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Business Communication
Section A: Objective Type & Short Questions (30 marks)
This section consists of multiple choices and Short Notes type questions.
Answer all the questions.
Part one questions carry 1 mark each & Part Two questions carry 4 marks each.
Part one:
Multiple choice:
1. __________is an essential function of Business Organizations:
a. Information
b. Communication
c. Power
d. None of the above
2. Physiological Barriers of listening are:
a. Hearing impairment
b. Physical conditions
c. Prejudices
d. All of the above
3. Which presentation tend to make you speak more quickly than usual:
a. Electronic
b. Oral
c. Both „a‟ and „b‟
d. None of the above
4. What is the main function of Business Communication:
a. Sincerity
b. Positive language
c. Persuasion
d. Ethical standard
5. The responsibilities of the office manager in a firm that produces electronics spares is:
a. Everything in the office runs efficiently
b. Furniture and other equipment in the office is adequate
c. Processing all the incoming official mail and responding to some
d. All of the above
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6. Labov‟s Storytelling Model based on:
a. Communication through speech
b. Language learning
c. Group Discussions
d. None of the above
7. Diagonal Communication is basically the:
a. Communication across boundaries
b. Communication between the CEO and the managers
c. Communication through body language
d. Communication within a department
8. How to make Oral Communication Effective?
a. By Clarity
b. By Brevity
c. By Right words
d. All of the above
9. Direct Eye contact of more than 10 seconds can create:
a. Discomfort & Anxiety
b. Emotional relationship between listeners and speakers
c. Excitement
d. None of the above
10. Encoding means:
a. Transmission
b. Perception
c. Ideation
d. None of the above
Part Two:
1. Define 7C‟s of effective communication.
2. Explain „Space Language‟.
3. Differentiate between good listeners and bad listeners.
4. List the different types of business report.
5. Define „Kinesics‟.
END OF SECTION A
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Section B: Caselets (40 marks)
This section consists of Caselets.
Answer all the questions.
Each Caselet carries 20 marks.
Detailed information should form the part of your answer (Word limit 150 to 200
words).
Caselet 1
Mr. and Mrs. Sharma went to Woodlands Apparel to buy a shirt. Mr. Sharma did not read the
price tag on the piece selected by him. At the counter, while making the payment he asked for
the price. Rs. 950 was the answer.
Meanwhile, Mrs. Sharma, who was still shopping came back and joined her husband. She was
glad that he had selected a nice black shirt for himself. She pointed out that there was a 25%
discount on that item. The counter person nodded in agreement.
Mr. Sharma was thrilled to hear that “It means the price of this shirt is just Rs. 712. That‟s
fantastic”, said Mr. Sharma.
He decided to buy one more shirt in blue color.
In no time, he returned with the second shirt and asked them to be packed. When he received the
cash memo for payment, he was astonished to find that he had to pay Rs. 1,900 and Rs. 1,424.
Mr. Sharma could hardly reconcile himself to the fact that the counter person had quoted the
discounted price which was Rs. 950. The original price printed on the price tag was Rs. 1,266.
Questions
1. What should Mr. Sharma have done to avoid the misunderstanding?
2. Discuss the main features involved in this case.
Caselet 2
I don‟t want to speak to you. Connect me to your boss in the US,” hissed the American on the
phone. The young girl at a Bangalore call centre tried to be as polite as she could. At another call
centre, another day, another young girl had a Londoner unleashing himself on her, “Young lady,
do you know that because of you Indians we are losing jobs?”
The outsourcing backlash is getting ugly. Handling irate callers is the new brief for the young
men and women taking calls at these outsourced job centres. Supervisors tell them to be „cool‟.
Avinash Vashistha, managing partner of NEOIT, a leading US-based consultancy firm says,
“Companies involved in outsourcing both in the US and India are already getting a lot of hate
mail against outsourcing and it is hardly surprising that some people should behave like this on
the telephone.” Vashistha says Indian call centre‟s should train their operators how to handle
such calls. Indeed, the furor raised by the Western media over job losses because of outsourcing
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IIBM Institute of Business Management
has made ordinary citizens there sensitive to the fact that their calls are being taken not from
their midst, but in countries such as India and the Philippines.
The angry outbursts the operators face border on the racist and sexist, says the manager of a call
centre in Hyderabad. But operators and senior executives of call centres refuse to go on record
for fear of kicking up a controversy that might result in their companies‟ losing clients overseas.
“It‟s happening often enough and so let‟s face it,” says a senior executive of a Gurgaon call
centre, adding, “This doesn‟t have any impact on business.”
Questions
1. Suppose you are working as an operator in a call centre in India and receiving calls
from Americans and Londoners. How would you handle such calls?
2. Do you agree with the view such abusive happenings on the telephone do not have any
impact on business?
END OF SECTION B
Section C: Applied Theory (30 marks)
This section consists of Applied Theory Questions.
Answer all the questions.
Each question carries 15 marks.
Detailed information should form the part of your answer (Word limit 200 to 250
words).
`
1. What do you by Communication Barriers? How and why do they occur? What can be
done to overcome the Barriers to Communication?
2. Define and explain the term Negotiation and also briefly explain the phases of
Negotiation.
END OF SECTION C
Attempt Any
Four Case Study
Case Study 1 :
Structuring global companies
As the chapter illustrates, to carry out their
activities in pursuit of their objectives, virtually all organisations adopt some form of
organisational structure. One traditional method of
organisation is to group individuals by function or purpose, using a departmental structure to allocate
individuals to their specialist areas (e.g. Marketing, HRM and so on ). Another is to
group activities by product or service, with each product group normally responsible
for providing its own functional requirements. A
third is to combine the two in the form of a matrix structure with its vertical and horizontal flows of
responsibility and authority, a method of organisation much favoured in
university Business Schools.
What of companies with a global reach: how do
they usually organise them-
selves?
selves?
Writing in the Financial Times in November
2000 Julian Birkinshaw, Associate Professor of
Strategic and International Management at London Business School, identifies
four basic models of global company structure:
● The International Division - an arrangement
in which the company establishes a
separate division to deal with business outside its own country. The
International Division would typically be concerned with tariff and trade issues,
foreign agents/partners and other aspects involved in selling overseas. Normally
the division does not make anything itself, it is simply responsible for interna-
tional sales. This arrangement tends to be found in medium-sized companies
with limited international sales.
separate division to deal with business outside its own country. The
International Division would typically be concerned with tariff and trade issues,
foreign agents/partners and other aspects involved in selling overseas. Normally
the division does not make anything itself, it is simply responsible for interna-
tional sales. This arrangement tends to be found in medium-sized companies
with limited international sales.
The Global Product Division - a product-based
structure with managers responsible
for their product line globally. The company is split into a number of global busi-
nesses arranged by product (or service) and usually overseen by their own
president. It has been a favoured structure among large global companies such as
BP, Siemens and 3M.
for their product line globally. The company is split into a number of global busi-
nesses arranged by product (or service) and usually overseen by their own
president. It has been a favoured structure among large global companies such as
BP, Siemens and 3M.
● The Area Division - a geographically based
structure in which the major line of
authority lies with the country (e.g. Germany) or regional (e.g. Europe) manager who
is responsible for the different product offerings within her/his geographical area.
● The Global Matrix - as the name suggests a hybrid of the two previous structural
types. In the global matrix each business manager reports to two bosses, one
responsible for the global product and one for the country/region. As we indi-
cated in the previous edition of this book, this type of structure tends to come
into and go out of fashion. Ford, for example, adopted a matrix structure in the
later 1990s, while a number of other global companies were either streamlining
or dismantling theirs (e.g. Shell, BP, IBM).
authority lies with the country (e.g. Germany) or regional (e.g. Europe) manager who
is responsible for the different product offerings within her/his geographical area.
● The Global Matrix - as the name suggests a hybrid of the two previous structural
types. In the global matrix each business manager reports to two bosses, one
responsible for the global product and one for the country/region. As we indi-
cated in the previous edition of this book, this type of structure tends to come
into and go out of fashion. Ford, for example, adopted a matrix structure in the
later 1990s, while a number of other global companies were either streamlining
or dismantling theirs (e.g. Shell, BP, IBM).
As Professor Birkinshaw indicates, ultimately
there is no perfect structure and organisations tend
to change their approach over time according to changing circumstances,
fads, the perceived
needs of the
senior executives or the
predispositions of
powerful individuals. This observation is no less true of universities than it
is of traditional businesses.
Case study questions
1.
Professor
Birkinshaw’s article identifies the advantages and disadvantages of being
a global business. What are his major arguments?
2.
In
your opinion what are likely to be the key factors determining how a global company will organise itself?
Case 2 : Resource
prices
As we saw in Chapter 1, resources such as
labour, technology and raw materials
constitute inputs into the production process that are utilised by organisations to
produce outputs. Apart from concerns over the quality, quantity and availability of
the different factors of production, businesses are also interested in the issue of
input prices since these represent costs to the organisation which ultimately have
to be met from revenues if the business is to survive. As in any other market, the
prices of economic resources can change over time for a variety of reasons, most, if
not all, of which are outside the direct control of business organisations. Such fluc-
tuations in input prices can be illustrated by the following examples:
constitute inputs into the production process that are utilised by organisations to
produce outputs. Apart from concerns over the quality, quantity and availability of
the different factors of production, businesses are also interested in the issue of
input prices since these represent costs to the organisation which ultimately have
to be met from revenues if the business is to survive. As in any other market, the
prices of economic resources can change over time for a variety of reasons, most, if
not all, of which are outside the direct control of business organisations. Such fluc-
tuations in input prices can be illustrated by the following examples:
● Rising labour costs - e.g. rises in wages or
salaries and other labour-related costs
(such as pension contributions or healthcare schemes) that are not offset by
increases in productivity or changes in working practices. Labour costs could rise
for a variety of reasons including skills shortages, demographic pressures, the
introduction of a national minimum wage or workers seeking to maintain their
living standards in an inflationary period.
(such as pension contributions or healthcare schemes) that are not offset by
increases in productivity or changes in working practices. Labour costs could rise
for a variety of reasons including skills shortages, demographic pressures, the
introduction of a national minimum wage or workers seeking to maintain their
living standards in an inflationary period.
● Rising raw material costs - e.g. caused by
increases in the demand for certain raw
materials and/or shortages (or bottlenecks) in supply. It can also be the result of
the need to switch to more expensive raw material sources because of customer
pressure, environmental considerations or lack of availability.
materials and/or shortages (or bottlenecks) in supply. It can also be the result of
the need to switch to more expensive raw material sources because of customer
pressure, environmental considerations or lack of availability.
● Rising energy costs - e.g. caused by demand
and/or supply problems as in the oil
market in recent years, with growth in India and China helping to push up
demand and coinciding with supply difficulties linked to events such as the war
in Iraq, hurricanes in the Gulf of Mexico or decisions by OPEC.
● Increases in the cost of purchasing new technology/capital equipment - e.g.
caused by the need to compete with rivals or to meet more stringent government
regulations in areas such as health and safety or the environment.
market in recent years, with growth in India and China helping to push up
demand and coinciding with supply difficulties linked to events such as the war
in Iraq, hurricanes in the Gulf of Mexico or decisions by OPEC.
● Increases in the cost of purchasing new technology/capital equipment - e.g.
caused by the need to compete with rivals or to meet more stringent government
regulations in areas such as health and safety or the environment.
As the above examples illustrate, rising input
prices can be the result of factors operating at both
the micro and macro level and these can range from events which are linked to natural causes to
developments of a political, social and/or economic kind. While many of these influences in
the business environment are uncontrollable,
there are steps business organisations can (and do) often take to address the issue of rising input prices that
may threaten their competitiveness. Examples include
the following:
● Seeking cheaper sources of labour (e.g. Dyson
moved its production of vacuum
cleaners to the Far East).
cleaners to the Far East).
● Abandoning salary-linked pension schemes or
other fringe benefits (e.g. com-
pany cars, healthcare provisions, paid holidays).
pany cars, healthcare provisions, paid holidays).
● Outsourcing certain activities (e.g. using
call centres to handle customer com-
plaints, or outsourcing services such as security, catering, cleaning, payroll, etc.). ● Switching raw materials or energy suppliers (e.g. to take advantage of discounts
plaints, or outsourcing services such as security, catering, cleaning, payroll, etc.). ● Switching raw materials or energy suppliers (e.g. to take advantage of discounts
by entering into longer agreements to
purchase). 
● Energy-saving measures (e.g. through better
insulation, more regular servicing of
equipment, product and/or process redesign).
equipment, product and/or process redesign).
● Productivity gains (e.g. introducing
incentive schemes).
In addition to measures such as these, some
organisations seek cost savings through
divestment of parts of the business or alternatively through merger or takeover
activity. In the former case the aim tends to be to focus on the organisation’s core
products/services and to shed unprofitable and/or costly activities; in the latter the
objective is usually to take advantage of economies of scale, particularly those asso-
ciated with purchasing, marketing, administration and financing the business.
divestment of parts of the business or alternatively through merger or takeover
activity. In the former case the aim tends to be to focus on the organisation’s core
products/services and to shed unprofitable and/or costly activities; in the latter the
objective is usually to take advantage of economies of scale, particularly those asso-
ciated with purchasing, marketing, administration and financing the business.
Case study questions
1. If a company is considering switching production to a country
where wage costs
are lower, what other factors will it need to take into account before doing so?
are lower, what other factors will it need to take into account before doing so?
2.
Will increased
environmental standards imposed by government on businesses
inevitably result in higher business costs?
inevitably result in higher business costs?
Case 3 :
Government and business - friend or foe?
As we have seen, governments intervene in the
day-to-day working of the economy
in a variety of ways in the hope of improving the environment in which industrial
and commercial activity takes place. How far they are successful in achieving this
goal is open to question. Businesses, for example, frequently complain of over-
interference by governments and of the burdens imposed upon them by
government legislation and regulation. Ministers, in contrast, tend to stress how
they have helped to create an environment conducive to entrepreneurial activity
through the different policy initiatives and through a supportive legal and fiscal
regime. Who is right?
in a variety of ways in the hope of improving the environment in which industrial
and commercial activity takes place. How far they are successful in achieving this
goal is open to question. Businesses, for example, frequently complain of over-
interference by governments and of the burdens imposed upon them by
government legislation and regulation. Ministers, in contrast, tend to stress how
they have helped to create an environment conducive to entrepreneurial activity
through the different policy initiatives and through a supportive legal and fiscal
regime. Who is right?
While there is no simple answer to this
question, it is instructive to examine the
different surveys which are regularly undertaken of business attitudes and condi-
tions in different countries. One such survey by the European Commission - and
reported by Andrew Osborn in the Guardian on 20 November 2001 - claimed that
whereas countries such as Finland, Luxembourg, Portugal and the Netherlands
tended to be regarded as business-friendly, the United Kingdom was perceived as
the most difficult and complicated country to do business with in the whole of
Europe. Foreign firms evidently claimed that the UK was harder to trade with than
other countries owing to its bureaucratic procedures and its tendency to rigidly
enforce business regulations. EU officials singled out Britain’s complex tax formali-
ties, employment regulations and product conformity rules as particular problems
for foreign companies - criticisms which echo those of the CBI and other represen-
tative bodies who have been complaining of the cost of over-regulation to UK firms
over a considerable number of years.
different surveys which are regularly undertaken of business attitudes and condi-
tions in different countries. One such survey by the European Commission - and
reported by Andrew Osborn in the Guardian on 20 November 2001 - claimed that
whereas countries such as Finland, Luxembourg, Portugal and the Netherlands
tended to be regarded as business-friendly, the United Kingdom was perceived as
the most difficult and complicated country to do business with in the whole of
Europe. Foreign firms evidently claimed that the UK was harder to trade with than
other countries owing to its bureaucratic procedures and its tendency to rigidly
enforce business regulations. EU officials singled out Britain’s complex tax formali-
ties, employment regulations and product conformity rules as particular problems
for foreign companies - criticisms which echo those of the CBI and other represen-
tative bodies who have been complaining of the cost of over-regulation to UK firms
over a considerable number of years.
The news, however, is not all bad. The
Competitive Alternatives study (2002) by
KPMG of costs in various cities in the G7 countries, Austria and the Netherlands
indicated that Britain is the second cheapest place in which to do business in the
nine industrial countries (see www.competitivealternatives.com). The survey, which
looked at a range of business costs - especially labour costs and taxation -, placed
the UK second behind Canada world-wide and in first place within Europe. The
country’s strong showing largely reflected its competitive labour costs, with manu-
facturing costs estimated to be 12.5 per cent lower than in Germany and 20 per
cent lower than many other countries in continental Europe. Since firms frequently
use this survey to identify the best places to locate their business, the data on rela-
tive costs are likely to provide the UK with a competitive advantage in the battle for
foreign inward investment (see Mini case, above).
KPMG of costs in various cities in the G7 countries, Austria and the Netherlands
indicated that Britain is the second cheapest place in which to do business in the
nine industrial countries (see www.competitivealternatives.com). The survey, which
looked at a range of business costs - especially labour costs and taxation -, placed
the UK second behind Canada world-wide and in first place within Europe. The
country’s strong showing largely reflected its competitive labour costs, with manu-
facturing costs estimated to be 12.5 per cent lower than in Germany and 20 per
cent lower than many other countries in continental Europe. Since firms frequently
use this survey to identify the best places to locate their business, the data on rela-
tive costs are likely to provide the UK with a competitive advantage in the battle for
foreign inward investment (see Mini case, above).
Case study questions
1. How
would you account for the difference in perspective between firms who often
complain of government over-interference in business matters and ministers who
claim that they have the interests of business at heart when taking decisions?
complain of government over-interference in business matters and ministers who
claim that they have the interests of business at heart when taking decisions?
2.
To what extent
do you think that relative costs are the critical factor in determining
inward investment decisions?
inward investment decisions?
Case 4 : The
end of the block exemption
As we have seen in the chapter, governments
frequently use laws and regulations to promote competition within the marketplace in
the belief that this has significant benefits for the
consumer and for the economy generally. Such interventions occur not only at national level, but also in
situations where governments work together to provide mutual benefits, as in the European
Union’s attempts to set up a ‘Single Market’ across the member states of the
EU.
While few would deny that competitive markets
have many benefits, the search
for increased competition at national level and beyond can sometimes be
restrained by the political realities of the situation, a point underlined by a previous
decision of the EU authorities to allow a block exemption from the normal rules of
competition in the EU car market. Under this system, motor manufacturers operat-
ing within the EU were permitted to create networks of selective and exclusive dealerships and to engage in certain other activities normally outlawed under the competition provisions of the single market. It was argued that the system of selective and exclusive distribution (SED) benefited consumers by providing them with a cradle-to-grave service, alongside what was said to be a highly competitive supply situation within the heavily branded global car market.
for increased competition at national level and beyond can sometimes be
restrained by the political realities of the situation, a point underlined by a previous
decision of the EU authorities to allow a block exemption from the normal rules of
competition in the EU car market. Under this system, motor manufacturers operat-
ing within the EU were permitted to create networks of selective and exclusive dealerships and to engage in certain other activities normally outlawed under the competition provisions of the single market. It was argued that the system of selective and exclusive distribution (SED) benefited consumers by providing them with a cradle-to-grave service, alongside what was said to be a highly competitive supply situation within the heavily branded global car market.
Introduced in 1995, and extended until the end
of September 2002, the block
exemption was highly criticised for its impact on the operation of the car market in
Europe. Following a critical report by the UK competition authorities in April 2000,
the EU published a review (in November 2000) of the workings of the existing
arrangement for distributing and servicing cars, highlighting its adverse conse-
quences for both consumers and retailers and signalling the need for change. Despite
intensive lobbying by the major car manufacturers, and by some national govern-
ments, to maintain the current rules largely intact, the European Commission
announced its intention of replacing the block exemption regulation when it expired
in September, subject of course to consultation with interested parties.
exemption was highly criticised for its impact on the operation of the car market in
Europe. Following a critical report by the UK competition authorities in April 2000,
the EU published a review (in November 2000) of the workings of the existing
arrangement for distributing and servicing cars, highlighting its adverse conse-
quences for both consumers and retailers and signalling the need for change. Despite
intensive lobbying by the major car manufacturers, and by some national govern-
ments, to maintain the current rules largely intact, the European Commission
announced its intention of replacing the block exemption regulation when it expired
in September, subject of course to consultation with interested parties.
In essence the Commission’s proposals aimed to
give dealers far more independ-
ence from suppliers by allowing them to solicit for business anywhere in the EU
and to open showrooms wherever they want; they would also be able to sell cars
supplied by different manufacturers under the same roof. The plan also sought to
open up the aftersales market by breaking the tie which existed between sales and
servicing. The proposal was that independent repairers would in future be able to
get greater access to the necessary spare parts and technology, thereby encouraging
new entrants to join the market with reduced initial investment costs.
ence from suppliers by allowing them to solicit for business anywhere in the EU
and to open showrooms wherever they want; they would also be able to sell cars
supplied by different manufacturers under the same roof. The plan also sought to
open up the aftersales market by breaking the tie which existed between sales and
servicing. The proposal was that independent repairers would in future be able to
get greater access to the necessary spare parts and technology, thereby encouraging
new entrants to join the market with reduced initial investment costs.
While these proposals were broadly welcomed by
groups representing consumers
(e.g. the Consumer Association in the UK), some observers felt that the planned
reforms did not go far enough to weaken the power of the suppliers over the market
(see e.g. the editorial in the Financial Times, 11 January 2002). For instance it
appeared to be the case that while manufacturers would be able to supply cars to
supermarkets and other new retailers, they would not be required by law to do so,
suggesting that a market free-for-all was highly unlikely to emerge in the foreseeable
future. Equally the Commission’s plans appeared to do little to protect dealers from
threats to terminate their franchises should there be a dispute with the supplier.
(e.g. the Consumer Association in the UK), some observers felt that the planned
reforms did not go far enough to weaken the power of the suppliers over the market
(see e.g. the editorial in the Financial Times, 11 January 2002). For instance it
appeared to be the case that while manufacturers would be able to supply cars to
supermarkets and other new retailers, they would not be required by law to do so,
suggesting that a market free-for-all was highly unlikely to emerge in the foreseeable
future. Equally the Commission’s plans appeared to do little to protect dealers from
threats to terminate their franchises should there be a dispute with the supplier.
In the event the old block exemption scheme
expired at the end of September
2002 and the new rules began the next day. However, the majority of the provisions
under the EC rules did not come into effect until the following October (2003) and
the ban on ‘location clauses’ - which limit the geographical scope of dealer opera-
tions - only came into effect two years later. Since October 2005 dealers have been
free to set up secondary sales outlets in other areas of the EU, as well as their own
countries. This is expected to stengthen competition between dealers across the
Single Market to the advantage of consumers (e.g. greater choice and reduced prices).
2002 and the new rules began the next day. However, the majority of the provisions
under the EC rules did not come into effect until the following October (2003) and
the ban on ‘location clauses’ - which limit the geographical scope of dealer opera-
tions - only came into effect two years later. Since October 2005 dealers have been
free to set up secondary sales outlets in other areas of the EU, as well as their own
countries. This is expected to stengthen competition between dealers across the
Single Market to the advantage of consumers (e.g. greater choice and reduced prices).
Case study questions
1.
Can you suggest
any reasons why the European Commission was willing to grant
the block exemption in the first place, given that it ran counter to its proposals for
a Single Market?
the block exemption in the first place, given that it ran counter to its proposals for
a Single Market?
2.
Why might the
new reforms make cars cheaper for European consumers?
Case 5 : The sale of goods on the
Internet
The sale of consumer goods on the Internet
(particularly those between European member states)
raises a number of legal issues. First, there is the issue of trust, with-
out which the consumer will not buy; they will need assurance that the seller is genuine, and that they will get the goods that they believe they have ordered.
Second, there is the issue of consumer rights with respect to the goods in question: what rights exist and do they vary across Europe? Last, the issue of enforcement: what happens should anything go wrong?
out which the consumer will not buy; they will need assurance that the seller is genuine, and that they will get the goods that they believe they have ordered.
Second, there is the issue of consumer rights with respect to the goods in question: what rights exist and do they vary across Europe? Last, the issue of enforcement: what happens should anything go wrong?
Information and trust
Europe recognises the problems of doing business across the
Internet or telephone
and it has attempted to address the main stumbling blocks via Directives. The
Consumer Protection (Distance Selling) Regulations 2000 attempts to address the
issues of trust in cross-border consumer sales, which may take place over the
Internet (or telephone). In short, the consumer needs to know quite a bit of infor-
mation, which they may otherwise have easy access to if they were buying face to
face. Regulation 7 requires inter alia for the seller to identify themselves and an
address must be provided if the goods are to be paid for in advance. Moreover, a
full description of the goods and the final price (inclusive of any taxes) must also
be provided. The seller must also inform the buyer of the right of cancellation available under Regulations 10-12, where the buyer has a right to cancel the contract for seven days starting on the day after the consumer receives the goods or services. Failure to inform the consumer of this right automatically extends the period to three months. The cost of returning goods is to be borne by the buyer, and the seller is entitled to deduct the costs directly flowing from recovery as a restocking fee. All of this places a considerable obligation on the seller; however, such data should stem many misunderstandings and so greatly assist consumer faith and confidence in non-face-to-face sales.
and it has attempted to address the main stumbling blocks via Directives. The
Consumer Protection (Distance Selling) Regulations 2000 attempts to address the
issues of trust in cross-border consumer sales, which may take place over the
Internet (or telephone). In short, the consumer needs to know quite a bit of infor-
mation, which they may otherwise have easy access to if they were buying face to
face. Regulation 7 requires inter alia for the seller to identify themselves and an
address must be provided if the goods are to be paid for in advance. Moreover, a
full description of the goods and the final price (inclusive of any taxes) must also
be provided. The seller must also inform the buyer of the right of cancellation available under Regulations 10-12, where the buyer has a right to cancel the contract for seven days starting on the day after the consumer receives the goods or services. Failure to inform the consumer of this right automatically extends the period to three months. The cost of returning goods is to be borne by the buyer, and the seller is entitled to deduct the costs directly flowing from recovery as a restocking fee. All of this places a considerable obligation on the seller; however, such data should stem many misunderstandings and so greatly assist consumer faith and confidence in non-face-to-face sales.
Another concern for the consumer is fraud. The consumer who has
paid by
credit card will be protected by section 83 of the Consumer Credit Act 1974, under
which a consumer/purchaser is not liable for the debt incurred, if it has been run
up by a third party not acting as the agent of the buyer. The Distance Selling
Regulations extend this to debit cards, and remove the ability of the card issuer to
charge the consumer for the first £50 of loss (Regulation 21). Moreover, section 75
of the Consumer Credit Act 1974 also gives the consumer/buyer a like claim against
the credit card company for any misrepresentation or breach of contract by the
seller. This is extremely important in a distance selling transaction, where the seller
may disappear.
credit card will be protected by section 83 of the Consumer Credit Act 1974, under
which a consumer/purchaser is not liable for the debt incurred, if it has been run
up by a third party not acting as the agent of the buyer. The Distance Selling
Regulations extend this to debit cards, and remove the ability of the card issuer to
charge the consumer for the first £50 of loss (Regulation 21). Moreover, section 75
of the Consumer Credit Act 1974 also gives the consumer/buyer a like claim against
the credit card company for any misrepresentation or breach of contract by the
seller. This is extremely important in a distance selling transaction, where the seller
may disappear.
What quality and what rights?
The next issue relates to the quality that may be expected from
goods bought over
the Internet. Clearly, if goods have been bought from abroad, the levels of quality
required in other jurisdictions may vary. It is for this reason that Europe has
attempted to standardise the issue of quality and consumer rights, with the
Consumer Guarantees Directive (1999/44/EC), thus continuing the push to encour-
age cross-border consumer purchases. The implementing Sale and Supply of Goods
to Consumer Regulations 2002 came into force in 2003, which not only lays down
minimum quality standards, but also provides a series of consumer remedies which
will be common across Europe. The Regulations further amend the Sale of Goods
Act 1979. The DTI, whose job it was to incorporate the Directive into domestic law
(by way of delegated legislation) ensured that the pre-existing consumer rights were
maintained, so as not to reduce the overall level of protection available to con-
sumers. The Directive requires goods to be of ‘normal’ quality, or fit for any
purpose made known by the seller. This has been taken to be the same as our pre-
existing ‘reasonable quality’ and ‘fitness for purpose’ obligations owed under
sections 14(2) and 14(3) of the Sale of Goods Act 1979. Moreover, the pre-existing
remedy of the short-term right to reject is also retained. This right provides the
buyer a short period of time to discover whether the goods are in conformity with
the contract. In practice, it is usually a matter of weeks at most. After that time has
elapsed, the consumer now has four new remedies that did not exist before, which
are provided in two pairs. These are repair or replacement, or price reduction or
rescission. The pre-existing law only gave the consumer a right to damages, which
would rarely be exercised in practice. (However, the Small Claims Court would
ensure a speedy and cheap means of redress for almost all claims brought.) Now
there is a right to a repair or a replacement, so that the consumer is not left with an
impractical action for damages over defective goods. The seller must also bear the
cost of return of the goods for repair. So such costs must now be factored into any
the Internet. Clearly, if goods have been bought from abroad, the levels of quality
required in other jurisdictions may vary. It is for this reason that Europe has
attempted to standardise the issue of quality and consumer rights, with the
Consumer Guarantees Directive (1999/44/EC), thus continuing the push to encour-
age cross-border consumer purchases. The implementing Sale and Supply of Goods
to Consumer Regulations 2002 came into force in 2003, which not only lays down
minimum quality standards, but also provides a series of consumer remedies which
will be common across Europe. The Regulations further amend the Sale of Goods
Act 1979. The DTI, whose job it was to incorporate the Directive into domestic law
(by way of delegated legislation) ensured that the pre-existing consumer rights were
maintained, so as not to reduce the overall level of protection available to con-
sumers. The Directive requires goods to be of ‘normal’ quality, or fit for any
purpose made known by the seller. This has been taken to be the same as our pre-
existing ‘reasonable quality’ and ‘fitness for purpose’ obligations owed under
sections 14(2) and 14(3) of the Sale of Goods Act 1979. Moreover, the pre-existing
remedy of the short-term right to reject is also retained. This right provides the
buyer a short period of time to discover whether the goods are in conformity with
the contract. In practice, it is usually a matter of weeks at most. After that time has
elapsed, the consumer now has four new remedies that did not exist before, which
are provided in two pairs. These are repair or replacement, or price reduction or
rescission. The pre-existing law only gave the consumer a right to damages, which
would rarely be exercised in practice. (However, the Small Claims Court would
ensure a speedy and cheap means of redress for almost all claims brought.) Now
there is a right to a repair or a replacement, so that the consumer is not left with an
impractical action for damages over defective goods. The seller must also bear the
cost of return of the goods for repair. So such costs must now be factored into any
business sales plan. If neither of
these remedies is suitable or actioned within a ‘rea-
sonable period of time’ then the consumer may rely on the second pair of
remedies. Price reduction permits the consumer to claim back a segment of the pur-
chase price if the goods are still useable. It is effectively a discount for defective
goods. Rescission permits the consumer to reject the goods, but does not get a full
refund, as they would under the short-term right to reject. Here money is knocked
off for ‘beneficial use’. This is akin to the pre-existing treatment for breaches of
durability, where goods have not lasted as long as goods of that type ought reason-
ably be expected to last. The level of compensation would take account of the use
that the consumer has (if any) been able to put the goods to and a deduction made
off the return of the purchase price. However, the issue that must be addressed is as
to the length of time that goods may be expected to last. A supplier may state the
length of the guarantee period, so a £500 television set guaranteed for one year
would have a life expectancy of one year. On the other hand, a consumer may
expect a television set to last ten years. Clearly, if the set went wrong after six
months, the consumer would only get £250 back if the retailer’s figure was used,
but would receive £475 if their own figure was used. It remains to be seen how this
provision will work in practice.
sonable period of time’ then the consumer may rely on the second pair of
remedies. Price reduction permits the consumer to claim back a segment of the pur-
chase price if the goods are still useable. It is effectively a discount for defective
goods. Rescission permits the consumer to reject the goods, but does not get a full
refund, as they would under the short-term right to reject. Here money is knocked
off for ‘beneficial use’. This is akin to the pre-existing treatment for breaches of
durability, where goods have not lasted as long as goods of that type ought reason-
ably be expected to last. The level of compensation would take account of the use
that the consumer has (if any) been able to put the goods to and a deduction made
off the return of the purchase price. However, the issue that must be addressed is as
to the length of time that goods may be expected to last. A supplier may state the
length of the guarantee period, so a £500 television set guaranteed for one year
would have a life expectancy of one year. On the other hand, a consumer may
expect a television set to last ten years. Clearly, if the set went wrong after six
months, the consumer would only get £250 back if the retailer’s figure was used,
but would receive £475 if their own figure was used. It remains to be seen how this
provision will work in practice.
One problem with distance sales
has been that of liability for goods which arrive
damaged. The pre-existing domestic law stated that risk would pass to the buyer once
the goods were handed over to a third-party carrier. This had the major problem in
practice of who would actually be liable for the damage. Carriers would blame the
supplier and vice versa. The consumer would be able to sue for the loss, if they were
able to determine which party was responsible. In practice, consumers usually went
uncompensated and such a worry has put many consumers off buying goods over the
Internet. The Sale and Supply of Goods to Consumer Regulations also modify the
transfer of risk, so that now the risk remains with the seller until actual delivery. This
will clearly lead to a slight increase in the supply of goods to consumers, with the
goods usually now being sent by insured delivery. However, this will avoid the prob-
lem of who is actually liable and should help to boost confidence.
damaged. The pre-existing domestic law stated that risk would pass to the buyer once
the goods were handed over to a third-party carrier. This had the major problem in
practice of who would actually be liable for the damage. Carriers would blame the
supplier and vice versa. The consumer would be able to sue for the loss, if they were
able to determine which party was responsible. In practice, consumers usually went
uncompensated and such a worry has put many consumers off buying goods over the
Internet. The Sale and Supply of Goods to Consumer Regulations also modify the
transfer of risk, so that now the risk remains with the seller until actual delivery. This
will clearly lead to a slight increase in the supply of goods to consumers, with the
goods usually now being sent by insured delivery. However, this will avoid the prob-
lem of who is actually liable and should help to boost confidence.
Enforcement
Enforcement for domestic sales is
relatively straightforward. Small-scale consumer
claims can be dealt with expeditiously and cheaply under the Small Claims Court.
Here claims under £5000 for contract-based claims are brought in a special court
intended to keep costs down by keeping the lawyers’ out of the court room, as a vic-
torious party cannot claim for their lawyers’ expenses. The judge will conduct the
case in a more ‘informal’ manner, and will seek to discover the legal issues by ques-
tioning both parties, so no formal knowledge of the law is required. The total cost of
such a case, even if it is lost, is the cost of issuing the proceedings (approximately
claims can be dealt with expeditiously and cheaply under the Small Claims Court.
Here claims under £5000 for contract-based claims are brought in a special court
intended to keep costs down by keeping the lawyers’ out of the court room, as a vic-
torious party cannot claim for their lawyers’ expenses. The judge will conduct the
case in a more ‘informal’ manner, and will seek to discover the legal issues by ques-
tioning both parties, so no formal knowledge of the law is required. The total cost of
such a case, even if it is lost, is the cost of issuing the proceedings (approximately
10 per cent of the value claimed)
and the other side’s ‘reasonable expenses’. Expenses
must be kept down, and a judge will not award value which has been deliberately run
up, such first-class rail travel and stays in five star hotels. Residents of Northampton
have hosted a trial of an online claims procedure, so that claims may now be made
via the Internet. (www.courtservice.gov.uk outlines the procedure for MCOL, or
Money Claims Online.) Cases will normally be held in the defendant’s court, unless the complainant is a consumer and the defendant a business.
must be kept down, and a judge will not award value which has been deliberately run
up, such first-class rail travel and stays in five star hotels. Residents of Northampton
have hosted a trial of an online claims procedure, so that claims may now be made
via the Internet. (www.courtservice.gov.uk outlines the procedure for MCOL, or
Money Claims Online.) Cases will normally be held in the defendant’s court, unless the complainant is a consumer and the defendant a business.
Enforcement is the weak point in the European
legislation, for there is, as yet, no
European-wide Small Claims Court dealing with transnational European transac-
tions. The consumer is thus forced to contemplate expensive civil action abroad in a
foreign language, perhaps where no such small claims system exists - a pointless
measure for all but the most expensive of consumer purchases. The only redress lies
in EEJ-Net, the European Extra-Judicial Network, which puts the complainant in
touch with any applicable professional or trade body in the supplier’s home member
state. It does require the existence of such a body, which is unlikely if the transac-
tion is for electrical goods, which is one of the most popular types of Internet
purchase. Therefore, until Europe provides a Euro Small Claims Court, the consumer
cross-border buyer may have many rights, but no effective means of enforcement.
Until then it would appear that section 75 of the Consumer Credit Act 1974, which
gives the buyer the same remedies against their credit card company as against the
seller, is the only effective means of redress.
European-wide Small Claims Court dealing with transnational European transac-
tions. The consumer is thus forced to contemplate expensive civil action abroad in a
foreign language, perhaps where no such small claims system exists - a pointless
measure for all but the most expensive of consumer purchases. The only redress lies
in EEJ-Net, the European Extra-Judicial Network, which puts the complainant in
touch with any applicable professional or trade body in the supplier’s home member
state. It does require the existence of such a body, which is unlikely if the transac-
tion is for electrical goods, which is one of the most popular types of Internet
purchase. Therefore, until Europe provides a Euro Small Claims Court, the consumer
cross-border buyer may have many rights, but no effective means of enforcement.
Until then it would appear that section 75 of the Consumer Credit Act 1974, which
gives the buyer the same remedies against their credit card company as against the
seller, is the only effective means of redress.
Case study questions
1. Consider the checklist of data which a
distance seller must provide to a consumer
purchaser. Is this putting too heavy a burden on sellers?
purchaser. Is this putting too heavy a burden on sellers?
2. Is a consumer distance buyer any better off
after the European legislation?
3. Are there any remaining issues that must be tackled to increase
European cross-
border consumer trade?
border consumer trade?
1. Define Public Speaking & Determine the purpose of topic Selection
2. What is media of mass Communication & Explain the modes of Communication
3. Explain the methods of Oral Communication in Terms of
a) Among Individuals b)Among Group
4. List the different Electronic modes of Communication & Explain the mode of
Communication
5. Explain 7 phases of negotiating tactics
6. What is group discussion? How is it Evaluated? And what is the techniques of GD
7. What are the techniques for writing Successful job application
8. What is media of mass Communication & Explain the modes of Communication
Masters Program in Business Administration (MBA)
Note :- Solve any 4 Case
Study
All Case Carry equal Marks.
CASE
I
A
GLOBAL PLAYER?
This
is one game that India has
permanently lost to its arch-rival Pakistan India
and Pakistan were one before
1947, Sialkot , now in Pakistan Pakistan , Jalandhar became the second centre
after Hindus in the trade migrated to India Sialkot Pakistan
wrested the initiative as India Sialkot and Jalandhar, but with Sialkot having the advantage of easier entry, most of the
world's top sports manufactures and procedures developed an association with
local industry in Sialkot
In 1961 the late Narinder
Mayor started the first large scale sports goods manufacturing unit, Mayor
& Company, thereby laying the foundation of an organized industry. Even
today, more than 70 percent of the industry functions in an unorganized manner.
Starting with soccer balls, Mayor expanded to produce inflatable balls like
volleyballs, basketballs, and rugby balls. Today his two sons Rajan &
Rajesh have built it up into five companies engaged in a wide array of
businesses, though sports goods remain the group's core business. While the
parent trading company, Mayor & Company, remains the leading revenue-earner
to the tune of Rs. 55 crore annually out of a total group turnover of Rs. 85
crore-plus, Mayor's second venture, the Indo-Australian Mayor International
Limited, is spinning another Rs. 15 crore. Mayor International is a 100 per
cent export-oriented unit (EOU) exclusively manufacturing and exporting golf
and tennis balls.
The product portfolio of the company comprises the
following:
Inflatable
Balls
·
Soccer balls and footballs
(Professional, Indoor, Match and Training, leisure toy)
·
Volley balls, rugby balls
(Volley balls and Beach Volley Balls)
·
Australian rugby, hand
balls (English League, Union and touch)
(Australian rules, Australian Rugby League balls with laces)
Boxing Equipment
·
Boxing and punching balls
(Boxing and Punching Balls, Head Gear, Gloves, Punching Mitts and Kits Punching
Bags & Bag Sets)
·
Gloves
·
Goal keeper's gloves
(Football / Soccer)
·
Boxing gloves
Cricket Equipment
·
Worldwide distributor for
Spading Cricket Bats, Balls and Protective equipment.
HOCKEY
EQUIPMENT
·
Worldwide distributor for
Spading Hokey Sticks, Balls & Protective equipment
Based in Delhi India
and Australia South Asia .
Out of a total Rs. 300 crore of sports goods business generated in domestic
market, most of which is supplied by the unorganized players, golf balls
constitute a miniscule amount and therefore we came up with a 100 per cent EOU
for producing golf balls. Later the same facility was utilized with little
moderation for tennis balls too,” says Nowaskowaski.
Clarifying that the sports good industry in India Europe & that too only for sentimental reason,
otherwise we are capable of delivering products of the same, if not better
quality. Now since we manufacture balls for them, we cannot antimonies them by
producing balls of similar quality with our own brand name. Secondly, I agree
that competing with such big quaint in the world market in terms of branding is
a task that is well beyond our reach at the moment. However, we are trying to
brand ourselves in the domestic market and that is one of the prime focus in
the coming year,” says Rajan.
Coca-Cola, Unilever, McDonald’s, American Airlines, Disney
club, and other such big brands come up with huge orders at tines for golf
balls with their logos for promotional schemes. However, there is no mention of
the producing country since these companies do not want to show that balls they
deliver in the US are being produced in Asia, “Not only is our quality good
enough; labour in India is cheap enough to churn out a much less expensive
product in the end. Yet, the main threat to our industry comes from countries
like Taiwan and China China ’
or ‘Made in Taiwan ’ are more
acceptable in the West than ‘Made in India ’
or ‘Made in Pakistan India
Today, Mayor group is sitting pretty as its competitors,
Soccer International Sakay Trades, Savi, Wasan, Cosco, Nivia and Spartan are
only trying to catch up in the inflatables category. With 1.2 million dozen
golf balls, Mayor is way ahead of its competitors. The company is planning to
enhance its manufacturing capacity to 1.5 million dozen golf next fiscal. With
approval from the world’s two top golf associations – the US PGA and RNA of
Scotland, demand for its product is not a problem, the company’s senior
marketing officials point out. With the markets in Mayor’s current export
destinations – Europe, North America, Australia Delhi
With nearly 2000 skilled workforce; quality certification
from ISO 9001:2000 and ISO 14001: 2004; and having spread to more than 40
countries, Mayor and Company is obviously sitting pretty.
Questions
1.
What
routes of globalization has the Mayor group chosen to go global? What other
routes could it have taken?
2.
What
impediments are coming in the Mayor group’s way becoming a major and active
player in international business?
3.
Why
is ‘Made in India’ not liked in foreign markets? What can be done to erase the
perception?
CASE
II
ARROW
AND THE APPAREL INDUSTRY
Ten
years ago, Arvind Clothing Ltd., a subsidery of Arvind Brands Ltd., a member of
the Ahmedabad based Lalbhai Group, signed up with the 150-year old Arrow
Company, a division of Cutlet Peabody & Co. Inc., US, for licensed
manufacture of Arrow shirts in India India
Arrow’s first plant, with a
55,000 sq. ft. area and capacity to make 3,000 to 4,000 shirts a day, was
established at Bangalore
The over two-dozen quality
checkpoints during the conversion of fabric to finished shirt was unique to the
industry. It is among the very few plants in the world that makes shirts with 2
ply 140s and 3 ply 100s cotton fabrics using 16 to 18 stitches per inch. In
March 2003, the Bangalore
The reputation of this plant
has spread far and wide and now it is loaded mostly with export orders from
renowed global brands such as GAR, Next, Espiri, and the like. Recently the
plant was identified by Tommy Hilfiger to make its brand of shirts for the
Indian market. As a result, Arvind Brands has had to take over four other
factories in Bangalore
In fact, the demand pressure
from global brands which want to out outscore from Arvind Brands, is so great
that the company has had to set up another large for export jobs on the
outskirts of Bangalore
Among the cutting edge
technologies deployed here are a Gerber make CNC fabric cutting machine,
automatic collar and cuff stitching machines, pneumatic holding for tasks like
shoulder joining, threat trimming and bottom hemming, a special machine to
attach and edge stitch the back yoke, foam finishers which use air and steam to
remove creases in the finished garment, and many others. The stitching machines
in this plant can deliver up to 25 stitches per inch. A continuous monitoring
of the production process in the entire factory is done through a computerized
apparel production management system, which is hooked to every machine. Because
of the use of such technology, this plant will need only 800 persons for a
capacity which is three that of the first plant which employs 580 persons.
Exports of garments made for
global brands fetched Arvind Brands over Rs. 60 crore in 2002, and this can
double in the next few years, when the new factory goes on full stream. In
fact, with the lifting of the country-wise quota regime in 2005, there will be
a surge in demand for high quality garments from India
It is not just in the area of
manufacture but also retailing that the arrow brand brought a wind of change on
the Indian scene. Prior to its coming, the usual Indian shirt shop used to be a
clutter of racks with little by way of display. What Arvind Brands did was to
set up exclusive showrooms for Arrow shirts in which the functional was
combined with the aesthetic. Stuffed racks and clutter were eschewed. The
products were displayed in such a manner that the customer could spot their
qualities from a distance. Of course, today this has become standard practice
with many other brands in the country, but Arrow showed the way. Arrow today
has the largest network of 64 exclusive outlets across India
From just formal dress shirts
in the beginning, the product range of Arvind Brands has expanded in the last
ten years to include casual shirts, T-shirts, and trousers. In the pipeline are
light jackets and jeans engineered for the middle age paunch. Arrow also tied
up with the renowed Italian designer, Renato Grande, who has worked with names
like Versace and Marlboro, to design its Spring / Summer Collection 2003. The
company has also announced its intention to license the Arrow brand for other
lifestyle accessories like footwear, watches, undergarments, fragrances, and
leather goods. According to Darshan Mehta, President, Arvind Brands Ltd., the
current turnover at retail price of the Arrow brand in India
In 2005, Arvind Brands launched
a major retail initiative fir all its brands. Arvind Brands licensed brands
(Arrow, Lee and Wrangler) had grown at a healthy 35 per cent rate in 2004 and
the company planned to sustain the growth by increasing their retail presence.
Arvind Brands also widened the geographical presence of its home-grown brands,
such as Newport and Ruf-n-Tuf, targeting small
towns across India
The company has plans to
expand its retail presence of Newport Jeans, from 1200 outlets across 480 towns
to 3000 outlets covering 800 towns.
For a company ranked as one
of the world’s largest manufacturers of denim cloth and owners of world famous
brands, the future looks bright certain for Arvind Brands Ltd.
Company
Profile
|
Name of the
Company
|
:
|
Arvind Mills
|
|
Year of Establishments
|
:
|
1931
|
|
Promoters
|
:
|
Three brothers –
Katurbhai, Narottam Bhai and Chimnabhai
|
|
Divisions
|
:
|
Arvind Mills was spilt
in 1993 into three units – textiles, telecom and garments. Arvind Brands Ltd.
(textile unit) is 100 per cent subsidiary of Arvind Mills.
|
|
Growth Strategy
|
:
|
Arvind Mills has grown
through buying – up of sick units, going global and acquisition of Germanand
US brand names.
|
Questions
1.
Why
did Arvind Mills choose globalization as major route to achieve growth when
domestic market was huge?
2.
Hoe
does lifting of Country-wise quota regime’ help Arvind Mills?
3.
What
lessons can other Indain business learn from the experience of Arvind Mills?
CASE
III
AT
THE RECEIVING END !
Spread
over 121 countries with 30,000 restaurants, and serving 46 million customers
each day with the help of more than 400,000 employees, the reach of McDonald’s
is amazing. It all started in 1948 when two brothers, Richard and Maurice ‘Mac’
McDonald, built several hamburger stands, with golden arches in southern California
McDonald’s
depends on its overseas restaurants for revenue. In fact, 60 percent of its
revenues are generated outside of the United States
The
company, well known for its golden arches, is not the world’s largest company.
Its system wide sales are only about one-fifth of Exxon Mobil or Wal-Mart
stores. However, it owns one of the world’s best known brands, and the golden
arches are familiar to more people than the Christian cross. This prominence,
and its conquest of global markets, makes the company a focal point for inquiry
and criticism.
McDonald
is a frequent target of criticism by anti-globalization protesters. In France France Seattle Seattle France
Bove’s
and his followers are not the only critics of McDonald’s. Leftists, anarchists,
nationalists, farmers, labor unions, environmentalists, consumer advocates,
protectors of animal rights, religious orders and intellectuals are equally
critical of the fast food chain. For these and others, McDonald’s represents an
evil America US
bombers began to pound Afghanistan
in 2001, angry Pakistanis damaged McDonald’s restaurants in Islamabad
McDonald
entered India
Though it worked for sometimes, this
arrangement did not last long. In 2001,
three Indian businessmen settled in Seattle
McDonald’s succeeded in spreading
American culture in the East Asian countries.
In Hong Kong and Taiwan Hong Kong , children’s birthdays had
traditionally gone unrecognized, but McDonald’s introduced the practice of
birthday parties in its restaurants, and now such parties have become popular
among the public. A journalist set forth
a ‘Golden Arches Theory of Conflict Prevention’ based on the notion that
countries with McDonald’s restaurants do not go to war with each other. A British magazine, The Economist, paints an
yearly ‘Big Mac Index’ that uses the price of a Big Mac in different foreign
currencies to access exchange rate distortions.
Questions :
1. What lessons can other MNCs learn from the experience of
McDonald’s?
2. Aware of the food habits of Indians,
why did McDonald’s err in mixing beef extract in the oil used for fries?
3. How far has McDonald’s succeeded in
strategizing and meeting local cultures and needs?
CASE
IV
BPO-BANE OR BOON ?
Several
MNCs are increasingly unbundling or vertical disintegrating their activities.
Put in simple language, they have begun outsourcing (also called business process
outsourcing) activities formerly performed in-house and concentrating their
energies on a few functions. Outsourcing involves withdrawing from certain
stages/activities and relaying on outside vendors to supply the needed
products, support services, or functional activities.
Take
Infosys, its 250 engineers develop IT applications for BO/FA (Bank of America).
Elsewhere, Infosys staffers process home loans for green point mortgage of Novato , California Massachusetts General Hospital
2500
college educated men and women are buzzing at midnight at Wipro Spectramind at Delhi US
insurance company and providing help-desk support for a big US Internet service
provider – all at a cost upto 60 percent lower than in the US
Another
activist in BPO is Evalueserve, headquartered in Bermuda and having main
operations near Delhi US subsidiary
based in New York and a marketing office in Australia
Evalueserve
provides services like patent writing, evaluation and assessment of their
commercialization potential for law firms and entrepreneurs. Its market
research services are aimed at top-rung financial service firms, to which it provides analysis of investment
opportunities and business plans. Another major offering is multilingual
services. Evalueserve trains and qualifies employees to communicate in Chinese,
Spanish, German, Japanese and Italian, among other languages. That skill set
has opened market opportunities in Europe and
elsewhere, especially with global corporations.
ICICI
Infotech Services in Edison , New
Jersey , is another BPO services provider that is offering
marketing software products and diversifying into markets outside the US
In
its first year after setting up shop in March 1999, ICICI Infotech spent $33
million acquiring two information technology services firms in New Jersy –
Object Experts and lvory Consulting – and Command Systems in Connecticut US US market offensive, which would go towards R
& D and back-end infrastructure support, and creating new versions of its
products to comply with US
A
relatively late entrant to the US
ICICI
Infotech’s expansion into new overseas markets has paid off. Its $50 million
revenue for its latest financial year ending March 2003 has the US operations generating some $15 million, while
the Middle East and Far East markets brought
in another $9 million. It now boasts more than 700 customers in 30 countries,
including Dow Jones, Glaxo – Smithkline,
Panasonic and American Insurance Group.
The
outsourcing industry is indeed growing from strength. Though technical support
and financial services have dominated India
Outsourcing
of human resource services or HR BPO is emerging as big opportunity for Indian
BPOs with global market in this segment estimated at $40-60 billion per annum.
HR BPO comes to about 33 percent of the outsourcing revenue and India
Another
potential area is ITES/BPO industry. According to a NASSCOM Survey, the global
ITES/BPO industry was valued at around $773 billion during 2002 and it is
expected to grow at a compounded annual growth rate of nine percent during the
period 2002-06. NASSCOM lists the major indicators of the high growth potential
of ITES/BPO industry in India
During
2003-04, The ITES/BPO segment is estimated to have achieved a 54 percent growth
in revenues as compared to the previous year. ITES exports accounted for $3.6
billion in revenues, up from $2.5 billion in 2002-03. The ITES-BPO segment also
proved to be a major opportunity for job seekers, creating employment for
around 74,400 additional personnel in India
Legal
outsourcing sector is another area India India India
Research
firms such as Forrester Research, predict that by 2015, more than 489,000 US
Many
more new avenues are opening up for BPO services providers. Patent writing and
evaluation services are markets set to boom. Some 200,000 patent applications
are written in the western world annually, making for a market size of between
$5 billion and $7 billion. Outsourcing patent writing service could
significantly lower the cost of each patent application, now anywhere between
$12,000 and $15,000 apiece – which help expand the market.
Offshoring of equity research is
another major growth area. Translation services are also becoming a big Indian
plus. India produces some
3,000 graduates in German each year, which is more than in Switzerland
Though going is good, the Indian BPO
services providers cannot afford to be complacent, Phillippines ,
Mexico and Hungary Russia South Africa and even China
BPO is based on sound economic
reasons. Outsourcing helps gain cost advantage. If an activity can be performed
better or more cheaply by an outside supplier, why not outsource it ? Many PC
makers, for example, have shifted from in-house assembly to utilizing contract
assemblers to make their PCs. CISCO outsources all productions and assembly of
its routers and switching equipment to contract manufacturers that operate 37
factories, all linked via the Internet.
Secondly, the activity (outsourced) is
not crucial to the firm’s ability to gain sustainable competitive advantage and
won’t hollow out its core competence, capabilities, or technical knowhow.
Outsourcing of maintenance services, data processing, accounting, and other
administrative support activities to companies specializing in these services
has become common place. Thirdly, outsourcing reduces the company’s risk
exposure to changing technology and / or changing buyer preferences.
Fourthly, BPO streamlines company
operations in ways that improve organizational flexibility, cut cycle time,
speedup decision making and reduce coordination costs. Finally, outsourcing
allows a company to concentrate on its crore business and do what it does best.
Are Indian companies listening? If they listen, BPO is a boon them and not a
bane.
Questions
1. Which of the theories of International
trade can help Indian services providers gain competitive edge over their
competitors?
2. Pick up some Indian services providers.
With the help of Michael Porter’s diamond, analyze their strengths and
weaknesses as active players in BPO.
3. Compare this case with the case given
at the beginning of this chapter. What similarities and dissimilarities do you
notice? Your analysis should be based on the theories explained in this
chapter.
CASE
V
THE
SAGA CONTINUES
It
was the talk of the town in Bangalore Bangalore Yelahanka Road
An
interesting story is told about how one of the surviving founders (Larsen who
lived till 2003) visited the Bangalore
A
budding author captured all these and many more in his first book, which became
a big hit with all the teachers and students in different colleges buying and
reading it.
If
cannot be anything other than L & T, the huge engineering and construction
multi-plant organization, founded in 1938 by two Danish engineers, Henning
Holck – Larsen and Soren Kristin Toubro.
Henning
Holck – Larsen and Soren Kristin Toubro, school – mates in Denmark, would not
have dreamt, as they were learning about India in history classes that they
would, one day, create history in that land. In 1938, the two friends decided
to forgo the comforts of working in Europe and started their own operation in India Bombay India
As
on today, L & T is a 62 business conglomerate with turnover of Rs. 18,363
crore (2006-07), with the script commanding Rs. 2400 in the bourses.
No,
L & T is not sitting pretty. It want to hit Rs. 30,000 crore turnover mark
by 2010 and is busy restructuring, sniffing new pastures, grooming new talent
and projecting the new company credo – “It’s all about Imagineering.” With the
sole idea of creating several MNCs within, with footprints across nations, L
& T is shedding the old economy and embracing the emergent opportunities
and challenges.
Stagnant
Revenues and Low Margins
Not
everything went the L & T way.
In
the late nineties, the macro environment was ----- inspiring with stagnant
revenues and low margins, and L & T’s core strength, its engineers, were
being constantly weaned away by the fast-growing software sector. So, the
general comment around the bourses was about the credibility of the company, ‘L
& T is a, good company but its stock price, for some reason or the other,
is fixed at the Rs. 140-210 band. So the company had to change by keeping its
core intact. As s senior executive remarks. “L & T was perceived to be un
–sexy and we had to create a new buzz around the campuses.” The metamorphosis
must echo through a whimper, not a bang. Even before the company divested its
cement business in 2003, which accounted for 25% of its total sales, there were
years of incremental and low visibility organizational moves towards a new L
& T.
At
a 52-week high of Rs. 2400, the L & T scrip today looks dapper, a far cry
from the nineties when the stock price was in a state of flux. Much of the
change started as a ripple way back in 1999 when Naik took over as the CEO. He
visited employees at all levels across the organization and asked them what it
took to transform the company. The insights were mapped and implemented. “None
of our employees thought that we build shareholder value. They thought we build
monuments,” the chairman reminisces. The focus on people became stronger and
formed the basis of restructuring. It became the first old economy company to
provide stock options to its employees.
When
Naik came to the helm, he set upon himself a 90 – day transformational agenda.
Portfolios were reviewed and a vision clearly chalked out. He drew up a simple,
brief, “ L & T has to be a multinational company and it has to deliver
shareholder value at any cost. At the end of 90 days, between July 22 and July
24, 1999, the company launched Project Blue Chip, which essentially fast –
tracked projects. The moot point was to complete all projects by February of the
new millennium. Strategy formation teams were formed, portfolios reviewed and
structures were optimized. Young leadership was brought to the fore and the
business streamlining process kicked in.
Hiving
off from 1999-2001, L & T went about debottle- necking its cement plants.
They were modernized and capitalized were raised from 12 million tones to 16
million tones annually, with minimum costs. The mantra really was to grow the
business and then divest it as cement fell in the non-core category.
So,
in September 2003, L & T sold its cement business to the Aditya Birla
Group, which resulted in the company’s Economic Value Add (EVA), an important
indicator of the financial health of the company, swinging from a negative
Rs.350-crore to a positive Rs.50-crore immediately. The move also enabled
L&T to reduce its debt-equity ratio from 1:1 to 0.2:1. Analysts took a
positive view of the demerger, and re-rated L&T as AAA from AA+ in 2004.
From then on, began L&T’s transformation into a lean and mean machine. In
2004, the company envisaged a growth curve for the next five years. This marked
the beginning of Project Lakshya, which was centered around people, operations,
capabilities and new ventures. The company set out with over 300 initiatives in
hand, and also placed a rigorous risk management system. For instance, any
project above Rs. 1,000-crore needed the signature of the chairman. Project
Lakshya is known for targeting and selecting the right projects.
By
now, the Indian economy had started witnessing unprecedented boom and despite
divesting the cement business, the L&T turnover scaled the Rs. 10,000 crore
mark. Alongside, the lucrative Middle East market was booming and L&T
forayed into six countries in the Gulf with joint ventures. “The idea was to
develop a mini L&T in the region,” observes a senior company executive. The
company also set up manufacturing facilities in China to leverage the cost
structure. Exports in 2007 constituted 18% of net sales. With soaring revenues
and operating margins, L&T started benchmarking itself with the best in the
world. Suddenly, the notion of an Indian MNC became a reality.
L&T
has big plans to foray into new businesses. The new businesses are:
Ship-building: L&T
is getting into ship-building by building a world-class facility, and already
has a small shipyard in Hazira. Will build complex ocean going ships for the
first time in India.
Power equipment: It
is getting into power equipment in a big way. A JV with Mitsubishi for super
critical boilers, formed another with Toshiba for turbines on the way.
Financial services: L&T
is rapidly increasing its presence in infrastructure finance. It is also
planning to come up with a $1 billion infrastructure fund.
Railways: A
new area, L&T aims to be an end-to-end solutions provider for the railways,
from track-laying to signaling to transmission, and others.
The
global economic meltdown has hit L&T also, but lightly. Its order book at
Rs. 71,650cr has not grown as expected. Delay in finalization of several
government projects as well as the slowdown in the overseas markets are the key
reasons for the lax in order inflow. The company, however, has maintained its
forecast of a 25 percent growth in its order book for the fiscal 2010.
L&T’s,
IT and financial subsidiaries too witnessed lackluster performance with profits
remaining stagnant.
L&T’s
focus areas in future would be the Middle East and China in view of the booming
infrastructure market there.
Thus,
for an institution that has grown to legendary proportions, there cannot and
must not be an ‘end’. Unlike other stories, the L&T saga continues.
QUESTIONS
1.
Having
a strong presence in India, what drives L&T to think of emerging a strong
MNC ?
2.
What
challenges lies ahead of L&T ? How does it prepare to cope with them ?
3.
Will
the L&T Saga continue ?
CASE VI
THE ABB PBS JOINT VENTURE
IN OPERATION
ABB Prvni Brnenska Strojirna Brno, Ltd. (ABB-PBS), Czechoslovakia
Business for the joint venture in its
first two full years was good in most aspects. Orders received in 1994, the
first full year of the joint venture's operation, were higher than ever in the
history of PBS. Orders received in 1995 were 21/2 times
those in 1994. The company was profitable in 1995 and ahead of 1994s results
with a rate of return on assets of 2.3 per cent and a rate of return on sales
of 4.5 per cent.
The 1995 results showed substantial
progress towards meeting the joint venture's strategic goals adopted in 1994 as
part of a five-year plan. One of the goals was that exports should account for
half of the total orders by 1999. (Exports had accounted for more than a
quarter of the PBS business before 1989, but most of this business disappeared
when the Soviet Union collapsed), In 1995 exports increased as a share of total
orders to 28 per cent up from 16 per cent the year before.
The external service business,
organized and functioning as a separate business for the first time in 1995,
did not meet expectations. It accounted for five per cent of all orders and
revenues in 1995, below the 10 per cent goal set for it. The retrofitting
business, which was expected to be a major part of the service business, was
disappointing for ABB-PBS, partly because many other small companies began to
provide this service in 1994, including some started by former PBS employees
who took their knowledge of PBS-built power plants with them. However, ABB-PBS
managers hoped that as the company introduced new technologies, these former employees
would gradually lose their ability to perform these services, and the retrofit
and repair service business would return to ABB-PBS.
ABB-PBS dominated the Czech boiler
business with 70 per cent of the Czech market in 1995, but managers expected
this share to go down in the future as new domestic and foreign competitors
emerged. Furthermore, the west European boiler market was actually declining
because environmental laws caused a surge of retrofitting to occur in the
mid-1980s, leaving less business in the 1990s. Accordingly ABB-PBS boiler
orders were flat in 1995.
Top managers at ABB-PBS regarded
business results to date as respectable, but they were not satisfied with the
company's performance. Cash flow was not as good as expected. Cost reduction
had to go further. "The more we succeed, the more we see our
shortcomings", said one official.
Restructuring
The first round of restructuring was
largely completed in 1995, the last year of the three-year restructuring plan.
Plant logistics, information systems, and other physical capital improvements
were in place. The restructing included :
·
Renovating and
reconstructing workshops and engineering facilities
·
Achieving ISO 9001 for all
four ABB-PBS divisions (awarded in 1995)
·
Transfer of technology
from ABB (this was an ongoing project)
·
Installation of an
information system
·
Management training,
especially in total quality assurance and English language
·
Implementing a project
management approach.
A notable achievement of importance of
top management in 1995 was a 50 per cent increase in labour productivity,
measured as value added per payroll crown. However, in the future ABB-PBS
expected its wage rates to go up faster than west European wage rates (Czech
wages were increasing about 15 per cent per year) so it would be difficult to
maintain the ABB-PBS unit cost advantage over west European unit cost.
The Technology Role for ABB-PBS
The joint venture was expected from the beginning to
play an important role in technology development for part of ABB's power
generation business worldwide. PBS a.s. had engineering capability in
coal-fired steam boilers, and that capability was expected to be especially
useful to ABB as more countries became concerned about air quality. (When asked
if PBS really did have leading technology here, a boiler engineering manager
remarked, "Of course we do. We burn so much dirty coal in this country, we
have to have better technology").
However, the envisioned technology leadership role for
ABB-PBS had not been realised by mid-1996. Richard Kuba, the ABB-PBS managing
director, realised the slowness with which the technology role was being
fulfilled, and he offered his interpretation of events :
"ABB did not promise to make the joint venture its
steam technology leader. The main point we wanted to achieve in the joint
venture agreement was for ABB-PBS to be recognised as a full-fledged company,
not just a factory. We were slowed down on our technology plans because we had
a problem keeping our good, young engineers. The annual employee turnover rate
for companies in the Czech
Republic
ABB-PBS had benefited technologically from its
relationship with ABB. One example was the development of a new steam turbine
line. This project was a cooperative effort among ABB-PBS and two other ABB
companies, one in Sweden and
one in Germany
Questions
1.
Where
does the joint venture meet the needs of both the partners? Where does it fall
short?
2.
Why
had ABB-PBS failed to realized its technology leadership?
3.
What
lessons one can draw from this incident for better management of technology
transfers?
CASE VII
One of these potential investors is a large New York
During the 1970s, the Peruvian government nationalized a
number of industries and factories and began running them for the profit of the
state. In most cases, these state-run ventures became disasters. In the late
1970s, the fishing fleet owner was given back his ships and allowed to operate
his business as before. Since then, he has managed to remain profitable, but
the biggest problem is that his ships are getting old and he needs and influx
of capital to make repairs and add new technology. As he explained it to the New York
Having reviewed the fleet owner’s operation, the large
multinational bank believers that the loan is justified. The financial institution
is concerned, however, that the Peruvian government might step in during the
next couple of years and again take over the business. If this were to happen
it might take and additional decade for the loan to be repaid. If the
government were to allow the fleet owner to operate the fleet the way he has
over the last decade, the loan could be repaid within seven years.
Right now, the bank is deciding on the specific terms of
the agreement. Once these have been worked out, either a loan officer will fly
down to Lima and close the deal or the owner
will be asked to come to New York Lima
Questions
1.
What
are some current issues facing Peru Peru
2.
What
type of political risks does this fishing company need to evaluate? Identify
and describe them.
3.
What
types of integrative and protective and defensive techniques can the bank use?
4.
Would
the bank be better off negotiating the loan in New York
or in Lima
Masters Program in Business Administration (MBA)
Note :- Solve any 4 Case
Study
All Case Carry equal Marks.
CASE
I
A
GLOBAL PLAYER?
This
is one game that India has
permanently lost to its arch-rival Pakistan India
and Pakistan were one before
1947, Sialkot , now in Pakistan Pakistan , Jalandhar became the second centre
after Hindus in the trade migrated to India Sialkot Pakistan
wrested the initiative as India Sialkot and Jalandhar, but with Sialkot having the advantage of easier entry, most of the
world's top sports manufactures and procedures developed an association with
local industry in Sialkot
In 1961 the late Narinder
Mayor started the first large scale sports goods manufacturing unit, Mayor
& Company, thereby laying the foundation of an organized industry. Even
today, more than 70 percent of the industry functions in an unorganized manner.
Starting with soccer balls, Mayor expanded to produce inflatable balls like
volleyballs, basketballs, and rugby balls. Today his two sons Rajan &
Rajesh have built it up into five companies engaged in a wide array of
businesses, though sports goods remain the group's core business. While the
parent trading company, Mayor & Company, remains the leading revenue-earner
to the tune of Rs. 55 crore annually out of a total group turnover of Rs. 85
crore-plus, Mayor's second venture, the Indo-Australian Mayor International
Limited, is spinning another Rs. 15 crore. Mayor International is a 100 per
cent export-oriented unit (EOU) exclusively manufacturing and exporting golf
and tennis balls.
The product portfolio of the company comprises the
following:
Inflatable
Balls
·
Soccer balls and footballs
(Professional, Indoor, Match and Training, leisure toy)
·
Volley balls, rugby balls
(Volley balls and Beach Volley Balls)
·
Australian rugby, hand
balls (English League, Union and touch)
(Australian rules, Australian Rugby League balls with laces)
Boxing Equipment
·
Boxing and punching balls
(Boxing and Punching Balls, Head Gear, Gloves, Punching Mitts and Kits Punching
Bags & Bag Sets)
·
Gloves
·
Goal keeper's gloves
(Football / Soccer)
·
Boxing gloves
Cricket Equipment
·
Worldwide distributor for
Spading Cricket Bats, Balls and Protective equipment.
HOCKEY
EQUIPMENT
·
Worldwide distributor for
Spading Hokey Sticks, Balls & Protective equipment
Based in Delhi India
and Australia South Asia .
Out of a total Rs. 300 crore of sports goods business generated in domestic
market, most of which is supplied by the unorganized players, golf balls
constitute a miniscule amount and therefore we came up with a 100 per cent EOU
for producing golf balls. Later the same facility was utilized with little
moderation for tennis balls too,” says Nowaskowaski.
Clarifying that the sports good industry in India Europe & that too only for sentimental reason,
otherwise we are capable of delivering products of the same, if not better
quality. Now since we manufacture balls for them, we cannot antimonies them by
producing balls of similar quality with our own brand name. Secondly, I agree
that competing with such big quaint in the world market in terms of branding is
a task that is well beyond our reach at the moment. However, we are trying to
brand ourselves in the domestic market and that is one of the prime focus in
the coming year,” says Rajan.
Coca-Cola, Unilever, McDonald’s, American Airlines, Disney
club, and other such big brands come up with huge orders at tines for golf
balls with their logos for promotional schemes. However, there is no mention of
the producing country since these companies do not want to show that balls they
deliver in the US are being produced in Asia, “Not only is our quality good
enough; labour in India is cheap enough to churn out a much less expensive
product in the end. Yet, the main threat to our industry comes from countries
like Taiwan and China China ’
or ‘Made in Taiwan ’ are more
acceptable in the West than ‘Made in India ’
or ‘Made in Pakistan India
Today, Mayor group is sitting pretty as its competitors,
Soccer International Sakay Trades, Savi, Wasan, Cosco, Nivia and Spartan are
only trying to catch up in the inflatables category. With 1.2 million dozen
golf balls, Mayor is way ahead of its competitors. The company is planning to
enhance its manufacturing capacity to 1.5 million dozen golf next fiscal. With
approval from the world’s two top golf associations – the US PGA and RNA of
Scotland, demand for its product is not a problem, the company’s senior
marketing officials point out. With the markets in Mayor’s current export
destinations – Europe, North America, Australia Delhi
With nearly 2000 skilled workforce; quality certification
from ISO 9001:2000 and ISO 14001: 2004; and having spread to more than 40
countries, Mayor and Company is obviously sitting pretty.
Questions
1.
What
routes of globalization has the Mayor group chosen to go global? What other
routes could it have taken?
2.
What
impediments are coming in the Mayor group’s way becoming a major and active
player in international business?
3.
Why
is ‘Made in India’ not liked in foreign markets? What can be done to erase the
perception?
CASE
II
ARROW
AND THE APPAREL INDUSTRY
Ten
years ago, Arvind Clothing Ltd., a subsidery of Arvind Brands Ltd., a member of
the Ahmedabad based Lalbhai Group, signed up with the 150-year old Arrow
Company, a division of Cutlet Peabody & Co. Inc., US, for licensed
manufacture of Arrow shirts in India India
Arrow’s first plant, with a
55,000 sq. ft. area and capacity to make 3,000 to 4,000 shirts a day, was
established at Bangalore
The over two-dozen quality
checkpoints during the conversion of fabric to finished shirt was unique to the
industry. It is among the very few plants in the world that makes shirts with 2
ply 140s and 3 ply 100s cotton fabrics using 16 to 18 stitches per inch. In
March 2003, the Bangalore
The reputation of this plant
has spread far and wide and now it is loaded mostly with export orders from
renowed global brands such as GAR, Next, Espiri, and the like. Recently the
plant was identified by Tommy Hilfiger to make its brand of shirts for the
Indian market. As a result, Arvind Brands has had to take over four other
factories in Bangalore
In fact, the demand pressure
from global brands which want to out outscore from Arvind Brands, is so great
that the company has had to set up another large for export jobs on the
outskirts of Bangalore
Among the cutting edge
technologies deployed here are a Gerber make CNC fabric cutting machine,
automatic collar and cuff stitching machines, pneumatic holding for tasks like
shoulder joining, threat trimming and bottom hemming, a special machine to
attach and edge stitch the back yoke, foam finishers which use air and steam to
remove creases in the finished garment, and many others. The stitching machines
in this plant can deliver up to 25 stitches per inch. A continuous monitoring
of the production process in the entire factory is done through a computerized
apparel production management system, which is hooked to every machine. Because
of the use of such technology, this plant will need only 800 persons for a
capacity which is three that of the first plant which employs 580 persons.
Exports of garments made for
global brands fetched Arvind Brands over Rs. 60 crore in 2002, and this can
double in the next few years, when the new factory goes on full stream. In
fact, with the lifting of the country-wise quota regime in 2005, there will be
a surge in demand for high quality garments from India
It is not just in the area of
manufacture but also retailing that the arrow brand brought a wind of change on
the Indian scene. Prior to its coming, the usual Indian shirt shop used to be a
clutter of racks with little by way of display. What Arvind Brands did was to
set up exclusive showrooms for Arrow shirts in which the functional was
combined with the aesthetic. Stuffed racks and clutter were eschewed. The
products were displayed in such a manner that the customer could spot their
qualities from a distance. Of course, today this has become standard practice
with many other brands in the country, but Arrow showed the way. Arrow today
has the largest network of 64 exclusive outlets across India
From just formal dress shirts
in the beginning, the product range of Arvind Brands has expanded in the last
ten years to include casual shirts, T-shirts, and trousers. In the pipeline are
light jackets and jeans engineered for the middle age paunch. Arrow also tied
up with the renowed Italian designer, Renato Grande, who has worked with names
like Versace and Marlboro, to design its Spring / Summer Collection 2003. The
company has also announced its intention to license the Arrow brand for other
lifestyle accessories like footwear, watches, undergarments, fragrances, and
leather goods. According to Darshan Mehta, President, Arvind Brands Ltd., the
current turnover at retail price of the Arrow brand in India
In 2005, Arvind Brands launched
a major retail initiative fir all its brands. Arvind Brands licensed brands
(Arrow, Lee and Wrangler) had grown at a healthy 35 per cent rate in 2004 and
the company planned to sustain the growth by increasing their retail presence.
Arvind Brands also widened the geographical presence of its home-grown brands,
such as Newport and Ruf-n-Tuf, targeting small
towns across India
The company has plans to
expand its retail presence of Newport Jeans, from 1200 outlets across 480 towns
to 3000 outlets covering 800 towns.
For a company ranked as one
of the world’s largest manufacturers of denim cloth and owners of world famous
brands, the future looks bright certain for Arvind Brands Ltd.
Company
Profile
|
Name of the
Company
|
:
|
Arvind Mills
|
|
Year of Establishments
|
:
|
1931
|
|
Promoters
|
:
|
Three brothers –
Katurbhai, Narottam Bhai and Chimnabhai
|
|
Divisions
|
:
|
Arvind Mills was spilt
in 1993 into three units – textiles, telecom and garments. Arvind Brands Ltd.
(textile unit) is 100 per cent subsidiary of Arvind Mills.
|
|
Growth Strategy
|
:
|
Arvind Mills has grown
through buying – up of sick units, going global and acquisition of Germanand
US brand names.
|
Questions
1.
Why
did Arvind Mills choose globalization as major route to achieve growth when
domestic market was huge?
2.
Hoe
does lifting of Country-wise quota regime’ help Arvind Mills?
3.
What
lessons can other Indain business learn from the experience of Arvind Mills?
CASE
III
AT
THE RECEIVING END !
Spread
over 121 countries with 30,000 restaurants, and serving 46 million customers
each day with the help of more than 400,000 employees, the reach of McDonald’s
is amazing. It all started in 1948 when two brothers, Richard and Maurice ‘Mac’
McDonald, built several hamburger stands, with golden arches in southern California
McDonald’s
depends on its overseas restaurants for revenue. In fact, 60 percent of its
revenues are generated outside of the United States
The
company, well known for its golden arches, is not the world’s largest company.
Its system wide sales are only about one-fifth of Exxon Mobil or Wal-Mart
stores. However, it owns one of the world’s best known brands, and the golden
arches are familiar to more people than the Christian cross. This prominence,
and its conquest of global markets, makes the company a focal point for inquiry
and criticism.
McDonald
is a frequent target of criticism by anti-globalization protesters. In France France Seattle Seattle France
Bove’s
and his followers are not the only critics of McDonald’s. Leftists, anarchists,
nationalists, farmers, labor unions, environmentalists, consumer advocates,
protectors of animal rights, religious orders and intellectuals are equally
critical of the fast food chain. For these and others, McDonald’s represents an
evil America US
bombers began to pound Afghanistan
in 2001, angry Pakistanis damaged McDonald’s restaurants in Islamabad
McDonald
entered India
Though it worked for sometimes, this
arrangement did not last long. In 2001,
three Indian businessmen settled in Seattle
McDonald’s succeeded in spreading
American culture in the East Asian countries.
In Hong Kong and Taiwan Hong Kong , children’s birthdays had
traditionally gone unrecognized, but McDonald’s introduced the practice of
birthday parties in its restaurants, and now such parties have become popular
among the public. A journalist set forth
a ‘Golden Arches Theory of Conflict Prevention’ based on the notion that
countries with McDonald’s restaurants do not go to war with each other. A British magazine, The Economist, paints an
yearly ‘Big Mac Index’ that uses the price of a Big Mac in different foreign
currencies to access exchange rate distortions.
Questions :
1. What lessons can other MNCs learn from the experience of
McDonald’s?
2. Aware of the food habits of Indians,
why did McDonald’s err in mixing beef extract in the oil used for fries?
3. How far has McDonald’s succeeded in
strategizing and meeting local cultures and needs?
CASE
IV
BPO-BANE OR BOON ?
Several
MNCs are increasingly unbundling or vertical disintegrating their activities.
Put in simple language, they have begun outsourcing (also called business process
outsourcing) activities formerly performed in-house and concentrating their
energies on a few functions. Outsourcing involves withdrawing from certain
stages/activities and relaying on outside vendors to supply the needed
products, support services, or functional activities.
Take
Infosys, its 250 engineers develop IT applications for BO/FA (Bank of America).
Elsewhere, Infosys staffers process home loans for green point mortgage of Novato , California Massachusetts General Hospital
2500
college educated men and women are buzzing at midnight at Wipro Spectramind at Delhi US
insurance company and providing help-desk support for a big US Internet service
provider – all at a cost upto 60 percent lower than in the US
Another
activist in BPO is Evalueserve, headquartered in Bermuda and having main
operations near Delhi US subsidiary
based in New York and a marketing office in Australia
Evalueserve
provides services like patent writing, evaluation and assessment of their
commercialization potential for law firms and entrepreneurs. Its market
research services are aimed at top-rung financial service firms, to which it provides analysis of investment
opportunities and business plans. Another major offering is multilingual
services. Evalueserve trains and qualifies employees to communicate in Chinese,
Spanish, German, Japanese and Italian, among other languages. That skill set
has opened market opportunities in Europe and
elsewhere, especially with global corporations.
ICICI
Infotech Services in Edison , New
Jersey , is another BPO services provider that is offering
marketing software products and diversifying into markets outside the US
In
its first year after setting up shop in March 1999, ICICI Infotech spent $33
million acquiring two information technology services firms in New Jersy –
Object Experts and lvory Consulting – and Command Systems in Connecticut US US market offensive, which would go towards R
& D and back-end infrastructure support, and creating new versions of its
products to comply with US
A
relatively late entrant to the US
ICICI
Infotech’s expansion into new overseas markets has paid off. Its $50 million
revenue for its latest financial year ending March 2003 has the US operations generating some $15 million, while
the Middle East and Far East markets brought
in another $9 million. It now boasts more than 700 customers in 30 countries,
including Dow Jones, Glaxo – Smithkline,
Panasonic and American Insurance Group.
The
outsourcing industry is indeed growing from strength. Though technical support
and financial services have dominated India
Outsourcing
of human resource services or HR BPO is emerging as big opportunity for Indian
BPOs with global market in this segment estimated at $40-60 billion per annum.
HR BPO comes to about 33 percent of the outsourcing revenue and India
Another
potential area is ITES/BPO industry. According to a NASSCOM Survey, the global
ITES/BPO industry was valued at around $773 billion during 2002 and it is
expected to grow at a compounded annual growth rate of nine percent during the
period 2002-06. NASSCOM lists the major indicators of the high growth potential
of ITES/BPO industry in India
During
2003-04, The ITES/BPO segment is estimated to have achieved a 54 percent growth
in revenues as compared to the previous year. ITES exports accounted for $3.6
billion in revenues, up from $2.5 billion in 2002-03. The ITES-BPO segment also
proved to be a major opportunity for job seekers, creating employment for
around 74,400 additional personnel in India
Legal
outsourcing sector is another area India India India
Research
firms such as Forrester Research, predict that by 2015, more than 489,000 US
Many
more new avenues are opening up for BPO services providers. Patent writing and
evaluation services are markets set to boom. Some 200,000 patent applications
are written in the western world annually, making for a market size of between
$5 billion and $7 billion. Outsourcing patent writing service could
significantly lower the cost of each patent application, now anywhere between
$12,000 and $15,000 apiece – which help expand the market.
Offshoring of equity research is
another major growth area. Translation services are also becoming a big Indian
plus. India produces some
3,000 graduates in German each year, which is more than in Switzerland
Though going is good, the Indian BPO
services providers cannot afford to be complacent, Phillippines ,
Mexico and Hungary Russia South Africa and even China
BPO is based on sound economic
reasons. Outsourcing helps gain cost advantage. If an activity can be performed
better or more cheaply by an outside supplier, why not outsource it ? Many PC
makers, for example, have shifted from in-house assembly to utilizing contract
assemblers to make their PCs. CISCO outsources all productions and assembly of
its routers and switching equipment to contract manufacturers that operate 37
factories, all linked via the Internet.
Secondly, the activity (outsourced) is
not crucial to the firm’s ability to gain sustainable competitive advantage and
won’t hollow out its core competence, capabilities, or technical knowhow.
Outsourcing of maintenance services, data processing, accounting, and other
administrative support activities to companies specializing in these services
has become common place. Thirdly, outsourcing reduces the company’s risk
exposure to changing technology and / or changing buyer preferences.
Fourthly, BPO streamlines company
operations in ways that improve organizational flexibility, cut cycle time,
speedup decision making and reduce coordination costs. Finally, outsourcing
allows a company to concentrate on its crore business and do what it does best.
Are Indian companies listening? If they listen, BPO is a boon them and not a
bane.
Questions
1. Which of the theories of International
trade can help Indian services providers gain competitive edge over their
competitors?
2. Pick up some Indian services providers.
With the help of Michael Porter’s diamond, analyze their strengths and
weaknesses as active players in BPO.
3. Compare this case with the case given
at the beginning of this chapter. What similarities and dissimilarities do you
notice? Your analysis should be based on the theories explained in this
chapter.
CASE
V
THE
SAGA CONTINUES
It
was the talk of the town in Bangalore Bangalore Yelahanka Road
An
interesting story is told about how one of the surviving founders (Larsen who
lived till 2003) visited the Bangalore
A
budding author captured all these and many more in his first book, which became
a big hit with all the teachers and students in different colleges buying and
reading it.
If
cannot be anything other than L & T, the huge engineering and construction
multi-plant organization, founded in 1938 by two Danish engineers, Henning
Holck – Larsen and Soren Kristin Toubro.
Henning
Holck – Larsen and Soren Kristin Toubro, school – mates in Denmark, would not
have dreamt, as they were learning about India in history classes that they
would, one day, create history in that land. In 1938, the two friends decided
to forgo the comforts of working in Europe and started their own operation in India Bombay India
As
on today, L & T is a 62 business conglomerate with turnover of Rs. 18,363
crore (2006-07), with the script commanding Rs. 2400 in the bourses.
No,
L & T is not sitting pretty. It want to hit Rs. 30,000 crore turnover mark
by 2010 and is busy restructuring, sniffing new pastures, grooming new talent
and projecting the new company credo – “It’s all about Imagineering.” With the
sole idea of creating several MNCs within, with footprints across nations, L
& T is shedding the old economy and embracing the emergent opportunities
and challenges.
Stagnant
Revenues and Low Margins
Not
everything went the L & T way.
In
the late nineties, the macro environment was ----- inspiring with stagnant
revenues and low margins, and L & T’s core strength, its engineers, were
being constantly weaned away by the fast-growing software sector. So, the
general comment around the bourses was about the credibility of the company, ‘L
& T is a, good company but its stock price, for some reason or the other,
is fixed at the Rs. 140-210 band. So the company had to change by keeping its
core intact. As s senior executive remarks. “L & T was perceived to be un
–sexy and we had to create a new buzz around the campuses.” The metamorphosis
must echo through a whimper, not a bang. Even before the company divested its
cement business in 2003, which accounted for 25% of its total sales, there were
years of incremental and low visibility organizational moves towards a new L
& T.
At
a 52-week high of Rs. 2400, the L & T scrip today looks dapper, a far cry
from the nineties when the stock price was in a state of flux. Much of the
change started as a ripple way back in 1999 when Naik took over as the CEO. He
visited employees at all levels across the organization and asked them what it
took to transform the company. The insights were mapped and implemented. “None
of our employees thought that we build shareholder value. They thought we build
monuments,” the chairman reminisces. The focus on people became stronger and
formed the basis of restructuring. It became the first old economy company to
provide stock options to its employees.
When
Naik came to the helm, he set upon himself a 90 – day transformational agenda.
Portfolios were reviewed and a vision clearly chalked out. He drew up a simple,
brief, “ L & T has to be a multinational company and it has to deliver
shareholder value at any cost. At the end of 90 days, between July 22 and July
24, 1999, the company launched Project Blue Chip, which essentially fast –
tracked projects. The moot point was to complete all projects by February of the
new millennium. Strategy formation teams were formed, portfolios reviewed and
structures were optimized. Young leadership was brought to the fore and the
business streamlining process kicked in.
Hiving
off from 1999-2001, L & T went about debottle- necking its cement plants.
They were modernized and capitalized were raised from 12 million tones to 16
million tones annually, with minimum costs. The mantra really was to grow the
business and then divest it as cement fell in the non-core category.
So,
in September 2003, L & T sold its cement business to the Aditya Birla
Group, which resulted in the company’s Economic Value Add (EVA), an important
indicator of the financial health of the company, swinging from a negative
Rs.350-crore to a positive Rs.50-crore immediately. The move also enabled
L&T to reduce its debt-equity ratio from 1:1 to 0.2:1. Analysts took a
positive view of the demerger, and re-rated L&T as AAA from AA+ in 2004.
From then on, began L&T’s transformation into a lean and mean machine. In
2004, the company envisaged a growth curve for the next five years. This marked
the beginning of Project Lakshya, which was centered around people, operations,
capabilities and new ventures. The company set out with over 300 initiatives in
hand, and also placed a rigorous risk management system. For instance, any
project above Rs. 1,000-crore needed the signature of the chairman. Project
Lakshya is known for targeting and selecting the right projects.
By
now, the Indian economy had started witnessing unprecedented boom and despite
divesting the cement business, the L&T turnover scaled the Rs. 10,000 crore
mark. Alongside, the lucrative Middle East market was booming and L&T
forayed into six countries in the Gulf with joint ventures. “The idea was to
develop a mini L&T in the region,” observes a senior company executive. The
company also set up manufacturing facilities in China to leverage the cost
structure. Exports in 2007 constituted 18% of net sales. With soaring revenues
and operating margins, L&T started benchmarking itself with the best in the
world. Suddenly, the notion of an Indian MNC became a reality.
L&T
has big plans to foray into new businesses. The new businesses are:
Ship-building: L&T
is getting into ship-building by building a world-class facility, and already
has a small shipyard in Hazira. Will build complex ocean going ships for the
first time in India.
Power equipment: It
is getting into power equipment in a big way. A JV with Mitsubishi for super
critical boilers, formed another with Toshiba for turbines on the way.
Financial services: L&T
is rapidly increasing its presence in infrastructure finance. It is also
planning to come up with a $1 billion infrastructure fund.
Railways: A
new area, L&T aims to be an end-to-end solutions provider for the railways,
from track-laying to signaling to transmission, and others.
The
global economic meltdown has hit L&T also, but lightly. Its order book at
Rs. 71,650cr has not grown as expected. Delay in finalization of several
government projects as well as the slowdown in the overseas markets are the key
reasons for the lax in order inflow. The company, however, has maintained its
forecast of a 25 percent growth in its order book for the fiscal 2010.
L&T’s,
IT and financial subsidiaries too witnessed lackluster performance with profits
remaining stagnant.
L&T’s
focus areas in future would be the Middle East and China in view of the booming
infrastructure market there.
Thus,
for an institution that has grown to legendary proportions, there cannot and
must not be an ‘end’. Unlike other stories, the L&T saga continues.
QUESTIONS
1.
Having
a strong presence in India, what drives L&T to think of emerging a strong
MNC ?
2.
What
challenges lies ahead of L&T ? How does it prepare to cope with them ?
3.
Will
the L&T Saga continue ?
CASE VI
THE ABB PBS JOINT VENTURE
IN OPERATION
ABB Prvni Brnenska Strojirna Brno, Ltd. (ABB-PBS), Czechoslovakia
Business for the joint venture in its
first two full years was good in most aspects. Orders received in 1994, the
first full year of the joint venture's operation, were higher than ever in the
history of PBS. Orders received in 1995 were 21/2 times
those in 1994. The company was profitable in 1995 and ahead of 1994s results
with a rate of return on assets of 2.3 per cent and a rate of return on sales
of 4.5 per cent.
The 1995 results showed substantial
progress towards meeting the joint venture's strategic goals adopted in 1994 as
part of a five-year plan. One of the goals was that exports should account for
half of the total orders by 1999. (Exports had accounted for more than a
quarter of the PBS business before 1989, but most of this business disappeared
when the Soviet Union collapsed), In 1995 exports increased as a share of total
orders to 28 per cent up from 16 per cent the year before.
The external service business,
organized and functioning as a separate business for the first time in 1995,
did not meet expectations. It accounted for five per cent of all orders and
revenues in 1995, below the 10 per cent goal set for it. The retrofitting
business, which was expected to be a major part of the service business, was
disappointing for ABB-PBS, partly because many other small companies began to
provide this service in 1994, including some started by former PBS employees
who took their knowledge of PBS-built power plants with them. However, ABB-PBS
managers hoped that as the company introduced new technologies, these former employees
would gradually lose their ability to perform these services, and the retrofit
and repair service business would return to ABB-PBS.
ABB-PBS dominated the Czech boiler
business with 70 per cent of the Czech market in 1995, but managers expected
this share to go down in the future as new domestic and foreign competitors
emerged. Furthermore, the west European boiler market was actually declining
because environmental laws caused a surge of retrofitting to occur in the
mid-1980s, leaving less business in the 1990s. Accordingly ABB-PBS boiler
orders were flat in 1995.
Top managers at ABB-PBS regarded
business results to date as respectable, but they were not satisfied with the
company's performance. Cash flow was not as good as expected. Cost reduction
had to go further. "The more we succeed, the more we see our
shortcomings", said one official.
Restructuring
The first round of restructuring was
largely completed in 1995, the last year of the three-year restructuring plan.
Plant logistics, information systems, and other physical capital improvements
were in place. The restructing included :
·
Renovating and
reconstructing workshops and engineering facilities
·
Achieving ISO 9001 for all
four ABB-PBS divisions (awarded in 1995)
·
Transfer of technology
from ABB (this was an ongoing project)
·
Installation of an
information system
·
Management training,
especially in total quality assurance and English language
·
Implementing a project
management approach.
A notable achievement of importance of
top management in 1995 was a 50 per cent increase in labour productivity,
measured as value added per payroll crown. However, in the future ABB-PBS
expected its wage rates to go up faster than west European wage rates (Czech
wages were increasing about 15 per cent per year) so it would be difficult to
maintain the ABB-PBS unit cost advantage over west European unit cost.
The Technology Role for ABB-PBS
The joint venture was expected from the beginning to
play an important role in technology development for part of ABB's power
generation business worldwide. PBS a.s. had engineering capability in
coal-fired steam boilers, and that capability was expected to be especially
useful to ABB as more countries became concerned about air quality. (When asked
if PBS really did have leading technology here, a boiler engineering manager
remarked, "Of course we do. We burn so much dirty coal in this country, we
have to have better technology").
However, the envisioned technology leadership role for
ABB-PBS had not been realised by mid-1996. Richard Kuba, the ABB-PBS managing
director, realised the slowness with which the technology role was being
fulfilled, and he offered his interpretation of events :
"ABB did not promise to make the joint venture its
steam technology leader. The main point we wanted to achieve in the joint
venture agreement was for ABB-PBS to be recognised as a full-fledged company,
not just a factory. We were slowed down on our technology plans because we had
a problem keeping our good, young engineers. The annual employee turnover rate
for companies in the Czech
Republic
ABB-PBS had benefited technologically from its
relationship with ABB. One example was the development of a new steam turbine
line. This project was a cooperative effort among ABB-PBS and two other ABB
companies, one in Sweden and
one in Germany
Questions
1.
Where
does the joint venture meet the needs of both the partners? Where does it fall
short?
2.
Why
had ABB-PBS failed to realized its technology leadership?
3.
What
lessons one can draw from this incident for better management of technology
transfers?
CASE VII
One of these potential investors is a large New York
During the 1970s, the Peruvian government nationalized a
number of industries and factories and began running them for the profit of the
state. In most cases, these state-run ventures became disasters. In the late
1970s, the fishing fleet owner was given back his ships and allowed to operate
his business as before. Since then, he has managed to remain profitable, but
the biggest problem is that his ships are getting old and he needs and influx
of capital to make repairs and add new technology. As he explained it to the New York
Having reviewed the fleet owner’s operation, the large
multinational bank believers that the loan is justified. The financial institution
is concerned, however, that the Peruvian government might step in during the
next couple of years and again take over the business. If this were to happen
it might take and additional decade for the loan to be repaid. If the
government were to allow the fleet owner to operate the fleet the way he has
over the last decade, the loan could be repaid within seven years.
Right now, the bank is deciding on the specific terms of
the agreement. Once these have been worked out, either a loan officer will fly
down to Lima and close the deal or the owner
will be asked to come to New York Lima
Questions
1.
What
are some current issues facing Peru Peru
2.
What
type of political risks does this fishing company need to evaluate? Identify
and describe them.
3.
What
types of integrative and protective and defensive techniques can the bank use?
4.
Would
the bank be better off negotiating the loan in New York
or in Lima
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