in with their requirements owing to its personalised service and reasonable commission structure.
The organisational structure at Synergos has a board at the top, consisting of seven people, including the four founding members and three independent directors. One of the independent directors is the chairman of the board. Urmish, as the founder CEO, also heads an executive management committee with each of the founding members, leading three other top-level committees dealing with business portfolio, service management and executive recruitment.
The management team is called the professional group. The rest of the employees are referred to as the staff. The professional group has young women and men who are graduates from some of the best institutions in India and abroad. They are assigned to taskforces based on their qualifications, experience and interests. The departmentation at Synergos is flexible, based on an interplay of the three categories: skill, service and specialty. For instance, a professional may have IT skills, may have worked to provide supply-chain management services and developed expertise in handling operational assignments for medium-sized food and beverage firms. There is a lot of multi-tasking however, to utilise the wide range of skills and special expertise that the professionals have. For administrative matters, the professionals are assigned to client-service departments of industry solutions, enterprise solutions and technology solutions. The flexibility that such an organisational arrangement affords seems to have been the major reason for the evolution of the organisation structure at Synergos over the years.
The staff group of employees consists of the support people who provide a variety of services to the professionals. Among these are research assistants, industry analysts, documentation experts and secretarial staff. There is no set pattern for assignment of staff to the administrative departments and generally, a need-based approach is followed, depending on the workload at a particular time.
Recruitment for professionals is stringent. Synergos typically looks for a good combination of education and experience and lays much emphasis on the compatibility of the prospective employee with the shared values. Creativity, broad range of professional interests, intellectual acumen, team-working and physical fitness to undertake demanding tasks and work for long hours are the criteria for hiring. There are not many training opportunities except the on-the-job learning. New professionals are assigned to a mentor for some time till they are ready to handle assignments autonomously. The staff members are usually recruited from fresh graduates, with good degrees from reputed institutions, in arts, sciences and commerce. The staff positions are also open for persons wanting to work on part-time or project-bases. Emphasis is given to the ability of the prospective staff to undertake multi-tasking and work with documentation and word processing and presentation software packages.
The compensation system consists of a base salary with commission and bonus depending on performance. There are other usual elements such as medical reimbursement, loan facility and gratuity and retirement benefits. the performance appraisal is informal, with at least one of the four founding members being part of the evaluation committee for a professional. Usually, the founding member closest to the work area of the employee is involved in determining the rewards to be given. The time-cycle for appraisal is one year. Management control is discreet and performance-based rather than behaviour-based. The means for control are informal, such as direct supervision.
Urmish is a strong proponent of the emergent strategy and is not in favour of tying Synergos to a fixed strategic posture. So are the other founder members, though at times they do talk about deciding on a niche such as SME organisations as clients and enterprise solutions as the core competence. In the highly fragmented consultancy industry where it is possible for even one person to set up an office in a commercial area and leverage connections to secure projects, Synergos is open to opportunities as they emerge, while trying to maintain the flexibility that has made it successful till now.
Questions:
1. Identify the type of organisation structure being used at Synergos and explain how it works. What are the benefits of using this type of structure? What are the pitfalls?
2. Express your opinion about whether the structure is in line with the recruitments of the strategy that Synergos is implementing.
3. Based on the information related to the information, control and reward systems available in the case, examine whether these systems are appropriate for the type of strategy being implemented.
CASE: 5 EXERCISING STRATEGIC AND OPERATIONAL CONTROLS AT iGATE GLOBAL SOLUTIONS
The Bangalore-based iGATE Global Solutions is the flagship company of iGATE Corporation, a NASDAQ-listed US-based corporation. Known earlier as Mascot Systems, it was set up in India in 1993, to offer staffing services. It acquired business process outsourcing (BPO) and contact centre businesses in 2003, making it an end-to-end IT and ITES service provider. Its service portfolio includes consulting, IT services, data analytics, enterprise systems, BPO/BSP, contact centre and infrastructure management services. iGATE has over 100 active clients and centres based in Canada, China, Malaysia, India, the UK and the US. Chairman, Ashok Trivedi and CEO Phaneesh Murthy, an ex-Infosys IT professional and their partners hold a major stake, with some participation by institutional and public investors. The revenues for 2006-2007 are over Rs. 805 crore and net profits, Rs. 49.6 crore.
The corporate strategies of iGATE are offering integrated IT services and divesting the legacy IT staffing business and possibly making acquisitions in the domain expertise for financial services businesses. The business strategy is focused differentiation based on the focal points of testing, infrastructure management and enterprise solutions. The competitive tactic is avoiding head-on competition with the formidable larger players in the industry by carving out a niche. The business definition is serving large customers and staying away from sub-contracting work.
iGATE adopts a differentiation business model based on an integrated technology and operations model which it calls as the iTOPS model. This is an advancement over the prevalent model in the ITES industry based on low-cost arbitrage model. iTOPS is based on transaction-based pricing for services and supporting the clients by providing the platform, processes and services.
The strategic evaluation and control has both the elements of strategic as well as operational controls.
The functional and operational implementation is aimed at achieving four sets of objectives:
(a) Shifting from small customers to large customer (Fortune 1000 companies)
(b) Shifting away from stocking to project-consulting assignments
(c) Working directly with clients rather than with system integrators
(d) Moving from a local to international markets
Some illustrations of the performance indicators that reflect these objectives are:
1. On-shore versus off-shore mix of business revenues: In 2004, this ratio was 55:45 and in 2007, it has improved to 27:73, indicating a much higher revenue generation from off-shore business.
2. Billing rates: Revenue charged from clients on assignments. With project consulting assignments from off-shore clients, where the revenues are typically higher, with lower costs and higher productivity in India, the realisations from billing have to be higher. The industry norms for ITES are US$18-25 per hour for off-shore and US$ 55-65 per hour for on-shore assignments.
3. The number of large clients from Fortune 1000 companies: Presently, iGATE has nearly half of its more than 100 clients from Fortune 1000 companies, of which the top 10 account for 70 per cent of its business.
4. Controlling employee costs: This is an area where concerted effort is required from the HR and finance functions. Hiring less experienced employees lowers the compensation bill. In the IT and ITES industry, attracting and retaining well-qualified and experienced employees is a critical success factor. The performance indicator for this objective is the cost per employee.
5. Human resource metrics such as the hiring and attrition rates: In the IT and ITES industry, the human resource metrics such as hiring and attrition rates are critical indicators. Increasing the number of employees and lowering the attrition rate by retaining the employees is a big challenge. There are presently about 5800 employees, likely to go up to 8500 in the next two years. The attrition of 20 per cent presently at iGATE is on the higher side. But such attrition is common in the industry where the employee mobility is high and employee pinching a widespread trend.
The human resource management function being critical in an industry where so many challenges exist, needs a strong emphasis on training and development, motivation, autonomy and attractive incentives. iGATE has an integrated people management model focusing on developing technical, behavioural and leadership competencies. The three metrics by which the HR function is assessed are: human capital index, work culture and employee affective commitment. The reward system at iGATE consists of meritorious employees across all levels being granted restricted stock options, thus providing an incentive to remain with the company till they become due. The company, though, is an average paymaster, which disadvantage it tries to trade-off offering a more challenging work environment, quicker promotions and chances for practising innovation.
Critics say that that iGATE lacks the big-brand appeal of the larger players such as Infosys and Wipro, cannot compete on scale and is still under the shadow of its original business of body-shopping IT personnel.
Questions:
1. Analyse the iGATE case to highlight how it could apply some of the strategic controls such as premise control, implementation control, strategic surveillance and special alert control.
2. Analyse and describe the process of setting of standards at iGATE.
3. Give your opinion on the effectiveness of the role of reward system in exercising HR performance management at iGATE and suggest what improvements are possible, given the environmental conditions in the IT/ITES industry in India at present.
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CASE – 1: Where Do We Go from Here?
As one of the many seminars held to discuss the corporate response of family-owned business to liberalisation and globalisation, the keynote Mr Gurcharan Das concluded his speech by saying, “In the end, I would say that the success of Indian economy would depend on how the Indian industry and business respond to the reform process.”
As the proceedings of the seminar progressed it became clear that there was a difference of opinion in the perception of participants. Those who were supporting the case for letting the family-owned businesses face competition opined that such businesses in India have exhibited financial acumen; its members have generally adopted an austere life style; they have demonstrated an ability to take calculated risks, and an ability to accumulate and manage capital. They have devised unique managerial style and led the creation of the equity cult among Indians. Several of them are low-cost producers.
The participants critical of the role of family business had this is to say: “There has been a tendency to mix up family’s intent with that of businesses managed by them. There is a lack of focus and business strategy. Family businesses have generally adopted a short-term approach to business causing less purposeful investments in specially critical areas such as employee development and product development. Customers and development of marketing skills have been neglected.”
The valedictory session of the Seminar attempted to bring out the issues clearly. It culminated in an agenda for reform by the family businesses. The points highlighted in the agenda are:
1. Indian family-owned business organisations need to professionalise management,
2. they need to curtail the diversified of their business groups and impart a sharper focus to their business activities, and
3. they need to pay greater attention to the development of human capital.
Question
Suppose you were an observer at the seminar. During tea and lunch breaks you had an occasion to meet several people who were skeptical and felt that the reform process was having only a superficial impact on the corporates. Express your opinion that you form about the issues at the seminar.
CASE – 2 A Healthy Dose of Success
Muhammad Majeed represents a typical Indian who has created success out of sheer hard work and commitment through his education and expertise. At the age of 23 years, Majeed, after graduating in pharmacy from Kerala University, went to pursue higher studies in the US. He completed his masters and PhD in industrial chemistry. Armed with high qualifications, he became a research pharmacist and eventually, as most expatriate Indians do, set up his own company, Sabinsa Corporation. Experiencing difficulties with the long-drawn drug approval process of the US Food and Drug Administration and his own dwindling savings, Majeed focussed on ayurvedic products based on natural extracts. He returned to India in 1991 (incidentally, the year when liberalisation started in India) and set up Sami Chemicals and Extracts Ltd, late renamed as Sami Labs Ltd (SLL), Bangalore.
SLL has over three dozen products, and seven US patents. There are 25 European and other country patents pending approval. SLL has four manufacturing units all based in Karnataka. The sales is Rs 44.5 crore and the profit-after-tax is Rs 5.89 crore. It has pioneered specialised products based on Indian herbal extracts relying on the principles of ayurveda. The major thrust is on remedies for cholesterol control, fat reduction, and weight management. As against several Indian companies exporting raw herbs, SLL specialises in value-addition through extractions. The result is encouraging: SLL’s products typically fetch an export price that is more than double the price of raw herbs.
SLL thinks of its business as “manufacturing and selling traditional standardized extracts and nutritional and pharmaceutical fine chemicals”. Sabinsa, its US-based company, secures contracts from the US companies to manufacture certain chemicals in India. Its business plans are quite ambitious. Setting up a product management team, assisting farmers in cultivation of pharmaceutically useful herbs, and international collaborations for developing research-based intellectual property and its commercialisation are some of the strategic actions on the anvil.
SLL looks forward to being a Rs 500-crore company by 2005 when the World Trade Organisation’s patenting regimes comes into force.
Question
How will you define the business of SLL? Comment on the business of SLL and your opinion on the likelihood of its success.
CASE – 3 No Chain, No Gain
Textile industry is one of the oldest industries in India. Several business houses have their origin in this industry. In the mid-1980s, the powerloom sector in the unorganised sector started hurting badly the interests of the composite textile mills of the sector. Their cost structure, with lower overheads and no duties, was less than half of that of mills for equivalent production. While the powerlooms sold cloth as a commodity, the mills tried to establish their products as brands. The post-liberalisation period has seen a large number of foreign brands enter India. It is in this scenario that the Mayur brand of Rajasthan Spinning and Weaving Mills (RSWM) had to carve out a place for itself.
RSWM is the flagship company of the LNJ Bhilwara group. It has been the largest producer and trader of yarn in the country and caters to the large demands for blended yarns and grey cloth fabric used for children’s school uniform. In 1994, the yarn business faced a severe crunch owing to overcapacity. From 1995 onward, RSWM became a late follower of the industry trend as other competitors already moved up the value chain.
Textile manufacturing is basically constituted of the processes of spinning, weaving, processing, and marketing. More than 50 per cent of the value is concentrated in weaving and processing. Moving up the value chain from spinning involves large investments in machinery and labour. Graduating to marketing requires getting closer to the customers. This is the challenge that a traditional spinning mill like RSWM had to face if it was to sustain itself in a highly competitive market.
At another level, for RSWM, it was a matter of cultural transformation of the organisation long used to a conservative, trader mentality. Imagine a company whose main driving force, Shekhar Agarwal, Vice-Chairman and Managing Director having little interest in watching Hindi movies signing up Sharukh Khan at a considerable price for celebrity advertising. From the market side, it has long been troubled with its commitment to the loyal middle-class customers as it had to simultaneously pay attention to the upwardly mobile upper middle class customers. Then there was the dilemma of being too many things to a wide range of audience. RSWM wanted to have a stake in the export markets as well as keep its share in the rural markets. It perceived itself as an efficient producer and wished to become a flamboyant retailer. It excelled in basic textile processing yet dreamt of attaining sophistication in in-house production of readymade garments. And all this while it has been a late mover, losing out to early movers such as Raymonds. No wonder it virtually landed up on the fringes of the industry, far behind formidable competitors like Reliance, Grasim, and S. Kumar.
Question
Suggest how should RSWM manage its value chain effectively. Should it try to imitate the market leaders? If yes, why? If no, why not? What alternatives routes to success do you propose?
CASE – 4 A Very Intriguing Package
It is not quite often that a positive product feature becomes an albatross around the neck of a company. VIP Industries had held sway for over two decades in the organised Indian luggage market on the basis of the durability of its moulded suitcases. Obviously, the customer perceives value-for-money in the long-lasting, reasonably-priced Alfa brand of VIP suitcases which sells 1.5 lakh pieces a month. But this means that having bought one suitcase the customer can do with it for several years. Market research by the company shows that an average Indian family pulls out the suitcase merely for outstation travel a few times a year. Hence, there is no pressing need for continual replacement of the old luggage.
The VIP products are made of virgin polymer as compared to the recycled grade I and II polymers used by the unorganised sector. They are subjected to stringent stress tests for quality control.
VIP has a presence in a wide range of the market segments within a price spectrum of Rs 295 to Rs 6,000 apiece. It is her that the competition from the unorganised sector hurts the company most. VIP’s economically-priced brand, Alfa is widely imitated and sold at much lower prices. This enables the unorganised sector to typically sell 20 times more than VIP can. The lower price threshold seems to be Rs 225 which in nearly impossible for VIP to achieve given its cost structure. In the Rs 1500 plus premium range, VIP has to contend with Samsonite which is a formidable competitor.
The obvious tactic for VIP has been to cut costs. Distribution and logistics is one area where valiant efforts have been made at cost reduction. VIP has four factories located in heart of India. The average distribution costs come to Rs 7 to Rs 8 apiece. Reduction in cost has been attempted through distributed manufacturing by having vendors making the product at different locations, thereby, avoiding transportation of high-volume suitcases across long distances and reducing inventory build-up in the channel.
Severe pressure on sales has resulted in VIP Industries offering discounts and unwittingly entering into a disastrous price war. Promotion of a high visibility product suffered and advertising expenditure has been ruthlessly curtailed from the earlier Rs 11 crore to Rs 2 crore now. Its lead advertising agency is HTA. Action on the promotion front has seen reorganisation of the brand portfolio. Incidentally, earlier its successful and popular Kal bhi aaj bhi campaign served to reinforce its durability theme.
There are several roadblocks that the company has to negotiate. Increase in population, rising propensity of Indian to travel, and the insatiable thirst of customers for state-of-the-art technological products with newer designs and innovation, all at an affordable price are the opportunities and challenges before the company. Introduction of new brands, Mantra and Skybags, product range of diversification to include children’s bags and ladies’ bags, strategic alliance with Europe’s leading luggage-maker—Delsey—are some of the steps taken by the company.
Yet, caught in its self spun web of past successes, VIP is today faced with an uncertain future.
Question
How should the VIP Industries get out of the bind that it finds itself in? Outline the contours of the marketing plans and policies that VIP needs to formulate and implement?
CASE – 5 Let There be Light
Traditionally, power plants, being capital-intensive, have been set up by the public sector and state electricity boards (SEBs) in India. Everyone agrees today that the energy sector is the major infrastructure bottleneck holding up economic development. A critical aspect of economic reforms thus is the reform of the energy sector.
The Madhya Pradesh State Electricity Board (MPSEB) is not much different from its counterparts in other states. It faces similar problems and is opting for identical solutions. The common elements in the power sector reforms are: corporatisation by breaking the SEB into generation, transmission, and distribution; financial restructuring including debt and interest payment rescheduling; reduction of manpower; and improvements in operational efficiency.
Public utilities, like SEBS, have to be commercially viable in order to survive. Yet historically, this aspect of SEB as an organisation has been sacrificed at the altar of political expediency. The ruling party, irrespective of whether it is the Congress at present or the Bharatiya Janata Party earlier, have made pre-election promises of supplying free or heavily-subsidised power. Digvijay Singh, the present chief minister of Madhya Pradesh, a populist politician earlier, on longer sees electoral benefit in providing free electricity. “It pays to pay” is his refrain today, whether it is healthcare or electricity.
Bold steps—bold, as they still carry the risk of a political fallout with fiery BJP leader Uma Bharti breathing down Digvijay’s neck or the silent schemers of his own party working overtime behind the scenes—have been initiated to reform the energy sector in Madhya Pradesh. MPSEB is to be divided into generation, transmission, and distribution (T&D), and supply companies. Financial management and cash flow management is to be improved. The retirement age of MPSEB employees has been reduced from 60 to 58 years. Effective operational control is sought to be exercised by metering power supply at division / district level to fix responsibility for T & D losses and power thefts. A sustained drive is on to identify non-paying consumers, install meters, and make them pay their bills regularly.
MPSEB’s annual losses are to the tune of a massive Rs 1,600 crore; total liabilities are estimated to be Rs 20,000 crore. Undeniably, are parameters indicating the rot that has corroded the system.
At one level, the reform of the energy sector is a political action but at another, and perhaps, a more fundamental level, it is a question of managing an organisation strategically through strategic actions designed to turn around a vital public utility.
Question
Analyse the problems of the MPSEB from the strategic management perspective. Do you feel that the actions taken or being contemplated are strategic in nature? Propose what else needs to be done to make the MPSEB a viable organisation.
Attempt any Ten Questions:
1. Discuss the role of SEBI in regulating Indian Capital Market.
2. Discuss the basic problems of Industrial finance in India
3. Write short notes on the following (Any Three)
i) Corporate disasters
ii) Corporate ethics
iii) Managers and professionalism
iv) Role played by SEBI in avoiding, corporate disasters, ethics ,and also describe CSR initiatives of corporate world.
4. Explain Principles of Corporate Governance .
5. Explain the Guidelines issued by SEBI towards Corporate Governance.
6. Explain the underlying assumptions of the Black and Scholes option pricing model and why are they needed? Explain in detail Black Scholes option pricing model .
7. Discuss the relationship between the financing decision and investment decision in a firm
8. Discuss RAD and CE approach
9. Explain the advantages of Decision tree approach in investment decisions
10. .Discuss the factors which exercise influence on the demand for working capital in a manufacturing concern
11. Discuss the role of Commercial bank as financial intermediaries
12. What do you mean by share capital? Explain the different forms of share can a company issue?
13. Explain the role of EXIM Bank Financing of exports
14. Explain the relevance which is associated with the financing decision and investment in the organization.
____________________________________________________________________________
Case 1
Difficult Transitions
Tony Stark had just finished his first week at Reece Enterprises and decided to drive upstate to a small lakefront lodge for some fishing and relaxation. Tony had worked for the previous ten years for the O’Grady Company, but O’Grady had been through some hard times of late and had recently shut down several of its operating groups, including Tony’s, to cut costs. Fortunately, Tony’s experience and recommendations had made finding another position fairly easy. As he drove the interstate, he reflected on the past ten years and the apparent situation at Reece.
At O’Grady, things had been great. Tony had been part of the team from day one. The job had met his personal goals and expectations perfectly, and Tony believed he had grown greatly as a person. His work was appreciated and recognized; he had received three promotions and many more pay increases.
Tony had also liked the company itself. The firm was decentralized, allowing its managers considerable autonomy and freedom. The corporate Culture was easygoing. Communication was open. It seemed that everyone knew what was going on at all times, and if you didn’t know about something, it was easy to find out.
The people had been another plus. Tony and three other managers went to lunch often and played golf every Saturday. They got along well both personally and professionally and truly worked together as a team. Their boss had been very supportive, giving them the help they needed but also staying out of the way and letting them work.
When word about the shutdown came down, Tony was devastated. He was sure that nothing could replace O’Grady. After the final closing was announced, he spent only a few weeks looking around before he found a comparable position at Reece Enterprises.
As Tony drove, he reflected that "comparable" probably was the wrong word. Indeed, Reece and
O’Grady were about as different as you could get. Top managers at Reece apparently didn’t worry too much about who did a good job and who didn’t. They seemed to promote and reward people based on how long they had been there and how well they played the never-ending political games.
Maybe this stemmed from the organization itself, Tony pondered. Reece was a bigger organization than O’Grady and was structured much more bureaucratically. It seemed that no one was allowed to make any sort of decision without getting three signatures from higher up. Those signatures, though, were hard to get. All the top managers usually were too busy to see anyone, and interoffice memos apparently had very low priority.
Tony also had had some problems fitting in. His peers treated him with polite indifference. He sensed that a couple of them resented that he, an outsider, had been brought right in at their level after they had had to work themselves up the ladder. On Tuesday he had asked two colleagues about playing golf.
They had politely declined, saying that they did not play often. But later in the week, he had overheard them making arrangements to play that very Saturday.
It was at that point that Tony had decided to go fishing. As he steered his car off the interstate to get gas, he wondered if perhaps he had made a mistake in accepting the Reece offer without finding out more about what he was getting into.
Case Questions
1. Identify several concepts and characteristics from the field of organizational behavior that this case
illustrates?
2. What advice can you give Tony? How would this advice be supported or tempered by behavioral
concepts and processes?
3. Is it possible to find an "ideal" place to work? Explain.
Case 2
Humanized Robots?
Helen Bowers was stumped. Sitting in her office at the plant, she pondered the same questions she had been facing for months: how to get her company’s employees to work harder and produce more. No matter what she did, it didn’t seem to help much.
Helen had inherited the business three years ago when her father, Jake Bowers, passed away
unexpectedly. Bowers Machine Parts was founded four decades ago by Jake and had grown into a moderate-size corporation. Bowers makes replacement parts for large-scale manufacturing machines such as lathes and mills. The firm is headquartered in Kansas City and has three plants scattered throughout Missouri.
Although Helen grew up in the family business, she never understood her father’s approach. Jake had treated his employees like part of his family. In Helen’s view, however, he paid them more than he had to, asked their advice far more often than he should have, and spent too much time listening to their ideas and complaints. When Helen took over, she vowed to change how things were done. In particular, she resolved to stop handling employees with kid gloves and to treat them like what they were: the hired help.
In addition to changing the way employees were treated, Helen had another goal for Bowers. She wanted to meet the challenge of international competition. Japanese firms had moved aggressively into the market for heavy industrial equipment. She saw this as both a threat and an opportunity. On the one hand, if she could get a toehold as a parts supplier to these firms, Bowers could grow rapidly. On the other, the lucrative parts market was also sure to attract more Japanese competitors. Helen had to make sure that Bowers could compete effectively with highly productive and profitable Japanese firms.
From the day Helen took over, she practiced an altogether different philosophy to achieve her goals. For one thing, she increased production quotas by 20 percent. She instructed her first-line supervisors to crack down on employees and eliminate all idle time. She also decided to shut down the company softball field her father had built. She thought the employees really didn’t use it much, and she wanted the space for future expansion.
Helen also announced that future contributions to the firm’s profit-sharing plan would be phased out.
Employees were paid enough, she believed, and all profits were the rightful property of the owner—her.She also had private plans to cut future pay increases to bring average wages down to where she thought they belonged. Finally, Helen changed a number of operational procedures. In particular, she stopped asking other people for their advice. She reasoned that she was the boss and knew what was best. If she asked for advice and then didn’t take it, it would only stir up resentment.
All in all, Helen thought, things should be going much better. Output should be up and costs should be way down. Her strategy should be resulting in much higher levels of productivity and profits.
But that was not happening. Whenever Helen walked through one of the plants, she sensed that people weren’t doing their best. Performance reports indicated that output was only marginally higher than before but scrap rates had soared. Payroll costs were indeed lower, but other personnel costs were up. It
seemed that turnover had increased substantially and training costs had gone up as a result.
In desperation, Helen finally had hired a consultant. After carefully researching the history of the
organization and Helen’s recent changes, the consultant made some remarkable suggestions. The bottom line, Helen felt, was that the consultant thought she should go back to that "humanistic nonsense" her father had used. No matter how she turned it, though, she just couldn’t see the wisdom in this. People worked to make a buck and didn’t want all that participation stuff.Suddenly, Helen knew just what to do: She would announce that all employees who failed to increase their productivity by 10 percent would suffer an equal pay cut. She sighed in relief, feeling confident that she had finally figured out the answer.
Case Questions
1. How successful do you think Helen Bowers’s new plan will be?
2. What challenges does Helen confront?
3. If you were Helen’s consultant, what would you advise her to do?
Case 3
Teams at Evans RV Wholesale Supply and Distribution Company?
Evans RV Wholesale Supply and Distribution Company sells parts, equipment, and supplies for
recreational vehicles-motor homes, travel trailers, campers, and similar vehicles. In addition, Evans has a service department for the repair and service of RVs. The owner, Alex Evans, bought the company five years ago from its original owner, changed the name of the company, and has finally made it profitable, although it has been rough going. The organization is set up in three divisions: service, retail parts and supplies, and wholesale parts and supplies. Alex, the owner, CEO, and president, has a vice president for each operating division and a vice president of finance and operations. The organization chart shows these divisions and positions.
In the warehouse there are three groups: receiving (checking orders for completeness, returning
defective merchandise, stocking the shelves, filling orders), service parts, and order filling for outgoing shipments. The warehouse group is responsible for all activities related to parts and supplies receiving,storage, and shipping.
The retail sales division includes all functions related to selling of parts and supplies at the two stores and in the mobile sales trailer. Personnel in the retail division include salespeople and cashiers. The retail salespeople also work in the warehouse because the warehouse also serves as the showroom for walk-in customers.
In the service department the service manager supervises the service writers, one scheduler, and lead mechanics and technicians. The service department includes the collision repair group at the main store and the service department at the satellite store. The collision repair group has two service writers who have special expertise in collision repair and insurance regulations. Two drivers who move RVs around the "yard" also work in the service division.
The accounting and finance groups do everything related to the money side of the business, including accounts payable and receivable, cash management, and payroll. Also in this group is the one person who handles all of the traditional personnel functions.
Alex has run other small businesses and is known as a benevolent owner, always taking care of the loyal employees who work hard and are the backbone of any small business. He is also known as being real tough on anyone who loafs on the job or tries to take unfair advantage of Alex or the company. Most of the employees are either veterans of the RV industry at Evans or elsewhere, or are very young and still learning the business. Alex is working hard to develop a good work ethic among the younger employees and to keep the old-timers fully involved. Since he bought the business, Alex has instituted new, modern, employee-centered human resource policies. However, the company is still a traditional hierarchically structured organization.
The company is located in a major metropolitan area that has a lot of potential customers for the RV business. The region has many outdoor recreational activities and an active retirement community that either lives in RVs (motor homes, trailers, or mobile homes) or uses them for recreation. The former owner of the business specifically chose not to be in the RV sales business, figuring that parts and service was the better end of the business. Two stores are strategically located on opposite ends of the metropolitan area, and a mobile sales office is moved around the major camping and recreational areas during the peak months of the year.
When Alex bought the company, the parts and supplies business was only retail, relying on customers to walk in the door to buy something. After buying the business, Alex applied good management, marketing, and cash-management principles to get the company out of the red and into profitability.
Although his was not the only such business in town, it was the only one locally owned, and it had a good local following. About two years ago, Alex recognized that the nature of the business was changing. First, he saw the large nationwide retailers moving into town. These retailers were using discount pricing in large warehouse-type stores. These large retail stores could use volume purchasing to get lower prices from manufacturers, and they had the large stores necessary to store and shelve the large inventory. Alex, with only two stores, was unable to get such low prices from manufacturers. He also noted that retired people were notorious for shopping around for the lowest prices, but they also appreciated good, friendly customer service. People interested in recreational items also seemed to be following the national trend to shop via catalogs.
So for a variety of reasons Alex began to develop a wholesale business by becoming a wholesale
distributor to the many RV parts and supply businesses in the small towns located in the recreational areas around that state and in surrounding states. At the same time, he created the first catalog for RV parts and supplies, featuring all the brand-name parts and supplies by category and supplier. The catalog had a very attractive camping scene on the cover, a combination of attractively displayed items and many pages full of all the possible parts and supplies that the RV owner could think of. Of course, he made placing an order very easy, by phone, mail, or fax, and accepted many easy payment methods. He filled both distributor orders and catalog orders from his warehouse in the main store using standard mail and parcel delivery services, charging the full delivery costs to the customers. He credits the business’s survival so far to his diversification into the warehouse and catalog business through which he could directly compete with the national chains.
Although it is now barely profitable, Alex is concerned about the changes in the industry and the
competition and about making the monthly payments on the $5 million loan he got from the bank to buy the business in the first place. In addition, he reads about the latest management techniques and attends various professional conferences around the country. He has been hearing and reading about this team-based organization idea and thinks it might be just the thing to energize his company and take it to the next level of performance and profitability. At the annual strategic planning retreat in August, Alex announced to his top management team that starting on October 1 (the beginning of the next fiscal year), the company would be changing to a team-based arrangement.
Case Questions
1. What mistakes has Alex already made in developing a team-based organization?
2. If Alex were to call you in as a consultant, what would you tell him to do?
3. Using the organization chart of Evans RV Wholesale Supply and Distribution, describe how you
would put the employees together in teams.
Case 4 Stress Takes Its Toll
Larry Field had a lot of fun in high school. He was a fairly good student, especially in math, he worked harder than most of his friends, and somehow he ended up going steady with Alice Shiflette, class valedictorian. He worked summers for a local surveyor, William Loude, and when he graduated Mr. Loude offered him a job as number-three man on one of his survey crews. The pay wasn’t very high, but Larry already was good at the work, and he believed all he needed was a steady job to boost his confidence to ask Alice to marry him. Once he did, events unfolded rapidly. He started work in June, he and Alice were married in October, Alice took a job as a secretary in a local company that made business forms, and a year later they had their first child. The baby came as something of a shock to Larry. He had come to enjoy the independence his own paycheck gave him every week. Food and rent took up most of it, but he still enjoyed playing basketball a few nights a week with his high school buddies and spending Sunday afternoons on the softball field.
When the baby came, however, Larry’s brow began to furrow a bit. He was only 20 years old, and he still wasn’t making much money. He asked Mr. Loude for a raise and got it—his first.
Two months later, one of the crew chiefs quit just when Mr. Loude’s crews had more work than they could handle. Mr. Loude hated to turn down work, so he made Larry Field a crew chief, giving his crew some of the old instruments that weren’t good enough for the precision work of the top crews, and assigned him the easy title surveys in town. Because it meant a jump in salary, Larry had no choice but to accept the crew chief position. But it scared him. He had never been very ambitious or curious, so he’d paid little attention to the training of his former crew chief. He knew how to run the instruments— the basics, anyway—but every morning he woke up terrified that he would be sent on a job he couldn’t handle.
During his first few months as a crew chief, Larry began doing things that his wife thought he had outgrown. He frequently talked so fast that he would stumble over his own words, stammer, turn red in the face, and have to start all over again. He began smoking, too, something he had not done since they had started dating. He told his two crew members that smoking kept his hands from shaking when he was working on an instrument. Neither of them smoked, and when Larry began lighting up in the truck while they were waiting for the rain to stop, they would become resentful and complain that he had no right to ruin their lungs too.
Larry found it particularly hard to adjust to being "boss," especially since one of his workers was getting an engineering degree at night school and both crew members were the same age as he. He felt sure that Alfonso Reyes, the scholar, would take over his position in no time. He kept feeling that Alfonso was looking over his shoulder and began snapping any time they worked close together.
Things were getting tense at home, too. Alice had to give up her full-time day job to take care of the baby, so she had started working nights. They hardly ever saw each other, and it seemed as though her only topic of conversation was how they should move to California or Alaska, where she had heard that surveyors were paid five times what Larry made. Larry knew his wife was dissatisfied with her work and believed her intelligence was being wasted, but he didn’t know what he could do about it. He was disconcerted when he realized that drinking and worrying about the next day at work while sitting at home with the baby at night had become a pattern.
Case Questions
1. What signs of stress was Larry Field exhibiting?
2. How was Larry Field trying to cope with his stress? Can you suggest more effective methods?
CONTACT:
DR. PRASANTH MBA PH.D. DME MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com
Strategic Management
Marks - 100
Attempt Only 4 Case Study
CASE – 1 MANAGING HINDUSTAN UNILEVER STRATEGICALLY
Unilever is one of the world’s oldest multinational companies. Its origin goes back to the 19th century when a group of companies operating independently, produced soaps and margarine. In 1930, the companies merged to form Unilever that diversified into food products in 1940s. Through the next five decades, it emerged as a major fast-moving consumer goods (FMCG) multinational operating in several businesses. In 2004, the Unilever 2010 strategic plan was put into action with the mission to ‘bring vitality to life’ and ‘to meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good, and get more out of life’. The corporate strategy is of focusing on bore businesses of food, home care and personal care. Unilever operates in more than 100 countries, has a turnover of € 39.6 billion and net profit of € 3.685 billion in 2006 and derives 41 per cent of its income from the developing and emerging economies around the world. It has 179,000 employees and is a culturally-diverse organisation with its top management coming from 24 nations. Internationalisation is based on the principle of local roots with global scale aimed at becoming a ‘multi-local multinational’.
The genesis of Hindustan Unilever (HUL) in India, goes back to 1888 when Unilever exported Sunlight soap to India. Three Indian, subsidiaries came into existence in the period 1931-1935 that merged to form Hindustan Lever in 1956. Mergers and acquisitions of Lipton (1972), Brooke Bond (1984), Ponds (1986), TOMCO (1993), Lakme (1998) and Modern Foods (2002) have resulted in an organisation that is a conglomerate of several businesses that have been continually restructured over the years.
HUL is one of the largest FMCG company in India with total sales of Rs. 12,295 crore and net profit of 1855crore in 2006. There are over 15000 employees, including more than 1300 managers. The present corporate strategy of HUL is to focus on core businesses. These core businesses are in home and personal care and food. There are 20 different consumer categories in these two businesses. For instance, home and personal care is made up of personal wash, laundry, skin care, hair care, oral care, deodorants, colour cosmetics and ayurvedic personal and health care, while food businesses have tea, coffee, ice creams and processed food brands. Apart from the two product divisions, there are separate departments for specialty exports and new ventures.
Strategic management at HUL is the responsibility of the board of directors headed by a chairman. There are five independent and five whole-time directors. The operational management is looked after by a management committee comprising of Vice Chairman, CEO and managing director and executive directors of the two business divisions and functional areas. The divisions have a lot of autonomy with dedicated assets and resources. A divisional committee having the executive director and heads of functions of sales, commercial and manufacturing looks after the business level decision-making. The functional-level management is the responsibility of the functional head. For instance, a marketing manager has a team of brand managers looking after the individual brands. Besides the decentralised divisional structure, HUL has centralised some functions such as finance, human resource management, research, technology, information technology and corporate and legal affairs.
Unilever globally and HUL nationally, operate in the highly competitive FMCG markets. The consumer markets for FMCG products are finicky: it’s difficult to create customers and much more difficult to retain them. Price is often the central concern in a consumer purchase decision requiring producers to be on continual guard against cost increases. Sales and distribution are critical functions organisationally. HUL operates in such a milieu. It has strong competitors such as the multinationals Procter & Gamble, Nivea or L’Oreal and formidable local companies such as, Amul, Nirma or the Tata
FMCG companies to contend with. Rivals have copied HUL’s strategies and tactics, especially in the area of marketing and distribution. Its innovations such as new style packaging or distribution through women entrepreneurs are much valued but also copied relentlessly, hurting its competitive advantage.
HUL is identified closely with India. There is a ring of truth to its vision statement: ‘to earn the love and respect of India by making a real difference to every Indian’. It has an impeccable record in corporate social responsibility. There is an element of nostalgia associated with brands like Lifebuoy (introduced in 1895) and Dalda (1937) for senior citizens in India. Consequently Indians have always perceived HUL as an Indian company rather than a multinational. HUL has attempted to align its strategies in the past to the special needs of Indian business environment. Be it marketing or human resource management, HUL has experimented with new ideas suited to the local context. For instance, HUL is known for its capabilities in rural marketing, effective distribution systems and human resource development. But this focus on India seems to be changing. This might indicate a change in the strategic posture as well as recognition that Indian markets have matured to the extent that they can be dealt with by the global strategies of Unilever. At the corporate level, it could also be an attempt to leverage global scale while retaining local responsiveness to some extent.
In line with the shift in corporate strategy, the focus of strategic decision-making seems to have moved from the subsidiary to the headquarters. Unilever has formulated a new global realignment under which it will develop brands and streamline product offerings across the world and the subsidiaries will sell the products. Other subtle indications of the shift of decision-making authority could be the appointment of a British CEO after nearly forty years during which there were Indian CEOs, the changed focus on a limited number of international brands rather than a large range of local brands developed over the years and the name-change from Hindustan Lever to Hindustan Unilever.
The shift in the strategic decision-making power from the subsidiary to headquarters could however, prove to be double-edged sword. An example could be of HUL adopting Unilever’s global strategy of focussing on a limited number of products, called the 30 power brands in 2002. That seemed a perfectly sensible strategic decision aimed at focusing managerial attention to a limited set of high-potential products. But one consequence of that was the HUL’s strong position in the niche soap and detergent markets suffering owing to neglect and the competitors were quick to take advantage of the opportunity. Then there are the statistics to deal with: HUL has nearly 80 per cent of sales and 85 per cent of net profits from the home and personal care businesses. Globally, Unilever derives half its revenues from food business. HUL does not have a strong position in the food business in India though the food processing industry remains quite attractive both in terms of local consumption as well as export markets. HUL’s own strategy of offering low-price, competitive products may also suffer at the cost of Unilever’s emphasis on premium priced, high end products sold through modern outlets.
There are some dark clouds on the horizon. HUL’s latest financials are not satisfactory. Net profit is down, sales are sluggish, input costs have been rising and new food products introduced in the market have yet to pick up. All this while, in one market segment after another, a competitor pushes ahead. In a company of such a big size and over-powering presence, these might still be minor events developments in a long history that needs to be taken in stride. But, pessimistically, they could also be pointers to what may come.
Questions:
1. State the strategy of Hindustan Unilever in your own words.
2. At what different levels is strategy formulated in HUL?
3. Comment on the strategic decision-making at HUL.
4. Give your opinion on whether the shift in strategic decision-making from India to Unilever’s headquarters could prove to be advantageous to HUL or not.
CASE: 2 THE STRATEGIC ASPIRATIONS OF THE RESERVE BANK OF INDIA
The Reserve Bank of India (RBI) is India’s central bank or ‘the bank of the bankers’. It was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1935. The Central Office of the RBI, initially set up at Kolkata, is at Mumbai. The RBI is fully owned by the Government of India.
The history of RBI is closely aligned with the economic and financial history of India. Most central banks around the world were established around the beginning of the twentieth century. The Bank was established on the basis of the Hilton Young Commission. It began its operations by taking over from the Government the functions so far being performed by the Controller of Currency and from the Imperial Bank of India, the management of Government accounts and public debt. After independence, RBI gradually strengthened its institution-building capabilities and evolved in terms of functions from central banking to that of development. There have been several attempts at reorganisation, restructuring and creation of specialised institutions to cater to emerging needs.
The Preamble of the RBI describes its basic functions like this: ‘….to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.’ The vision states that the RBI ‘….aims to be a leading central bank with credible, transparent, proactive and contemporaneous policies and seeks to be a catalyst for the emergence of a globally competitive financial system that helps deliver a high quality of life to the people in the country.’ The mission states that ‘RBI seeks to develop a sound and efficient financial system with monetary stability conductive to balanced and sustained growth of the Indian economy’. The corporate values of underlining the mission statement include public interest, integrity, excellence, independence of views and responsiveness and dynamism.
The three areas in which objectives of the RBI can be stated are as below.
1. Monetary policy objectives such as containing inflation and promoting economic growth, management of foreign exchange reserves and making currency available.
2. Objectives set for managing financial sector developments such as supervision of systems and information access and assisting banking and financial institutions to become competitive globally.
3. Organisational development objectives such as development of economic research facilities, creating information system for supporting economic decision-making, financial management and human resource management.
Strategic actions taken to realise the objectives fall under four categories:
1. The thrust area of monetary policy formulation and managing financial sector;
2. Evolving the legal framework to support the thrust area;
3. Customer service for providing support and creation of positive relationship; and
4. Organisational support such as structure, systems, human resource development and adoption of modern technology.
The major functions performed by the RBI are:
• Acting as the monetary authority
• Acting as the regulator and supervisor of the financial system
• Discharging responsibilities as the manager of foreign exchange
• Issue currency
• Play as developmental role
• Related functions such as acting as the banker to the government and scheduled banks
The management of the RBI is the responsibility of the central board of directors headed by the governor and consisting of deputy governors and other directors, all of whom are appointed by the government. There are four local boards based at Chennai, Kolkata, Mumbai and New Delhi. The day-to-day management of RBI is in the hands of the executive directors, managers at various levels and the support staff. There are about 22000 employees at RBI, working in 25 departments and training colleges.
The RBI identified its strengths and weaknesses as under.
• Strengths A large body of competent officers and staff; access to key data on the economy; wide organisational network with 22 regional offices; established infrastructure; ability to attract talent; and financial self sufficiency.
• Weaknesses Structural rigidity, lack of accountability and slow decision-making; eroded specialist know-how; strong employee unions with rigid industrial relations stance; surplus staff; and weak market intelligence.
Over the years, the RBI has evolved in terms of structure and functions, in response to the role assigned to it. There have been sweeping changes in the economic, social and political environment. The RBI has had to respond to it even in the absence of a systematic strategic plan. In 1992, the RBI, with the assistance of a private consultancy firm, embarked on a massive strategic planning exercise. The objective was to establish a roadmap to redefine RBI’s role and to review internal organisational and managerial efficacy, address the changing expectations from external stakeholders and reposition the bank in the global context. The strategic planning exercise was buttressed by departmental position papers and documents on various subjects such as technology, human resources and environmental trends. The strategic plan of the RBI emerged with four sections dealing with the statement of mission, objectives and policy, a review of RBI’s strengths and weaknesses and strategic actions required with an implementation plan. The strategic plan reiterates anticipation of evolving external environment in the medium-term; revisiting strengths and weaknesses (evaluation of capabilities); and doing away with the outdated mandates for enhancing efficiency in operations in furtherance of best public interests. The results of these efforts are likely to manifest in attaining a visible focus, reinforced proficiency, realisation of shared sense of purpose, optimising resource use and build-up of momentum to achieve goals.
Historically, the RBI adopted the time-tested technique of responding to external environment in a pragmatic manner and making piecemeal changes. The dilemma in adoption of a comprehensive strategic plan was the risk of trading off the flexibility of the pragmatic approach to creating rigidity imposed by a set model of planning.
Questions:
1. Consider the vision and mission statements of the Reserve Bank of India. Comment on the quality of both these statements.
2. Should the RBI go for a systematic and comprehensive strategic plan in place of its earlier pragmatic approach of responding to environmental events as and when they occur? Why?
CASE: 3 THE INTERNATIONALISATION OF KALYANI GROUP
The Kalyani Group is a large family-business group of India, employing more than 10000 employees. It has diverse businesses in engineering, steel, forgings, auto components, non-conventional energy and specialty chemicals. The annual turnover of the Group is over US$2.1 billion. The Group is known for its impressive internationalisation achievements. It has nine manufacturing locations spread over six countries. Over the years, it has established joint ventures with many global companies such as ArvinMeritor, USA, Carpenter Technology Corporation, USA, Hayes Lemmerz, USA and FAW Corporation, China.
The flagship company of the Group is Bharat Forge Limited that is claimed to be the second largest forging company in the world and the largest nationally, with about 80 per cent share in axle and engine components. The other major companies of the Group are Kalyani Steels, Kalyani Carpenter Special Steels, Kalyani Lemmerz, Automotive Axles, Kalyani Thermal Systems, BF Utilities, Hikal Limited, Epicenter and Synise Technologies
The emphasis on internationalisation is reflected in the vision statement of the Group where two of the five points relate to the Group trying to be a world-class organisation and achieving growth aggressively by accessing global markets. The Group is led by Mr. B.N. Kalyani, who is considered to be the major force behind the Group’s aggressive internationalisation drive. Mr. Kalyani joined the Group in 1972 when it was a small-scale diesel engine component business.
The corporate strategy of the Group is a combination of concentration of its core competence in its business with efforts at building, nurturing and sustaining mutually beneficial partnerships with alliance partners and customers. The value of these partnerships essentially lies in collaborative product development with the partners who are the original equipment manufacturers. The foreign partners are not intended to provide expansion in capacity, but to enable the Kalyani Group to extend its global marketing reach.
In achieving its successful status, the Kalyani Group has followed the path of integration, extending from the upstream steel making to downstream machining for auto components such as crank-shafts, front axle beams, steering knuckles, cam-shafts, connecting rods and rocker arms. In all these products, the Group has tried to move up the value chain instead of providing just the raw forgings. In the 1990s, it undertook a restructuring exercise to trim its unrelated businesses such as television and video products and concentrate on its core business of auto components.
Four factors are supposed to have influenced the growth of the Group over the years. These are mentioned below:
• Focussing on core businesses to maximise growth potential
• Attaining aggressive cost savings
• Expanding geographically to build global capacity and establishing leading positions
• Achieving external growth through acquisitions
The Group companies are claimed to be positioned at either number one or two in their respective businesses. For instance, the Group claims to be number one in forging and machined components, axle aggregates, wheels and alloy steel. The technology used by the Group in its mainline business of auto components and other businesses, is claimed to be state-of-the-art. The Group invests in forging technology to enhance efficiency, production quality and design capabilities. The Group’s emphasis on technology can be gauged from the fact that in the 1990s, it took the risky decision of investing Rs. 100 crore in the then latest forging technology, when the total Group turnover was barely Rs. 230 crore. Information technology is applied for product development, reducing production and product development time, supply-chain management and marketing of products. The Group lays high emphasis on research and development for providing engineering support, advanced metallurgical analysis and latest testing equipment in tandem with its high-class manufacturing facilities.
Being a top-driven group, the pattern of strategic decision-making within seems to be entrepreneurial. There was an attempt to formulate a five-year strategic plan in 1997, with the participation of the company executives. But no much is mentioned in the business press about that collaborative strategic decision-making after that.
Recent strategic moves include Kalyani Steels, a Group company, entering into a joint venture agreement in may 2007, with Gerdau S.A. Brazil for installation of rolling mills. An attempt to move out of the mainstream forging business was made when the Group strengthened its position in the prospective business of wind energy through 100 per cent acquisition of RSBconsult GmbH (RSB) of Germany. Prior to the acquisition, the Group was just a wind farm operator and supplier of components.
Questions:
1. What is the motive for internationalisation by the Kalyani Group? Discuss.
2. Which type of international strategy is Kalyani Group adopting? Explain.
CASE 4: THE STORY OF SYNERGOS UNFOLDS
Synergos is a young management and strategy consulting firm based at Mumbai. It was established in 1992 at a time when there were a lot of expectations among the industry people from the liberalisation policies that were started the previous year by the Government of India.
The consulting firm is an entrepreneurial venture started by Urmish Patel, a dynamic person who worked with a multinational consulting firm at the time. He left his comfortable position there to venture into the management consultancy industry. The motivation was to be ‘the master of his own destiny’ rather than being an employee working for others. Urmish comes from an upper middle-class Gujarati family, settled in a small town in Rajasthan. His father was a government servant who retired with a meagre pension. His mother is a housewife. His other siblings are all educated and well-settled in their respective careers and professions. Urmish is a creative individual, uncomfortable with the status-quo. During his student days at a college at Jaipur, he was continually coming up with bright ideas that some of his friends found to be preposterous. To him, however, these were perfectly achievable ideas. He studied biotechnology and then went to the US on a scholarship to do his Masters. After a semester at a well-known university there, he lost interest and switched to pursue an MBA. He liked it and soon settled down to work with an American consultancy firm and toured several countries on varied assignments during the seven years he worked there.
In 1992 came the urge to Urmish to chuck his job and be on his own. It was risky, yet an exciting step to take. His accumulated capital was limited—just enough to rent office space, buy a few computers and hire an assistant. There were no consultancy assignments for the first three months. But an acquaintance soon came to his aid, introducing him to the CFO of a major family business group who needed advice on a performance improvement project they wanted to launch. The opportunity came in handy though the returns were nothing to write home about. That project was the first step to
many more that came gradually. Synergos started gaining presence in the competitive management consultancy industry and attracting attention from the people whom they worked for. Word-of-mouth publicity led them from one project to another for the first three years till 1995. Synergos took up whatever came its way, delivering a cost-effective solution to its clients. A team of four had formed by now, each member of the team specialising in services rendered to the clients. For instance, one of the members is a specialist in engineering projects, while another has expertise finance. The third one is a service sector specialist, also having experience in dealing with government matters.
The phase of rapid growth started some time in 1995 when the Synergos team decided to focus on the small and medium enterprises (SMEs). These were firms that realised they had problems needing specialist advice, but were apprehensive to approach the big firms on account of their limited outlay and inexperience of dealing with such firms. Synergos came to their aid by tailoring their services as near as possible to their needs. Another differentiation platform Synergos offered to its client was a fully-integrated consultancy service where it got involved right from the stage of planning down to its implementation and monitoring.
Presently, Synergos has grown to be a medium-sized consultancy firm, serving clients in India and abroad, working for industries ranging from auto components to financial services and for manufacturing organisations to service providers. Some-how, nearly half of the assignments it has worked on have been for mid-sized, upcoming, family-owned businesses, a niche it has served well. These organisations typically need a boutique sort of consultancy that can offer customised services dealing with a broad range of practices related to strategy, organisation design, mergers and acquisitions and operational matter such as logistics and supply-chain management. Synergos fits in with their requirements owing to its personalised service and reasonable commission structure.
The organisational structure at Synergos has a board at the top, consisting of seven people, including the four founding members and three independent directors. One of the independent directors is the chairman of the board. Urmish, as the founder CEO, also heads an executive management committee with each of the founding members, leading three other top-level committees dealing with business portfolio, service management and executive recruitment.
The management team is called the professional group. The rest of the employees are referred to as the staff. The professional group has young women and men who are graduates from some of the best institutions in India and abroad. They are assigned to taskforces based on their qualifications, experience and interests. The departmentation at Synergos is flexible, based on an interplay of the three categories: skill, service and specialty. For instance, a professional may have IT skills, may have worked to provide supply-chain management services and developed expertise in handling operational assignments for medium-sized food and beverage firms. There is a lot of multi-tasking however, to utilise the wide range of skills and special expertise that the professionals have. For administrative matters, the professionals are assigned to client-service departments of industry solutions, enterprise solutions and technology solutions. The flexibility that such an organisational arrangement affords seems to have been the major reason for the evolution of the organisation structure at Synergos over the years.
The staff group of employees consists of the support people who provide a variety of services to the professionals. Among these are research assistants, industry analysts, documentation experts and secretarial staff. There is no set pattern for assignment of staff to the administrative departments and generally, a need-based approach is followed, depending on the workload at a particular time.
Recruitment for professionals is stringent. Synergos typically looks for a good combination of education and experience and lays much emphasis on the compatibility of the prospective employee with the shared values. Creativity, broad range of professional interests, intellectual acumen, team-working and physical fitness to undertake demanding tasks and work for long hours are the criteria for hiring. There are not many training opportunities except the on-the-job learning. New professionals are assigned to a mentor for some time till they are ready to handle assignments autonomously. The staff members are usually recruited from fresh graduates, with good degrees from reputed institutions, in arts, sciences and commerce. The staff positions are also open for persons wanting to work on part-time or project-bases. Emphasis is given to the ability of the prospective staff to undertake multi-tasking and work with documentation and word processing and presentation software packages.
The compensation system consists of a base salary with commission and bonus depending on performance. There are other usual elements such as medical reimbursement, loan facility and gratuity and retirement benefits. the performance appraisal is informal, with at least one of the four founding members being part of the evaluation committee for a professional. Usually, the founding member closest to the work area of the employee is involved in determining the rewards to be given. The time-cycle for appraisal is one year. Management control is discreet and performance-based rather than behaviour-based. The means for control are informal, such as direct supervision.
Urmish is a strong proponent of the emergent strategy and is not in favour of tying Synergos to a fixed strategic posture. So are the other founder members, though at times they do talk about deciding on a niche such as SME organisations as clients and enterprise solutions as the core competence. In the highly fragmented consultancy industry where it is possible for even one person to set up an office in a commercial area and leverage connections to secure projects, Synergos is open to opportunities as they emerge, while trying to maintain the flexibility that has made it successful till now.
Questions:
1. Identify the type of organisation structure being used at Synergos and explain how it works. What are the benefits of using this type of structure? What are the pitfalls?
2. Express your opinion about whether the structure is in line with the recruitments of the strategy that Synergos is implementing.
3. Based on the information related to the information, control and reward systems available in the case, examine whether these systems are appropriate for the type of strategy being implemented.
CASE: 5 EXERCISING STRATEGIC AND OPERATIONAL CONTROLS AT iGATE GLOBAL SOLUTIONS
The Bangalore-based iGATE Global Solutions is the flagship company of iGATE Corporation, a NASDAQ-listed US-based corporation. Known earlier as Mascot Systems, it was set up in India in 1993, to offer staffing services. It acquired business process outsourcing (BPO) and contact centre businesses in 2003, making it an end-to-end IT and ITES service provider. Its service portfolio includes consulting, IT services, data analytics, enterprise systems, BPO/BSP, contact centre and infrastructure management services. iGATE has over 100 active clients and centres based in Canada, China, Malaysia, India, the UK and the US. Chairman, Ashok Trivedi and CEO Phaneesh Murthy, an ex-Infosys IT professional and their partners hold a major stake, with some participation by institutional and public investors. The revenues for 2006-2007 are over Rs. 805 crore and net profits, Rs. 49.6 crore.
The corporate strategies of iGATE are offering integrated IT services and divesting the legacy IT staffing business and possibly making acquisitions in the domain expertise for financial services businesses. The business strategy is focused differentiation based on the focal points of testing, infrastructure management and enterprise solutions. The competitive tactic is avoiding head-on competition with the formidable larger players in the industry by carving out a niche. The business definition is serving large customers and staying away from sub-contracting work.
iGATE adopts a differentiation business model based on an integrated technology and operations model which it calls as the iTOPS model. This is an advancement over the prevalent model in the ITES industry based on low-cost arbitrage model. iTOPS is based on transaction-based pricing for services and supporting the clients by providing the platform, processes and services.
The strategic evaluation and control has both the elements of strategic as well as operational controls.
The functional and operational implementation is aimed at achieving four sets of objectives:
(a) Shifting from small customers to large customer (Fortune 1000 companies)
(b) Shifting away from stocking to project-consulting assignments
(c) Working directly with clients rather than with system integrators
(d) Moving from a local to international markets
Some illustrations of the performance indicators that reflect these objectives are:
1. On-shore versus off-shore mix of business revenues: In 2004, this ratio was 55:45 and in 2007, it has improved to 27:73, indicating a much higher revenue generation from off-shore business.
2. Billing rates: Revenue charged from clients on assignments. With project consulting assignments from off-shore clients, where the revenues are typically higher, with lower costs and higher productivity in India, the realisations from billing have to be higher. The industry norms for ITES are US$18-25 per hour for off-shore and US$ 55-65 per hour for on-shore assignments.
3. The number of large clients from Fortune 1000 companies: Presently, iGATE has nearly half of its more than 100 clients from Fortune 1000 companies, of which the top 10 account for 70 per cent of its business.
4. Controlling employee costs: This is an area where concerted effort is required from the HR and finance functions. Hiring less experienced employees lowers the compensation bill. In the IT and ITES industry, attracting and retaining well-qualified and experienced employees is a critical success factor. The performance indicator for this objective is the cost per employee.
5. Human resource metrics such as the hiring and attrition rates: In the IT and ITES industry, the human resource metrics such as hiring and attrition rates are critical indicators. Increasing the number of employees and lowering the attrition rate by retaining the employees is a big challenge. There are presently about 5800 employees, likely to go up to 8500 in the next two years. The attrition of 20 per cent presently at iGATE is on the higher side. But such attrition is common in the industry where the employee mobility is high and employee pinching a widespread trend.
The human resource management function being critical in an industry where so many challenges exist, needs a strong emphasis on training and development, motivation, autonomy and attractive incentives. iGATE has an integrated people management model focusing on developing technical, behavioural and leadership competencies. The three metrics by which the HR function is assessed are: human capital index, work culture and employee affective commitment. The reward system at iGATE consists of meritorious employees across all levels being granted restricted stock options, thus providing an incentive to remain with the company till they become due. The company, though, is an average paymaster, which disadvantage it tries to trade-off offering a more challenging work environment, quicker promotions and chances for practising innovation.
Critics say that that iGATE lacks the big-brand appeal of the larger players such as Infosys and Wipro, cannot compete on scale and is still under the shadow of its original business of body-shopping IT personnel.
Questions:
1. Analyse the iGATE case to highlight how it could apply some of the strategic controls such as premise control, implementation control, strategic surveillance and special alert control.
2. Analyse and describe the process of setting of standards at iGATE.
3. Give your opinion on the effectiveness of the role of reward system in exercising HR performance management at iGATE and suggest what improvements are possible, given the environmental conditions in the IT/ITES industry in India at present.
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CASE – 1: Where Do We Go from Here?
As one of the many seminars held to discuss the corporate response of family-owned business to liberalisation and globalisation, the keynote Mr Gurcharan Das concluded his speech by saying, “In the end, I would say that the success of Indian economy would depend on how the Indian industry and business respond to the reform process.”
As the proceedings of the seminar progressed it became clear that there was a difference of opinion in the perception of participants. Those who were supporting the case for letting the family-owned businesses face competition opined that such businesses in India have exhibited financial acumen; its members have generally adopted an austere life style; they have demonstrated an ability to take calculated risks, and an ability to accumulate and manage capital. They have devised unique managerial style and led the creation of the equity cult among Indians. Several of them are low-cost producers.
The participants critical of the role of family business had this is to say: “There has been a tendency to mix up family’s intent with that of businesses managed by them. There is a lack of focus and business strategy. Family businesses have generally adopted a short-term approach to business causing less purposeful investments in specially critical areas such as employee development and product development. Customers and development of marketing skills have been neglected.”
The valedictory session of the Seminar attempted to bring out the issues clearly. It culminated in an agenda for reform by the family businesses. The points highlighted in the agenda are:
1. Indian family-owned business organisations need to professionalise management,
2. they need to curtail the diversified of their business groups and impart a sharper focus to their business activities, and
3. they need to pay greater attention to the development of human capital.
Question
Suppose you were an observer at the seminar. During tea and lunch breaks you had an occasion to meet several people who were skeptical and felt that the reform process was having only a superficial impact on the corporates. Express your opinion that you form about the issues at the seminar.
CASE – 2 A Healthy Dose of Success
Muhammad Majeed represents a typical Indian who has created success out of sheer hard work and commitment through his education and expertise. At the age of 23 years, Majeed, after graduating in pharmacy from Kerala University, went to pursue higher studies in the US. He completed his masters and PhD in industrial chemistry. Armed with high qualifications, he became a research pharmacist and eventually, as most expatriate Indians do, set up his own company, Sabinsa Corporation. Experiencing difficulties with the long-drawn drug approval process of the US Food and Drug Administration and his own dwindling savings, Majeed focussed on ayurvedic products based on natural extracts. He returned to India in 1991 (incidentally, the year when liberalisation started in India) and set up Sami Chemicals and Extracts Ltd, late renamed as Sami Labs Ltd (SLL), Bangalore.
SLL has over three dozen products, and seven US patents. There are 25 European and other country patents pending approval. SLL has four manufacturing units all based in Karnataka. The sales is Rs 44.5 crore and the profit-after-tax is Rs 5.89 crore. It has pioneered specialised products based on Indian herbal extracts relying on the principles of ayurveda. The major thrust is on remedies for cholesterol control, fat reduction, and weight management. As against several Indian companies exporting raw herbs, SLL specialises in value-addition through extractions. The result is encouraging: SLL’s products typically fetch an export price that is more than double the price of raw herbs.
SLL thinks of its business as “manufacturing and selling traditional standardized extracts and nutritional and pharmaceutical fine chemicals”. Sabinsa, its US-based company, secures contracts from the US companies to manufacture certain chemicals in India. Its business plans are quite ambitious. Setting up a product management team, assisting farmers in cultivation of pharmaceutically useful herbs, and international collaborations for developing research-based intellectual property and its commercialisation are some of the strategic actions on the anvil.
SLL looks forward to being a Rs 500-crore company by 2005 when the World Trade Organisation’s patenting regimes comes into force.
Question
How will you define the business of SLL? Comment on the business of SLL and your opinion on the likelihood of its success.
CASE – 3 No Chain, No Gain
Textile industry is one of the oldest industries in India. Several business houses have their origin in this industry. In the mid-1980s, the powerloom sector in the unorganised sector started hurting badly the interests of the composite textile mills of the sector. Their cost structure, with lower overheads and no duties, was less than half of that of mills for equivalent production. While the powerlooms sold cloth as a commodity, the mills tried to establish their products as brands. The post-liberalisation period has seen a large number of foreign brands enter India. It is in this scenario that the Mayur brand of Rajasthan Spinning and Weaving Mills (RSWM) had to carve out a place for itself.
RSWM is the flagship company of the LNJ Bhilwara group. It has been the largest producer and trader of yarn in the country and caters to the large demands for blended yarns and grey cloth fabric used for children’s school uniform. In 1994, the yarn business faced a severe crunch owing to overcapacity. From 1995 onward, RSWM became a late follower of the industry trend as other competitors already moved up the value chain.
Textile manufacturing is basically constituted of the processes of spinning, weaving, processing, and marketing. More than 50 per cent of the value is concentrated in weaving and processing. Moving up the value chain from spinning involves large investments in machinery and labour. Graduating to marketing requires getting closer to the customers. This is the challenge that a traditional spinning mill like RSWM had to face if it was to sustain itself in a highly competitive market.
At another level, for RSWM, it was a matter of cultural transformation of the organisation long used to a conservative, trader mentality. Imagine a company whose main driving force, Shekhar Agarwal, Vice-Chairman and Managing Director having little interest in watching Hindi movies signing up Sharukh Khan at a considerable price for celebrity advertising. From the market side, it has long been troubled with its commitment to the loyal middle-class customers as it had to simultaneously pay attention to the upwardly mobile upper middle class customers. Then there was the dilemma of being too many things to a wide range of audience. RSWM wanted to have a stake in the export markets as well as keep its share in the rural markets. It perceived itself as an efficient producer and wished to become a flamboyant retailer. It excelled in basic textile processing yet dreamt of attaining sophistication in in-house production of readymade garments. And all this while it has been a late mover, losing out to early movers such as Raymonds. No wonder it virtually landed up on the fringes of the industry, far behind formidable competitors like Reliance, Grasim, and S. Kumar.
Question
Suggest how should RSWM manage its value chain effectively. Should it try to imitate the market leaders? If yes, why? If no, why not? What alternatives routes to success do you propose?
CASE – 4 A Very Intriguing Package
It is not quite often that a positive product feature becomes an albatross around the neck of a company. VIP Industries had held sway for over two decades in the organised Indian luggage market on the basis of the durability of its moulded suitcases. Obviously, the customer perceives value-for-money in the long-lasting, reasonably-priced Alfa brand of VIP suitcases which sells 1.5 lakh pieces a month. But this means that having bought one suitcase the customer can do with it for several years. Market research by the company shows that an average Indian family pulls out the suitcase merely for outstation travel a few times a year. Hence, there is no pressing need for continual replacement of the old luggage.
The VIP products are made of virgin polymer as compared to the recycled grade I and II polymers used by the unorganised sector. They are subjected to stringent stress tests for quality control.
VIP has a presence in a wide range of the market segments within a price spectrum of Rs 295 to Rs 6,000 apiece. It is her that the competition from the unorganised sector hurts the company most. VIP’s economically-priced brand, Alfa is widely imitated and sold at much lower prices. This enables the unorganised sector to typically sell 20 times more than VIP can. The lower price threshold seems to be Rs 225 which in nearly impossible for VIP to achieve given its cost structure. In the Rs 1500 plus premium range, VIP has to contend with Samsonite which is a formidable competitor.
The obvious tactic for VIP has been to cut costs. Distribution and logistics is one area where valiant efforts have been made at cost reduction. VIP has four factories located in heart of India. The average distribution costs come to Rs 7 to Rs 8 apiece. Reduction in cost has been attempted through distributed manufacturing by having vendors making the product at different locations, thereby, avoiding transportation of high-volume suitcases across long distances and reducing inventory build-up in the channel.
Severe pressure on sales has resulted in VIP Industries offering discounts and unwittingly entering into a disastrous price war. Promotion of a high visibility product suffered and advertising expenditure has been ruthlessly curtailed from the earlier Rs 11 crore to Rs 2 crore now. Its lead advertising agency is HTA. Action on the promotion front has seen reorganisation of the brand portfolio. Incidentally, earlier its successful and popular Kal bhi aaj bhi campaign served to reinforce its durability theme.
There are several roadblocks that the company has to negotiate. Increase in population, rising propensity of Indian to travel, and the insatiable thirst of customers for state-of-the-art technological products with newer designs and innovation, all at an affordable price are the opportunities and challenges before the company. Introduction of new brands, Mantra and Skybags, product range of diversification to include children’s bags and ladies’ bags, strategic alliance with Europe’s leading luggage-maker—Delsey—are some of the steps taken by the company.
Yet, caught in its self spun web of past successes, VIP is today faced with an uncertain future.
Question
How should the VIP Industries get out of the bind that it finds itself in? Outline the contours of the marketing plans and policies that VIP needs to formulate and implement?
CASE – 5 Let There be Light
Traditionally, power plants, being capital-intensive, have been set up by the public sector and state electricity boards (SEBs) in India. Everyone agrees today that the energy sector is the major infrastructure bottleneck holding up economic development. A critical aspect of economic reforms thus is the reform of the energy sector.
The Madhya Pradesh State Electricity Board (MPSEB) is not much different from its counterparts in other states. It faces similar problems and is opting for identical solutions. The common elements in the power sector reforms are: corporatisation by breaking the SEB into generation, transmission, and distribution; financial restructuring including debt and interest payment rescheduling; reduction of manpower; and improvements in operational efficiency.
Public utilities, like SEBS, have to be commercially viable in order to survive. Yet historically, this aspect of SEB as an organisation has been sacrificed at the altar of political expediency. The ruling party, irrespective of whether it is the Congress at present or the Bharatiya Janata Party earlier, have made pre-election promises of supplying free or heavily-subsidised power. Digvijay Singh, the present chief minister of Madhya Pradesh, a populist politician earlier, on longer sees electoral benefit in providing free electricity. “It pays to pay” is his refrain today, whether it is healthcare or electricity.
Bold steps—bold, as they still carry the risk of a political fallout with fiery BJP leader Uma Bharti breathing down Digvijay’s neck or the silent schemers of his own party working overtime behind the scenes—have been initiated to reform the energy sector in Madhya Pradesh. MPSEB is to be divided into generation, transmission, and distribution (T&D), and supply companies. Financial management and cash flow management is to be improved. The retirement age of MPSEB employees has been reduced from 60 to 58 years. Effective operational control is sought to be exercised by metering power supply at division / district level to fix responsibility for T & D losses and power thefts. A sustained drive is on to identify non-paying consumers, install meters, and make them pay their bills regularly.
MPSEB’s annual losses are to the tune of a massive Rs 1,600 crore; total liabilities are estimated to be Rs 20,000 crore. Undeniably, are parameters indicating the rot that has corroded the system.
At one level, the reform of the energy sector is a political action but at another, and perhaps, a more fundamental level, it is a question of managing an organisation strategically through strategic actions designed to turn around a vital public utility.
Question
Analyse the problems of the MPSEB from the strategic management perspective. Do you feel that the actions taken or being contemplated are strategic in nature? Propose what else needs to be done to make the MPSEB a viable organisation.
Attempt any Ten Questions:
1. Discuss the role of SEBI in regulating Indian Capital Market.
2. Discuss the basic problems of Industrial finance in India
3. Write short notes on the following (Any Three)
i) Corporate disasters
ii) Corporate ethics
iii) Managers and professionalism
iv) Role played by SEBI in avoiding, corporate disasters, ethics ,and also describe CSR initiatives of corporate world.
4. Explain Principles of Corporate Governance .
5. Explain the Guidelines issued by SEBI towards Corporate Governance.
6. Explain the underlying assumptions of the Black and Scholes option pricing model and why are they needed? Explain in detail Black Scholes option pricing model .
7. Discuss the relationship between the financing decision and investment decision in a firm
8. Discuss RAD and CE approach
9. Explain the advantages of Decision tree approach in investment decisions
10. .Discuss the factors which exercise influence on the demand for working capital in a manufacturing concern
11. Discuss the role of Commercial bank as financial intermediaries
12. What do you mean by share capital? Explain the different forms of share can a company issue?
13. Explain the role of EXIM Bank Financing of exports
14. Explain the relevance which is associated with the financing decision and investment in the organization.
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Case 1
Difficult Transitions
Tony Stark had just finished his first week at Reece Enterprises and decided to drive upstate to a small lakefront lodge for some fishing and relaxation. Tony had worked for the previous ten years for the O’Grady Company, but O’Grady had been through some hard times of late and had recently shut down several of its operating groups, including Tony’s, to cut costs. Fortunately, Tony’s experience and recommendations had made finding another position fairly easy. As he drove the interstate, he reflected on the past ten years and the apparent situation at Reece.
At O’Grady, things had been great. Tony had been part of the team from day one. The job had met his personal goals and expectations perfectly, and Tony believed he had grown greatly as a person. His work was appreciated and recognized; he had received three promotions and many more pay increases.
Tony had also liked the company itself. The firm was decentralized, allowing its managers considerable autonomy and freedom. The corporate Culture was easygoing. Communication was open. It seemed that everyone knew what was going on at all times, and if you didn’t know about something, it was easy to find out.
The people had been another plus. Tony and three other managers went to lunch often and played golf every Saturday. They got along well both personally and professionally and truly worked together as a team. Their boss had been very supportive, giving them the help they needed but also staying out of the way and letting them work.
When word about the shutdown came down, Tony was devastated. He was sure that nothing could replace O’Grady. After the final closing was announced, he spent only a few weeks looking around before he found a comparable position at Reece Enterprises.
As Tony drove, he reflected that "comparable" probably was the wrong word. Indeed, Reece and
O’Grady were about as different as you could get. Top managers at Reece apparently didn’t worry too much about who did a good job and who didn’t. They seemed to promote and reward people based on how long they had been there and how well they played the never-ending political games.
Maybe this stemmed from the organization itself, Tony pondered. Reece was a bigger organization than O’Grady and was structured much more bureaucratically. It seemed that no one was allowed to make any sort of decision without getting three signatures from higher up. Those signatures, though, were hard to get. All the top managers usually were too busy to see anyone, and interoffice memos apparently had very low priority.
Tony also had had some problems fitting in. His peers treated him with polite indifference. He sensed that a couple of them resented that he, an outsider, had been brought right in at their level after they had had to work themselves up the ladder. On Tuesday he had asked two colleagues about playing golf.
They had politely declined, saying that they did not play often. But later in the week, he had overheard them making arrangements to play that very Saturday.
It was at that point that Tony had decided to go fishing. As he steered his car off the interstate to get gas, he wondered if perhaps he had made a mistake in accepting the Reece offer without finding out more about what he was getting into.
Case Questions
1. Identify several concepts and characteristics from the field of organizational behavior that this case
illustrates?
2. What advice can you give Tony? How would this advice be supported or tempered by behavioral
concepts and processes?
3. Is it possible to find an "ideal" place to work? Explain.
Case 2
Humanized Robots?
Helen Bowers was stumped. Sitting in her office at the plant, she pondered the same questions she had been facing for months: how to get her company’s employees to work harder and produce more. No matter what she did, it didn’t seem to help much.
Helen had inherited the business three years ago when her father, Jake Bowers, passed away
unexpectedly. Bowers Machine Parts was founded four decades ago by Jake and had grown into a moderate-size corporation. Bowers makes replacement parts for large-scale manufacturing machines such as lathes and mills. The firm is headquartered in Kansas City and has three plants scattered throughout Missouri.
Although Helen grew up in the family business, she never understood her father’s approach. Jake had treated his employees like part of his family. In Helen’s view, however, he paid them more than he had to, asked their advice far more often than he should have, and spent too much time listening to their ideas and complaints. When Helen took over, she vowed to change how things were done. In particular, she resolved to stop handling employees with kid gloves and to treat them like what they were: the hired help.
In addition to changing the way employees were treated, Helen had another goal for Bowers. She wanted to meet the challenge of international competition. Japanese firms had moved aggressively into the market for heavy industrial equipment. She saw this as both a threat and an opportunity. On the one hand, if she could get a toehold as a parts supplier to these firms, Bowers could grow rapidly. On the other, the lucrative parts market was also sure to attract more Japanese competitors. Helen had to make sure that Bowers could compete effectively with highly productive and profitable Japanese firms.
From the day Helen took over, she practiced an altogether different philosophy to achieve her goals. For one thing, she increased production quotas by 20 percent. She instructed her first-line supervisors to crack down on employees and eliminate all idle time. She also decided to shut down the company softball field her father had built. She thought the employees really didn’t use it much, and she wanted the space for future expansion.
Helen also announced that future contributions to the firm’s profit-sharing plan would be phased out.
Employees were paid enough, she believed, and all profits were the rightful property of the owner—her.She also had private plans to cut future pay increases to bring average wages down to where she thought they belonged. Finally, Helen changed a number of operational procedures. In particular, she stopped asking other people for their advice. She reasoned that she was the boss and knew what was best. If she asked for advice and then didn’t take it, it would only stir up resentment.
All in all, Helen thought, things should be going much better. Output should be up and costs should be way down. Her strategy should be resulting in much higher levels of productivity and profits.
But that was not happening. Whenever Helen walked through one of the plants, she sensed that people weren’t doing their best. Performance reports indicated that output was only marginally higher than before but scrap rates had soared. Payroll costs were indeed lower, but other personnel costs were up. It
seemed that turnover had increased substantially and training costs had gone up as a result.
In desperation, Helen finally had hired a consultant. After carefully researching the history of the
organization and Helen’s recent changes, the consultant made some remarkable suggestions. The bottom line, Helen felt, was that the consultant thought she should go back to that "humanistic nonsense" her father had used. No matter how she turned it, though, she just couldn’t see the wisdom in this. People worked to make a buck and didn’t want all that participation stuff.Suddenly, Helen knew just what to do: She would announce that all employees who failed to increase their productivity by 10 percent would suffer an equal pay cut. She sighed in relief, feeling confident that she had finally figured out the answer.
Case Questions
1. How successful do you think Helen Bowers’s new plan will be?
2. What challenges does Helen confront?
3. If you were Helen’s consultant, what would you advise her to do?
Case 3
Teams at Evans RV Wholesale Supply and Distribution Company?
Evans RV Wholesale Supply and Distribution Company sells parts, equipment, and supplies for
recreational vehicles-motor homes, travel trailers, campers, and similar vehicles. In addition, Evans has a service department for the repair and service of RVs. The owner, Alex Evans, bought the company five years ago from its original owner, changed the name of the company, and has finally made it profitable, although it has been rough going. The organization is set up in three divisions: service, retail parts and supplies, and wholesale parts and supplies. Alex, the owner, CEO, and president, has a vice president for each operating division and a vice president of finance and operations. The organization chart shows these divisions and positions.
In the warehouse there are three groups: receiving (checking orders for completeness, returning
defective merchandise, stocking the shelves, filling orders), service parts, and order filling for outgoing shipments. The warehouse group is responsible for all activities related to parts and supplies receiving,storage, and shipping.
The retail sales division includes all functions related to selling of parts and supplies at the two stores and in the mobile sales trailer. Personnel in the retail division include salespeople and cashiers. The retail salespeople also work in the warehouse because the warehouse also serves as the showroom for walk-in customers.
In the service department the service manager supervises the service writers, one scheduler, and lead mechanics and technicians. The service department includes the collision repair group at the main store and the service department at the satellite store. The collision repair group has two service writers who have special expertise in collision repair and insurance regulations. Two drivers who move RVs around the "yard" also work in the service division.
The accounting and finance groups do everything related to the money side of the business, including accounts payable and receivable, cash management, and payroll. Also in this group is the one person who handles all of the traditional personnel functions.
Alex has run other small businesses and is known as a benevolent owner, always taking care of the loyal employees who work hard and are the backbone of any small business. He is also known as being real tough on anyone who loafs on the job or tries to take unfair advantage of Alex or the company. Most of the employees are either veterans of the RV industry at Evans or elsewhere, or are very young and still learning the business. Alex is working hard to develop a good work ethic among the younger employees and to keep the old-timers fully involved. Since he bought the business, Alex has instituted new, modern, employee-centered human resource policies. However, the company is still a traditional hierarchically structured organization.
The company is located in a major metropolitan area that has a lot of potential customers for the RV business. The region has many outdoor recreational activities and an active retirement community that either lives in RVs (motor homes, trailers, or mobile homes) or uses them for recreation. The former owner of the business specifically chose not to be in the RV sales business, figuring that parts and service was the better end of the business. Two stores are strategically located on opposite ends of the metropolitan area, and a mobile sales office is moved around the major camping and recreational areas during the peak months of the year.
When Alex bought the company, the parts and supplies business was only retail, relying on customers to walk in the door to buy something. After buying the business, Alex applied good management, marketing, and cash-management principles to get the company out of the red and into profitability.
Although his was not the only such business in town, it was the only one locally owned, and it had a good local following. About two years ago, Alex recognized that the nature of the business was changing. First, he saw the large nationwide retailers moving into town. These retailers were using discount pricing in large warehouse-type stores. These large retail stores could use volume purchasing to get lower prices from manufacturers, and they had the large stores necessary to store and shelve the large inventory. Alex, with only two stores, was unable to get such low prices from manufacturers. He also noted that retired people were notorious for shopping around for the lowest prices, but they also appreciated good, friendly customer service. People interested in recreational items also seemed to be following the national trend to shop via catalogs.
So for a variety of reasons Alex began to develop a wholesale business by becoming a wholesale
distributor to the many RV parts and supply businesses in the small towns located in the recreational areas around that state and in surrounding states. At the same time, he created the first catalog for RV parts and supplies, featuring all the brand-name parts and supplies by category and supplier. The catalog had a very attractive camping scene on the cover, a combination of attractively displayed items and many pages full of all the possible parts and supplies that the RV owner could think of. Of course, he made placing an order very easy, by phone, mail, or fax, and accepted many easy payment methods. He filled both distributor orders and catalog orders from his warehouse in the main store using standard mail and parcel delivery services, charging the full delivery costs to the customers. He credits the business’s survival so far to his diversification into the warehouse and catalog business through which he could directly compete with the national chains.
Although it is now barely profitable, Alex is concerned about the changes in the industry and the
competition and about making the monthly payments on the $5 million loan he got from the bank to buy the business in the first place. In addition, he reads about the latest management techniques and attends various professional conferences around the country. He has been hearing and reading about this team-based organization idea and thinks it might be just the thing to energize his company and take it to the next level of performance and profitability. At the annual strategic planning retreat in August, Alex announced to his top management team that starting on October 1 (the beginning of the next fiscal year), the company would be changing to a team-based arrangement.
Case Questions
1. What mistakes has Alex already made in developing a team-based organization?
2. If Alex were to call you in as a consultant, what would you tell him to do?
3. Using the organization chart of Evans RV Wholesale Supply and Distribution, describe how you
would put the employees together in teams.
Case 4 Stress Takes Its Toll
Larry Field had a lot of fun in high school. He was a fairly good student, especially in math, he worked harder than most of his friends, and somehow he ended up going steady with Alice Shiflette, class valedictorian. He worked summers for a local surveyor, William Loude, and when he graduated Mr. Loude offered him a job as number-three man on one of his survey crews. The pay wasn’t very high, but Larry already was good at the work, and he believed all he needed was a steady job to boost his confidence to ask Alice to marry him. Once he did, events unfolded rapidly. He started work in June, he and Alice were married in October, Alice took a job as a secretary in a local company that made business forms, and a year later they had their first child. The baby came as something of a shock to Larry. He had come to enjoy the independence his own paycheck gave him every week. Food and rent took up most of it, but he still enjoyed playing basketball a few nights a week with his high school buddies and spending Sunday afternoons on the softball field.
When the baby came, however, Larry’s brow began to furrow a bit. He was only 20 years old, and he still wasn’t making much money. He asked Mr. Loude for a raise and got it—his first.
Two months later, one of the crew chiefs quit just when Mr. Loude’s crews had more work than they could handle. Mr. Loude hated to turn down work, so he made Larry Field a crew chief, giving his crew some of the old instruments that weren’t good enough for the precision work of the top crews, and assigned him the easy title surveys in town. Because it meant a jump in salary, Larry had no choice but to accept the crew chief position. But it scared him. He had never been very ambitious or curious, so he’d paid little attention to the training of his former crew chief. He knew how to run the instruments— the basics, anyway—but every morning he woke up terrified that he would be sent on a job he couldn’t handle.
During his first few months as a crew chief, Larry began doing things that his wife thought he had outgrown. He frequently talked so fast that he would stumble over his own words, stammer, turn red in the face, and have to start all over again. He began smoking, too, something he had not done since they had started dating. He told his two crew members that smoking kept his hands from shaking when he was working on an instrument. Neither of them smoked, and when Larry began lighting up in the truck while they were waiting for the rain to stop, they would become resentful and complain that he had no right to ruin their lungs too.
Larry found it particularly hard to adjust to being "boss," especially since one of his workers was getting an engineering degree at night school and both crew members were the same age as he. He felt sure that Alfonso Reyes, the scholar, would take over his position in no time. He kept feeling that Alfonso was looking over his shoulder and began snapping any time they worked close together.
Things were getting tense at home, too. Alice had to give up her full-time day job to take care of the baby, so she had started working nights. They hardly ever saw each other, and it seemed as though her only topic of conversation was how they should move to California or Alaska, where she had heard that surveyors were paid five times what Larry made. Larry knew his wife was dissatisfied with her work and believed her intelligence was being wasted, but he didn’t know what he could do about it. He was disconcerted when he realized that drinking and worrying about the next day at work while sitting at home with the baby at night had become a pattern.
Case Questions
1. What signs of stress was Larry Field exhibiting?
2. How was Larry Field trying to cope with his stress? Can you suggest more effective methods?
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