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International Human Resource Management (Spz.)
_____________________________________________________________________________
1. Discuss the components of Multinational Compensation System. What factors should be kept in
mind while designing a compensation system?
2. Ethics and the question of social responsibility are complex and the source of much controversy"
Discuss the statement.
3. How does appraising an expatriate’s performance differ from appraising that
of a home office manager?
4. (a) What is the role of women managers in our global economy?
(b) How compensation is a motivational factor.
5. What is expatriate re-entry? What are the factors behind failure of expatriates? What are the needs
of expatriates?
6. Define performance appraisal. Suggest criteria for performance appraisal of subsidiary staff.
7. Describe Kluckhohn and Strodtbeck’s value orientation model. What are its applications in
managing business organizations?
8. Highlight the difficulties encountered in International Human Resource Planning. Elaborate the
international Human Resource Planning Process.
COURSE: EMBA (Sem-II)
SUBJECT: International Business
N.B: 1} Attempt all the questions
_____________________________________________________________________________
Case Study 1 - Documentary Credit (Marks -16)
M/S Auto India
Introduction
M/S Auto India is a public limited company; they manufacture SUVs (sports utility Vehicle), in technical
collaboration with General Motors of USA. The company has established their manufacturing base at
Ranjangaon in Pune. They have acquired an area of 250 acres and the total project cost is estimated at
Rs 1500 crores. As per the projections, the company is slated to achieve a 25% market share in the
Indian market, within a period of two years.
Out of the total project cost, 49% is brought in by General Motors and the rest is tied up with financial
institutions, international banks and Indian banks. The working capital is financed by a consortium of
banks in which Global bank, Pune branch, is the leader. The company imports many parts of the car
engine in a CKD (completely knocked down) condition from General Motors, Detroit, after establishing
import letters of credit through its main bankers, Global Bank, Pune Branch.
M/S Auto India approached Global Bank, Pune for opening of import letter of credit as per UCP ICC 600
for USD 100,000, on sight basis, in favour of General Motors, Detroit.
Type of credit - Irrevocable negotiable
Application - UCP ICC 600
Applicant - M/S Auto India, Pune, India
Beneficiary - M/S General Motors, Detroit, USA.
Issuing Bank - Global Bank, Pune, India
Advising Bank - The American Bank, New York
Negotiating Bank - The American Bank, New York
Reimbursing Bank - International Bank, New York
Availability - Negotiable at sight
Expiry - At the counters of The American Bank, New York
Amount - USD 100,000
Merchandise - Car engine parts
Quantity and price - 50 units @ USD 2000 per unit
Circumstances
Issuing Bank
Global Bank, Pune issued its irrevocable negotiable credit through its head office in Pune
since Global Bank co-ordinated all its accounting and communication functions at its head office. The
Bank’s head office transmitted the credit through Swift network as
instructed by its Pune branch to General Motors, Detroit, through The American Bank, New
York.
Advising Bank
The American Bank, New York advised the credit to General Motors, Detroit on receipt
of the swift transmission.
Credit
Along with other conditions, the credit clearly stated that the negotiating bank was to
forward the documents directly to Global Bank’s head office at Pune.
Beneficiary
After export of the consignment, General Motors, Detroit presented the documents under
the credit to The American bank, New York.
Negotiating Bank
The American Bank, New York, examined the documents presented by General Motors
and determined that they were in compliance with the terms and conditions of the credit. The
American bank negotiated the documents and forwarded the documents, as per the credit
terms, to the HO of Global Bank in Pune and claimed reimbursement from International
bank, New York.
Reimbursing Bank
International Bank, New York honoured the reimbursement claim by crediting the current
account of the American Bank, New York and debiting the account of Global Bank, Pune, in its
books.
Issuing Bank Head Office
Global Bank’s Head Office, at Pune, received the documents and after internal
registration of the documents, forwarded the documents to its Pune Branch by inter-office
mail.
Issuing Bank Branch
On receipt of the documents by the Pune branch of Global Bank, they examined the
documents and determined that they were discrepant. They were (a) 60 units were
shipped instead of 50 units, thereby overdrawing the credit value by USD 2000 (b)
Inspection certificate by Auto Inspection Council, USA is not submitted, as per credit
terms. Global Bank contacted Auto India for waiver of the discrepancies.
Applicant
Auto India requested for copies of the documents to be forwarded by fax and after
reviewing the same, they refused to waive the discrepancies.
Issuing Bank Branch
Global Bank, Pune Branch instructed its HO to transmit an authenticated swift to The
American Bank, New York stating that Global Bank had rejected the documents for the noted
discrepancies, requesting the American Bank’s instructions as to disposal of the documents,
and demanding a refund of the funds reimbursed.
Issuing Bank Head Office
The HO of the Global Bank sent the authenticated swift message to the American Bank,
New York, as instructed by its Pune Branch.
Negotiating Bank
On receipt of the swift notification advising that Global Bank had rejected the documents
for the stated discrepancies, the American Bank informed Global Bank that it did not accept
the rejection of the drawing since the Global Bank did not comply with UCP 600 sub-article 14
for standard examination of documents. Therefore, Global Bank was said to be stopped from
dishonouring its irrevocable obligation.
Issuing Bank
Global Bank, Pune Branch responded by stating that they acted in accordance with UCP
article 14, since their action did not exceed five banking days following the day of receipt of the
documents at their branch counters after which they scrutinised the documents and
determined to refuse them. They maintained that as per article 14 of UCP 600, they notified
about the rejection of the documents, by swift, not later than the close of the fifth banking day
following the day of receipt of the documents. They had pointed out all the discrepancies and
had informed American Bank, New York that they were holding the documents at the latter’s
disposal.
Negotiating Bank
The American Bank, New York replied as follows:-
We disagree with your position that you acted in accordance with UCP 600 article 14.
Documents were delivered by courier to your HO as per the terms of the credit, on Monday,
January 7, 2008. Your swift notifying rejection of the documents was not sent until
Wednesday, Jan 16, 2008 that is, on the eighth banking day after receipt of the documents
by your bank.
Issuing Bank
Global Bank, Pune Branch, responded by stating that even though its HO received the
documents on January 7,2008; the Global Bank’s Pune Branch did not receive the documents
until the following Thursday, January 10, 2008, and the swift advice rejecting the documents
was sent within the time period permitted in UCP article 14.
Negotiating Bank
The American Bank, New York, replied that it was not their concern how Global Bank’s
operational policy impacted on their inability to comply with UCP. The American Bank, New
York stated that in accordance with the credit terms and conditions, documents were
negotiated by them and forwarded to Global Bank’s HO by courier. The documents were
received by Global Bank on Jan 7, 2008, and any notice of rejection of the documents should have been
given within the close of the fifth banking day following receipt of the documents. Global Bank’s Pune
Branch failed to do so. Therefore, the American Bank, New York’s position was firm relative to UCP 600
article 14 and they would not refund the funds reimbursed.
Questions
1) Was Global Bank, Pune Branch correct in its argument, as the credit issuing bank?
2) Was the stand taken by The American Bank, New York correct, as the negotiating bank?
***
Case Study 2 - (Marks -16)
Foreign Trade
M/S Taneja Exports, Mumbai
Introduction
Mr. Gurmeet Taneja and Mr. Rahul Khatri are partners of M/S Taneja exports, Mumbai.
Both of them qualified from IIFT, New Delhi in the year 2002. They declined lucrative
corporate job offers, since they have decided to plunge into the world of international
business.
M/S Taneja Exports is registered as a partnership firm, with Mr. Gurmeet Taneja and Mr. Rahul
Khatri sharing the profits in the ratio of 60: 40.
The partners had conducted in depth market survey in the domestic as well as
international markets regarding the demand of women’s apparels in cotton and hosiery. They
have taken the assistance of Apparel export promotion council and the marketing agencies in
various countries of European Union.
On account of their knowledge in foreign trade, they were able to quickly assess that Indian
exporters have not succeeded in penetrating into the huge apparel market of Europe.
They found out that the main reasons were ineffective marketing, improper quality control and
non adherence to the shipping schedules. Mr. Gurmeet concentrated on marketing of the
cotton and hosiery apparels abroad and Mr. Rahul ensured on the procurement of the raw
materials and timely execution of shipments.
The firm had taken an industrial gala, measuring 700 sq ft, at 501, Mangal Das market, Lower
Parel, Mumbai. They were paying a monthly rent of Rs. 35,000/- for the office premises and
the stock of garments was kept in a godown in the same gala area, for which the rent
payable was Rs. 15,000/- pm
The firm was sourcing their raw materials from the south Indian towns of Tirupur and
Coimbatore. As per the export orders, they were providing the raw materials for job works
in Mumbai and subject the samples to rigorous quality and specification checks. The firm had
employed 2 accounts staff and 3 contract workers to attend to daily office and godown
activities.
The firm was able to achieve steady improvement in export sales due to the stringent quality
control measures and timely execution of shipment schedules. The following were the credit
facilities enjoyed from M/S International Bank of India, Fort branch, Mumbai.
Facility (Amount in Lakhs) 2003 2004 2005
Fund based
a) Export packing credit 5.00 7.00 10.00
b) Foreign bill purchased/Foreign
bill negotiated
5.00 7.00 10.00
Non Fund based
a) Performance guarantee 2.00 5.00 7.00
Export sales 20.00 30.00 40.00
Towards the security of the credit facilities, the firm had mortgaged the residential house,
valued at Rs 85 lakhs, belonging to Mr. Vikram Taneja, father of Mr. Gurmeet Taneja, and
stocks valued at Rs 15 lakhs was also hypothecated to the Bank. Mr. Vikram Taneja stood
guarantee for the facilities sanctioned to the firm.
M/S Taneja exports used to avail the export packing credit facility from International Bank of
India and adjust the same by purchase or negotiation of the export bills drawn on their
European buyers. Generally the bills carried a tenor period of 60 days. Most of the export bills
were drawn and send for collection through international Bank of India, Mumbai Fort Branch,
to the foreign buyer’s bankers, based on the confirmed purchase order of the buyer. The bills
were paid on the due dates and the conduct of the account on the bank’s books was quite
satisfactory. Based on the past history and the increase in
sales turnover achieved by the firm, the bankers were happy to increase the credit limits
from Rs 7 lakhs in 2003 to Rs 17 lakhs in 2005.
On June 17, 2005, the firm submitted an export document to International Bank of India, Fort
Branch, for Euro 53000.00, drawn on M/S St Laurn Fashions, Paris. The documents were
drawn on 60 days DA terms as per the contract. The merchandise under the export were ladies
garments in cotton and hosiery. In the covering letter of the firm to the bank, they had
instructed the bank to present the documents to St Laurn, Paris, through their bankers viz,
Credit Lyonnais, Paris. The exporter had submitted bills of exchange, bills of lading, commercial
invoice, packing list, inspection certificate, certificate of origin and in the bill of exchange it was
typed as ‘to be co-accepted by credit Lyonnais’.
The International Bank of India took the documents in its books and sent the documents for
collection to Credit Lyonnais, Paris. In due course, they received communication from Credit
Lyonnais that the documents were accepted by St Laurn and due date of the
documents were August 25, 2005.The bankers informed the due date of the bill to Taneja
exports. On August 30, 2005, Taneja Exports informed the bankers that they are yet to receive
the payment of the bill for Euro 53000.00 in their books. The bank sent a swift message
enquiring about the fate and payment of the bill. Two days later the bank received a message
from Credit Lyonnais saying that the importer, St Laurn, had become bankrupt and they were
unable to pay the bill. International Bank of India informed the same to Taneja Exports. They
argued with the bank that they had clearly mentioned in the bills of exchange that the
documents were to be released against the co-acceptance of the
French bank only. Immediately the Indian bank send a message to Credit Lyonnais that
since the bill of exchange contained the co-acceptance clause by the French bank, they
are liable to pay even though the importer had become bankrupt. The French bank refuted the
claim of the Indian Bank and intimated that the bank’s collection instruction did not contain
any co-acceptance clause by the French bank and they had acted as per the provisions in the
uniform rules for collection in the ICC publication No 522.
Since payments were not forthcoming, Taneja Exports filed a suit with the National Consumer
Forum, New Delhi for deficiency of services by International Bank of India, Mumbai, on
November 10, 2005. They put forth the argument that the bank was deficient in not
mentioning about the co-acceptance clause in their covering letter to the French bank and in
case of non-coacceptance by the French bank they would have returned the documents to
India and the exporter could have arranged for an alternate buyer or re- import of the
merchandise. This negligence on the part of the bank had caused them total financial loss.
After hearing the arguments of both the parties, The National Consumer Forum gave the
judgement, on February 6, 2006, that the International Bank of India was deficient and
negligent in their services and ordered them to compensate the value of the export bill of Euro
53000.00 (approx Rs 24 lakhs) along with 15% interest, till the date of payment.
The bank went on appeal against the order of the consumer forum in the Supreme Court on
March 20, 2006. After hearing the counsels of both sides, the Supreme Court gave the
judgement that since the original agreement between the exporter and importer do not have
any co-acceptance clause by the importer’s banker, the co-acceptance clause on the bill of
exchange cannot be binding on the French Bank as well as on the Indian Bank.
The bankruptcy of the importer is the reason for loss to the exporter and not the deficiency of
service by the bank. The Supreme Court set aside the judgement of the National consumer
forum and passed the judgement in favour of the bank, with costs, on March 15, 2007.
Questions
1) Elaborate the deficiency of service on the part of the bank, pointed out by the National
consumer redressal forum, in the light of the uniform rules for collection ICC publication
No.522.
2) Advise the firm about the precautions they should have taken to avoid such a colossal
business loss.
3) Discuss the remedial measures the bank in India should take to avoid such damaging
judgements by the consumer forums.
4) Elaborate the Supreme Court judgement in the context of the international banking
rules and practises, as guided by the ICC publications.
Case-3 (Marks -16)
LATE MOVER ADVANTAGE?
Though a late entrant, Toyota is planning to conquer the Indian car market. The Japanese auto major
wants to dispel the notion that the first mover enjoys an edge over the rivals who arrive late into a
market.
Toyota entered the Indian market through the joint venture route, the partner being the Bangalore based
Kirloskar Electric Co. Known as Toyota Kirloskar Motor (TKM), and the plant was set up in 1998 at Bidadi
near Bangalore.
To start with, TKM released its maiden offer— Qualis. Qualis is not a newly conceived, designed, and
brought out vehicle. Rather it is the new avatar of Kijang under which brand the vehicle was sold in
markets like Indonesia.
Qualis virtually had no competition. Telco’s Sumo was not a multi-utility vehicle like Qualis. Rather, it was
a mini-truck converted into a rugged all-purpose van. More importantly, Toyota proved that even its old
offering, but decked up for India, could offer better quality than its competitor. Backed by a carefully
thought out advertising campaign that communicated Toyota’s formidable global reputation, Qualis went
on a roll and overtook Tata Sumo within two years of launch.
Sumo sold 25,706 vehicles during 2000—2001, compared to a 3 per cent growth over the previous year,
compared to 25,373 of Qualis. But during 2001—2002, it was a different story. Qualis had been clocking
more than 40 per cent share of the market. At the end of Sept 2001, Qualis had sold over 25,000 units,
compared to Sumo’s 18000 plus.
The heady initial success has made TKM think of the future with robust confidence. By 2010, TKM wants to
make and sell one million vehicles per year and garner one-third share of the Indian market. The firm is
planning to introduce a wide range of vehicles—a sub-compact, a sedan, a luxury car and a new multiutility
vehicle to replace Qualis. A significant percentage of the vehicles will be exported.
But Toyota is not as lucky in China. Its strategy of ‘late entry’ in China seems to have back fired. In 2005,
it sold just 1, 83, 000 cars in China, the fastest growing auto market in the world. Toyota ranks ninth in
the market, far behind Volkswagen, General Motors, Hyundai and Honda. Toyota delayed producing cars
in China until 2002, when it entered a joint venture with a local company, the First Auto Works Group
(FAW). The first car manufactured by Toyota FAW, the Vios, failed to attract much of a market, as, despite
its unremarkable design, it was three times as expensive as most cars sold in China.
Late start was not the only problem. There were other lapses too. Toyota assumed the Chinese market
would be similar to the Japanese market. But Chinese market, in reality, resembled the American market.
Sales personnel in Japan are paid salaries. They succeeded in building a loyal clientele for Toyota by
providing first-class service to them. Likewise, most Japanese auto dealers sell a single brand, thereby
ensuring their loyalty to it. Japan is a relatively a well-knit country with an ethnically homogeneous
population. Accordingly, Toyota used nationwide advertising to market its products in its home country.
But China is different. Sales people are paid commissions and most dealers sell multiple brands.
Obviously, loyalty plays little role in motivating either the sales staff or the dealers, who will ignore a slow
selling product should a more profitable one turn up. Besides, China is a large, diverse country. A
standardized ad campaign will not do. Luckily, Toyota is learning its lessons. Competition in the Chinese
market is tough, and Toyota’s success in reaching its goal of selling a million cars a year, by 2010, is
uncertain. But, its chances are brighter as the company is able to transfer lessons learned in the American
market to its operations in China.
Questions:-
1. Why has the late corner’s strategy’ of Toyota failed in China, though it succeeded in India?
2. Why has Toyota failed to capture the Chinese market? Why is it trailing behind its rivals?
Case – 4 (Marks -16)
THE EU’S LAGGING COMPETITIVENESS
In a report produced for the European Commission, published in November 1998, it was argued that the
EU lags behind the USA and Japan on most measures of international competitiveness. Gross domestic
product per capita, sometimes used as an indicator of international competitiveness at the country level,
was 33 per cent lower in the EU as a whole than in the USA and 13 per cent lower than in Japan. The EU’s
poor record in creating employment was singled out for particular criticism. As this appeared to apply
across 2. the board in most industrial sectors, it suggested that the EU’s poor performance related to the
business environment in general and, in particular, to the flexibility of Europe’s labor markets and
excessive regulation in markets for goods and 3. Services. A shortage of risk capital for advanced
technological development and high cost and 4. Inefficiency of Europe’s financial services was also
highlighted by the report. For one reason or another, European industries generally lag behind in
technology industries. If measured by the number 5. of inventions patented in at least two countries, the
USA is well ahead of most European countries, as well as Japan. Despite these shortcomings, the report’s
authors focus attention on flexible markets, market liberalization, and the creation of a competitive
business environment rather than on targeted intervention by the EU or national authorities.
Questions:-
1) Is gross domestic product per capita a useful indicator of international competitiveness in the EU?
2) Is it fair to point the blame for the EU’s poor international competitiveness at inflexible labor markets,
regulated goods and services markets, and a general lack of competition? What alternative explanations
might be suggested? What appears to be the problem with the EU’s banking sector?
3) Is the number of patents registered a useful indicator of superior international competitiveness? Why
do you think the USA does well in this area?
4) Should the EU consider more targeted intervention in the form of subsidies or strategic trade policy?
Case-5 (Marks-16)
AT THE RECEIVING END
Spread over 121 countries with 30,000 restaurants, and serving 46 million customers each day with the
help of more than 400,000 employees, the reach of McDonald’s is amazing. It all started in 1948 when
two brothers, Richard and Maurice ‘Mac’ McDonald, built several hamburger stands, with golden arches in
southern California. One day a travelling salesman, Ray Kroc, came to sell milkshake mixers. The
popularity of their $0.15 hamburgers impressed him, so he bought the world franchise rights from them
and spread the golden arches around the globe.
McDonald’s depends on its overseas restaurants for revenue. In fact, 60 per cent of its revenues are
generated outside of the United States. The key to the company’s success is its ability to standardize the
formula of quality, service, cleanliness and value, and apply it everywhere.
The company, well known for its golden arches, is not the world’s largest company. Its system wide sales
are only about one-fifth of Exxon Mobil or Wal-Mart stores. However, it owns one of the world’s best
known brands, and the golden arches are familiar to more people than the Christian cross. This
prominence, and its conquest of global markets, makes the company a focal point for inquiry and
criticism.
McDonald’s is a frequent target of criticism by anti-globalization protesters. In France, a pipes moking
sheep farmer named Jose Bove shot to fame by leading a campaign against the fast-food chain.
McDonald’s is a symbol of American trade hegemony and economic globalization. Jose Bove organized
fellow sheep farmers in France, and the group led by him drove tractors to the construction site of a new
McDonald’s restaurant and ransacked it. Bove was jailed for 20 days, and almost overnight an
international anti-globalization star was borne. Bove, who resembles the irrelevant French comic book
hero Asterix, travelled to Seattle in 1999, as part of the French delegation to lead the protest against
commercialization of food crops promoted by the WTO. Food, according to him, is too vital a part of life to
be trusted to the vagaries of the world trade. In Seattle, he led a demonstration in which some skimasked
protestors trashed at McDonald’s. As Bove explained, his movement was for small farmers against
industrial farming, brought about by globalization. For them, McDonald’s was a symbol of globalization
implying the standardization of food through industrial farming. If this was allowed to go on, he said,
there would no longer be need for farmers. “For us,” he declared, “McDonald’s is a symbol of what WTO
and the big companies want to do with the world.” lroncally, for all of Bove’s fulminations against
McDonald’s, the fast food chain counts its French operations among its most profitable in 121 countries.
As employer of about 35,000 workers, in 2006, McDonald’s was also one of France’s biggest foreign
employers.
Bove’s and his followers are not the only critics of McDonald’s. Leftists, anarchists, nationalists, farmers,
labor unions, environmentalists, consumer advocates, protectors of animal rights, religious orders and
intellectuals are equally critical of the fast food chain. For these and others, McDonald’s represents an evil
America. Within hours after US bombers began to pound Afghanistan in 2001, angry Pakistanis damaged
McDonald’s restaurants in Islamabad and an Indonesian mob burned an American flag.
McDonald’s entered India in the late 1990s. On its entry, the company encountered a unique situation.
Majority of the Indians did not eat beef but the company’s preparations contained cow’s meat. Nor could
the company use pork as Muslims were against eating it. This left chicken and mutton. McDonald’s came
out with ‘Maharaja Mac’, which is made from mutton and ‘McAloo Tikki Burger’ with chicken potato as the
main input. Food items were segregated into vegetarian and non-vegetarian categories.
Though it worked for sometime, this arrangement did not last long. In 2001, three Indian businessmen
settled in Seattle sued McDonald’s for fraudulently concealing the existence of beef in its French fries. The
company admitted its guilt of mixing miniscule quantity of beef extract in the oil. The company settled the
suit for $10 million and tendered an apology too. Further, the company pledged to label the ingredients of
its food items, and to find a substitute for the beef extract used in its oil.
McDonald’s succeeded in spreading American culture in the East Asian countries. In Hong Kong and
Taiwan, the company’s clean restrooms and kitchens set a new standard that elevated expectations
throughout those countries. In Hong Kong, children’s birthdays had traditionally gone unrecognized, but
McDonald’s introduced the practice of birthday parties in its restaurants, and now such parties have
become popular among the public. A journalist set forth a ‘Golden Arches Theory of Conflict Prevention’
based on the notion that countries with McDonald’s restaurants do not go to war with each other. A British
magazine, The Economist, prints an yearly ‘Big Mac Index’ that uses the price of a Big Mac in different
foreign currencies to assess exchange rate distortions.
Questions:-
1. What lessons can other MNCs learn from the experience of McDonald’s?
2. Aware of the food habits of Indians, why did McDonald’s err in mixing beef extract in the oil used for
fries?
3. How far has McDonald’s succeeded in strategizing and meeting local cultures and needs?
SUBJECT: Managerial Economics
N.B: 1} Attempt all the questions
_________________
Case 1: Where is the Fair Play? (Marks-16)
In most countries in Europe, and primarily America, they don’t prefer the leg meat – it is waste matter
for them so they look for nations where they can dump this meat. They did in the Philippines, Sri Lanka
and Russia. They might deny it in the US but everybody knows that they are sitting on stocks for at
least 2-3 years. They have succeeded in doing that because of their good freezing techniques. Now it’s
becoming a major problem for them. They’re not used to eating leg meat and are in a fix. In the US
they actually load the price of the entire chicken on the breast meat, and the rest of the bird is like a
carcass to them. Due to environmental reasons they can’t dump it in the sea so they have to dump it
somewhere. It can be any underdeveloped country, may be India!
It’s wrong notion that supply of this meat to underdeveloped countries will be good for the consumers
there. It is not. Can the Americans guarantee anything – how long will they be able to supply the
chicken? How long will they supply subsidized eggs to such a large country? We could end up destroying
our industry base and that will be very sad. As far as chicken is concerned, they can only supply the
legs – they can never supply the whole bird. The white meat costs US $3 to 3.5 per pound, so it’s out of
range. May be the consumer gets the advantage of subsidized supply of the white meat in the short run
but over time the consumers’ interests are likely to suffer because such a supply will result only in
destroying the chicken and egg industry in India. Once their surplus stock gets exhausted they can
charge you any price – can they guarantee the price? They can’t and they won’t.
The chicken/egg business deals with livestock. It is not possible for people to stop producing for a year
and come back – they will be finished. Once they are out of the cycle they are out of the industry. It
would be very said if that happened to this industry that has grown over the past 25 years.
For many people it provides a day-to-day livelihood. Once the foreign players come in and are allowed
to sell their products at very low rates, the industry could collapse as it has in other countries.
India is a the cheapest egg producer in the world – about Re.1 a piece. But now we are very worried. In
European countries, eggs cost between Rs.3-5 but they are able to deliver the same egg to the Middle
East at Re 1-1.50. This is because in Western countries they have so many subsidies. When it comes to
agriculture, they are very sensitive and protective. If they bring it to the Middle East, then why can’t
they do it here as well? The government knows that the Western countries are not going to remove
subsidies – they know when it comes to agriculture, neither the Europeans nor the Americans are going
to do anything. They are going to protect them forever- so where is the fair play?
Questions:
i. What would you recommend to the government to create a level playing field for the local firms
and the western exporters of meat to India?
ii. Can you cite any other typical product where India’s advantage turns into disadvantages as a
result of WTO agreement?
Case: 2 (Marks -16)
One of the most notable things about consumer behaviour is that the demand in the short run is always
less elastic (or more inelastic) than the demand in the medium or long term. Petroleum, which is one of
the most essential commodities of modern life is a classic example of this phenomenon. Petroleum, also
known as a luxurious necessity because of its steep price, is the greatest cause for our Balance of
Payment being perennially in deficit. Despite all its disadvantages, life is literally and figuratively
`immobile’ without petroleum.
Our country faced two oil shocks during the 1970s. The shock of 1973-74 was a severe one and was felt
by many other countries, while the oil shock of 1979 was mild and pertained only to India. In order to
combat the sudden fall in supply, resulting in excess demand for it, the price of petrol was hiked (in
India, petroleum prices are always administered, and not market-driven) assuming that consumer
demand for petrol will go down. There was some reduction in the consumption of petrol as people
limited their pleasure trips and joy rides. The concept of `car pool’ to go to offices started and the
middle class started depending heavily on diesel-run public transport (diesel although a by-product of
crude oil is a cheaper and readily available product).
Besides this, there was no perceptible change in the demand for petrol and people continued to buy
petrol at a higher price. As a result, although the prices went up by 25 to 30 percent, the demand
decreased by only 5 to 6 percent between the 1970s and the early 1980s.
However, analysts and planners observed phenomenon, believed to be related to the hike in the price of
petrol. People, especially in the urban areas, started to stay near the workplace (even if it meant a
higher rent), showing a preference for fuel-efficient vehicles when compared to steady, stable but not
such fuel-efficient vehicles.
The phenomenal success of Maruti 800 cars launched in the mid-1980s was because of its single
attribute of fuel-efficiency, despite other disadvantages of a light body (which made it easy for the car to
topple over and get dented or damaged on Indian roads), costly parts (when compared to the
Ambassador or Fiat). Consumes preferred Maruti for its excellent fuel-efficient technology and hence a
lower running cost, than for any other reason. So much was the popularity of Maruti cars that
automobile associations discovered that the demand for other vehicles had falled by 30 to 40 percent in
favour of Maruti 800. a permanent change in the demand pattern for small, fuel-efficient cars had been
achieved.
For most commodities, economists found that in the long term (the concept of long term varies from
commodity to commodity) the absolute value of the demand elasticity is higher than in the short run. A
few of these are given in the following Table:
The value of demand elasticity for certain goods and services in India
(This includes urban, semi-urban and small town area)
Goods + Services Short-Run
Demand Elasticity
Long-Run
Demand
Elasticity
Expenditure on food 0.35 0.36
Expenditure on clothing 0.68 1.22
Consumption of electricity 0.54 0.90
House rent 0.75 1.82
Transportation 0.40 1.60
Source: Calculated on the basis of Government of India published reports.
Questions:
i Why do you think the absolute value of demand elasticity is less in the short run than in the long
run?
ii. Do you think jewellery as a commodity, can also be categorized in the same group as others in
the given table? In other words, will it also exhibit change in the demand elasticity between the
short and long run? Explain why?
iii. The change in the value of demand elasticity between short and long run is much smaller in case
of food than in clothing, what does this reflect about the consumer behaviour?
Case :3 (Marks -16)
TAKE THE BULL BY THE HORN
Through its relatively brief history, the Reliance group has specialised in taking gambles, sometimes
huge ones. A pattern repeated time and again - such as when it set up capacities for Polyester Staple
Fibre (PSF) which was the same size as the domestic market or when it put up a 27 million tonne
refinery in Jamnagar, which is close to a third of India's demand for petroleum products.
There's no gamble quite so audacious as the one that's underway. The Rs. 25,000 crore Reliance
Infocom project that's currently taking shape aims at no less than a complete remake of India's telecom
landscape to emerge as India's number one telecommunications company, ahead of the state-owned
behemoth Bharat Sanchar Nigam l td.
It's also an attempt to realign Reliance's revenues and profits - which today originate entirely from
manufacturing - with India's economic profile, in which services account for over 40 per cent of GDP.
"Reliance's revenues will have to become diversified with a larger proportion originating from services
which would be in keeping with the
changing structure of India's economy," says Mukesh Ambani, vice chairman of Reliance Industries.
Rs. 8000 crore will be invested over a three - year period. As of now, it's full steam ahead for Reliance's
Infocom plans. As it had done earlier in oil and gas. Reliance plans to emerge as an integrated player,
focusing on the entire range of telecom services ranging from high - speed internet access for business
and consumers, call centres,
data centres, cellular phone services and domestic and international long distance telephony. Apart from
the gamut of telecom services, Reliance's integration plans are in one respect unique in the telecom
industry. If senior group officials are to be believed, the company has plans to assemble cellular phones
and set-top boxes.
At the core of the Infocom project is a 115,000 km fibre optic backbone covering 115 cities across 12
States, accounting for over 50 per of India's GDP. The company plans to become what the industry
jargon refers to as a carriers' carrier, where it hires out infrastructure to other telecom operations. Here
Reliance, along with the Bharti group, has obtained a licence for providing domestic long-distance
services. In fact, these are the only two companies to do so. The total domestic long-distance market is
worth Rs. 6,000 crore. Of this, the market available to the long
distance operator is likely to be Rs. 2,400 crore, according to a December 2000 Merrill Lynch report. This
is based on a 30 : 40 : 30 revenue share between the originator, the carrier and the last-mile access
provider. However, Reliance would hope for a larger share since it plans to fill all the three roles. Merrill
Lynch estimates that the domestic long-distance revenues accruing to the carrier would amount to Rs.
2760 crore in 2002 - 03, of which Reliance is expected to garner 20 per cent - or Rs. 620 crore.
As part of its plans to enter international long-distance telecommunication, Reliance has already
submitted an expression of interest for international long-distance operator VSNL. The total international
long-distance market in India right now is Rs. 4,900 crore. Reliance's own estimates for revenue and
profitability have not been made publicly available. However, internal estimates reportedly project
revenues of Rs. 30,000 crore, which is roughly a third of the total telecommunication market of around
Rs. 1,00,000 crore estimated for fiscal year 2004 - 05. The annual total telecommunications market is
around Rs. 42,000 crore. These estimates are of course based on the assumptions of a rapid take-off in
traffic, particularly data traffic. Check out some figures: out of the 30 million households that have an
income over Rs. 4000, an estimated 20 million are in the urban market and 10 million in the rural
market. Out of the urban people, 13 million already have fixed-line connections. And out of the 10
million rural customers, 6.5 million already have fixed lines.
In the light of the above: "what kind of growth can one really expect" for the telecommunication sector
in India as such and Reliance lnfocom in particular ?
Questions :
(a) Is there such a market in India for all the huge plans that they have ?
(b) Can you support it as a case of economies of scope ?
(c) Does it not lend to monopolistic conditions ? Give reasons.
Case : 4 (Marks-16)
The Industry
The automotive sector is one of the core industries of the Indian economy, whose prospect is reflective
of the economic resilience of the country. The automobile industry witnessed a growth of 19.35 percent
in April-July 2006 when compared to April-July 2005. As per Davos Report 2006, Indian is largest three
wheeler market in the world; 2nd largest two wheeler market; 4th largest tractor market; 5th largest
commercial vehicle market and 11th largest passenger car market in the world and expected to the
seventh largest by 2016. India is among few countries that are showing a growth rate of 30 per cent in
demand for passenger cars. The industry currently accounts for nearly 4% of the GNP and 17% of the
indirect tax revenue. The well developed India automotive industry produces a wide variety of vehicles
including passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles, scooters,
motorcycles, mopeds, three wheelers, tractors etc. Economic liberalization over the years made India as
one of the prime business destination for many global automotive players, including international giants
like Ford, Toyota, GM and Hyundai have also made their also made their presence with a mark.
As per another report, every commercial vehicle manufacture, create 13.31jobs, while every
passenger car creates 5.31 jobs, and every two-wheeler create 0.49 jobs, in the country. Beside, the
automobile industry has as output multiplier of 2.24, i.e., for every additional rupee of output in the auto
industry, the overall output of the India economy increases by Rs. 2.24.
The India automotive sector has a presence across all vehicle segments and key components. In
terms of volume, two wheelers dominate the sector, with nearly 80 percent share, followed by passenger
vehicles with 13 percent. At present, there are 12 manufactures of passenger cars, 5 manufactures of
multi utility vehicles (MUVs), 9 manufactures of commercial vehicles (CVs), 12 of two wheelers and 4 of
three wheelers, besides 5 manufactures of engines.
Table 1 Vehicle Segment-wise Market Share (2005-06)
Items Percent Share
Commercial Vehicles
Passenger Vehicles
Two Wheelers
Three Wheelers
Total
3.94
12.83
79.19
4.04
100.00
Source: Report of Society of Indian Automobile Manufactures (SIAM), 2006.
Although the automotive industry in India is nearly six decades old, until 1982, there were only three
manufactures – M/s. Hindustan Motors, M/s. Premier Automobiles and M/s. Standard Motors in the
motorcar sector. In 1982, Maruti Udyog Ltd. (MUL) came up as a government initiative in collaboration
with Suzuki of Japan to establish volume production of contemporary models.
The Company
Maruti Udyog Limited (MUL) has become Suzuki Motor Corporation’s R&D hub for Asia outside Japan.
Maruti introduced upgraded versions of the Esteem, Maruti 800 and Omni, completely designed and style
in house. This followed the up gradation of WagonR and Zen models, done in house only a year before.
Maruti engineer also worked with their counterparts in Suzuki Motor Corporation in the design and
development of its new model, Swift.
The company launched superior Bharat Stage III version of most of its models, well before the
Government deadline. Maruti also set up a Center for Excellence with a corpus of Rs. 100 million. This
was done in collaboration with suppliers, who contributed an additional Rs. 50 million. The Center
provides consultancy and training support to Maruti’s Suppliers and Sales Network to enable them to
achieve standards in Quality, Cost, Service and Technology Orientation.
Maruti has embarked upon this new project in collaboration with SMC for the manufacture of diesel
engines, petrol engines and transmission assemblies for four wheeled vehicles. The project is being
implemented in the existing Joint Venture Company viz. Suzuki Metal India Limited (renamed Suzuki
Power train India Limited).
Questions:-
1. Identify the most important factors of production in case of automobile industry. Also attempt to
explain the relative significance of each of these factors.
2. What more information would you like to obtain in order to draw a production function for Maruti
Udyog? Explain with logic.
3. Automobile industry is a good example of capital augmenting technical progress. Discuss.
Case :5 (Marks-16)
By almost any measure, David Galbenski’s company Contract Counsel was a success. It was a company
Galbenski and a law school buddy, Mark Adams, started in 1993; it helps companies find lawyers on a
temporary contact basis. The growth over the past five years has been furious. Revenue went from less
than $200,000 to some $6,5 million at the end of 2003, and the company was placing thousands of
lawyers a year.
And then revenue growth began to flatten; the company grew just 8% in 2004 despite a robust
market for legal services estimated at about $250 billion in the United States alone. Frustrated and
concerned, Galbenski stepped back and began taking a hard look at his business. Could he get it back on
the fast track? “Most business books say that the hardest threshold to cross is that $10 million sales
mark,” he says. “I knew we couldn’t afford to grow only 10% a year. We needed to blow right through
that number.”
For that a happen, Galbenski knew he has to expand his customer base beyond the Midwest into
large legal supermarkets such as Boston, New York, and Washington, D.C. He also knew that in doing so,
he would run into stiff competition from large publicly traded rivals. Contract Counsel’s edge had always
been its low prices. Clients called when dealing with large-scale litigation or complicated merger and
acquisition deals, either of which can require as many 100 lawyers to manage the discovery process and
the piles of documents associated with it. Contract Counsel’s temps cost about $75 an hour, roughly half
of what a law firm would charge, which allowed the company to be competitive despite its relatively
small size. Galbenski was counting on using the same strategy as he expanded into new cities. But would
that be enough to spur the hyper growth that he craved for?
At the time, Galbenski had been reading quite a bit about the growing use of offshore employees.
He knew companies like General Electric, Microsoft and Cisco were saving bundles by setting up call and
data centers in India. Could law firms offshore their work? Galbenski’s mind raced with possibilities. He
imagined tapping into an army of discount-priced legal minds that would mesh with his existing talent
pool in the U.S. The two work forces could collaborate over the Web and be productive on a 24-7 basis.
And the cost saving could be massive.
Using offshore workers was a risk, but the payoff was potentially huge. Incidentally Galbenski and
his eight-person management team were preparing to meet for their semiannual strategic review
meeting. The purpose of the two-day event was to decide the company’s goals for the coming year.
Driving to the meeting, Galbenski struggled to figure out exactly what he was going to say. He was sill
undecided about whether to pursue an incremental and conservation national expansion or take a big
gamble on overseas contractors.
The Decision
The next morning Galbenski kicked off the management meeting. Galbenski laid out the facts as he saw
them. Rather than look at just the next five years of growth, look at the next 20, he said. He cited a
Forrester Research prediction that some 79,000 legal jobs, totaling $5.8 billion in wages, would be dent
offshore by 2015. He challenged his team to be pioneers in creating a new industry, rather than
stragglers racing to catch up. His team applauded. Returning to the office after the meeting, Galbenski
announced the change in strategy to his 20 full-timers.
Then he and his team began plotting a global action plan. The first step was to hire a company
out of Indianapolis, Analysts International, to start compiling a list of the best legal services providers in
countries where people had comparatively strong English skills. The next phase was vetting the
companies in person. In February 2005, just three months after the meeting in Port Huron, Galbenski
found himself jetting off on a three-month trip to scout potential contractors in India, Dubai, and Sri
Lanka. Traveling to cities like Bangalore, Chennai, and Hyderabad, he interviewed executive from more
than a dozen companies, investigating their day-to-say operation firsthand.
India seemed like the best bet. With more than 500 law schools and about 200,000 law students
graduating each year, it had no shortage of attorneys. What amazed Galbenski, however, was that
thanks to the Web, lawyers in India had access to the same research tools and case summaries as any
associate in the U.S. Sure they didn’t speak American English. “But they were also eager to tackle the
kinds of tasks that most new associates at law firms look down upon” such as poring over perfect for the
kind of document-review work he had in mind.
After a retune visit to India in August 2005, Galbenski signed a contract with two legal service
companies: QuisLex, in Hyderabad, and Manthan Services, in Bangalore. Using their lawyers and
Paralegals, Galbenski figured he could cut his document-review rates to $50 an hours. He also
outsourced the maintenance of the database used to store the contact information for his thousands of
contractors. In all, he spent about 12 months and $250,000 readying his newly global company.
Convincing U.S. based clients to take a chance on the new service hasn’t been easy. In November,
Galbenski lined up pilot programs with four clients (none of which are ready to publicise their use of
offshore resources). To help get the word out, he launched a website (offshore-legal-services.com),
which includes a cache of white papers and case studies to serve as a resource guide for companies
interested in outsourcing.
Questions:-
1. As money costs will decrease due to decision to outsource human resource, some real costs and
opportunity cost may surface. What could these be?
2. Elaborate the external and internal economies of scale as occurring to Contract Counsel.
3. Can you see some possibility of economies of scope from the information given in the case?
Discuss.
SUBJECT: Operation Management
Note:- 1) Kindly write case study number question number properly
2) Attached question papers with answer sheets
_____________________________________________________________________________
SECTION A
Case – 1 Marks- 20
Dr. Govinda Venkataswamy (fondly called Dr. V) founded the Aravind Eye Hospitals in 1976 with an 11-
bed facility in Madural, which performed all types of eye surgeries. Its goal was to offer quality care at
reasonable cost. In 1978, a 70 bed free hospital was opened to provide the poor with quality care. In
2004, Aravind Eye Care System comprised Eye Care Facilities at Madural, Theni, Tirunelveli, Coimbatore
and Pondicherry (Exhibit 1) and performed nearly 230,000 eye surgeries and handled 1,640,000
outpatient visits (Exhibit 2). It is recognized as the world’s most productive eye hospital handling the
largest patient volume. Its website states that ‘with less than 1% of the country’s ophthalmic manpower,
Aravind accounts for 5% of the ophthalmic surgeries performed nationwide”. Its mission has now become
to “eradicate needless blindness by providing appropriate, compassionate and quality eye care for all”.
Each day, across all five Aravind Eye Hospitals, about 4481 outpatient visits are handled, about 627
surgeries take place and about three camps are conducted.
Currently, there are more than 20 million blind people in India and only over four million surgeries are
performed every year. Over 75% of the blindness is due to cataract. Cataract is the clouding of the
natural eye lens due to ageing or otherwise. There are two types of cataract surgeries: one in which the
natural lens is removed and then glasses are provided after three to four weeks, called intracapsular
surgery (ICCE) and the other where after removing the natural lens, the intraocular lens inserted, called
extra capsular surgery or ECCE. In ECCE, patients normally do not require corrective lenses after the
surgery. ECCE is better and often preferred because the quality of the restored sight is distortion-free and
near natural. However, ECCE is slightly expensive due to the cost of the intraocular lens. Talking to a
Harvard Business School professor, Dr.V argued, “Tell me, can a cataract surgery be marketed like
hamburgers? Don’t you call it social marketing or something? See, in America, McDonald’s and Dunkin’
Donuts and Pizza Hut have all mastered the art of mass marketing, we have to do something like that to
clear the backlog of Million blind eyes in India. We perform only one million cater acts a year. At this rate
we can’t catch up.” Each of the Aravind Hospitals has two sections: one is the Main Hospital for the paid
patients and other is free hosp ital for nonpaying patients. The series of steps, which a patient normally
goes through, is the same in both the hospitals: patients are initially registered, their vision is recorded
and they undergo a preliminary examination followed by testing of tension and tear duct function. This
follows refraction test and final examination. While the assistants carry out many of the intermediate
steps, a senior ophthalmologist does the final examination. The two sections differ in size, the kind of beds
they provide and general kind of patients. Who come to use them? However, the same pool of doctors and
nurses serves both sections. “The hallmarks of the Aravind model are quality care and productivity at
prices that everyone can afford. A core principle of the Aravind System is that the hospital must provide
services to the rich and poor alike, yet be financially self-supporting. This principle is achieved through
high quality, large volume care and a well-organized system.” In Aravind Hospitals, a typical Operation
Theater (OT) has two tables side by side. The surgical team keeps one table ready while the surgeon is
working on the other. The surgeon merely turns and starts doing surgery on the other table as soon as he
finishes the current one. In this way, the valuable time of surgeon is used properly. Aravinds’ surgeons
take only 10 minutes per surgery while industry standard is 30 minutes. Aravind achieves this feat while
maintaining the world standard in quality. Its infection rate is only 4 per 10,000 cases as opposed to 6 per
10,000 in UK. And they are able to carry out 400 surgeries per doctor per month as opposed to the
average of 25 surgeries per doctor per month.
To cater to such high performing, large-scale surgical system, Aravind has to ensure that enough patients
come to it; partly to achieve this, Aravind organizes camps to attract patients in rural areas, Help of local
organizations like ions club is taken in publicizing the camps. They also of ten help with sharing of the part
of cost in transporting patients and other such activities. In these camps, patients go through the similar
steps of registration, vision recording. Preliminary examination, testing of tension, refraction, and final
examination. If a surgery is found to be required, patients additionally undergo BP and urine sugar test
and their surgery papers are prepared. Following this, patients are taken to the nearest Aravind for
surgery and brought back to the same place after three days. This is unlike many other camp organizers
who perform surgeries in the camps themselves.
For its hospitals, Aravind recruits nurses from the nearby villages. Aravind essentially looks for hunger to
do some good in such people before it trains them for the job. They need not have any nursing training
before coming to Aravind. Nurses typically do not leave Aravind because they tack the necessary
qualifications to get employed in other hospitals.
Aravind is finding it a little harder to recruit and keep doctors; it expects its doctors to work nearly 60
hours a week as opposed to 30 hours in many institutions. They tend to leave Aravind after few years as
they command higher salaries in the marketplace than what Aravind gives them.
Till few years back, Aravind used to provide only the intra-cap surgeries for free patients as the cost of in
ocular lens was high. Each in ocular lens used to cost Rs 800, as t had to be imported. In 1991, Aravind
set up a factory to produce 60,000 IOLs per year. Initially, it had a detect rate of 50% and the cost of
each lens worked out to be Rs 200/-. Over time, it was expected that the cost of the lens would drop to Rs
100/- as the factory improved its working. This factory was set up as a separate venture so that the
hospitals could keep their focus on eye care. Recently, the factory has also started manufacturing sutures
and other items used in the surgeries.
In a recent interview to two Indian business school professors, Mr. R. D. Thulsiraj, MD, Aravind Hospitals,
remarked that eye care has some unique characteristics that make it possible to transfer the model
directly. One characteristic is the high volume: about 20% of the population needs glasses and 1% has
cataract. Secondly, the intervention for the most part is one time, because it is not a chronic disease, or
one needing long-term treatment like cancer, Finally, intervention is quite low cost unlike, say, bypass
surgery. But Dr. V argued, “I think this model must work in other health care sectors also, whether it is
women’s heath or children’s health, or cancer or tuberculosis, People like you must explore and see where
this model can be applied, our main focus should be on improving the total health of the country
Exhibit 1
Exhibit 2
ARAVIND EYE HOSPITALS
Statistics—Year 2004
Outpatient Visits: 1,635,599
Surgeries: 228,894
Free Eye Camps: 1,271
Statistics—Year 1976—2004
Outpatient Visits: 17,778,075
Surgeries: 2,225,225
Free Eye camps: 20,995
QUESTIONS:-
1. What is the vision of AECS? What is the role of operations in meeting it?
2. Can this system be replicated to other aspects of health care? Other services? What will be the
problems? What will be the advantages?
3. How do different elements of AECS work together to deliver the vision of Dr. V?
4. What are some of the problems AECS facing? Are they inherent in its model or they could be rectified
while keeping the model intact?
Case – 2 Marks-15
On the night of Feb 28th, the last day of classes, Nilesh proposed to Geeta, his MBA classmate of nearly a
year and a half. Geeta agreed immediately and wondered if all her classmates will be able to attend their
wedding as once they all go back to their homes it would be really very difficult for everyone to get
together again. Suddenly, Nilesh came up with the idea: what if they got married on March 22nd? “But how
could it be? Our convocation is on March 21st Geeta said.
“Exactly! All our classmates will definitely come here for convocation and they would not mind staying an
extra day for the wedding. In fact, we will get the blessings of even their parents as many are planning to
come for the convocation.”
Geeta: Right. But so many things have to be done. That is also when the wedding season starts and all
the reception halls become unavailable. For our send-off party, juniors were saying that hotels were
insisting on 17 days notice. Of course, for Rs 5000/- extra the notice period can be reduced to 10 days.
Nilesh: I want my brother and sister-in-law to come for the wedding.
Geeta: But, they are in US and working. They will require at least 10 days before they can be here. Also
my parents will have to buy your sister-in-law a sari-set (sari with matching blouse and petticoat) as per
the tradition. She will have to be here well in time so that they can be fitted well.
Nilesh: And catering! It takes two days to choose the menu and Pandal decorations. Hotel Sayaji wants at
least 10 days notice period before the formal engagement ceremony (one night before the wedding).
Geeta: And what about our dresses? These days, it is better to get it made after choosing the pattern and
buying the material yourself. It would take three days to choose the pattern and eight days to order and
receive the material after
Nilesh: Yes. But the material supplier can deliver in five days if we pay an extra of Rs 1000/- for
expediting it.
Geeta: I want Joyti of Asha Boutique to work on our dresses.
Nilesh: But she charges Rs 500/- for one day of work.
Geeta: If I got my mother to do all the services, we could finish the dresses in 11 days. If Joyti helped, we
could cut that down to six days, at a cost of Rs 500/- for each day less than 11 days.
Nilesh: It would take another two days to do the final fitting. Then dry-cleaner will take two days to clean
and press the dresses unless we pay Ps 1000/- for the express service of single day delivery.
Geeta: That’s right. By the way, have you thought about invitations? Nobody will come unless we invite
them formally.
Nilesh: Anand Printing Press will take 12 days to print the invitation cards. Of course, they do have an
express service and can deliver in five days if we pay them extra Rs 1500/-
Geeta: It will take three days to prepare the matter which will be printed and select the styles.
Nilesh: Given the postal delays, the invitations have to go out at least 10 days before the wedding.
Geeta: Mailing them will take a day and that cannot be done until we write addresses on them. Addressing
will take four days unless we hire some help. We can finish addresses in two days if we hire a part-time
help for Ps 200/-.
Geeta: We also have to buy some jewellery items to be given as gift to my brother-in-law. It will take a
day to do that
Nilesh: But before we start writing address, we will have to prepare a guest list. We can’t afford to miss
out on anyone important, as that will have an impact on the relationship with them forever. We will have
to be really thorough on that. I think it will take four days to prepare an exhaustive guest list.
Geeta: That does sound like a lot. Now it certainly looks much easier to earn an MBA degree than get
married!!!
QUESTIONS:-
1. Given the activities and precedence relationships described in the (A) case, develop a network diagram
for the wedding plans.
2. Identify the paths. Which are critical?
3. What is the maximum cost plan that meets the March 22nd deadline?
Case -3 {Continuation of Case 2} Marks-15
Several complications arose during the course of trying to meet the deadline of March 21, for the Nilesh—
Geeta engagement. Since it was important for Nilesh and Geeta to get married on March 22nd, the
implications of each of these complications had to be assessed.
1. All hotels informed that the express booking had to be withdrawn that year as there was a mad-rush for
getting married, and therefore Nilesh and Geeta would have to give 17 days’ notice.
2.A call to the US revealed that brother and sister-in-law couldn’t leave till March 1st as they had urgent
deadlines at work.
3.Nilesh came down with four day flu just as he started to work on the guest list.
4. The dress material was lost in transit. Notice of loss was delivered to Geeta on March 10th.
5. There was an unplanned repair work at Sayaji on March 8. They informed that they would be closed for
two to three days.
QUESTIONS :-
1. Given your answers to the (A) case, describe the effects on the wedding plans of each incident
noted in the (B) case.
SECTION B Marks-30
Attempt all the questions:-
1 ) Br i ef l y s k et c h t h e pr o du c t d e v e l o pme n t p r o c es s .
2 ) Wh a t d o y o u me a n b y c o nt i n u o u s impr o v eme nt ? Gi v e two e x amp l e s o f
c o nt i n u o u s impr o v eme n t s t h a t or g a n i z a t i o n s u n d e r t a k e .
3 ) Su p p o s e y o u wa n t t o v i s i t y o ur b a n k t o d e p o s i t y o u r s a la r y c h e qu e a n d t h e n
wi t h dr aw s ome mo n e y f r om y o ur a c c o u nt . Us e y o u r k n owl e d g e o f pr o c e s s
ma p p i n g a n d d r aw t h e p r o c e s s .
CONTACT:
DR. PRASANTH MBA PH.D. DME MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com
International Human Resource Management (Spz.)
_____________________________________________________________________________
1. Discuss the components of Multinational Compensation System. What factors should be kept in
mind while designing a compensation system?
2. Ethics and the question of social responsibility are complex and the source of much controversy"
Discuss the statement.
3. How does appraising an expatriate’s performance differ from appraising that
of a home office manager?
4. (a) What is the role of women managers in our global economy?
(b) How compensation is a motivational factor.
5. What is expatriate re-entry? What are the factors behind failure of expatriates? What are the needs
of expatriates?
6. Define performance appraisal. Suggest criteria for performance appraisal of subsidiary staff.
7. Describe Kluckhohn and Strodtbeck’s value orientation model. What are its applications in
managing business organizations?
8. Highlight the difficulties encountered in International Human Resource Planning. Elaborate the
international Human Resource Planning Process.
COURSE: EMBA (Sem-II)
SUBJECT: International Business
N.B: 1} Attempt all the questions
_____________________________________________________________________________
Case Study 1 - Documentary Credit (Marks -16)
M/S Auto India
Introduction
M/S Auto India is a public limited company; they manufacture SUVs (sports utility Vehicle), in technical
collaboration with General Motors of USA. The company has established their manufacturing base at
Ranjangaon in Pune. They have acquired an area of 250 acres and the total project cost is estimated at
Rs 1500 crores. As per the projections, the company is slated to achieve a 25% market share in the
Indian market, within a period of two years.
Out of the total project cost, 49% is brought in by General Motors and the rest is tied up with financial
institutions, international banks and Indian banks. The working capital is financed by a consortium of
banks in which Global bank, Pune branch, is the leader. The company imports many parts of the car
engine in a CKD (completely knocked down) condition from General Motors, Detroit, after establishing
import letters of credit through its main bankers, Global Bank, Pune Branch.
M/S Auto India approached Global Bank, Pune for opening of import letter of credit as per UCP ICC 600
for USD 100,000, on sight basis, in favour of General Motors, Detroit.
Type of credit - Irrevocable negotiable
Application - UCP ICC 600
Applicant - M/S Auto India, Pune, India
Beneficiary - M/S General Motors, Detroit, USA.
Issuing Bank - Global Bank, Pune, India
Advising Bank - The American Bank, New York
Negotiating Bank - The American Bank, New York
Reimbursing Bank - International Bank, New York
Availability - Negotiable at sight
Expiry - At the counters of The American Bank, New York
Amount - USD 100,000
Merchandise - Car engine parts
Quantity and price - 50 units @ USD 2000 per unit
Circumstances
Issuing Bank
Global Bank, Pune issued its irrevocable negotiable credit through its head office in Pune
since Global Bank co-ordinated all its accounting and communication functions at its head office. The
Bank’s head office transmitted the credit through Swift network as
instructed by its Pune branch to General Motors, Detroit, through The American Bank, New
York.
Advising Bank
The American Bank, New York advised the credit to General Motors, Detroit on receipt
of the swift transmission.
Credit
Along with other conditions, the credit clearly stated that the negotiating bank was to
forward the documents directly to Global Bank’s head office at Pune.
Beneficiary
After export of the consignment, General Motors, Detroit presented the documents under
the credit to The American bank, New York.
Negotiating Bank
The American Bank, New York, examined the documents presented by General Motors
and determined that they were in compliance with the terms and conditions of the credit. The
American bank negotiated the documents and forwarded the documents, as per the credit
terms, to the HO of Global Bank in Pune and claimed reimbursement from International
bank, New York.
Reimbursing Bank
International Bank, New York honoured the reimbursement claim by crediting the current
account of the American Bank, New York and debiting the account of Global Bank, Pune, in its
books.
Issuing Bank Head Office
Global Bank’s Head Office, at Pune, received the documents and after internal
registration of the documents, forwarded the documents to its Pune Branch by inter-office
mail.
Issuing Bank Branch
On receipt of the documents by the Pune branch of Global Bank, they examined the
documents and determined that they were discrepant. They were (a) 60 units were
shipped instead of 50 units, thereby overdrawing the credit value by USD 2000 (b)
Inspection certificate by Auto Inspection Council, USA is not submitted, as per credit
terms. Global Bank contacted Auto India for waiver of the discrepancies.
Applicant
Auto India requested for copies of the documents to be forwarded by fax and after
reviewing the same, they refused to waive the discrepancies.
Issuing Bank Branch
Global Bank, Pune Branch instructed its HO to transmit an authenticated swift to The
American Bank, New York stating that Global Bank had rejected the documents for the noted
discrepancies, requesting the American Bank’s instructions as to disposal of the documents,
and demanding a refund of the funds reimbursed.
Issuing Bank Head Office
The HO of the Global Bank sent the authenticated swift message to the American Bank,
New York, as instructed by its Pune Branch.
Negotiating Bank
On receipt of the swift notification advising that Global Bank had rejected the documents
for the stated discrepancies, the American Bank informed Global Bank that it did not accept
the rejection of the drawing since the Global Bank did not comply with UCP 600 sub-article 14
for standard examination of documents. Therefore, Global Bank was said to be stopped from
dishonouring its irrevocable obligation.
Issuing Bank
Global Bank, Pune Branch responded by stating that they acted in accordance with UCP
article 14, since their action did not exceed five banking days following the day of receipt of the
documents at their branch counters after which they scrutinised the documents and
determined to refuse them. They maintained that as per article 14 of UCP 600, they notified
about the rejection of the documents, by swift, not later than the close of the fifth banking day
following the day of receipt of the documents. They had pointed out all the discrepancies and
had informed American Bank, New York that they were holding the documents at the latter’s
disposal.
Negotiating Bank
The American Bank, New York replied as follows:-
We disagree with your position that you acted in accordance with UCP 600 article 14.
Documents were delivered by courier to your HO as per the terms of the credit, on Monday,
January 7, 2008. Your swift notifying rejection of the documents was not sent until
Wednesday, Jan 16, 2008 that is, on the eighth banking day after receipt of the documents
by your bank.
Issuing Bank
Global Bank, Pune Branch, responded by stating that even though its HO received the
documents on January 7,2008; the Global Bank’s Pune Branch did not receive the documents
until the following Thursday, January 10, 2008, and the swift advice rejecting the documents
was sent within the time period permitted in UCP article 14.
Negotiating Bank
The American Bank, New York, replied that it was not their concern how Global Bank’s
operational policy impacted on their inability to comply with UCP. The American Bank, New
York stated that in accordance with the credit terms and conditions, documents were
negotiated by them and forwarded to Global Bank’s HO by courier. The documents were
received by Global Bank on Jan 7, 2008, and any notice of rejection of the documents should have been
given within the close of the fifth banking day following receipt of the documents. Global Bank’s Pune
Branch failed to do so. Therefore, the American Bank, New York’s position was firm relative to UCP 600
article 14 and they would not refund the funds reimbursed.
Questions
1) Was Global Bank, Pune Branch correct in its argument, as the credit issuing bank?
2) Was the stand taken by The American Bank, New York correct, as the negotiating bank?
***
Case Study 2 - (Marks -16)
Foreign Trade
M/S Taneja Exports, Mumbai
Introduction
Mr. Gurmeet Taneja and Mr. Rahul Khatri are partners of M/S Taneja exports, Mumbai.
Both of them qualified from IIFT, New Delhi in the year 2002. They declined lucrative
corporate job offers, since they have decided to plunge into the world of international
business.
M/S Taneja Exports is registered as a partnership firm, with Mr. Gurmeet Taneja and Mr. Rahul
Khatri sharing the profits in the ratio of 60: 40.
The partners had conducted in depth market survey in the domestic as well as
international markets regarding the demand of women’s apparels in cotton and hosiery. They
have taken the assistance of Apparel export promotion council and the marketing agencies in
various countries of European Union.
On account of their knowledge in foreign trade, they were able to quickly assess that Indian
exporters have not succeeded in penetrating into the huge apparel market of Europe.
They found out that the main reasons were ineffective marketing, improper quality control and
non adherence to the shipping schedules. Mr. Gurmeet concentrated on marketing of the
cotton and hosiery apparels abroad and Mr. Rahul ensured on the procurement of the raw
materials and timely execution of shipments.
The firm had taken an industrial gala, measuring 700 sq ft, at 501, Mangal Das market, Lower
Parel, Mumbai. They were paying a monthly rent of Rs. 35,000/- for the office premises and
the stock of garments was kept in a godown in the same gala area, for which the rent
payable was Rs. 15,000/- pm
The firm was sourcing their raw materials from the south Indian towns of Tirupur and
Coimbatore. As per the export orders, they were providing the raw materials for job works
in Mumbai and subject the samples to rigorous quality and specification checks. The firm had
employed 2 accounts staff and 3 contract workers to attend to daily office and godown
activities.
The firm was able to achieve steady improvement in export sales due to the stringent quality
control measures and timely execution of shipment schedules. The following were the credit
facilities enjoyed from M/S International Bank of India, Fort branch, Mumbai.
Facility (Amount in Lakhs) 2003 2004 2005
Fund based
a) Export packing credit 5.00 7.00 10.00
b) Foreign bill purchased/Foreign
bill negotiated
5.00 7.00 10.00
Non Fund based
a) Performance guarantee 2.00 5.00 7.00
Export sales 20.00 30.00 40.00
Towards the security of the credit facilities, the firm had mortgaged the residential house,
valued at Rs 85 lakhs, belonging to Mr. Vikram Taneja, father of Mr. Gurmeet Taneja, and
stocks valued at Rs 15 lakhs was also hypothecated to the Bank. Mr. Vikram Taneja stood
guarantee for the facilities sanctioned to the firm.
M/S Taneja exports used to avail the export packing credit facility from International Bank of
India and adjust the same by purchase or negotiation of the export bills drawn on their
European buyers. Generally the bills carried a tenor period of 60 days. Most of the export bills
were drawn and send for collection through international Bank of India, Mumbai Fort Branch,
to the foreign buyer’s bankers, based on the confirmed purchase order of the buyer. The bills
were paid on the due dates and the conduct of the account on the bank’s books was quite
satisfactory. Based on the past history and the increase in
sales turnover achieved by the firm, the bankers were happy to increase the credit limits
from Rs 7 lakhs in 2003 to Rs 17 lakhs in 2005.
On June 17, 2005, the firm submitted an export document to International Bank of India, Fort
Branch, for Euro 53000.00, drawn on M/S St Laurn Fashions, Paris. The documents were
drawn on 60 days DA terms as per the contract. The merchandise under the export were ladies
garments in cotton and hosiery. In the covering letter of the firm to the bank, they had
instructed the bank to present the documents to St Laurn, Paris, through their bankers viz,
Credit Lyonnais, Paris. The exporter had submitted bills of exchange, bills of lading, commercial
invoice, packing list, inspection certificate, certificate of origin and in the bill of exchange it was
typed as ‘to be co-accepted by credit Lyonnais’.
The International Bank of India took the documents in its books and sent the documents for
collection to Credit Lyonnais, Paris. In due course, they received communication from Credit
Lyonnais that the documents were accepted by St Laurn and due date of the
documents were August 25, 2005.The bankers informed the due date of the bill to Taneja
exports. On August 30, 2005, Taneja Exports informed the bankers that they are yet to receive
the payment of the bill for Euro 53000.00 in their books. The bank sent a swift message
enquiring about the fate and payment of the bill. Two days later the bank received a message
from Credit Lyonnais saying that the importer, St Laurn, had become bankrupt and they were
unable to pay the bill. International Bank of India informed the same to Taneja Exports. They
argued with the bank that they had clearly mentioned in the bills of exchange that the
documents were to be released against the co-acceptance of the
French bank only. Immediately the Indian bank send a message to Credit Lyonnais that
since the bill of exchange contained the co-acceptance clause by the French bank, they
are liable to pay even though the importer had become bankrupt. The French bank refuted the
claim of the Indian Bank and intimated that the bank’s collection instruction did not contain
any co-acceptance clause by the French bank and they had acted as per the provisions in the
uniform rules for collection in the ICC publication No 522.
Since payments were not forthcoming, Taneja Exports filed a suit with the National Consumer
Forum, New Delhi for deficiency of services by International Bank of India, Mumbai, on
November 10, 2005. They put forth the argument that the bank was deficient in not
mentioning about the co-acceptance clause in their covering letter to the French bank and in
case of non-coacceptance by the French bank they would have returned the documents to
India and the exporter could have arranged for an alternate buyer or re- import of the
merchandise. This negligence on the part of the bank had caused them total financial loss.
After hearing the arguments of both the parties, The National Consumer Forum gave the
judgement, on February 6, 2006, that the International Bank of India was deficient and
negligent in their services and ordered them to compensate the value of the export bill of Euro
53000.00 (approx Rs 24 lakhs) along with 15% interest, till the date of payment.
The bank went on appeal against the order of the consumer forum in the Supreme Court on
March 20, 2006. After hearing the counsels of both sides, the Supreme Court gave the
judgement that since the original agreement between the exporter and importer do not have
any co-acceptance clause by the importer’s banker, the co-acceptance clause on the bill of
exchange cannot be binding on the French Bank as well as on the Indian Bank.
The bankruptcy of the importer is the reason for loss to the exporter and not the deficiency of
service by the bank. The Supreme Court set aside the judgement of the National consumer
forum and passed the judgement in favour of the bank, with costs, on March 15, 2007.
Questions
1) Elaborate the deficiency of service on the part of the bank, pointed out by the National
consumer redressal forum, in the light of the uniform rules for collection ICC publication
No.522.
2) Advise the firm about the precautions they should have taken to avoid such a colossal
business loss.
3) Discuss the remedial measures the bank in India should take to avoid such damaging
judgements by the consumer forums.
4) Elaborate the Supreme Court judgement in the context of the international banking
rules and practises, as guided by the ICC publications.
Case-3 (Marks -16)
LATE MOVER ADVANTAGE?
Though a late entrant, Toyota is planning to conquer the Indian car market. The Japanese auto major
wants to dispel the notion that the first mover enjoys an edge over the rivals who arrive late into a
market.
Toyota entered the Indian market through the joint venture route, the partner being the Bangalore based
Kirloskar Electric Co. Known as Toyota Kirloskar Motor (TKM), and the plant was set up in 1998 at Bidadi
near Bangalore.
To start with, TKM released its maiden offer— Qualis. Qualis is not a newly conceived, designed, and
brought out vehicle. Rather it is the new avatar of Kijang under which brand the vehicle was sold in
markets like Indonesia.
Qualis virtually had no competition. Telco’s Sumo was not a multi-utility vehicle like Qualis. Rather, it was
a mini-truck converted into a rugged all-purpose van. More importantly, Toyota proved that even its old
offering, but decked up for India, could offer better quality than its competitor. Backed by a carefully
thought out advertising campaign that communicated Toyota’s formidable global reputation, Qualis went
on a roll and overtook Tata Sumo within two years of launch.
Sumo sold 25,706 vehicles during 2000—2001, compared to a 3 per cent growth over the previous year,
compared to 25,373 of Qualis. But during 2001—2002, it was a different story. Qualis had been clocking
more than 40 per cent share of the market. At the end of Sept 2001, Qualis had sold over 25,000 units,
compared to Sumo’s 18000 plus.
The heady initial success has made TKM think of the future with robust confidence. By 2010, TKM wants to
make and sell one million vehicles per year and garner one-third share of the Indian market. The firm is
planning to introduce a wide range of vehicles—a sub-compact, a sedan, a luxury car and a new multiutility
vehicle to replace Qualis. A significant percentage of the vehicles will be exported.
But Toyota is not as lucky in China. Its strategy of ‘late entry’ in China seems to have back fired. In 2005,
it sold just 1, 83, 000 cars in China, the fastest growing auto market in the world. Toyota ranks ninth in
the market, far behind Volkswagen, General Motors, Hyundai and Honda. Toyota delayed producing cars
in China until 2002, when it entered a joint venture with a local company, the First Auto Works Group
(FAW). The first car manufactured by Toyota FAW, the Vios, failed to attract much of a market, as, despite
its unremarkable design, it was three times as expensive as most cars sold in China.
Late start was not the only problem. There were other lapses too. Toyota assumed the Chinese market
would be similar to the Japanese market. But Chinese market, in reality, resembled the American market.
Sales personnel in Japan are paid salaries. They succeeded in building a loyal clientele for Toyota by
providing first-class service to them. Likewise, most Japanese auto dealers sell a single brand, thereby
ensuring their loyalty to it. Japan is a relatively a well-knit country with an ethnically homogeneous
population. Accordingly, Toyota used nationwide advertising to market its products in its home country.
But China is different. Sales people are paid commissions and most dealers sell multiple brands.
Obviously, loyalty plays little role in motivating either the sales staff or the dealers, who will ignore a slow
selling product should a more profitable one turn up. Besides, China is a large, diverse country. A
standardized ad campaign will not do. Luckily, Toyota is learning its lessons. Competition in the Chinese
market is tough, and Toyota’s success in reaching its goal of selling a million cars a year, by 2010, is
uncertain. But, its chances are brighter as the company is able to transfer lessons learned in the American
market to its operations in China.
Questions:-
1. Why has the late corner’s strategy’ of Toyota failed in China, though it succeeded in India?
2. Why has Toyota failed to capture the Chinese market? Why is it trailing behind its rivals?
Case – 4 (Marks -16)
THE EU’S LAGGING COMPETITIVENESS
In a report produced for the European Commission, published in November 1998, it was argued that the
EU lags behind the USA and Japan on most measures of international competitiveness. Gross domestic
product per capita, sometimes used as an indicator of international competitiveness at the country level,
was 33 per cent lower in the EU as a whole than in the USA and 13 per cent lower than in Japan. The EU’s
poor record in creating employment was singled out for particular criticism. As this appeared to apply
across 2. the board in most industrial sectors, it suggested that the EU’s poor performance related to the
business environment in general and, in particular, to the flexibility of Europe’s labor markets and
excessive regulation in markets for goods and 3. Services. A shortage of risk capital for advanced
technological development and high cost and 4. Inefficiency of Europe’s financial services was also
highlighted by the report. For one reason or another, European industries generally lag behind in
technology industries. If measured by the number 5. of inventions patented in at least two countries, the
USA is well ahead of most European countries, as well as Japan. Despite these shortcomings, the report’s
authors focus attention on flexible markets, market liberalization, and the creation of a competitive
business environment rather than on targeted intervention by the EU or national authorities.
Questions:-
1) Is gross domestic product per capita a useful indicator of international competitiveness in the EU?
2) Is it fair to point the blame for the EU’s poor international competitiveness at inflexible labor markets,
regulated goods and services markets, and a general lack of competition? What alternative explanations
might be suggested? What appears to be the problem with the EU’s banking sector?
3) Is the number of patents registered a useful indicator of superior international competitiveness? Why
do you think the USA does well in this area?
4) Should the EU consider more targeted intervention in the form of subsidies or strategic trade policy?
Case-5 (Marks-16)
AT THE RECEIVING END
Spread over 121 countries with 30,000 restaurants, and serving 46 million customers each day with the
help of more than 400,000 employees, the reach of McDonald’s is amazing. It all started in 1948 when
two brothers, Richard and Maurice ‘Mac’ McDonald, built several hamburger stands, with golden arches in
southern California. One day a travelling salesman, Ray Kroc, came to sell milkshake mixers. The
popularity of their $0.15 hamburgers impressed him, so he bought the world franchise rights from them
and spread the golden arches around the globe.
McDonald’s depends on its overseas restaurants for revenue. In fact, 60 per cent of its revenues are
generated outside of the United States. The key to the company’s success is its ability to standardize the
formula of quality, service, cleanliness and value, and apply it everywhere.
The company, well known for its golden arches, is not the world’s largest company. Its system wide sales
are only about one-fifth of Exxon Mobil or Wal-Mart stores. However, it owns one of the world’s best
known brands, and the golden arches are familiar to more people than the Christian cross. This
prominence, and its conquest of global markets, makes the company a focal point for inquiry and
criticism.
McDonald’s is a frequent target of criticism by anti-globalization protesters. In France, a pipes moking
sheep farmer named Jose Bove shot to fame by leading a campaign against the fast-food chain.
McDonald’s is a symbol of American trade hegemony and economic globalization. Jose Bove organized
fellow sheep farmers in France, and the group led by him drove tractors to the construction site of a new
McDonald’s restaurant and ransacked it. Bove was jailed for 20 days, and almost overnight an
international anti-globalization star was borne. Bove, who resembles the irrelevant French comic book
hero Asterix, travelled to Seattle in 1999, as part of the French delegation to lead the protest against
commercialization of food crops promoted by the WTO. Food, according to him, is too vital a part of life to
be trusted to the vagaries of the world trade. In Seattle, he led a demonstration in which some skimasked
protestors trashed at McDonald’s. As Bove explained, his movement was for small farmers against
industrial farming, brought about by globalization. For them, McDonald’s was a symbol of globalization
implying the standardization of food through industrial farming. If this was allowed to go on, he said,
there would no longer be need for farmers. “For us,” he declared, “McDonald’s is a symbol of what WTO
and the big companies want to do with the world.” lroncally, for all of Bove’s fulminations against
McDonald’s, the fast food chain counts its French operations among its most profitable in 121 countries.
As employer of about 35,000 workers, in 2006, McDonald’s was also one of France’s biggest foreign
employers.
Bove’s and his followers are not the only critics of McDonald’s. Leftists, anarchists, nationalists, farmers,
labor unions, environmentalists, consumer advocates, protectors of animal rights, religious orders and
intellectuals are equally critical of the fast food chain. For these and others, McDonald’s represents an evil
America. Within hours after US bombers began to pound Afghanistan in 2001, angry Pakistanis damaged
McDonald’s restaurants in Islamabad and an Indonesian mob burned an American flag.
McDonald’s entered India in the late 1990s. On its entry, the company encountered a unique situation.
Majority of the Indians did not eat beef but the company’s preparations contained cow’s meat. Nor could
the company use pork as Muslims were against eating it. This left chicken and mutton. McDonald’s came
out with ‘Maharaja Mac’, which is made from mutton and ‘McAloo Tikki Burger’ with chicken potato as the
main input. Food items were segregated into vegetarian and non-vegetarian categories.
Though it worked for sometime, this arrangement did not last long. In 2001, three Indian businessmen
settled in Seattle sued McDonald’s for fraudulently concealing the existence of beef in its French fries. The
company admitted its guilt of mixing miniscule quantity of beef extract in the oil. The company settled the
suit for $10 million and tendered an apology too. Further, the company pledged to label the ingredients of
its food items, and to find a substitute for the beef extract used in its oil.
McDonald’s succeeded in spreading American culture in the East Asian countries. In Hong Kong and
Taiwan, the company’s clean restrooms and kitchens set a new standard that elevated expectations
throughout those countries. In Hong Kong, children’s birthdays had traditionally gone unrecognized, but
McDonald’s introduced the practice of birthday parties in its restaurants, and now such parties have
become popular among the public. A journalist set forth a ‘Golden Arches Theory of Conflict Prevention’
based on the notion that countries with McDonald’s restaurants do not go to war with each other. A British
magazine, The Economist, prints an yearly ‘Big Mac Index’ that uses the price of a Big Mac in different
foreign currencies to assess exchange rate distortions.
Questions:-
1. What lessons can other MNCs learn from the experience of McDonald’s?
2. Aware of the food habits of Indians, why did McDonald’s err in mixing beef extract in the oil used for
fries?
3. How far has McDonald’s succeeded in strategizing and meeting local cultures and needs?
SUBJECT: Managerial Economics
N.B: 1} Attempt all the questions
_________________
Case 1: Where is the Fair Play? (Marks-16)
In most countries in Europe, and primarily America, they don’t prefer the leg meat – it is waste matter
for them so they look for nations where they can dump this meat. They did in the Philippines, Sri Lanka
and Russia. They might deny it in the US but everybody knows that they are sitting on stocks for at
least 2-3 years. They have succeeded in doing that because of their good freezing techniques. Now it’s
becoming a major problem for them. They’re not used to eating leg meat and are in a fix. In the US
they actually load the price of the entire chicken on the breast meat, and the rest of the bird is like a
carcass to them. Due to environmental reasons they can’t dump it in the sea so they have to dump it
somewhere. It can be any underdeveloped country, may be India!
It’s wrong notion that supply of this meat to underdeveloped countries will be good for the consumers
there. It is not. Can the Americans guarantee anything – how long will they be able to supply the
chicken? How long will they supply subsidized eggs to such a large country? We could end up destroying
our industry base and that will be very sad. As far as chicken is concerned, they can only supply the
legs – they can never supply the whole bird. The white meat costs US $3 to 3.5 per pound, so it’s out of
range. May be the consumer gets the advantage of subsidized supply of the white meat in the short run
but over time the consumers’ interests are likely to suffer because such a supply will result only in
destroying the chicken and egg industry in India. Once their surplus stock gets exhausted they can
charge you any price – can they guarantee the price? They can’t and they won’t.
The chicken/egg business deals with livestock. It is not possible for people to stop producing for a year
and come back – they will be finished. Once they are out of the cycle they are out of the industry. It
would be very said if that happened to this industry that has grown over the past 25 years.
For many people it provides a day-to-day livelihood. Once the foreign players come in and are allowed
to sell their products at very low rates, the industry could collapse as it has in other countries.
India is a the cheapest egg producer in the world – about Re.1 a piece. But now we are very worried. In
European countries, eggs cost between Rs.3-5 but they are able to deliver the same egg to the Middle
East at Re 1-1.50. This is because in Western countries they have so many subsidies. When it comes to
agriculture, they are very sensitive and protective. If they bring it to the Middle East, then why can’t
they do it here as well? The government knows that the Western countries are not going to remove
subsidies – they know when it comes to agriculture, neither the Europeans nor the Americans are going
to do anything. They are going to protect them forever- so where is the fair play?
Questions:
i. What would you recommend to the government to create a level playing field for the local firms
and the western exporters of meat to India?
ii. Can you cite any other typical product where India’s advantage turns into disadvantages as a
result of WTO agreement?
Case: 2 (Marks -16)
One of the most notable things about consumer behaviour is that the demand in the short run is always
less elastic (or more inelastic) than the demand in the medium or long term. Petroleum, which is one of
the most essential commodities of modern life is a classic example of this phenomenon. Petroleum, also
known as a luxurious necessity because of its steep price, is the greatest cause for our Balance of
Payment being perennially in deficit. Despite all its disadvantages, life is literally and figuratively
`immobile’ without petroleum.
Our country faced two oil shocks during the 1970s. The shock of 1973-74 was a severe one and was felt
by many other countries, while the oil shock of 1979 was mild and pertained only to India. In order to
combat the sudden fall in supply, resulting in excess demand for it, the price of petrol was hiked (in
India, petroleum prices are always administered, and not market-driven) assuming that consumer
demand for petrol will go down. There was some reduction in the consumption of petrol as people
limited their pleasure trips and joy rides. The concept of `car pool’ to go to offices started and the
middle class started depending heavily on diesel-run public transport (diesel although a by-product of
crude oil is a cheaper and readily available product).
Besides this, there was no perceptible change in the demand for petrol and people continued to buy
petrol at a higher price. As a result, although the prices went up by 25 to 30 percent, the demand
decreased by only 5 to 6 percent between the 1970s and the early 1980s.
However, analysts and planners observed phenomenon, believed to be related to the hike in the price of
petrol. People, especially in the urban areas, started to stay near the workplace (even if it meant a
higher rent), showing a preference for fuel-efficient vehicles when compared to steady, stable but not
such fuel-efficient vehicles.
The phenomenal success of Maruti 800 cars launched in the mid-1980s was because of its single
attribute of fuel-efficiency, despite other disadvantages of a light body (which made it easy for the car to
topple over and get dented or damaged on Indian roads), costly parts (when compared to the
Ambassador or Fiat). Consumes preferred Maruti for its excellent fuel-efficient technology and hence a
lower running cost, than for any other reason. So much was the popularity of Maruti cars that
automobile associations discovered that the demand for other vehicles had falled by 30 to 40 percent in
favour of Maruti 800. a permanent change in the demand pattern for small, fuel-efficient cars had been
achieved.
For most commodities, economists found that in the long term (the concept of long term varies from
commodity to commodity) the absolute value of the demand elasticity is higher than in the short run. A
few of these are given in the following Table:
The value of demand elasticity for certain goods and services in India
(This includes urban, semi-urban and small town area)
Goods + Services Short-Run
Demand Elasticity
Long-Run
Demand
Elasticity
Expenditure on food 0.35 0.36
Expenditure on clothing 0.68 1.22
Consumption of electricity 0.54 0.90
House rent 0.75 1.82
Transportation 0.40 1.60
Source: Calculated on the basis of Government of India published reports.
Questions:
i Why do you think the absolute value of demand elasticity is less in the short run than in the long
run?
ii. Do you think jewellery as a commodity, can also be categorized in the same group as others in
the given table? In other words, will it also exhibit change in the demand elasticity between the
short and long run? Explain why?
iii. The change in the value of demand elasticity between short and long run is much smaller in case
of food than in clothing, what does this reflect about the consumer behaviour?
Case :3 (Marks -16)
TAKE THE BULL BY THE HORN
Through its relatively brief history, the Reliance group has specialised in taking gambles, sometimes
huge ones. A pattern repeated time and again - such as when it set up capacities for Polyester Staple
Fibre (PSF) which was the same size as the domestic market or when it put up a 27 million tonne
refinery in Jamnagar, which is close to a third of India's demand for petroleum products.
There's no gamble quite so audacious as the one that's underway. The Rs. 25,000 crore Reliance
Infocom project that's currently taking shape aims at no less than a complete remake of India's telecom
landscape to emerge as India's number one telecommunications company, ahead of the state-owned
behemoth Bharat Sanchar Nigam l td.
It's also an attempt to realign Reliance's revenues and profits - which today originate entirely from
manufacturing - with India's economic profile, in which services account for over 40 per cent of GDP.
"Reliance's revenues will have to become diversified with a larger proportion originating from services
which would be in keeping with the
changing structure of India's economy," says Mukesh Ambani, vice chairman of Reliance Industries.
Rs. 8000 crore will be invested over a three - year period. As of now, it's full steam ahead for Reliance's
Infocom plans. As it had done earlier in oil and gas. Reliance plans to emerge as an integrated player,
focusing on the entire range of telecom services ranging from high - speed internet access for business
and consumers, call centres,
data centres, cellular phone services and domestic and international long distance telephony. Apart from
the gamut of telecom services, Reliance's integration plans are in one respect unique in the telecom
industry. If senior group officials are to be believed, the company has plans to assemble cellular phones
and set-top boxes.
At the core of the Infocom project is a 115,000 km fibre optic backbone covering 115 cities across 12
States, accounting for over 50 per of India's GDP. The company plans to become what the industry
jargon refers to as a carriers' carrier, where it hires out infrastructure to other telecom operations. Here
Reliance, along with the Bharti group, has obtained a licence for providing domestic long-distance
services. In fact, these are the only two companies to do so. The total domestic long-distance market is
worth Rs. 6,000 crore. Of this, the market available to the long
distance operator is likely to be Rs. 2,400 crore, according to a December 2000 Merrill Lynch report. This
is based on a 30 : 40 : 30 revenue share between the originator, the carrier and the last-mile access
provider. However, Reliance would hope for a larger share since it plans to fill all the three roles. Merrill
Lynch estimates that the domestic long-distance revenues accruing to the carrier would amount to Rs.
2760 crore in 2002 - 03, of which Reliance is expected to garner 20 per cent - or Rs. 620 crore.
As part of its plans to enter international long-distance telecommunication, Reliance has already
submitted an expression of interest for international long-distance operator VSNL. The total international
long-distance market in India right now is Rs. 4,900 crore. Reliance's own estimates for revenue and
profitability have not been made publicly available. However, internal estimates reportedly project
revenues of Rs. 30,000 crore, which is roughly a third of the total telecommunication market of around
Rs. 1,00,000 crore estimated for fiscal year 2004 - 05. The annual total telecommunications market is
around Rs. 42,000 crore. These estimates are of course based on the assumptions of a rapid take-off in
traffic, particularly data traffic. Check out some figures: out of the 30 million households that have an
income over Rs. 4000, an estimated 20 million are in the urban market and 10 million in the rural
market. Out of the urban people, 13 million already have fixed-line connections. And out of the 10
million rural customers, 6.5 million already have fixed lines.
In the light of the above: "what kind of growth can one really expect" for the telecommunication sector
in India as such and Reliance lnfocom in particular ?
Questions :
(a) Is there such a market in India for all the huge plans that they have ?
(b) Can you support it as a case of economies of scope ?
(c) Does it not lend to monopolistic conditions ? Give reasons.
Case : 4 (Marks-16)
The Industry
The automotive sector is one of the core industries of the Indian economy, whose prospect is reflective
of the economic resilience of the country. The automobile industry witnessed a growth of 19.35 percent
in April-July 2006 when compared to April-July 2005. As per Davos Report 2006, Indian is largest three
wheeler market in the world; 2nd largest two wheeler market; 4th largest tractor market; 5th largest
commercial vehicle market and 11th largest passenger car market in the world and expected to the
seventh largest by 2016. India is among few countries that are showing a growth rate of 30 per cent in
demand for passenger cars. The industry currently accounts for nearly 4% of the GNP and 17% of the
indirect tax revenue. The well developed India automotive industry produces a wide variety of vehicles
including passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles, scooters,
motorcycles, mopeds, three wheelers, tractors etc. Economic liberalization over the years made India as
one of the prime business destination for many global automotive players, including international giants
like Ford, Toyota, GM and Hyundai have also made their also made their presence with a mark.
As per another report, every commercial vehicle manufacture, create 13.31jobs, while every
passenger car creates 5.31 jobs, and every two-wheeler create 0.49 jobs, in the country. Beside, the
automobile industry has as output multiplier of 2.24, i.e., for every additional rupee of output in the auto
industry, the overall output of the India economy increases by Rs. 2.24.
The India automotive sector has a presence across all vehicle segments and key components. In
terms of volume, two wheelers dominate the sector, with nearly 80 percent share, followed by passenger
vehicles with 13 percent. At present, there are 12 manufactures of passenger cars, 5 manufactures of
multi utility vehicles (MUVs), 9 manufactures of commercial vehicles (CVs), 12 of two wheelers and 4 of
three wheelers, besides 5 manufactures of engines.
Table 1 Vehicle Segment-wise Market Share (2005-06)
Items Percent Share
Commercial Vehicles
Passenger Vehicles
Two Wheelers
Three Wheelers
Total
3.94
12.83
79.19
4.04
100.00
Source: Report of Society of Indian Automobile Manufactures (SIAM), 2006.
Although the automotive industry in India is nearly six decades old, until 1982, there were only three
manufactures – M/s. Hindustan Motors, M/s. Premier Automobiles and M/s. Standard Motors in the
motorcar sector. In 1982, Maruti Udyog Ltd. (MUL) came up as a government initiative in collaboration
with Suzuki of Japan to establish volume production of contemporary models.
The Company
Maruti Udyog Limited (MUL) has become Suzuki Motor Corporation’s R&D hub for Asia outside Japan.
Maruti introduced upgraded versions of the Esteem, Maruti 800 and Omni, completely designed and style
in house. This followed the up gradation of WagonR and Zen models, done in house only a year before.
Maruti engineer also worked with their counterparts in Suzuki Motor Corporation in the design and
development of its new model, Swift.
The company launched superior Bharat Stage III version of most of its models, well before the
Government deadline. Maruti also set up a Center for Excellence with a corpus of Rs. 100 million. This
was done in collaboration with suppliers, who contributed an additional Rs. 50 million. The Center
provides consultancy and training support to Maruti’s Suppliers and Sales Network to enable them to
achieve standards in Quality, Cost, Service and Technology Orientation.
Maruti has embarked upon this new project in collaboration with SMC for the manufacture of diesel
engines, petrol engines and transmission assemblies for four wheeled vehicles. The project is being
implemented in the existing Joint Venture Company viz. Suzuki Metal India Limited (renamed Suzuki
Power train India Limited).
Questions:-
1. Identify the most important factors of production in case of automobile industry. Also attempt to
explain the relative significance of each of these factors.
2. What more information would you like to obtain in order to draw a production function for Maruti
Udyog? Explain with logic.
3. Automobile industry is a good example of capital augmenting technical progress. Discuss.
Case :5 (Marks-16)
By almost any measure, David Galbenski’s company Contract Counsel was a success. It was a company
Galbenski and a law school buddy, Mark Adams, started in 1993; it helps companies find lawyers on a
temporary contact basis. The growth over the past five years has been furious. Revenue went from less
than $200,000 to some $6,5 million at the end of 2003, and the company was placing thousands of
lawyers a year.
And then revenue growth began to flatten; the company grew just 8% in 2004 despite a robust
market for legal services estimated at about $250 billion in the United States alone. Frustrated and
concerned, Galbenski stepped back and began taking a hard look at his business. Could he get it back on
the fast track? “Most business books say that the hardest threshold to cross is that $10 million sales
mark,” he says. “I knew we couldn’t afford to grow only 10% a year. We needed to blow right through
that number.”
For that a happen, Galbenski knew he has to expand his customer base beyond the Midwest into
large legal supermarkets such as Boston, New York, and Washington, D.C. He also knew that in doing so,
he would run into stiff competition from large publicly traded rivals. Contract Counsel’s edge had always
been its low prices. Clients called when dealing with large-scale litigation or complicated merger and
acquisition deals, either of which can require as many 100 lawyers to manage the discovery process and
the piles of documents associated with it. Contract Counsel’s temps cost about $75 an hour, roughly half
of what a law firm would charge, which allowed the company to be competitive despite its relatively
small size. Galbenski was counting on using the same strategy as he expanded into new cities. But would
that be enough to spur the hyper growth that he craved for?
At the time, Galbenski had been reading quite a bit about the growing use of offshore employees.
He knew companies like General Electric, Microsoft and Cisco were saving bundles by setting up call and
data centers in India. Could law firms offshore their work? Galbenski’s mind raced with possibilities. He
imagined tapping into an army of discount-priced legal minds that would mesh with his existing talent
pool in the U.S. The two work forces could collaborate over the Web and be productive on a 24-7 basis.
And the cost saving could be massive.
Using offshore workers was a risk, but the payoff was potentially huge. Incidentally Galbenski and
his eight-person management team were preparing to meet for their semiannual strategic review
meeting. The purpose of the two-day event was to decide the company’s goals for the coming year.
Driving to the meeting, Galbenski struggled to figure out exactly what he was going to say. He was sill
undecided about whether to pursue an incremental and conservation national expansion or take a big
gamble on overseas contractors.
The Decision
The next morning Galbenski kicked off the management meeting. Galbenski laid out the facts as he saw
them. Rather than look at just the next five years of growth, look at the next 20, he said. He cited a
Forrester Research prediction that some 79,000 legal jobs, totaling $5.8 billion in wages, would be dent
offshore by 2015. He challenged his team to be pioneers in creating a new industry, rather than
stragglers racing to catch up. His team applauded. Returning to the office after the meeting, Galbenski
announced the change in strategy to his 20 full-timers.
Then he and his team began plotting a global action plan. The first step was to hire a company
out of Indianapolis, Analysts International, to start compiling a list of the best legal services providers in
countries where people had comparatively strong English skills. The next phase was vetting the
companies in person. In February 2005, just three months after the meeting in Port Huron, Galbenski
found himself jetting off on a three-month trip to scout potential contractors in India, Dubai, and Sri
Lanka. Traveling to cities like Bangalore, Chennai, and Hyderabad, he interviewed executive from more
than a dozen companies, investigating their day-to-say operation firsthand.
India seemed like the best bet. With more than 500 law schools and about 200,000 law students
graduating each year, it had no shortage of attorneys. What amazed Galbenski, however, was that
thanks to the Web, lawyers in India had access to the same research tools and case summaries as any
associate in the U.S. Sure they didn’t speak American English. “But they were also eager to tackle the
kinds of tasks that most new associates at law firms look down upon” such as poring over perfect for the
kind of document-review work he had in mind.
After a retune visit to India in August 2005, Galbenski signed a contract with two legal service
companies: QuisLex, in Hyderabad, and Manthan Services, in Bangalore. Using their lawyers and
Paralegals, Galbenski figured he could cut his document-review rates to $50 an hours. He also
outsourced the maintenance of the database used to store the contact information for his thousands of
contractors. In all, he spent about 12 months and $250,000 readying his newly global company.
Convincing U.S. based clients to take a chance on the new service hasn’t been easy. In November,
Galbenski lined up pilot programs with four clients (none of which are ready to publicise their use of
offshore resources). To help get the word out, he launched a website (offshore-legal-services.com),
which includes a cache of white papers and case studies to serve as a resource guide for companies
interested in outsourcing.
Questions:-
1. As money costs will decrease due to decision to outsource human resource, some real costs and
opportunity cost may surface. What could these be?
2. Elaborate the external and internal economies of scale as occurring to Contract Counsel.
3. Can you see some possibility of economies of scope from the information given in the case?
Discuss.
SUBJECT: Operation Management
Note:- 1) Kindly write case study number question number properly
2) Attached question papers with answer sheets
_____________________________________________________________________________
SECTION A
Case – 1 Marks- 20
Dr. Govinda Venkataswamy (fondly called Dr. V) founded the Aravind Eye Hospitals in 1976 with an 11-
bed facility in Madural, which performed all types of eye surgeries. Its goal was to offer quality care at
reasonable cost. In 1978, a 70 bed free hospital was opened to provide the poor with quality care. In
2004, Aravind Eye Care System comprised Eye Care Facilities at Madural, Theni, Tirunelveli, Coimbatore
and Pondicherry (Exhibit 1) and performed nearly 230,000 eye surgeries and handled 1,640,000
outpatient visits (Exhibit 2). It is recognized as the world’s most productive eye hospital handling the
largest patient volume. Its website states that ‘with less than 1% of the country’s ophthalmic manpower,
Aravind accounts for 5% of the ophthalmic surgeries performed nationwide”. Its mission has now become
to “eradicate needless blindness by providing appropriate, compassionate and quality eye care for all”.
Each day, across all five Aravind Eye Hospitals, about 4481 outpatient visits are handled, about 627
surgeries take place and about three camps are conducted.
Currently, there are more than 20 million blind people in India and only over four million surgeries are
performed every year. Over 75% of the blindness is due to cataract. Cataract is the clouding of the
natural eye lens due to ageing or otherwise. There are two types of cataract surgeries: one in which the
natural lens is removed and then glasses are provided after three to four weeks, called intracapsular
surgery (ICCE) and the other where after removing the natural lens, the intraocular lens inserted, called
extra capsular surgery or ECCE. In ECCE, patients normally do not require corrective lenses after the
surgery. ECCE is better and often preferred because the quality of the restored sight is distortion-free and
near natural. However, ECCE is slightly expensive due to the cost of the intraocular lens. Talking to a
Harvard Business School professor, Dr.V argued, “Tell me, can a cataract surgery be marketed like
hamburgers? Don’t you call it social marketing or something? See, in America, McDonald’s and Dunkin’
Donuts and Pizza Hut have all mastered the art of mass marketing, we have to do something like that to
clear the backlog of Million blind eyes in India. We perform only one million cater acts a year. At this rate
we can’t catch up.” Each of the Aravind Hospitals has two sections: one is the Main Hospital for the paid
patients and other is free hosp ital for nonpaying patients. The series of steps, which a patient normally
goes through, is the same in both the hospitals: patients are initially registered, their vision is recorded
and they undergo a preliminary examination followed by testing of tension and tear duct function. This
follows refraction test and final examination. While the assistants carry out many of the intermediate
steps, a senior ophthalmologist does the final examination. The two sections differ in size, the kind of beds
they provide and general kind of patients. Who come to use them? However, the same pool of doctors and
nurses serves both sections. “The hallmarks of the Aravind model are quality care and productivity at
prices that everyone can afford. A core principle of the Aravind System is that the hospital must provide
services to the rich and poor alike, yet be financially self-supporting. This principle is achieved through
high quality, large volume care and a well-organized system.” In Aravind Hospitals, a typical Operation
Theater (OT) has two tables side by side. The surgical team keeps one table ready while the surgeon is
working on the other. The surgeon merely turns and starts doing surgery on the other table as soon as he
finishes the current one. In this way, the valuable time of surgeon is used properly. Aravinds’ surgeons
take only 10 minutes per surgery while industry standard is 30 minutes. Aravind achieves this feat while
maintaining the world standard in quality. Its infection rate is only 4 per 10,000 cases as opposed to 6 per
10,000 in UK. And they are able to carry out 400 surgeries per doctor per month as opposed to the
average of 25 surgeries per doctor per month.
To cater to such high performing, large-scale surgical system, Aravind has to ensure that enough patients
come to it; partly to achieve this, Aravind organizes camps to attract patients in rural areas, Help of local
organizations like ions club is taken in publicizing the camps. They also of ten help with sharing of the part
of cost in transporting patients and other such activities. In these camps, patients go through the similar
steps of registration, vision recording. Preliminary examination, testing of tension, refraction, and final
examination. If a surgery is found to be required, patients additionally undergo BP and urine sugar test
and their surgery papers are prepared. Following this, patients are taken to the nearest Aravind for
surgery and brought back to the same place after three days. This is unlike many other camp organizers
who perform surgeries in the camps themselves.
For its hospitals, Aravind recruits nurses from the nearby villages. Aravind essentially looks for hunger to
do some good in such people before it trains them for the job. They need not have any nursing training
before coming to Aravind. Nurses typically do not leave Aravind because they tack the necessary
qualifications to get employed in other hospitals.
Aravind is finding it a little harder to recruit and keep doctors; it expects its doctors to work nearly 60
hours a week as opposed to 30 hours in many institutions. They tend to leave Aravind after few years as
they command higher salaries in the marketplace than what Aravind gives them.
Till few years back, Aravind used to provide only the intra-cap surgeries for free patients as the cost of in
ocular lens was high. Each in ocular lens used to cost Rs 800, as t had to be imported. In 1991, Aravind
set up a factory to produce 60,000 IOLs per year. Initially, it had a detect rate of 50% and the cost of
each lens worked out to be Rs 200/-. Over time, it was expected that the cost of the lens would drop to Rs
100/- as the factory improved its working. This factory was set up as a separate venture so that the
hospitals could keep their focus on eye care. Recently, the factory has also started manufacturing sutures
and other items used in the surgeries.
In a recent interview to two Indian business school professors, Mr. R. D. Thulsiraj, MD, Aravind Hospitals,
remarked that eye care has some unique characteristics that make it possible to transfer the model
directly. One characteristic is the high volume: about 20% of the population needs glasses and 1% has
cataract. Secondly, the intervention for the most part is one time, because it is not a chronic disease, or
one needing long-term treatment like cancer, Finally, intervention is quite low cost unlike, say, bypass
surgery. But Dr. V argued, “I think this model must work in other health care sectors also, whether it is
women’s heath or children’s health, or cancer or tuberculosis, People like you must explore and see where
this model can be applied, our main focus should be on improving the total health of the country
Exhibit 1
Exhibit 2
ARAVIND EYE HOSPITALS
Statistics—Year 2004
Outpatient Visits: 1,635,599
Surgeries: 228,894
Free Eye Camps: 1,271
Statistics—Year 1976—2004
Outpatient Visits: 17,778,075
Surgeries: 2,225,225
Free Eye camps: 20,995
QUESTIONS:-
1. What is the vision of AECS? What is the role of operations in meeting it?
2. Can this system be replicated to other aspects of health care? Other services? What will be the
problems? What will be the advantages?
3. How do different elements of AECS work together to deliver the vision of Dr. V?
4. What are some of the problems AECS facing? Are they inherent in its model or they could be rectified
while keeping the model intact?
Case – 2 Marks-15
On the night of Feb 28th, the last day of classes, Nilesh proposed to Geeta, his MBA classmate of nearly a
year and a half. Geeta agreed immediately and wondered if all her classmates will be able to attend their
wedding as once they all go back to their homes it would be really very difficult for everyone to get
together again. Suddenly, Nilesh came up with the idea: what if they got married on March 22nd? “But how
could it be? Our convocation is on March 21st Geeta said.
“Exactly! All our classmates will definitely come here for convocation and they would not mind staying an
extra day for the wedding. In fact, we will get the blessings of even their parents as many are planning to
come for the convocation.”
Geeta: Right. But so many things have to be done. That is also when the wedding season starts and all
the reception halls become unavailable. For our send-off party, juniors were saying that hotels were
insisting on 17 days notice. Of course, for Rs 5000/- extra the notice period can be reduced to 10 days.
Nilesh: I want my brother and sister-in-law to come for the wedding.
Geeta: But, they are in US and working. They will require at least 10 days before they can be here. Also
my parents will have to buy your sister-in-law a sari-set (sari with matching blouse and petticoat) as per
the tradition. She will have to be here well in time so that they can be fitted well.
Nilesh: And catering! It takes two days to choose the menu and Pandal decorations. Hotel Sayaji wants at
least 10 days notice period before the formal engagement ceremony (one night before the wedding).
Geeta: And what about our dresses? These days, it is better to get it made after choosing the pattern and
buying the material yourself. It would take three days to choose the pattern and eight days to order and
receive the material after
Nilesh: Yes. But the material supplier can deliver in five days if we pay an extra of Rs 1000/- for
expediting it.
Geeta: I want Joyti of Asha Boutique to work on our dresses.
Nilesh: But she charges Rs 500/- for one day of work.
Geeta: If I got my mother to do all the services, we could finish the dresses in 11 days. If Joyti helped, we
could cut that down to six days, at a cost of Rs 500/- for each day less than 11 days.
Nilesh: It would take another two days to do the final fitting. Then dry-cleaner will take two days to clean
and press the dresses unless we pay Ps 1000/- for the express service of single day delivery.
Geeta: That’s right. By the way, have you thought about invitations? Nobody will come unless we invite
them formally.
Nilesh: Anand Printing Press will take 12 days to print the invitation cards. Of course, they do have an
express service and can deliver in five days if we pay them extra Rs 1500/-
Geeta: It will take three days to prepare the matter which will be printed and select the styles.
Nilesh: Given the postal delays, the invitations have to go out at least 10 days before the wedding.
Geeta: Mailing them will take a day and that cannot be done until we write addresses on them. Addressing
will take four days unless we hire some help. We can finish addresses in two days if we hire a part-time
help for Ps 200/-.
Geeta: We also have to buy some jewellery items to be given as gift to my brother-in-law. It will take a
day to do that
Nilesh: But before we start writing address, we will have to prepare a guest list. We can’t afford to miss
out on anyone important, as that will have an impact on the relationship with them forever. We will have
to be really thorough on that. I think it will take four days to prepare an exhaustive guest list.
Geeta: That does sound like a lot. Now it certainly looks much easier to earn an MBA degree than get
married!!!
QUESTIONS:-
1. Given the activities and precedence relationships described in the (A) case, develop a network diagram
for the wedding plans.
2. Identify the paths. Which are critical?
3. What is the maximum cost plan that meets the March 22nd deadline?
Case -3 {Continuation of Case 2} Marks-15
Several complications arose during the course of trying to meet the deadline of March 21, for the Nilesh—
Geeta engagement. Since it was important for Nilesh and Geeta to get married on March 22nd, the
implications of each of these complications had to be assessed.
1. All hotels informed that the express booking had to be withdrawn that year as there was a mad-rush for
getting married, and therefore Nilesh and Geeta would have to give 17 days’ notice.
2.A call to the US revealed that brother and sister-in-law couldn’t leave till March 1st as they had urgent
deadlines at work.
3.Nilesh came down with four day flu just as he started to work on the guest list.
4. The dress material was lost in transit. Notice of loss was delivered to Geeta on March 10th.
5. There was an unplanned repair work at Sayaji on March 8. They informed that they would be closed for
two to three days.
QUESTIONS :-
1. Given your answers to the (A) case, describe the effects on the wedding plans of each incident
noted in the (B) case.
SECTION B Marks-30
Attempt all the questions:-
1 ) Br i ef l y s k et c h t h e pr o du c t d e v e l o pme n t p r o c es s .
2 ) Wh a t d o y o u me a n b y c o nt i n u o u s impr o v eme nt ? Gi v e two e x amp l e s o f
c o nt i n u o u s impr o v eme n t s t h a t or g a n i z a t i o n s u n d e r t a k e .
3 ) Su p p o s e y o u wa n t t o v i s i t y o ur b a n k t o d e p o s i t y o u r s a la r y c h e qu e a n d t h e n
wi t h dr aw s ome mo n e y f r om y o ur a c c o u nt . Us e y o u r k n owl e d g e o f pr o c e s s
ma p p i n g a n d d r aw t h e p r o c e s s .
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