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Business Law
Marks - 100
Attempt any 10 Questions
1. How are right of lien and stoppage-in-transit affected by sub-sale or pledge by the buyer?
2. Discuss the rule regarding duration of transit. When does it come of an end?
3. Comment on the statement, “Delivery does not amount to acceptance of goods”?
4. State the exceptions to the rule that no one can convey a better title than what he has.
5. When are the goods said to be unascertained? What are the rules as to the transfer of property in the unascertained goods to the buyer?
6. Discuss the implied condition relating to sale by sample?
7. Discuss the doctrine of caveat emptor and state its exceptions.
8. What is the effect of perishing of goods on the contract of sale?
9. Explain the various methods of creating agency?
10. Pledge can be created only of movable property. Comment.
11. Discuss the position of guarantee in respect of loans to a minor.
12. Does the release by the creditor of one of the sureties discharge the others?
13. Explain the provisions relating to appointment of directors in Producer Company.
14. Two separate company wish to amalgamate. State the steps which they must take for this purpose.
15. Does the failure of inspector to submit his or her report in time amount to an end to investigation?
16. A, the secretary of the company is also a minority shareholder. He is removed from the post of secretary. He brings complaint on the ground of oppression? Advise
17. A single member of a company wishes to challenge the decisions of the majority. Can he succeed?
18. What new provisions have been made for the protection of interests of debenture holders?
19. Write a short note on Consumer Protection Councils.
20. Describe the powers of SEBI relating to the working of the depository system.
Attempt Any Four Case Study
CASE – 1 Your Job and Your Passion—You Can Pursue Both!
The 21st century offers many challenges to every one of us. As more firms go global, as more economies interconnect, and as the Web blasts away boundaries to communication, we become more informed citizens. This interconnectedness means that the organizations you work for will require you to develop both general and specialized knowledge—such as speaking multiple languages, using various software applications, or understanding details of financial transactions. You will have to develop general management skills to foster your ability to be self-reliant and thrive in a changing market-place. And here’s the exciting part: As you build both types of knowledge, you may be able to integrate your growing expertise with the causes or activities you care most about. Or, your career adventure may lead you to a new passion.
Former presidents George H. W. Bush and Bill Clinton are well known for combining their management skills—running a country—with their passion for helping people around the world. Together they have raised funds to assist disaster victims, those with HIV/AIDS, and others in need. Jake Burton turned his love of snow sports into an entire industry when he founded Burton Snowboards. Annie Withey poured her business and marketing knowledge into her two famous business ventures: Smart food and Annie’s Homegrown. Both products were the result of her passion for healthful foods made from organic ingredients.
As you enter the workforce, you may have no idea where your career path will lead. You may be asking yourself, “How will I fit in?” “Where will I live?” “How much will I earn?” “Where will my business and personal careers evolve as the world continuous to change at such a fast pace?” If you are feeling nervous because you don’t know the answers to these questions yet, relax. A career is a journey, not a single destination. You may have one type of career or several. It is likely you will work for several organisations, or you may run one or more businesses of your own.
As you ask yourself what you want to do and where you want to be, take a few minutes to review the chapter and its main topics. Think about your personality, what you like and dislike, what you know and what you want to learn, what you fear and what you dream. Then try the following exercise.
Questions
1. Create a three-column chart in which the first column lists nonmanagement skills you have. Are you good at travel? Do you know how to build furniture? Are you a whiz at sports statistics? Are you an innovative cook? Do you play video games for hours? In the second column, list the causes or activities about which you are passionate. These may dovetail with the first list, but they might not.
2. Once you have you two columns complete, draw lines between entries that seem compatible. If you are good at building furniture, you might have also listed a concern about families who are homeless. Remember that not all entries will find a match—the idea is to begin finding some connections.
3. In the third column, generate a list of firms or organizations you know about that reflect your interests. If you are good at building furniture, you might be interested working for the Habitat for Humanity organization, or you might find yourself gravitating towards a furniture retailer like Ikea or Ethan Allen. You can do further research on organizations via Internet or business publications.
Note: Solve any 4 Cases Study’s
CASE: I Enterprise Builds On People
When most people think of car-rental firms, the names of Hertz and Avis usually come to mind. But in the last few years, Enterprise Rent-A-Car has overtaken both of these industry giants, and today it stands as both the largest and the most profitable business in the car-rental industry. In 2001, for instance, the firm had sales in excess of $6.3 billion and employed over 50,000 people.
Jack Taylor started Enterprise in St. Louis in 1957. Taylor had a unique strategy in mind for Enterprise, and that strategy played a key role in the firm’s initial success. Most car-rental firms like Hertz and Avis base most of their locations in or near airports, train stations, and other transportation hubs. These firms see their customers as business travellers and people who fly for vacation and then need transportation at the end of their flight. But Enterprise went after a different customer. It sought to rent cars to individuals whose own cars are being repaired or who are taking a driving vacation.
The firm got its start by working with insurance companies. A standard feature in many automobile insurance policies is the provision of a rental car when one’s personal car has been in an accident or has been stolen. Firms like Hertz and Avis charge relatively high daily rates because their customers need the convenience of being near an airport and/or they are having their expenses paid by their employer. These rates are often higher than insurance companies are willing to pay, so customers who these firms end up paying part of the rental bills themselves. In addition, their locations are also often inconvenient for people seeking a replacement car while theirs is in the shop.
But Enterprise located stores in downtown and suburban areas, where local residents actually live. The firm also provides local pickup and delivery service in most areas. It also negotiates exclusive contract arrangements with local insurance agents. They get the agent’s referral business while guaranteeing lower rates that are more in line with what insurance covers.
In recent years, Enterprise has started to expand its market base by pursuing a two-pronged growth strategy. First, the firm has started opening airport locations to compete with Hertz and Avis more directly. But their target is still the occasional renter than the frequent business traveller. Second, the firm also began to expand into international markets and today has rental offices in the United Kingdom, Ireland and Germany.
Another key to Enterprise’s success has been its human resource strategy. The firm targets a certain kind of individual to hire; its preferred new employee is a college graduate from bottom half of graduating class, and preferably one who was an athlete or who was otherwise actively involved in campus social activities. The rationale for this unusual academic standard is actually quite simple. Enterprise managers do not believe that especially high levels of achievements are necessary to perform well in the car-rental industry, but having a college degree nevertheless demonstrates intelligence and motivation. In addition, since interpersonal relations are important to its business, Enterprise wants people who were social directors or high-ranking officers of social organisations such as fraternities or sororities. Athletes are also desirable because of their competitiveness.
Once hired, new employees at Enterprise are often shocked at the performance expectations placed on them by the firm. They generally work long, grueling hours for relatively low pay.
And all Enterprise managers are expected to jump in and help wash or vacuum cars when a rental agency gets backed up. All Enterprise managers must wear coordinated dress shirts and ties and can have facial hair only when “medically necessary”. And women must wear skirts no shorter than two inches above their knees or creased pants.
So what are the incentives for working at Enterprise? For one thing, it’s an unfortunate fact of life that college graduates with low grades often struggle to find work. Thus, a job at Enterprise is still better than no job at all. The firm does not hire outsiders—every position is filled by promoting someone already inside the company. Thus, Enterprise employees know that if they work hard and do their best, they may very well succeed in moving higher up the corporate ladder at a growing and successful firm.
Question:
1. Would Enterprise’s approach human resource management work in other industries?
2. Does Enterprise face any risks from its human resource strategy?
3. Would you want to work for Enterprise? Why or why not?
CASE: II Doing The Dirty Work
Business magazines and newspapers regularly publish articles about the changing nature of work in the United States and about how many jobs are being changed. Indeed, because so much has been made of the shift toward service-sector and professional jobs, many people assumed that the number of unpleasant an undesirable jobs has declined.
In fact, nothing could be further from the truth. Millions of Americans work in gleaming air-conditioned facilities, but many others work in dirty, grimy, and unsafe settings. For example, many jobs in the recycling industry require workers to sort through moving conveyors of trash, pulling out those items that can be recycled. Other relatively unattractive jobs include cleaning hospital restrooms, washing dishes in a restaurant, and handling toxic waste.
Consider the jobs in a chicken-processing facility. Much like a manufacturing assembly line, a chicken-processing facility is organised around a moving conveyor system. Workers call it the chain. In reality, it’s a steel cable with large clips that carries dead chickens down what might be called a “disassembly line.” Standing along this line are dozens of workers who do, in fact, take the birds apart as they pass.
Even the titles of the jobs are unsavory. Among the first set of jobs along the chain is the skinner. Skinners use sharp instruments to cut and pull the skin off the dead chicken. Towards the middle of the line are the gut pullers. These workers reach inside the chicken carcasses and remove the intestines and other organs. At the end of the line are the gizzard cutters, who tackle the more difficult organs attached to the inside of the chicken’s carcass. These organs have to be individually cut and removed for disposal.
The work is obviously distasteful, and the pace of the work is unrelenting. On a good day the chain moves an average of ninety chickens a minute for nine hours. And the workers are essentially held captive by the moving chain. For example, no one can vacate a post to use the bathroom or for other reasons without the permission of the supervisor. In some plants, taking an unauthorised bathroom break can result in suspension without pay. But the noise in a typical chicken-processing plant is so loud that the supervisor can’t hear someone calling for relief unless the person happens to be standing close by.
Jobs such as these on the chicken-processing line are actually becoming increasingly common. Fuelled by Americans’ growing appetites for lean, easy-to-cook meat, the number of poultry workers has almost doubled since 1980, and today they constitute a work force of around a quarter of a million people. Indeed, the chicken-processing industry has become a major component of the state economies of Georgia, North Carolina, Mississippi, Arkansas, and Alabama.
Besides being unpleasant and dirty, many jobs in a chicken-processing plant are dangerous and unhealthy. Some workers, for example, have to fight the live birds when they are first hung on the chains. These workers are routinely scratched and pecked by the chickens. And the air inside a typical chicken-processing plant is difficult to breathe. Workers are usually supplied with paper masks, but most don’t use them because they are hot and confining.
And the work space itself is so tight that the workers often cut themselves—and sometimes their coworkers—with the knives, scissors, and other instruments they use to perform their jobs. Indeed, poultry processing ranks third among industries in the United States for cumulative trauma injuries such as carpet tunnel syndrome. The inevitable chicken feathers, faeces, and blood also contribute to the hazardous and unpleasant work environment.
Question:
1. How relevant are the concepts of competencies to the jobs in a chicken-processing plant?
2. How might you try to improve the jobs in a chicken-processing plant?
3. Are dirty, dangerous, and unpleasant jobs an inevitable part of any economy?
Attempt Any Four Case Study
CASE – 1 Dabur India Limited: Growing Big and Global
Dabur is among the top five FMCG companies in India and is positioned successfully on the specialist herbal platform. Dabur has proven its expertise in the fields of health care, personal care, homecare and foods.
The company was founded by Dr. S. K. Burman in 1884 as small pharmacy in Calcutta (now Kolkata), India. And is now led by his great grandson Vivek C. Burman, who is the Chairman of Dabur India Limited and the senior most representative of the Burman family in the company. The company headquarters are in Ghaziabad, India, near the Indian capital New Delhi, where it is registered. The company has over 12 manufacturing units in India and abroad. The international facilities are located in Nepal, Dubai, Bangladesh, Egypt and Nigeria.
S.K. Burman, the founder of Dabur, was trained as a physician. His mission was to provide effective and affordable cure for ordinary people in far-flung villages. Soon, he started preparing natural remedies based on Ayurved for diseases such as Cholera, Plague and Malaria. Due to his cheap and effective remedies, he became to be known as ‘Daktar’ (Indianised version of ‘doctor’). And that is how his venture Dabur got its name—derived from Daktar Burman.
The company faces stiff competition from many multi national and domestic companies. In the Branded and Packaged Food and Beverages segment major companies that are active include Hindustan Lever, Nestle, Cadbury and Dabur. In case of Ayurvedic medicines and products, the major competitors are Baidyanath, Vicco, Jhandu, Himani and other pharmaceutical companies.
Vision, Mission and Objectives
Vision statement of Dabur says that the company is “dedicated to the health and well being of every household”. The objective is to “significantly accelerate profitable growth by providing comfort to others”. For achieving this objective Dabur aims to:
• Focus on growing core brands across categories, reaching out to new geographies, within and outside India, and improve operational efficiencies by leveraging technology.
• Be the preferred company to meet the health and personal grooming needs of target consumers with safe, efficacious, natural solutions by synthesising deep knowledge of ayurveda and herbs with modern science.
• Be a professionally managed employer of choice, attracting, developing and retaining quality personnel.
• Be responsible citizens with a commitment to environmental protection.
• Provide superior returns, relative to our peer group, to our shareholders.
Chairman of the company
Vivek C. Burman joined Dabur in 1954 after completing his graduation in Business Administration from the USA. In 1986 he was appointed Managing Director of Dabur and in 1998 he took over as Chairman of the Company.
Under Vivek Burman’s leadership, Dabur has grown and evolved as a multi-crore business house with a diverse product portfolio and a marketing network that traverses the whole of India and more than 50 countries across the world. As a strong and positive leader, Vivek C. Burman has motivated employees of Dabur to “do better than their best”—a credo that gives Dabur its status as India’s most trusted nature-based products company.
Leading brands
More than 300 diverse products in the FMCG, Healthcare and Ayurveda segments are in the product line of Dabur. List of products of the company include very successful brands like Vatika, Anmol, Hajmola, Dabur Amla Chyawanprash, Dabur Honey and Lal Dant Manjan with turnover of Rs.100 crores each.
Strategic positioning of Dabur Honey as food product, lead to market leadership with over 40% market share in branded honey market; Dabur Chyawanprash is the largest selling Ayurvedic medicine with over 65% market share. Dabur is a leader in herbal digestives with 90% market share. Hajmola tablets are in command with 75% market share of digestive tablets category. Dabur Lal Tail tops baby massage oil market with 35% of total share.
CHD (Consumer Health Division), dealing with classical Ayurvedic medicines has more than 250 products sold through prescription as well as over the counter. Proprietary Ayurvedic medicines developed by Dabur include Nature Care Isabgol, Madhuvaani and Trifgol.
However, some of the subsidiary units of Dabur have proved to be low margin business; like Dabur Finance Limited. The international units are also operating on low profit margin. The company also produces several “me – too” products. At the same time the company is very popular in the rural segment.
Questions
1. What is the objective of Dabur? Is it profit maximisation or growth maximisation? Discuss.
2. Do you think the growth of Dabur from a small pharmacy to a large multinational company is an indicator of the advantages of joint stock company against proprietorship form? Elaborate.
CASE – 2 IT Industry: Checkered Growth
IT industry is now considered as vital for the development of any economy. Developing countries value the importance of this industry due to its capacity to provide much needed export earnings and support in the development of other industries. Especially in Indian context, this industry has assumed a significant position in the overall economy, due to its exemplary potentials in creating high value jobs, enhancing business efficiency and earning export revenues. The IT revolution has brought unexpected opportunities for India, which is emerging as an increasingly preferred location for customised software development. Experts are estimating the global IT industry to grow to US$1.6 million over the coming six years and exports to reach Rs. 2000 billion by 2008. It is envisaged that Indian IT industry, though a very small portion of the global IT pie, has tremendous growth prospects.
Stock Taking
The decade of 1970 may be taken as the stage of introduction of the Indian IT industry. The early years were marked by 75 per cent of software development taking place overseas and the rest 25 per cent in India. Exports of Indian software until the mid-1970s was mainly Eastern Europe, followed by US. Tata Consultancy Services (TCS) was among the pioneers in selling its services outside India, by working for IBM Labs in the US. The hardware segment lagged behind its software counterpart. With instances of exports worth US$ 4 million in 1980, the software segment of the industry has shown an uneven profile. It was not until 1980s that vigorous and sustained growth in software exports begun, as MNCs like Texas Instruments started to take serious interest in India as a centre of software production. Destinations of export also underwent changes, with US dominating the main export market with 75 per cent of the exports. The IT Enabled Services (ITeS) segment, however, had not emerged at this stage.
It was also during the mid to late 1980s that computer firms shifted focus from mainframe computers (the mainstay of MNCs) to Personal Computers (PCs). In March 1985, Minicomp installed the first ever PC at CSI, Delhi; this changed the entire industry for good. With the entry of networking and applications like CAD/CAM, PC sales soared in 1987-88, touching 50,000 units.
From a modest growth in the mid-1980s software exports moved up to Rs. 3.8 billion in 1991-92. Since then, it grew at an incredible rate, up to 115 per cent in 1993. The hardware could also register an annual growth of 40 per cent in this period, backed by a surging demand for PCs and networking. Growth of the industry was also driven by the emergence and rapid growth of the ITeS segment.
Note: Solve any 4 Cases Study’s
CASE: I Managing the Guinness brand in the face of consumers’ changing tastes
1997 saw the US$19 billion merger of Guinness and GrandMet to form Diageo, the world’s largest drinks company. Guinness was the group’s top-selling beverage after Smirnoff vodka, and the group’s third most profitable brand, with an estimated global value of US$1.2 billion. More than 10 million glasses of the popular stout were sold every day, predominantly in Guinness’s top markets: respectively, the UK, Ireland, Nigeria, the USA and Cameroon.
However, the famous dark stout with the white, creamy head was causing some strategic concerns for Diageo. In 1999, for the first time in the 241-year of Guinness, sales fell. In early 2002 Diageo CEO Paul Walsh announced to the group’s concerned shareholders that global volume growth of Guinness was down 4 per cent in the last six months of 2001 and, more alarmingly, sales were also down 4 per cent in its home market, Ireland. How should Diageo address falling sales in the centuries-old brand shrouded in Irish mystique and tradition?
The changing face of the Irish beer market
The Irish were very fond of beer and even fonder of Guinness. With close to 200 litres per capita drunk each year—the equivalent of one pint per person per day—Ireland ranked top in worldwide per capita beer consumption, ahead of the Czech Republic and Germany.
Beer accounted for two-thirds of all alcohol bought in Ireland in 2001. Stout led the way in volume sales and accounted for 40 per cent of all beer value sales. Guinness, first brewed in 1759 in Dublin by Arthur Guinness, enjoyed legendary status in Ireland, a national symbol as respected as the green, white and gold flag. It was by far the most popular alcoholic drink in Ireland, accounting for nearly one of every two pints of beer sold. Its nearest competitors were Budweiser and Heineken, which held 13 per cent and 12 per cent of the market respectively.
However, the spectacular economic growth of the Irish economy since the mid-1990s had opened up the traditional drinking market to new cultures and influences, and encouraged the travel-friendly Irish to try other drinks. Beer and in particular stout were losing popularity compared with wine or the recently launched RTDs (ready-to-drinks) or FABs (flavoured alcoholic beverages), which the younger generation of drinkers considered trendier and ‘healthier’. As a Euromonitor report explained: Younger consumers consider dark beers and stout to be old fashioned drinks, with the perceived stout or ale drinker being an old, slightly overweight man and thus not in tune with image conscious youth culture.
Beer sales, which once accounted for 75 per cent of all alcohol bought in Ireland, were expected to drop to close to 50 per cent by 2006, while stout sales were forecast to decrease by 12 per cent between 2002 and 2006.
Giving Guinness a boost in its home market
With Guinness alone accounting for 37 per cent of Diageo’s volume in the market, Guinness/UDV Ireland was one of the first to feel the pain caused by the declining popularity of beer and in particular stout. A Euromonitor report in February 2002 explained how the profile of the Guinness drinker, typically men aged 21-plus, was affected: The average age of Guinness drinkers is rising and this is bringing about the worrying fact that the size of the Guinness target audience is falling. The rate of decline is likely to quicken as the number of less brand loyal, non-stout drinking younger consumers increases.
The report continued:
In Ireland, in particular, the consumer base for Guinness is shrinking as the majority of 18 to 24 year olds consistently reject stout as a product relevant to their generation, opting instead to consume lager or spirits.
Effectively, one-third of young Irish men and half of young Irish women had reportedly never tried Guinness. A Guinness employee provided another explanation. Guinness is similar to coffee in that when you’re young you drink it [coffee] with sugar, but when you’re older you drink it without. It’s got a similar acquired taste and once you’re over the initial hurdle, you’ll fall in love with it.
In an attempt to lure young drinkers to the somewhat ‘acquired’ Guinness taste (40 per cent of the Irish population was under the age of 24) Diageo had invested millions in developing product innovations and brand building in Ireland’s 10,000 pubs, clubs and supermarkets.
Product innovation
Until the mid-1990s most Guinness in Ireland was drunk in a pint glass in the local pub. The launch of product innovations in the form of a new cooling mechanism for draft Guinness and the ‘widget’ technology applied to cans and bottles attempted to modernize the brand’s image and respond to increasing competition from other local and imported stouts and lagers.
‘A perfect head’ for canned Guinness
In 1989, and at a cost of more than £10 million, Guinness developed an ingenious ‘widget’ device for its canned draft stout sold in ‘off-trade’ outlets such as supermarkets and off-licences. The widget, placed in the bottom of the can, released a gas that replicated the draft effect.
Although over 90 per cent of beer in Ireland was sold in ‘on-trade’ pubs and bars, sale of beer in the cheaper ‘off-trade’ channel were slowly gaining in importance. The Guinness brand manager at the time, John O’Keeffe, explained how home drinkers could now enjoy a smoother, creamier head similar to the one obtained in a pub thanks to the new widget technology:
When the can is opened, the pressure causes the nitrogen to be released as the widget moves through the beer, creating the classic draft Guinness surge.
Nearly 10 years later, in 1997, the ‘floating widget’ was introduced, which improved the effectiveness of the device.
A colder pint
In 1997 Guinness Draft Extra Cold was launched in Ireland. An additional chilled tap system could be added to the standard barrel in pubs, allowing the Guinness to be served at 4ºC rather than the normal 6ºC. By serving Guinness at a cooler temperature, Guinness/UDV hoped to mute the bitter taste of the stout and make it more palatable for younger adults, who were increasingly accustomed to drinking chilled lager, particularly in the summer
A cooler image for Guinness
In October 1999 the widget technology was applied to long-stemmed bottles of Guinness. The launch was supported by a US$2 million TV and outdoor board campaign. The packaging—with a clear, shiny plastic wrap, designed to look like a pint complete with creamy head—was quite a departure from the traditional Guinness look.
The objective was to reposition Guinness alongside certain similarly packaged lagers and RTDs and offer younger adults a more fashionable way to drink Guinness: straight from the bottle. It also gave Guinness easier access to the growing number of clubs and bars that were less likely to serve traditional draft Guinness easier access to the growing number of clubs and bars that were less likely to serve traditional draft Guinness, which could be kept for only six to eight weeks and took two minutes to pour. The RTDs, by contrast, had a shelf-life of more than a year and were drunk straight from the bottle.
However, financial analyst remained sceptical about the Guinness product innovations, which had no significant positive impact on sales or profitability:
The last news about the success of the recently introduced innovations suggests that they have not had a notably material impact on Guinness brand performance.
Brand building
Euromonitor estimates that, in 2000, Diageo invested between US$230 and US$250 million worldwide in Guinness advertising and promotions. However, with a cost-cutting objective, the company reduced marketing expenses in both Ireland and the UK up to 10 per cent in 2001 and the number of global Guinness agencies from six to two.
Nevertheless, Guinness remained one of the most advertised brands in Ireland. It was the leading cinema advertiser and, in terms of advertising, was second only to the national telecoms provider, Eircom. Guinness was also heavily promoted at leading sporting and music events, in particular those that were popular with the younger age groups.
The ultimate tribute to the brand was the opening of the new Guinness Storehouse in Dublin in late 2000, a sort of Mecca for all Guinness fans. The Storehouse was also a fashionable visitor centre with an art gallery and restaurants, and regularly hosted evening events. The company’s design brief highlighted another key objective:
To use an ultramodern facility to breathe life into an ageing brand, to reconnect an old company with young (sceptical) customers.
As the Storehouse’s design firm’s director, Ralph Ardill, explained:
Guinness Storehouse had become the top tourist destination in Ireland, attracting more than half a million people and hosting 45,000 people for special events and training.
The Storehouse also had training facilities for Guinness’s bartenders and 3000 Irish employees. The quality of the Guinness pint remained a high priority for the company, which not only developed pub-like classrooms at the Storehouse but also employed teams of draft technicians to teach barmen how to pour a proper pint. The process involved two steps—the pour and the top-up—and took a total of 119.5 seconds. Barmen also needed to learn how to check that the pressure gauges were properly set and that the proportion of nitrogen to carbon dioxide in the gas was correct.
The uncertain future of the Guinness brand in Ireland
Despite Guinness/DUV’s attempt to appeal to the younger generation of drinkers and boost its fading image, rumours persisted in Ireland about the brand future. The country’s leading and respected newspaper, the Irish times, reported in an article in July 2001:
The uncertainty over its future all adds to the air of crisis that is building around Guinness Ireland Group four months ago…The review is not complete and the assumption is that there is more bad news to come.
In the pubs across Ireland, the traditional Guinness drinkers looked on anxiously as the younger generation drank Bacardi Breezers, Smirnoff Ices or Californian wines. Could the goliath Guinness survive another two centuries? Was the preference for these new drinks just a fad or fashion, or did Diageo need to seriously reconsider how it marketed Guinness?
A quick solution?
In late February 2002, Diageo CEO Paul Walsh revealed that the company was testing technology to cut the waiting time for a pint of Guinness from 1 minute 59 seconds to 15-25 seconds. Ultrasound could release bubbles in the stout and form the head instantly, making a pint of Guinness that would be indistinguishable from one produced by the slower, traditional method.
‘A two-minute pour is not relevant to our customers today,’ Walsh said. A Guinness spokeswoman continued, ‘We have got to move with the times and the brand must evolve. We must take all the opportunities that we can. In outlets where it is really busy, if you walk in after nine o’clock in the evening there will be a cloth over the Guinness pump because it takes longer to pour than other drinks. Aware that some consumers might not be attracted by the innovation, she added ‘It wouldn’t be put everywhere—only where people want a quick pint with no effect on the quality.’
Although still being tested, the ‘quick-pour pint’ was a popular topic of conversation in Dublin pubs, among barmen and customers alike. There were rumours that it would be introduced in Britain only; others thought it would be released worldwide.
Some market commentators viewed the quick-pour pint as an innovative way to appeal to the younger, less patient segment in which Guinness had under-performed. Others feared that the young would be unconvinced by the introduction, and loyal customers would be turned off by what they characterized as a ‘marketing u-turn’.
Question:
1. From a marketing perspective, what has Guinness done to ensure its longevity?
2. How would you characterize the Guinness brand?
3. What could Guinness do to attract younger drinkers? And to retain its older loyal customer base? Can both be done at the same time?
Attempt All Case Study
CASE – 1
The Indian Railways' ambitious Kashmir Railway Project. This was one of its most important and difficult projects as it aimed to build a railroad connection through the Himalayan foothills linking Kashmir with the rest of India. The main objective of this project was to provide an alternative and more reliable mode of transportation system to the people of Kashmir than the existing mode of travel by road. Officially, this track was named as the Jammu-Udhampur-Katra-Qazigund-Baramulla link (JUSBRL). The unique features of this line, according to observers, were the presence of a major earthquake zone, extreme environmental conditions in terms of temperature, and the most extreme geological profile throughout the entire terrain.
Some experts lauded the Indian Railway's initiatives and how it had overcome some of the challenges associated with the project and said that once accomplished it would be an engineering miracle. However, it was also criticized on many fronts and some experts believed that the project had been bungled at the planning stage itself.
Question:
» Understand issues and challenges in executing a large infrastructure project by studying the ambitious Kashmir Railway Project which once accomplished would be an engineering miracle.
» Appreciate the difficulties before the project managers due to the fragile geology and steep topography - presence of a major earthquake zone, extreme environmental conditions in terms of temperature, etc.
» Appreciate the difficulties involved in the execution of large infrastructure projects in developing countries, and how these can be overcome.
CASE – 2
Spain-based Mango MNG Holding SL (Mango), the flagship of a group of companies involved in design, manufacture, and distribution of garments and fashion accessories, sold garments for men and women and accessories through exclusive stores. The company was started in 1984 in Spain, and expanded rapidly to more than 107 countries across the world by 2012. Mango went on to become the second largest textile exporter in Spain. Mango was one of the pioneers of fast fashion. The company was able to design the garments and send them to the stores within a span of three months.
It could also bring designs with slight modifications within just two weeks. The case discusses Mango’s business model under which it retained some of the core activities of its value chain in-house while outsourcing the rest of the activities. Important activities like design and distribution were managed completely by the company, while manufacturing, which was a labor-intensive task, was outsourced. The company retailed through its own outlets as well as through franchisees. This business model helped the company expand rapidly and also minimize the risks.
Question:
» Analyze Mango's business model.
» Study the design, production, distribution, and store management processes at Mango.
» Evaluate Mango's core and non-core activities.
» Understand which processes can be managed in-house and which ones can be outsourced..
CASE – 3
Tthe Just-in-Time (JIT) implementation at Harley-Davidson Motor Company (Harley-Davidson), a US-based motorcycle manufacturing company. JIT, a philosophy developed by Japanese companies, aims at reducing inventory and advocates the production of only what is needed when needed and no more. After World War II, Harley-Davidson faced fierce competition from Japanese automobile companies which were able to produce better quality motorcycles at comparatively lower cost. Harley-Davidson visited some of the Japanese companies and found that Japanese companies were following three main practices: employee involvement, use of statistical process control, and JIT. The company soon realized that in order to beat Japanese competition, it had to implement these practices as well. The company successfully implemented JIT practices and reaped several benefits.
After spectacular growth in the 1990s and the early 2000s, Harley-Davidson again faced hard times from 2007. The case also looks at the challenges faced by the company in the latter part of the first decade of the new millennium, and how it was trying to focus on ‘continuous improvement' in a bid to bring itself back into profits.
Question:
» To understand Just-in-time philosophy and its importance in reducing overall production cost and enhancing product quality.
» To understand how the JIT philosophy requires the alignment of operational strategies to achieve the goal.
» To understand the important role of having a stable supplier network for achieving JIT.
» To understand that besides the use of statistical techniques in achieving JIT, employees' involvement is equally important.
» To discuss the challenges faced by Harley-Davidson since 2007.
» To explore operational strategies that Harley-Davidson can adopt to overcome those strategies.
CASE – 4
The case discusses the master franchise model of the US-based Domino's Pizza Inc (Domino's). Domino's, which was started in the 1960s, expanded in international markets mainly through its master franchise model. Under this model, the franchisees were provided with exclusive rights to operate stores, or to sub-franchise them in a particular area. Domino's recruited franchisees with business experience and knowledge of local markets as master franchisees, and was able to mitigate the risks associated with entering and operating in international markets. Under master franchising, in markets where there was high potential for development, Domino's transferred market exclusivity to an individual/company, who had a significant presence and knowledge about the local markets.
These individuals/companies in turn invested in establishing the master franchise, whose responsibilities include building stores, sub-franchising, operating distribution system, etc. The case discusses in detail the store operations of Domino's and the benefits of its master franchise system.
Question:
» Understand the master franchise model of Domino's and its advantages.
» Examine some of the unique features of the master franchise model of Domino's.
» Analyze the store operations of Domino's.
» Examine the training/support provided by Domino's to the franchisees.
» Understand how the master franchise model helped Domino's in facing the adverse impact of global economic slowdown successfully.
Note: Solve any 8 Question out of 10.
1. “All quantitative techniques have hardly any real-life applications.” Do you agree with the statement? Discuss
2. A company makes two kinds of leather belts. Belt A is a high quality belt, and belt B is of lower quality. The respective profits are Rs 20 and Rs 15 per belt. Each belt of type A requires twice as much time as belt of type B, and if all belts were of type B, the company could make 1,000 per day. The supply of leather is sufficient for only 800 belts per day (both A and B combined). Belt A requires a fancy buckle, and only 400 per day are available. There are only 700 buckles a day available for belt B. What should be the daily production of each type of belts to maximize profit. Use simplex method.
3. How can you formulate an assignment problem as a standard linear programming problem? Illustrate.
4. The following are the timing in regard to two jobs J1 and J2, each of which requires to be processed on two machines A and B in the order ‘A following B’. In what sequence should they be performed so that the total processing time involved is the least? Also obtain the time involved.
Job Time (Hours)
_______________________________________
Machine A Machine B
J1 6 8
J2 7 3
Use graphical method.
5. What function does inventory perform? State the two basic inventory decisions management must take as they attempt to accomplish the functions of inventory just described by you.
6. A truck owner finds from his past experience that the maintenance costs are Rs 200 for the first year and then increase by Rs 2,000 every year. The cost of the truck type A is Rs 9,000. Determine the best age at which to replace the truck. If the optimum replacement is followed, what will be the average yearly cost of owning and operating the truck? Truck type B costs Rs 10,000. Annual operating costs are Rs 400 for the first year and then increase by Rs 800 every year. The truck owner has now the truck type A which is one year old. Should it be replaced with B Type, and if so, when?
7. What are the major comparative characteristics of the PERT model and the CPM model? What are their limitations, if any? Discuss.
8. Describe the steps involved in the process of decision making.
9. A person plays a game in which he gains Rs 20 with a probability of 0.4 or loses Rs 10 with a probability of 0.6. He has an amount of Rs 20 with him and plays the game repeatedly until he loses all the amount he has or adds Rs 30 or Rs 40 to the initial amount. Draw up a transition probability matrix of him.
10. “Simulation is typically the process of carrying out sampling experiments on the models of the system rather than the system itself.” Elucidate this statement by taking some examples.
Attempt Only 4 Case Study
CASE – 1 MANAGING HINDUSTAN UNILEVER STRATEGICALLY
Unilever is one of the world’s oldest multinational companies. Its origin goes back to the 19th century when a group of companies operating independently, produced soaps and margarine. In 1930, the companies merged to form Unilever that diversified into food products in 1940s. Through the next five decades, it emerged as a major fast-moving consumer goods (FMCG) multinational operating in several businesses. In 2004, the Unilever 2010 strategic plan was put into action with the mission to ‘bring vitality to life’ and ‘to meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good, and get more out of life’. The corporate strategy is of focusing on bore businesses of food, home care and personal care. Unilever operates in more than 100 countries, has a turnover of € 39.6 billion and net profit of € 3.685 billion in 2006 and derives 41 per cent of its income from the developing and emerging economies around the world. It has 179,000 employees and is a culturally-diverse organization with its top management coming from 24 nations. Internationalization is based on the principle of local roots with global scale aimed at becoming a ‘multi-local multinational’.
The genesis of Hindustan Unilever (HUL) in India goes back to 1888 when Unilever exported Sunlight soap to India. Three Indian, subsidiaries came into existence in the period 1931-1935 that merged to form Hindustan Lever in 1956. Mergers and acquisitions of Lipton (1972), Brooke Bond (1984), Ponds (1986), TOMCO (1993), Lakme (1998) and Modern Foods (2002) have resulted in an organization that is a conglomerate of several businesses that have been continually restructured over the years.
HUL is one of the largest FMCG company in India with total sales of Rs. 12,295 crore and net profit of 1855crore in 2006. There are over 15000 employees, including more than 1300 managers. The present corporate strategy of HUL is to focus on core businesses. These core businesses are in home and personal care and food. There are 20 different consumer categories in these two businesses. For instance, home and personal care is made up of personal wash, laundry, skin care, hair care, oral care, deodorants, colour cosmetics and ayurvedic personal and health care, while food businesses have tea, coffee, ice creams and processed food brands. Apart from the two product divisions, there are separate departments for specialty exports and new ventures.
Strategic management at HUL is the responsibility of the board of directors headed by a chairman. There are five independent and five whole-time directors. The operational management is looked after by a management committee comprising of Vice Chairman, CEO and managing director and executive directors of the two business divisions and functional areas. The divisions have a lot of autonomy with dedicated assets and resources. A divisional committee having the executive director and heads of functions of sales, commercial and manufacturing looks after the business level decision-making. The functional-level management is the responsibility of the functional head. For instance, a marketing manager has a team of brand managers looking after the individual brands. Besides the decentralized divisional structure, HUL has centralized some functions such as finance, human resource management, research, technology, information technology and corporate and legal affairs.
Unilever globally and HUL nationally, operate in the highly competitive FMCG markets. The consumer markets for FMCG products are finicky: it’s difficult to create customers and much more difficult to retain them. Price is often the central concern in a consumer purchase decision requiring producers to be on continual guard against cost increases. Sales and distribution are critical functions organizationally. HUL operates in such a milieu. It has strong competitors such as the multinationals Procter & Gamble, Nivea or L’Oreal and formidable local companies such as, Amul, Nirma or the Tata
FMCG companies to contend with. Rivals have copied HUL’s strategies and tactics, especially in the area of marketing and distribution. Its innovations such as new style packaging or distribution through women entrepreneurs are much valued but also copied relentlessly, hurting its competitive advantage.
HUL is identified closely with India. There is a ring of truth to its vision statement: ‘to earn the love and respect of India by making a real difference to every Indian’. It has an impeccable record in corporate social responsibility. There is an element of nostalgia associated with brands like Lifebuoy (introduced in 1895) and Dalda (1937) for senior citizens in India. Consequently Indians have always perceived HUL as an Indian company rather than a multinational. HUL has attempted to align its strategies in the past to the special needs of Indian business environment. Be it marketing or human resource management, HUL has experimented with new ideas suited to the local context. For instance, HUL is known for its capabilities in rural marketing, effective distribution systems and human resource development. But this focus on India seems to be changing. This might indicate a change in the strategic posture as well as recognition that Indian markets have matured to the extent that they can be dealt with by the global strategies of Unilever. At the corporate level, it could also be an attempt to leverage global scale while retaining local responsiveness to some extent.
In line with the shift in corporate strategy, the focus of strategic decision-making seems to have moved from the subsidiary to the headquarters. Unilever has formulated a new global realignment under which it will develop brands and streamline product offerings across the world and the subsidiaries will sell the products. Other subtle indications of the shift of decision-making authority could be the appointment of a British CEO after nearly forty years during which there were Indian CEOs, the changed focus on a limited number of international brands rather than a large range of local brands developed over the years and the name-change from Hindustan Lever to Hindustan Unilever.
The shift in the strategic decision-making power from the subsidiary to headquarters could however, prove to be double-edged sword. An example could be of HUL adopting Unilever’s global strategy of focusing on a limited number of products, called the 30 power brands in 2002. That seemed a perfectly sensible strategic decision aimed at focusing managerial attention to a limited set of high-potential products. But one consequence of that was the HUL’s strong position in the niche soap and detergent markets suffering owing to neglect and the competitors were quick to take advantage of the opportunity. Then there are the statistics to deal with: HUL has nearly 80 per cent of sales and 85 per cent of net profits from the home and personal care businesses. Globally, Unilever derives half its revenues from food business. HUL does not have a strong position in the food business in India though the food processing industry remains quite attractive both in terms of local consumption as well as export markets. HUL’s own strategy of offering low-price, competitive products may also suffer at the cost of Unilever’s emphasis on premium priced, high end products sold through modern outlets.
There are some dark clouds on the horizon. HUL’s latest financials are not satisfactory. Net profit is down, sales are sluggish, input costs have been rising and new food products introduced in the market have yet to pick up. All this while, in one market segment after another, a competitor pushes ahead. In a company of such a big size and over-powering presence, these might still be minor events developments in a long history that needs to be taken in stride. But, pessimistically, they could also be pointers to what may come.
Questions:
1. State the strategy of Hindustan Unilever in your own words.
2. At what different levels is strategy formulated in HUL?
3. Comment on the strategic decision-making at HUL.
4. Give your opinion on whether the shift in strategic decision-making from India to Unilever’s headquarters could prove to be advantageous to HUL or not.
CONTACT:
DR. PRASANTH MBA PH.D. DME MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com
Business Law
Marks - 100
Attempt any 10 Questions
1. How are right of lien and stoppage-in-transit affected by sub-sale or pledge by the buyer?
2. Discuss the rule regarding duration of transit. When does it come of an end?
3. Comment on the statement, “Delivery does not amount to acceptance of goods”?
4. State the exceptions to the rule that no one can convey a better title than what he has.
5. When are the goods said to be unascertained? What are the rules as to the transfer of property in the unascertained goods to the buyer?
6. Discuss the implied condition relating to sale by sample?
7. Discuss the doctrine of caveat emptor and state its exceptions.
8. What is the effect of perishing of goods on the contract of sale?
9. Explain the various methods of creating agency?
10. Pledge can be created only of movable property. Comment.
11. Discuss the position of guarantee in respect of loans to a minor.
12. Does the release by the creditor of one of the sureties discharge the others?
13. Explain the provisions relating to appointment of directors in Producer Company.
14. Two separate company wish to amalgamate. State the steps which they must take for this purpose.
15. Does the failure of inspector to submit his or her report in time amount to an end to investigation?
16. A, the secretary of the company is also a minority shareholder. He is removed from the post of secretary. He brings complaint on the ground of oppression? Advise
17. A single member of a company wishes to challenge the decisions of the majority. Can he succeed?
18. What new provisions have been made for the protection of interests of debenture holders?
19. Write a short note on Consumer Protection Councils.
20. Describe the powers of SEBI relating to the working of the depository system.
Attempt Any Four Case Study
CASE – 1 Your Job and Your Passion—You Can Pursue Both!
The 21st century offers many challenges to every one of us. As more firms go global, as more economies interconnect, and as the Web blasts away boundaries to communication, we become more informed citizens. This interconnectedness means that the organizations you work for will require you to develop both general and specialized knowledge—such as speaking multiple languages, using various software applications, or understanding details of financial transactions. You will have to develop general management skills to foster your ability to be self-reliant and thrive in a changing market-place. And here’s the exciting part: As you build both types of knowledge, you may be able to integrate your growing expertise with the causes or activities you care most about. Or, your career adventure may lead you to a new passion.
Former presidents George H. W. Bush and Bill Clinton are well known for combining their management skills—running a country—with their passion for helping people around the world. Together they have raised funds to assist disaster victims, those with HIV/AIDS, and others in need. Jake Burton turned his love of snow sports into an entire industry when he founded Burton Snowboards. Annie Withey poured her business and marketing knowledge into her two famous business ventures: Smart food and Annie’s Homegrown. Both products were the result of her passion for healthful foods made from organic ingredients.
As you enter the workforce, you may have no idea where your career path will lead. You may be asking yourself, “How will I fit in?” “Where will I live?” “How much will I earn?” “Where will my business and personal careers evolve as the world continuous to change at such a fast pace?” If you are feeling nervous because you don’t know the answers to these questions yet, relax. A career is a journey, not a single destination. You may have one type of career or several. It is likely you will work for several organisations, or you may run one or more businesses of your own.
As you ask yourself what you want to do and where you want to be, take a few minutes to review the chapter and its main topics. Think about your personality, what you like and dislike, what you know and what you want to learn, what you fear and what you dream. Then try the following exercise.
Questions
1. Create a three-column chart in which the first column lists nonmanagement skills you have. Are you good at travel? Do you know how to build furniture? Are you a whiz at sports statistics? Are you an innovative cook? Do you play video games for hours? In the second column, list the causes or activities about which you are passionate. These may dovetail with the first list, but they might not.
2. Once you have you two columns complete, draw lines between entries that seem compatible. If you are good at building furniture, you might have also listed a concern about families who are homeless. Remember that not all entries will find a match—the idea is to begin finding some connections.
3. In the third column, generate a list of firms or organizations you know about that reflect your interests. If you are good at building furniture, you might be interested working for the Habitat for Humanity organization, or you might find yourself gravitating towards a furniture retailer like Ikea or Ethan Allen. You can do further research on organizations via Internet or business publications.
Note: Solve any 4 Cases Study’s
CASE: I Enterprise Builds On People
When most people think of car-rental firms, the names of Hertz and Avis usually come to mind. But in the last few years, Enterprise Rent-A-Car has overtaken both of these industry giants, and today it stands as both the largest and the most profitable business in the car-rental industry. In 2001, for instance, the firm had sales in excess of $6.3 billion and employed over 50,000 people.
Jack Taylor started Enterprise in St. Louis in 1957. Taylor had a unique strategy in mind for Enterprise, and that strategy played a key role in the firm’s initial success. Most car-rental firms like Hertz and Avis base most of their locations in or near airports, train stations, and other transportation hubs. These firms see their customers as business travellers and people who fly for vacation and then need transportation at the end of their flight. But Enterprise went after a different customer. It sought to rent cars to individuals whose own cars are being repaired or who are taking a driving vacation.
The firm got its start by working with insurance companies. A standard feature in many automobile insurance policies is the provision of a rental car when one’s personal car has been in an accident or has been stolen. Firms like Hertz and Avis charge relatively high daily rates because their customers need the convenience of being near an airport and/or they are having their expenses paid by their employer. These rates are often higher than insurance companies are willing to pay, so customers who these firms end up paying part of the rental bills themselves. In addition, their locations are also often inconvenient for people seeking a replacement car while theirs is in the shop.
But Enterprise located stores in downtown and suburban areas, where local residents actually live. The firm also provides local pickup and delivery service in most areas. It also negotiates exclusive contract arrangements with local insurance agents. They get the agent’s referral business while guaranteeing lower rates that are more in line with what insurance covers.
In recent years, Enterprise has started to expand its market base by pursuing a two-pronged growth strategy. First, the firm has started opening airport locations to compete with Hertz and Avis more directly. But their target is still the occasional renter than the frequent business traveller. Second, the firm also began to expand into international markets and today has rental offices in the United Kingdom, Ireland and Germany.
Another key to Enterprise’s success has been its human resource strategy. The firm targets a certain kind of individual to hire; its preferred new employee is a college graduate from bottom half of graduating class, and preferably one who was an athlete or who was otherwise actively involved in campus social activities. The rationale for this unusual academic standard is actually quite simple. Enterprise managers do not believe that especially high levels of achievements are necessary to perform well in the car-rental industry, but having a college degree nevertheless demonstrates intelligence and motivation. In addition, since interpersonal relations are important to its business, Enterprise wants people who were social directors or high-ranking officers of social organisations such as fraternities or sororities. Athletes are also desirable because of their competitiveness.
Once hired, new employees at Enterprise are often shocked at the performance expectations placed on them by the firm. They generally work long, grueling hours for relatively low pay.
And all Enterprise managers are expected to jump in and help wash or vacuum cars when a rental agency gets backed up. All Enterprise managers must wear coordinated dress shirts and ties and can have facial hair only when “medically necessary”. And women must wear skirts no shorter than two inches above their knees or creased pants.
So what are the incentives for working at Enterprise? For one thing, it’s an unfortunate fact of life that college graduates with low grades often struggle to find work. Thus, a job at Enterprise is still better than no job at all. The firm does not hire outsiders—every position is filled by promoting someone already inside the company. Thus, Enterprise employees know that if they work hard and do their best, they may very well succeed in moving higher up the corporate ladder at a growing and successful firm.
Question:
1. Would Enterprise’s approach human resource management work in other industries?
2. Does Enterprise face any risks from its human resource strategy?
3. Would you want to work for Enterprise? Why or why not?
CASE: II Doing The Dirty Work
Business magazines and newspapers regularly publish articles about the changing nature of work in the United States and about how many jobs are being changed. Indeed, because so much has been made of the shift toward service-sector and professional jobs, many people assumed that the number of unpleasant an undesirable jobs has declined.
In fact, nothing could be further from the truth. Millions of Americans work in gleaming air-conditioned facilities, but many others work in dirty, grimy, and unsafe settings. For example, many jobs in the recycling industry require workers to sort through moving conveyors of trash, pulling out those items that can be recycled. Other relatively unattractive jobs include cleaning hospital restrooms, washing dishes in a restaurant, and handling toxic waste.
Consider the jobs in a chicken-processing facility. Much like a manufacturing assembly line, a chicken-processing facility is organised around a moving conveyor system. Workers call it the chain. In reality, it’s a steel cable with large clips that carries dead chickens down what might be called a “disassembly line.” Standing along this line are dozens of workers who do, in fact, take the birds apart as they pass.
Even the titles of the jobs are unsavory. Among the first set of jobs along the chain is the skinner. Skinners use sharp instruments to cut and pull the skin off the dead chicken. Towards the middle of the line are the gut pullers. These workers reach inside the chicken carcasses and remove the intestines and other organs. At the end of the line are the gizzard cutters, who tackle the more difficult organs attached to the inside of the chicken’s carcass. These organs have to be individually cut and removed for disposal.
The work is obviously distasteful, and the pace of the work is unrelenting. On a good day the chain moves an average of ninety chickens a minute for nine hours. And the workers are essentially held captive by the moving chain. For example, no one can vacate a post to use the bathroom or for other reasons without the permission of the supervisor. In some plants, taking an unauthorised bathroom break can result in suspension without pay. But the noise in a typical chicken-processing plant is so loud that the supervisor can’t hear someone calling for relief unless the person happens to be standing close by.
Jobs such as these on the chicken-processing line are actually becoming increasingly common. Fuelled by Americans’ growing appetites for lean, easy-to-cook meat, the number of poultry workers has almost doubled since 1980, and today they constitute a work force of around a quarter of a million people. Indeed, the chicken-processing industry has become a major component of the state economies of Georgia, North Carolina, Mississippi, Arkansas, and Alabama.
Besides being unpleasant and dirty, many jobs in a chicken-processing plant are dangerous and unhealthy. Some workers, for example, have to fight the live birds when they are first hung on the chains. These workers are routinely scratched and pecked by the chickens. And the air inside a typical chicken-processing plant is difficult to breathe. Workers are usually supplied with paper masks, but most don’t use them because they are hot and confining.
And the work space itself is so tight that the workers often cut themselves—and sometimes their coworkers—with the knives, scissors, and other instruments they use to perform their jobs. Indeed, poultry processing ranks third among industries in the United States for cumulative trauma injuries such as carpet tunnel syndrome. The inevitable chicken feathers, faeces, and blood also contribute to the hazardous and unpleasant work environment.
Question:
1. How relevant are the concepts of competencies to the jobs in a chicken-processing plant?
2. How might you try to improve the jobs in a chicken-processing plant?
3. Are dirty, dangerous, and unpleasant jobs an inevitable part of any economy?
Attempt Any Four Case Study
CASE – 1 Dabur India Limited: Growing Big and Global
Dabur is among the top five FMCG companies in India and is positioned successfully on the specialist herbal platform. Dabur has proven its expertise in the fields of health care, personal care, homecare and foods.
The company was founded by Dr. S. K. Burman in 1884 as small pharmacy in Calcutta (now Kolkata), India. And is now led by his great grandson Vivek C. Burman, who is the Chairman of Dabur India Limited and the senior most representative of the Burman family in the company. The company headquarters are in Ghaziabad, India, near the Indian capital New Delhi, where it is registered. The company has over 12 manufacturing units in India and abroad. The international facilities are located in Nepal, Dubai, Bangladesh, Egypt and Nigeria.
S.K. Burman, the founder of Dabur, was trained as a physician. His mission was to provide effective and affordable cure for ordinary people in far-flung villages. Soon, he started preparing natural remedies based on Ayurved for diseases such as Cholera, Plague and Malaria. Due to his cheap and effective remedies, he became to be known as ‘Daktar’ (Indianised version of ‘doctor’). And that is how his venture Dabur got its name—derived from Daktar Burman.
The company faces stiff competition from many multi national and domestic companies. In the Branded and Packaged Food and Beverages segment major companies that are active include Hindustan Lever, Nestle, Cadbury and Dabur. In case of Ayurvedic medicines and products, the major competitors are Baidyanath, Vicco, Jhandu, Himani and other pharmaceutical companies.
Vision, Mission and Objectives
Vision statement of Dabur says that the company is “dedicated to the health and well being of every household”. The objective is to “significantly accelerate profitable growth by providing comfort to others”. For achieving this objective Dabur aims to:
• Focus on growing core brands across categories, reaching out to new geographies, within and outside India, and improve operational efficiencies by leveraging technology.
• Be the preferred company to meet the health and personal grooming needs of target consumers with safe, efficacious, natural solutions by synthesising deep knowledge of ayurveda and herbs with modern science.
• Be a professionally managed employer of choice, attracting, developing and retaining quality personnel.
• Be responsible citizens with a commitment to environmental protection.
• Provide superior returns, relative to our peer group, to our shareholders.
Chairman of the company
Vivek C. Burman joined Dabur in 1954 after completing his graduation in Business Administration from the USA. In 1986 he was appointed Managing Director of Dabur and in 1998 he took over as Chairman of the Company.
Under Vivek Burman’s leadership, Dabur has grown and evolved as a multi-crore business house with a diverse product portfolio and a marketing network that traverses the whole of India and more than 50 countries across the world. As a strong and positive leader, Vivek C. Burman has motivated employees of Dabur to “do better than their best”—a credo that gives Dabur its status as India’s most trusted nature-based products company.
Leading brands
More than 300 diverse products in the FMCG, Healthcare and Ayurveda segments are in the product line of Dabur. List of products of the company include very successful brands like Vatika, Anmol, Hajmola, Dabur Amla Chyawanprash, Dabur Honey and Lal Dant Manjan with turnover of Rs.100 crores each.
Strategic positioning of Dabur Honey as food product, lead to market leadership with over 40% market share in branded honey market; Dabur Chyawanprash is the largest selling Ayurvedic medicine with over 65% market share. Dabur is a leader in herbal digestives with 90% market share. Hajmola tablets are in command with 75% market share of digestive tablets category. Dabur Lal Tail tops baby massage oil market with 35% of total share.
CHD (Consumer Health Division), dealing with classical Ayurvedic medicines has more than 250 products sold through prescription as well as over the counter. Proprietary Ayurvedic medicines developed by Dabur include Nature Care Isabgol, Madhuvaani and Trifgol.
However, some of the subsidiary units of Dabur have proved to be low margin business; like Dabur Finance Limited. The international units are also operating on low profit margin. The company also produces several “me – too” products. At the same time the company is very popular in the rural segment.
Questions
1. What is the objective of Dabur? Is it profit maximisation or growth maximisation? Discuss.
2. Do you think the growth of Dabur from a small pharmacy to a large multinational company is an indicator of the advantages of joint stock company against proprietorship form? Elaborate.
CASE – 2 IT Industry: Checkered Growth
IT industry is now considered as vital for the development of any economy. Developing countries value the importance of this industry due to its capacity to provide much needed export earnings and support in the development of other industries. Especially in Indian context, this industry has assumed a significant position in the overall economy, due to its exemplary potentials in creating high value jobs, enhancing business efficiency and earning export revenues. The IT revolution has brought unexpected opportunities for India, which is emerging as an increasingly preferred location for customised software development. Experts are estimating the global IT industry to grow to US$1.6 million over the coming six years and exports to reach Rs. 2000 billion by 2008. It is envisaged that Indian IT industry, though a very small portion of the global IT pie, has tremendous growth prospects.
Stock Taking
The decade of 1970 may be taken as the stage of introduction of the Indian IT industry. The early years were marked by 75 per cent of software development taking place overseas and the rest 25 per cent in India. Exports of Indian software until the mid-1970s was mainly Eastern Europe, followed by US. Tata Consultancy Services (TCS) was among the pioneers in selling its services outside India, by working for IBM Labs in the US. The hardware segment lagged behind its software counterpart. With instances of exports worth US$ 4 million in 1980, the software segment of the industry has shown an uneven profile. It was not until 1980s that vigorous and sustained growth in software exports begun, as MNCs like Texas Instruments started to take serious interest in India as a centre of software production. Destinations of export also underwent changes, with US dominating the main export market with 75 per cent of the exports. The IT Enabled Services (ITeS) segment, however, had not emerged at this stage.
It was also during the mid to late 1980s that computer firms shifted focus from mainframe computers (the mainstay of MNCs) to Personal Computers (PCs). In March 1985, Minicomp installed the first ever PC at CSI, Delhi; this changed the entire industry for good. With the entry of networking and applications like CAD/CAM, PC sales soared in 1987-88, touching 50,000 units.
From a modest growth in the mid-1980s software exports moved up to Rs. 3.8 billion in 1991-92. Since then, it grew at an incredible rate, up to 115 per cent in 1993. The hardware could also register an annual growth of 40 per cent in this period, backed by a surging demand for PCs and networking. Growth of the industry was also driven by the emergence and rapid growth of the ITeS segment.
Note: Solve any 4 Cases Study’s
CASE: I Managing the Guinness brand in the face of consumers’ changing tastes
1997 saw the US$19 billion merger of Guinness and GrandMet to form Diageo, the world’s largest drinks company. Guinness was the group’s top-selling beverage after Smirnoff vodka, and the group’s third most profitable brand, with an estimated global value of US$1.2 billion. More than 10 million glasses of the popular stout were sold every day, predominantly in Guinness’s top markets: respectively, the UK, Ireland, Nigeria, the USA and Cameroon.
However, the famous dark stout with the white, creamy head was causing some strategic concerns for Diageo. In 1999, for the first time in the 241-year of Guinness, sales fell. In early 2002 Diageo CEO Paul Walsh announced to the group’s concerned shareholders that global volume growth of Guinness was down 4 per cent in the last six months of 2001 and, more alarmingly, sales were also down 4 per cent in its home market, Ireland. How should Diageo address falling sales in the centuries-old brand shrouded in Irish mystique and tradition?
The changing face of the Irish beer market
The Irish were very fond of beer and even fonder of Guinness. With close to 200 litres per capita drunk each year—the equivalent of one pint per person per day—Ireland ranked top in worldwide per capita beer consumption, ahead of the Czech Republic and Germany.
Beer accounted for two-thirds of all alcohol bought in Ireland in 2001. Stout led the way in volume sales and accounted for 40 per cent of all beer value sales. Guinness, first brewed in 1759 in Dublin by Arthur Guinness, enjoyed legendary status in Ireland, a national symbol as respected as the green, white and gold flag. It was by far the most popular alcoholic drink in Ireland, accounting for nearly one of every two pints of beer sold. Its nearest competitors were Budweiser and Heineken, which held 13 per cent and 12 per cent of the market respectively.
However, the spectacular economic growth of the Irish economy since the mid-1990s had opened up the traditional drinking market to new cultures and influences, and encouraged the travel-friendly Irish to try other drinks. Beer and in particular stout were losing popularity compared with wine or the recently launched RTDs (ready-to-drinks) or FABs (flavoured alcoholic beverages), which the younger generation of drinkers considered trendier and ‘healthier’. As a Euromonitor report explained: Younger consumers consider dark beers and stout to be old fashioned drinks, with the perceived stout or ale drinker being an old, slightly overweight man and thus not in tune with image conscious youth culture.
Beer sales, which once accounted for 75 per cent of all alcohol bought in Ireland, were expected to drop to close to 50 per cent by 2006, while stout sales were forecast to decrease by 12 per cent between 2002 and 2006.
Giving Guinness a boost in its home market
With Guinness alone accounting for 37 per cent of Diageo’s volume in the market, Guinness/UDV Ireland was one of the first to feel the pain caused by the declining popularity of beer and in particular stout. A Euromonitor report in February 2002 explained how the profile of the Guinness drinker, typically men aged 21-plus, was affected: The average age of Guinness drinkers is rising and this is bringing about the worrying fact that the size of the Guinness target audience is falling. The rate of decline is likely to quicken as the number of less brand loyal, non-stout drinking younger consumers increases.
The report continued:
In Ireland, in particular, the consumer base for Guinness is shrinking as the majority of 18 to 24 year olds consistently reject stout as a product relevant to their generation, opting instead to consume lager or spirits.
Effectively, one-third of young Irish men and half of young Irish women had reportedly never tried Guinness. A Guinness employee provided another explanation. Guinness is similar to coffee in that when you’re young you drink it [coffee] with sugar, but when you’re older you drink it without. It’s got a similar acquired taste and once you’re over the initial hurdle, you’ll fall in love with it.
In an attempt to lure young drinkers to the somewhat ‘acquired’ Guinness taste (40 per cent of the Irish population was under the age of 24) Diageo had invested millions in developing product innovations and brand building in Ireland’s 10,000 pubs, clubs and supermarkets.
Product innovation
Until the mid-1990s most Guinness in Ireland was drunk in a pint glass in the local pub. The launch of product innovations in the form of a new cooling mechanism for draft Guinness and the ‘widget’ technology applied to cans and bottles attempted to modernize the brand’s image and respond to increasing competition from other local and imported stouts and lagers.
‘A perfect head’ for canned Guinness
In 1989, and at a cost of more than £10 million, Guinness developed an ingenious ‘widget’ device for its canned draft stout sold in ‘off-trade’ outlets such as supermarkets and off-licences. The widget, placed in the bottom of the can, released a gas that replicated the draft effect.
Although over 90 per cent of beer in Ireland was sold in ‘on-trade’ pubs and bars, sale of beer in the cheaper ‘off-trade’ channel were slowly gaining in importance. The Guinness brand manager at the time, John O’Keeffe, explained how home drinkers could now enjoy a smoother, creamier head similar to the one obtained in a pub thanks to the new widget technology:
When the can is opened, the pressure causes the nitrogen to be released as the widget moves through the beer, creating the classic draft Guinness surge.
Nearly 10 years later, in 1997, the ‘floating widget’ was introduced, which improved the effectiveness of the device.
A colder pint
In 1997 Guinness Draft Extra Cold was launched in Ireland. An additional chilled tap system could be added to the standard barrel in pubs, allowing the Guinness to be served at 4ºC rather than the normal 6ºC. By serving Guinness at a cooler temperature, Guinness/UDV hoped to mute the bitter taste of the stout and make it more palatable for younger adults, who were increasingly accustomed to drinking chilled lager, particularly in the summer
A cooler image for Guinness
In October 1999 the widget technology was applied to long-stemmed bottles of Guinness. The launch was supported by a US$2 million TV and outdoor board campaign. The packaging—with a clear, shiny plastic wrap, designed to look like a pint complete with creamy head—was quite a departure from the traditional Guinness look.
The objective was to reposition Guinness alongside certain similarly packaged lagers and RTDs and offer younger adults a more fashionable way to drink Guinness: straight from the bottle. It also gave Guinness easier access to the growing number of clubs and bars that were less likely to serve traditional draft Guinness easier access to the growing number of clubs and bars that were less likely to serve traditional draft Guinness, which could be kept for only six to eight weeks and took two minutes to pour. The RTDs, by contrast, had a shelf-life of more than a year and were drunk straight from the bottle.
However, financial analyst remained sceptical about the Guinness product innovations, which had no significant positive impact on sales or profitability:
The last news about the success of the recently introduced innovations suggests that they have not had a notably material impact on Guinness brand performance.
Brand building
Euromonitor estimates that, in 2000, Diageo invested between US$230 and US$250 million worldwide in Guinness advertising and promotions. However, with a cost-cutting objective, the company reduced marketing expenses in both Ireland and the UK up to 10 per cent in 2001 and the number of global Guinness agencies from six to two.
Nevertheless, Guinness remained one of the most advertised brands in Ireland. It was the leading cinema advertiser and, in terms of advertising, was second only to the national telecoms provider, Eircom. Guinness was also heavily promoted at leading sporting and music events, in particular those that were popular with the younger age groups.
The ultimate tribute to the brand was the opening of the new Guinness Storehouse in Dublin in late 2000, a sort of Mecca for all Guinness fans. The Storehouse was also a fashionable visitor centre with an art gallery and restaurants, and regularly hosted evening events. The company’s design brief highlighted another key objective:
To use an ultramodern facility to breathe life into an ageing brand, to reconnect an old company with young (sceptical) customers.
As the Storehouse’s design firm’s director, Ralph Ardill, explained:
Guinness Storehouse had become the top tourist destination in Ireland, attracting more than half a million people and hosting 45,000 people for special events and training.
The Storehouse also had training facilities for Guinness’s bartenders and 3000 Irish employees. The quality of the Guinness pint remained a high priority for the company, which not only developed pub-like classrooms at the Storehouse but also employed teams of draft technicians to teach barmen how to pour a proper pint. The process involved two steps—the pour and the top-up—and took a total of 119.5 seconds. Barmen also needed to learn how to check that the pressure gauges were properly set and that the proportion of nitrogen to carbon dioxide in the gas was correct.
The uncertain future of the Guinness brand in Ireland
Despite Guinness/DUV’s attempt to appeal to the younger generation of drinkers and boost its fading image, rumours persisted in Ireland about the brand future. The country’s leading and respected newspaper, the Irish times, reported in an article in July 2001:
The uncertainty over its future all adds to the air of crisis that is building around Guinness Ireland Group four months ago…The review is not complete and the assumption is that there is more bad news to come.
In the pubs across Ireland, the traditional Guinness drinkers looked on anxiously as the younger generation drank Bacardi Breezers, Smirnoff Ices or Californian wines. Could the goliath Guinness survive another two centuries? Was the preference for these new drinks just a fad or fashion, or did Diageo need to seriously reconsider how it marketed Guinness?
A quick solution?
In late February 2002, Diageo CEO Paul Walsh revealed that the company was testing technology to cut the waiting time for a pint of Guinness from 1 minute 59 seconds to 15-25 seconds. Ultrasound could release bubbles in the stout and form the head instantly, making a pint of Guinness that would be indistinguishable from one produced by the slower, traditional method.
‘A two-minute pour is not relevant to our customers today,’ Walsh said. A Guinness spokeswoman continued, ‘We have got to move with the times and the brand must evolve. We must take all the opportunities that we can. In outlets where it is really busy, if you walk in after nine o’clock in the evening there will be a cloth over the Guinness pump because it takes longer to pour than other drinks. Aware that some consumers might not be attracted by the innovation, she added ‘It wouldn’t be put everywhere—only where people want a quick pint with no effect on the quality.’
Although still being tested, the ‘quick-pour pint’ was a popular topic of conversation in Dublin pubs, among barmen and customers alike. There were rumours that it would be introduced in Britain only; others thought it would be released worldwide.
Some market commentators viewed the quick-pour pint as an innovative way to appeal to the younger, less patient segment in which Guinness had under-performed. Others feared that the young would be unconvinced by the introduction, and loyal customers would be turned off by what they characterized as a ‘marketing u-turn’.
Question:
1. From a marketing perspective, what has Guinness done to ensure its longevity?
2. How would you characterize the Guinness brand?
3. What could Guinness do to attract younger drinkers? And to retain its older loyal customer base? Can both be done at the same time?
Attempt All Case Study
CASE – 1
The Indian Railways' ambitious Kashmir Railway Project. This was one of its most important and difficult projects as it aimed to build a railroad connection through the Himalayan foothills linking Kashmir with the rest of India. The main objective of this project was to provide an alternative and more reliable mode of transportation system to the people of Kashmir than the existing mode of travel by road. Officially, this track was named as the Jammu-Udhampur-Katra-Qazigund-Baramulla link (JUSBRL). The unique features of this line, according to observers, were the presence of a major earthquake zone, extreme environmental conditions in terms of temperature, and the most extreme geological profile throughout the entire terrain.
Some experts lauded the Indian Railway's initiatives and how it had overcome some of the challenges associated with the project and said that once accomplished it would be an engineering miracle. However, it was also criticized on many fronts and some experts believed that the project had been bungled at the planning stage itself.
Question:
» Understand issues and challenges in executing a large infrastructure project by studying the ambitious Kashmir Railway Project which once accomplished would be an engineering miracle.
» Appreciate the difficulties before the project managers due to the fragile geology and steep topography - presence of a major earthquake zone, extreme environmental conditions in terms of temperature, etc.
» Appreciate the difficulties involved in the execution of large infrastructure projects in developing countries, and how these can be overcome.
CASE – 2
Spain-based Mango MNG Holding SL (Mango), the flagship of a group of companies involved in design, manufacture, and distribution of garments and fashion accessories, sold garments for men and women and accessories through exclusive stores. The company was started in 1984 in Spain, and expanded rapidly to more than 107 countries across the world by 2012. Mango went on to become the second largest textile exporter in Spain. Mango was one of the pioneers of fast fashion. The company was able to design the garments and send them to the stores within a span of three months.
It could also bring designs with slight modifications within just two weeks. The case discusses Mango’s business model under which it retained some of the core activities of its value chain in-house while outsourcing the rest of the activities. Important activities like design and distribution were managed completely by the company, while manufacturing, which was a labor-intensive task, was outsourced. The company retailed through its own outlets as well as through franchisees. This business model helped the company expand rapidly and also minimize the risks.
Question:
» Analyze Mango's business model.
» Study the design, production, distribution, and store management processes at Mango.
» Evaluate Mango's core and non-core activities.
» Understand which processes can be managed in-house and which ones can be outsourced..
CASE – 3
Tthe Just-in-Time (JIT) implementation at Harley-Davidson Motor Company (Harley-Davidson), a US-based motorcycle manufacturing company. JIT, a philosophy developed by Japanese companies, aims at reducing inventory and advocates the production of only what is needed when needed and no more. After World War II, Harley-Davidson faced fierce competition from Japanese automobile companies which were able to produce better quality motorcycles at comparatively lower cost. Harley-Davidson visited some of the Japanese companies and found that Japanese companies were following three main practices: employee involvement, use of statistical process control, and JIT. The company soon realized that in order to beat Japanese competition, it had to implement these practices as well. The company successfully implemented JIT practices and reaped several benefits.
After spectacular growth in the 1990s and the early 2000s, Harley-Davidson again faced hard times from 2007. The case also looks at the challenges faced by the company in the latter part of the first decade of the new millennium, and how it was trying to focus on ‘continuous improvement' in a bid to bring itself back into profits.
Question:
» To understand Just-in-time philosophy and its importance in reducing overall production cost and enhancing product quality.
» To understand how the JIT philosophy requires the alignment of operational strategies to achieve the goal.
» To understand the important role of having a stable supplier network for achieving JIT.
» To understand that besides the use of statistical techniques in achieving JIT, employees' involvement is equally important.
» To discuss the challenges faced by Harley-Davidson since 2007.
» To explore operational strategies that Harley-Davidson can adopt to overcome those strategies.
CASE – 4
The case discusses the master franchise model of the US-based Domino's Pizza Inc (Domino's). Domino's, which was started in the 1960s, expanded in international markets mainly through its master franchise model. Under this model, the franchisees were provided with exclusive rights to operate stores, or to sub-franchise them in a particular area. Domino's recruited franchisees with business experience and knowledge of local markets as master franchisees, and was able to mitigate the risks associated with entering and operating in international markets. Under master franchising, in markets where there was high potential for development, Domino's transferred market exclusivity to an individual/company, who had a significant presence and knowledge about the local markets.
These individuals/companies in turn invested in establishing the master franchise, whose responsibilities include building stores, sub-franchising, operating distribution system, etc. The case discusses in detail the store operations of Domino's and the benefits of its master franchise system.
Question:
» Understand the master franchise model of Domino's and its advantages.
» Examine some of the unique features of the master franchise model of Domino's.
» Analyze the store operations of Domino's.
» Examine the training/support provided by Domino's to the franchisees.
» Understand how the master franchise model helped Domino's in facing the adverse impact of global economic slowdown successfully.
Note: Solve any 8 Question out of 10.
1. “All quantitative techniques have hardly any real-life applications.” Do you agree with the statement? Discuss
2. A company makes two kinds of leather belts. Belt A is a high quality belt, and belt B is of lower quality. The respective profits are Rs 20 and Rs 15 per belt. Each belt of type A requires twice as much time as belt of type B, and if all belts were of type B, the company could make 1,000 per day. The supply of leather is sufficient for only 800 belts per day (both A and B combined). Belt A requires a fancy buckle, and only 400 per day are available. There are only 700 buckles a day available for belt B. What should be the daily production of each type of belts to maximize profit. Use simplex method.
3. How can you formulate an assignment problem as a standard linear programming problem? Illustrate.
4. The following are the timing in regard to two jobs J1 and J2, each of which requires to be processed on two machines A and B in the order ‘A following B’. In what sequence should they be performed so that the total processing time involved is the least? Also obtain the time involved.
Job Time (Hours)
_______________________________________
Machine A Machine B
J1 6 8
J2 7 3
Use graphical method.
5. What function does inventory perform? State the two basic inventory decisions management must take as they attempt to accomplish the functions of inventory just described by you.
6. A truck owner finds from his past experience that the maintenance costs are Rs 200 for the first year and then increase by Rs 2,000 every year. The cost of the truck type A is Rs 9,000. Determine the best age at which to replace the truck. If the optimum replacement is followed, what will be the average yearly cost of owning and operating the truck? Truck type B costs Rs 10,000. Annual operating costs are Rs 400 for the first year and then increase by Rs 800 every year. The truck owner has now the truck type A which is one year old. Should it be replaced with B Type, and if so, when?
7. What are the major comparative characteristics of the PERT model and the CPM model? What are their limitations, if any? Discuss.
8. Describe the steps involved in the process of decision making.
9. A person plays a game in which he gains Rs 20 with a probability of 0.4 or loses Rs 10 with a probability of 0.6. He has an amount of Rs 20 with him and plays the game repeatedly until he loses all the amount he has or adds Rs 30 or Rs 40 to the initial amount. Draw up a transition probability matrix of him.
10. “Simulation is typically the process of carrying out sampling experiments on the models of the system rather than the system itself.” Elucidate this statement by taking some examples.
Attempt Only 4 Case Study
CASE – 1 MANAGING HINDUSTAN UNILEVER STRATEGICALLY
Unilever is one of the world’s oldest multinational companies. Its origin goes back to the 19th century when a group of companies operating independently, produced soaps and margarine. In 1930, the companies merged to form Unilever that diversified into food products in 1940s. Through the next five decades, it emerged as a major fast-moving consumer goods (FMCG) multinational operating in several businesses. In 2004, the Unilever 2010 strategic plan was put into action with the mission to ‘bring vitality to life’ and ‘to meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good, and get more out of life’. The corporate strategy is of focusing on bore businesses of food, home care and personal care. Unilever operates in more than 100 countries, has a turnover of € 39.6 billion and net profit of € 3.685 billion in 2006 and derives 41 per cent of its income from the developing and emerging economies around the world. It has 179,000 employees and is a culturally-diverse organization with its top management coming from 24 nations. Internationalization is based on the principle of local roots with global scale aimed at becoming a ‘multi-local multinational’.
The genesis of Hindustan Unilever (HUL) in India goes back to 1888 when Unilever exported Sunlight soap to India. Three Indian, subsidiaries came into existence in the period 1931-1935 that merged to form Hindustan Lever in 1956. Mergers and acquisitions of Lipton (1972), Brooke Bond (1984), Ponds (1986), TOMCO (1993), Lakme (1998) and Modern Foods (2002) have resulted in an organization that is a conglomerate of several businesses that have been continually restructured over the years.
HUL is one of the largest FMCG company in India with total sales of Rs. 12,295 crore and net profit of 1855crore in 2006. There are over 15000 employees, including more than 1300 managers. The present corporate strategy of HUL is to focus on core businesses. These core businesses are in home and personal care and food. There are 20 different consumer categories in these two businesses. For instance, home and personal care is made up of personal wash, laundry, skin care, hair care, oral care, deodorants, colour cosmetics and ayurvedic personal and health care, while food businesses have tea, coffee, ice creams and processed food brands. Apart from the two product divisions, there are separate departments for specialty exports and new ventures.
Strategic management at HUL is the responsibility of the board of directors headed by a chairman. There are five independent and five whole-time directors. The operational management is looked after by a management committee comprising of Vice Chairman, CEO and managing director and executive directors of the two business divisions and functional areas. The divisions have a lot of autonomy with dedicated assets and resources. A divisional committee having the executive director and heads of functions of sales, commercial and manufacturing looks after the business level decision-making. The functional-level management is the responsibility of the functional head. For instance, a marketing manager has a team of brand managers looking after the individual brands. Besides the decentralized divisional structure, HUL has centralized some functions such as finance, human resource management, research, technology, information technology and corporate and legal affairs.
Unilever globally and HUL nationally, operate in the highly competitive FMCG markets. The consumer markets for FMCG products are finicky: it’s difficult to create customers and much more difficult to retain them. Price is often the central concern in a consumer purchase decision requiring producers to be on continual guard against cost increases. Sales and distribution are critical functions organizationally. HUL operates in such a milieu. It has strong competitors such as the multinationals Procter & Gamble, Nivea or L’Oreal and formidable local companies such as, Amul, Nirma or the Tata
FMCG companies to contend with. Rivals have copied HUL’s strategies and tactics, especially in the area of marketing and distribution. Its innovations such as new style packaging or distribution through women entrepreneurs are much valued but also copied relentlessly, hurting its competitive advantage.
HUL is identified closely with India. There is a ring of truth to its vision statement: ‘to earn the love and respect of India by making a real difference to every Indian’. It has an impeccable record in corporate social responsibility. There is an element of nostalgia associated with brands like Lifebuoy (introduced in 1895) and Dalda (1937) for senior citizens in India. Consequently Indians have always perceived HUL as an Indian company rather than a multinational. HUL has attempted to align its strategies in the past to the special needs of Indian business environment. Be it marketing or human resource management, HUL has experimented with new ideas suited to the local context. For instance, HUL is known for its capabilities in rural marketing, effective distribution systems and human resource development. But this focus on India seems to be changing. This might indicate a change in the strategic posture as well as recognition that Indian markets have matured to the extent that they can be dealt with by the global strategies of Unilever. At the corporate level, it could also be an attempt to leverage global scale while retaining local responsiveness to some extent.
In line with the shift in corporate strategy, the focus of strategic decision-making seems to have moved from the subsidiary to the headquarters. Unilever has formulated a new global realignment under which it will develop brands and streamline product offerings across the world and the subsidiaries will sell the products. Other subtle indications of the shift of decision-making authority could be the appointment of a British CEO after nearly forty years during which there were Indian CEOs, the changed focus on a limited number of international brands rather than a large range of local brands developed over the years and the name-change from Hindustan Lever to Hindustan Unilever.
The shift in the strategic decision-making power from the subsidiary to headquarters could however, prove to be double-edged sword. An example could be of HUL adopting Unilever’s global strategy of focusing on a limited number of products, called the 30 power brands in 2002. That seemed a perfectly sensible strategic decision aimed at focusing managerial attention to a limited set of high-potential products. But one consequence of that was the HUL’s strong position in the niche soap and detergent markets suffering owing to neglect and the competitors were quick to take advantage of the opportunity. Then there are the statistics to deal with: HUL has nearly 80 per cent of sales and 85 per cent of net profits from the home and personal care businesses. Globally, Unilever derives half its revenues from food business. HUL does not have a strong position in the food business in India though the food processing industry remains quite attractive both in terms of local consumption as well as export markets. HUL’s own strategy of offering low-price, competitive products may also suffer at the cost of Unilever’s emphasis on premium priced, high end products sold through modern outlets.
There are some dark clouds on the horizon. HUL’s latest financials are not satisfactory. Net profit is down, sales are sluggish, input costs have been rising and new food products introduced in the market have yet to pick up. All this while, in one market segment after another, a competitor pushes ahead. In a company of such a big size and over-powering presence, these might still be minor events developments in a long history that needs to be taken in stride. But, pessimistically, they could also be pointers to what may come.
Questions:
1. State the strategy of Hindustan Unilever in your own words.
2. At what different levels is strategy formulated in HUL?
3. Comment on the strategic decision-making at HUL.
4. Give your opinion on whether the shift in strategic decision-making from India to Unilever’s headquarters could prove to be advantageous to HUL or not.
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