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GENERAL MANAGEMENT

Attempt Any Four Case Study

CASE – 1   Your Job and Your Passion—You Can Pursue Both!

        The 21st century offers many challenges to every one of us. As more firms go global, as more economies interconnect, and as the Web blasts away boundaries to communication, we become more informed citizens. This interconnectedness means that the organizations you work for will require you to develop both general and specialized knowledge—such as speaking multiple languages, using various software applications, or understanding details of financial transactions. You will have to develop general management skills to foster your ability to be self-reliant and thrive in a changing market-place. And here’s the exciting part: As you build both types of knowledge, you may be able to integrate your growing expertise with the causes or activities you care most about. Or, your career adventure may lead you to a new passion. 

Former presidents George H. W. Bush and Bill Clinton are well known for combining their management skills—running a country—with their passion for helping people around the world. Together they have raised funds to assist disaster victims, those with HIV/AIDS, and others in need. Jake Burton turned his love of snow sports into an entire industry when he founded Burton Snowboards. Annie Withey poured her business and marketing knowledge into her two famous business ventures: Smartfood and Annie’s Homegrown. Both products were the result of her passion for healthful foods made from organic ingredients.

As you enter the workforce, you may have no idea where your career path will lead. You may be asking yourself, “How will I fit in?” “Where will I live?” “How much will I earn?” “Where will my business and personal careers evolve as the world continuous to change at such a fast pace?” If you are feeling nervous because you don’t know the answers to these questions yet, relax. A career is a journey, not a single destination. You may have one type of career or several. It is likely you will work for several organisations, or you may run one or more businesses of your own.

As you ask yourself what you want to do and where you want to be, take a few minutes to review the chapter and its main topics. Think about your personality, what you like and dislike, what you know and what you want to learn, what you fear and what you dream. Then try the following exercise.

Questions

1.                    Create a three-column chart in which the first column lists nonmanagement skills you have. Are you good at travel? Do you know how to build furniture? Are you a whiz at sports statistics? Are you an innovative cook? Do you play video games for hours? In the second column, list the causes or activities about which you are passionate. These may dovetail with the first list, but they might not.

2.                    Once you have you two columns complete, draw lines between entries that seem compatible. If you are good at building furniture, you might have also listed a concern about families who are homeless. Remember that not all entries will find a match—the idea is to begin finding some connections.

3.                    In the third column, generate a list of firms or organizations you know about that reflect your interests. If you are good at building furniture, you might be interested working for the Habitat for Humanity organization, or you might find yourself gravitating towards a furniture retailer like Ikea or Ethan Allen. You can do further research on organizations via Internet or business publications. 

CASE – 2   Biyani – Pioneering a Retailing Revolution in India

       “I use people as hands and legs. I prefer to do thinking around here.”

      ─ Kishore Biyani, CEO & MD, Pantaloon Retail (India) Ltd.

        Kishore Biyani (Biyani), CEO& MD of Pantaloon Retail (India) Ltd., planned to have 30 Food Bazaar outlets, 22 outlets in Big Bazaar, 21 Pantaloons outlets, and four seamless malls under the Central logo, by the end of 2005. He also planned to launch at least three businesses every year and had already selected music, footwear and car accessories as his next areas of investments. He was already the top retailer in India followed by Raghu Pillai of RPG. As of 2004, Biyani headed a company that had a turnover of Rs 6,500 million and operated 13 Pantaloon apparel stores, 9 Big Bazaars, 13 Food Bazaars, and 3 seamless malls (Central), one each located in Bangalore, Hyderabad, and Pune.

        Biyani’s journey from a person who looked after his family business to India’s top retailer in 1987, when he launched Manz Wear Pvt. Ltd. The company launched one of the first readymade trousers brands – ‘Pantaloon’ – in the country. The company also launched its first jeans brand called ‘Bare’ in 1989. On September 20, 1991, Manz Wear Pvt. Ltd. went public and on September 25, 1992, it changed its name to Pantaloon Fashions (India) Limited (PFIL). ‘John Miller’ was the first formal shirt brand from PFIL.

The company opened its first apparel stores, called ‘Pantaloons’ at Kolkata in August 1997. The stores generated Rs 70 million. Biyani then realized the potential of the Indian market and started to aggressively tap it. Accordingly, Biyani decided to expand into other segments of retailing besides apparel. To reflect this change in focus, the company changed its name to Pantaloon Retail (India) Limited (PRIL) in July 1999 and set itself a target of achieving Rs 10 billion in sales by June 2005. In course of time he launched three other retail formats -- Big Bazaar, Food Bazaar, and Central.

Biyani didn’t believe in copying ideas from western retailers. He was critical of his peers who felt just copied ideas form the west without making any effort to mold them to Indian conditions. He ensured that his store formats such as Big Bazaar, Food Bazaar, and Pantaloons were all suited to the purchasing style of Indian consumers.

Biyani was a huge risk taker and his planning was always different from the conventional way of doing business. This was also one of the factors that had prompted Biyani to move away from his father’s conventional way of doing business. During the initial stages of his success, his risk-taking attitude sometimes had the effect of turning away financiers. The biggest risk that Biyani took was in opening Big Bazaar in Mumbai in 2001. The company needed money to expand Big Bazaar’s operations. However, it had profits of only Rs 40 million with a low share price at eighteen rupees. Therefore, Biyani could not raise money through equity. In light of this situation, Biyani took a loan of Rs 1,200 million from ICICI for launching the operations of Big Bazaar, which increased his debt exposure. However, Big Bazaar proved to be a resounding success with 100,000 customer visits in its first week of operations. According to analysts, if Big Bazaar had failed, Biyani would have landed in a severe debt crisis. The success of Big Bazaar not only increased the company profits, it also changed the perception of investors.

Many people criticized Biyani for not delegating authority and Biyani himself accepted the criticism. He said, “I use people as hands and legs. I prefer to do the thinking around here.” He preferred taking individual decision on activities like strategic planning, ideas for other ventures, and other important issues. It was because of this that managers like Kush Medhora of Westside were initially apprehensive about joining Biyani’s business. However, Biyani changed his attitude gradually with the launch of Big Bazaar, Food Bazaar, and Central and appointed different people for managing different business units.

Biyani believed in leading a simple life and in being simply dressed. His vision came from his diverse reading connected to retailing and other areas. He made it a point to visit each of his stores across the country. He aimed to spend at least seven hours a week at the stores. In the stores, he would stand at a corner and observe people. He also walked on streets, met common people, and talked to local leaders to plan and put up new products in his stores. Each of his stores was set with a weekly target, which was reviewed every Monday. Whenever a new store was opened, the details of its operations during the first 45 days were to be sent to him. Sometimes, he suggested remedies to some problems. Biyani believed in extensive advertising to make more people know about the product. His decision making was quick and devoid of unnecessary delays. Biyani was also a good learner and learned quickly from his mistakes. He planned to improve inventory management through responding effectively to the demands of the customers rather than forecasting them, as he felt that forecasting would pile up the inventory in this dynamic market.

Questions

1.                      The tremendous success of the ‘Pantaloons’, ‘Big Bazaar’ and ‘Food Bazaar’ retailing formats, easily made PRIL the number one retailer in India by early 2004, in terms of turnover and retail area occupied by its outlets. Explain how Biyani is further planning to consolidate his businesses.

2.                      “Our striving toward looking at the Indian market differently and strategizing with the evolving customer helped us perform better.” What other qualities of Kishore Biyani do you think were instrumental in making him top retailer of India?

CASE – 3   The New Frontier for Fresh Foods Supermarkets

         Fresh Foods Supermarket is a grocery store chain that was established in the Southeast 20 years ago. The company is now beginning to expand to other regions of the United States. First, the firm opened new stores along the eastern seaboard, gradually working its way up through Maryland and Washington, DC, then through New York and New jersey, and on into Connecticut and Massachusetts. It has yet to reach the northern New England states, but executives have decided to turn their attention to the Southwest, particularly because of the growth of population there.

Vivian Noble, the manager of one of the chain’s most successful stores in the Atlanta area, has been asked to relocate to Phoenix, Arizona, to open and run a new Fresh Foods Supermarket. She has decided to accept the job, but she knows it will be a challenge. As an African American woman, she has faced some prejudice during her career, but she refuses to be stopped by a glass ceiling or any other barrier. She understands that she will be living and working in an area where several cultures combine and collide, and she will be hiring and managing a diverse workforce. Noble has the support of top management at Fresh Foods, which wants the store to reflect the surrounding community—in both staff makeup and product selection. So she will be looking to hire employees with Hispanic and Native American roots, as well as older workers who can relate to the many retired residents in the area. And she will be seeking their inputs on the selection of certain food products, including ethnic brands, so that customers know they can buy what they need and want a Fresh Foods.

In addition, Noble wants to make sure that Fresh Foods provides services above and beyond those of a standard supermarket to attract local consumers. For instance, she wants the store to offer free delivery of groceries to home-bound customers who are either senior citizens or physically disabled. She wants to be sure that the store has enough bilingual employees to translate for and otherwise assist customers who speak little or no English. Noble believes that she is a pioneer of sorts, guiding Fresh Foods Supermarkets into a new frontier. “The sky is almost blue here,” she says of her new home state. “And there’s no glass ceiling between me and the sky.”

Questions

1.                    What steps can Vivian Noble take to recruit and develop her new workforce?

2.                    What other ways can Noble help her company reach out to the community?

3.                    How will Fresh Foods Supermarkets as whole benefit from successfully moving into this new region of the country?

CASE – 4   The Law Offices of Jeter, Jackson, Guidry, and Boyer

THE EVOLUTION OF THE FIRM

David Jeter and Nate Jackson started a small general law practice in 1992 near Sacramento, California. Prior to that, the two had spent five years in the district attorney’s office after completing their formal schooling. What began as a small partnership—just the two attorneys and a paralegal/assistant—had now grown into a practice that employed more than 27 people in three separated towns. The current staff included 18 attorneys (three of whom have become partners), three paralegals, and six secretaries.

For the first time in the firm’s existence, the partners felt that they were losing control of their overall operation. The firm’s current caseload, number of employees, number of clients, travel requirements, and facilities management needs had grown far beyond anything that the original partners had ever imagined.

Attorney Jeter called a meeting of the partners to discuss the matter. Before the meeting, opinions about the pressing problems of the day and proposed solutions were sought from the entire staff. The meeting resulted in a formal decision to create a new position, general manager of operations. The partners proceeded to compose a job description and job announcement for recruiting purposes.

Highlights and responsibilities of the job description include:

·      Supervising day-to-day office personnel and operations (phones, meetings, word processing, mail, billings, payroll, general overhead, and maintenance).

·      Improving customer relations (more expeditious processing of cases and clients).

·      Expanding the customer base.

·      Enhancing relations with the local communities.

·      Managing the annual budget and related incentive programs.

·      Maintaining annual growth in sales of 10 percent while maintaining or exceeding the current profit margin.

The general manager will provide an annual executive summary to the partners, along with specific action plans for improvement and change. A search committee was formed, and two months later the new position was offered to Brad Howser, a longtime administrator from the insurance industry seeking a final career change and a return to his California roots. Howser made it clear that he was willing to make a five-year commitment to the position and would then likely retire.

Things got off to a quiet and uneventful start as Howser spent few months just getting to know the staff, observing day-today operations; and reviewing and analyzing assorted client and attorney data and history, financial spreadsheets, and so on.

About six months into the position, Howser became more outspoken and assertive with the staff and established several new operational rules and procedures. He began by changing the regular working hours. The firm previously had a flex schedule in place that allowed employees to begin and end the workday at their choosing within given parameters. Howser did not care for such a “loose schedule” and now required that all office personnel work from 9:00 to 5:00 each day. A few staff member were unhappy about this and complained to Howser, who matter-of-factly informed them that “this is the new rule that everyone is expected to follow, and anyone who could or would not comply should probably look for another job.” Sylvia Bronson, an administrative assistant who had been with the firm for several years, was particularly unhappy about this change. She arranged for a private meeting with Howser to discuss her child care circumstances and the difficulty that the new schedule presented. Howser seemed to listen half-heartedly and at one point told Bronson that “assistance are essentially a-dime-a-dozen and are readily available.” Bronson was seen leaving the office in tears that day.

Howser was not happy with the average length of time that it took to receive payments for services rendered to the firm’s clients (accounts receivable). A closer look showed that 30 percent of the clients paid their bills in 30 days or less, 60 percent paid in 30 to 60 days, and the remaining 10 percent stretched it out to as  many as 120 days. Howser composed a letter that was sent to all clients whose outstanding invoices exceeded 30 days. The strongly worded letter demanded immediate payment in full and went on to indicate that legal action might be taken against anyone who did not respond in timely fashion. While a small number of “late” payments were received soon after the mailing, the firm received an even larger number of letters and phone calls from angry clients, some of whom had been with the firm since its inception.

Howser was given an advertising and promotion budget for purposes of expanding the client base. One of the paralegals suggested that those expenditures should be carefully planned and that the firm had several attorneys who knew the local markets quite well and could probably offer some insights and ideas on the subject. Howser thought about this briefly and then decided to go it alone, reasoning that most attorneys know little or nothing about marketing.

In an attempt to “bring all of the people together to form a team,” Howser established weekly staff meetings. These mandatory, hour-long sessions were run by Howser, who presented a series of overhead slides, handouts, and lectures about “some of the proven management techniques that were successful in the insurance industry.” The meetings typically ran past the allotted time frame and rarely if ever covered all of the agenda items.

Howser spent some of his time “enhancing community relations.” He was very generous with many local groups such as the historical society, the garden clubs, the recreational sports programs, the middle-and high-school band programs, and others. In less than six months he had written checks and authorized donations totaling more than $25,000. He was delighted about all this and was certain that such gestures of goodwill would pay off handsomely in the future.

As for the budget, Howser carefully reviewed each line item in search of ways to increase revenues and cut expenses. He then proceeded to increase the expected base or quota for attorney’s monthly billable hours, thus directly affecting their profit sharing and bonus program. On the other side, he significantly reduced the attorneys’ annual budget for travel, meals, and entertainment. He considered these to be frivolous and unnecessary. Howser decided that one of the two full-time administrative assistant positions in each office should be reduced to part-time with no benefits. He saw no reason why the current workload could not be completed within this model. Howser wrapped up his initial financial review and action plan by posting notices throughout each office with new rules regarding the use of copy machines, phones, and supplies.

Howser completed the first year of his tenure with the required executive summary report to the partners that included his analysis of the current status of each department and his action plan. The partners were initially impressed with both Howser’s approach to the new job and with the changes that he made. They all seemed to make sense and were directly in line with the key components of his job description. At the same time, “the office rumor mill and grape vine” had “heated up” considerably. Company morale, which had been quite high, was now clearly waning. The water coolers and hallways became the frequent meeting places of disgruntled employees.

As for the marketplace, while the partner did not expect to see an immediate influx of new clients, they certainly did not expect to see shrinkage in their existing client base. A number of individual and corporate clients took their business elsewhere, still fuming over the letter they had received.

The partners met with Howser to discuss the situation. Howser urged them to “sit tight and ride out the storm.” He had seen this happen before and had no doubt that in the long run the firm would achieve all of its goals. Howser pointed out that people in general are resistant to change. The partners met for drinks later that day and looked at each other with a great sense of uncertainty. Should they ride out the storm as Howser suggested? Had they done the right thing in creating the position and hiring Howser? What had started as a seemingly, wise, logical, and smooth sequence of events had now become a crisis.

Questions

1.                    Do you agree with Howser’s suggestion to “sit tight and ride out the storm,” or should the partners take some action immediately? If so, what actions specifically?

2.                    Assume that the creation of the GM—Operation position was a good decision. What leadership style and type of individual would you try to place in this position?

3.                    Consider your own leadership style. What types of positions and situations should you seek? What types of positions and situation should you seek to avoid? Why?

CASE – 5   The Grizzly Bear Lodge

         Diane and Rudy Conrad own a small lodge outside Yellowstone National Park. Their lodge has 15 rooms that can accommodate up to 40 guests, with some rooms set up for families. Diane and Rudy serve a continental breakfast on weekdays and a full breakfast on weekends, included in the room they charge. Their busy season runs from May through September, but they remain open until Thanksgiving and reopen in April for a short spring season. They currently employ one cook and two waitpersons for the breakfasts on weekends, handling the other breakfasts themselves. They also have several housekeeping staff members, a groundkeeper, and a front-desk employee. The Conrads take pride in the efficiency of their operation, including the loyalty of their employees, which they attribute to their own form of clan control. If a guest needs something—whether it’s a breakfast catered to a special diet or an extra set of towels—Grizzly Bear workers are empowered to supply it.

The Conrads are considering expanding their business. They have been offered the opportunity to buy the property next door, which would give them the space to build an annex containing an additional 20 rooms. Currently, their annual sales total $300,000. With expenses running $230,000—including mortgage, payroll, maintenance, and so forth—the Conrads’ annual income is $70,000. They want to expand and make improvements without cutting back on the personal service they offer to their guests. In fact, in addition to hiring more staff to handle the larger facility, they are considering collaborating with more local business to offer guided rafting, fishing, hiking, and horseback riding trips. They also want to expand their food service to include dinner during the high season, which means renovating the restaurant area of the lodge and hiring more kitchen and wait staff. Ultimately, the Conrads would like the lodge to open year-round, offering guests opportunities to cross-country ski, ride snow-mobiles, or hike in winter. They hope to offer holiday packages for Thanksgiving, Christmas, and New Year’s celebrations in the great outdoors. The Conrads report that their employees are enthusiastic about their plans and want to stay with them through the expansion process. “This is our dream business,” says Rudy. “We’re only at the beginning.”

Questions

1.                      Discuss how Rudy and Diane can use feedforward, concurrent, and feedback controls both now and in future at the Grizzly Bear Lodge to ensure their guests’ satisfaction.

2.                      What might be some of the fundamental budgetary considerations the Conrads would have as they plan the expansion of their logic?

3.                      Describe how the Conrads could use market controls plans and implement their expansion.

Note: Solve any 4 Cases Study’s

CASE: I    Enterprise Builds On People

When most people think of car-rental firms, the names of Hertz and Avis usually come to mind. But in the last few years, Enterprise Rent-A-Car has overtaken both of these industry giants, and today it stands as both the largest and the most profitable business in the car-rental industry. In 2001, for instance, the firm had sales in excess of $6.3 billion and employed over 50,000 people.

Jack Taylor started Enterprise in St. Louis in 1957. Taylor had a unique strategy in mind for Enterprise, and that strategy played a key role in the firm’s initial success. Most car-rental firms like Hertz and Avis base most of their locations in or near airports, train stations, and other transportation hubs. These firms see their customers as business travellers and people who fly for vacation and then need transportation at the end of their flight. But Enterprise went after a different customer. It sought to rent cars to individuals whose own cars are being repaired or who are taking a driving vacation.

The firm got its start by working with insurance companies. A standard feature in many automobile insurance policies is the provision of a rental car when one’s personal car has been in an accident or has been stolen. Firms like Hertz and Avis charge relatively high daily rates because their customers need the convenience of being near an airport and/or they are having their expenses paid by their employer. These rates are often higher than insurance companies are willing to pay, so customers who these firms end up paying part of the rental bills themselves. In addition, their locations are also often inconvenient for people seeking a replacement car while theirs is in the shop.

But Enterprise located stores in downtown and suburban areas, where local residents actually live. The firm also provides local pickup and delivery service in most areas. It also negotiates exclusive contract arrangements with local insurance agents. They get the agent’s referral business while guaranteeing lower rates that are more in line with what insurance covers.

In recent years, Enterprise has started to expand its market base by pursuing a two-pronged growth strategy. First, the firm has started opening  airport locations to compete with Hertz and Avis more directly. But their target is still the occasional renter than the frequent business traveller. Second, the firm also began to expand into international markets and today has rental offices in the United Kingdom, Ireland and Germany.

Another key to Enterprise’s success has been its human resource strategy. The firm targets a certain kind of individual to hire; its preferred new employee is a college graduate from bottom half of graduating class, and preferably one who was an athlete or who was otherwise actively involved in campus social activities. The rationale for this unusual academic standard is actually quite simple. Enterprise managers do not believe that especially high levels of achievements are necessary to perform well in the car-rental industry, but having a college degree nevertheless demonstrates intelligence and motivation. In addition, since interpersonal relations are important to its business, Enterprise wants people who were social directors or high-ranking officers of social organisations such as fraternities or sororities. Athletes are also desirable because of their competitiveness.

Once hired, new employees at Enterprise are often shocked at the performance expectations placed on them by the firm. They generally work long, grueling hours for relatively low pay.

And all Enterprise managers are expected to jump in and help wash or vacuum cars when a rental agency gets backed up. All Enterprise managers must wear coordinated dress shirts and ties and can have facial hair only when “medically necessary”. And women must wear skirts no shorter than two inches above their knees or creased pants.

So what are the incentives for working at Enterprise? For one thing, it’s an unfortunate fact of life that college graduates with low grades often struggle to find work. Thus, a job at Enterprise is still better than no job at all. The firm does not hire outsiders—every position is filled by promoting someone already inside the company. Thus, Enterprise employees know that if they work hard and do their best, they may very well succeed in moving higher up the corporate ladder at a growing and successful firm.

Question:

1.                    Would Enterprise’s approach human resource management work in other industries?

2.                    Does Enterprise face any risks from its human resource strategy?

3.                    Would you want to work for Enterprise? Why or why not?

CASE: II    Doing The Dirty Work

         Business magazines and newspapers regularly publish articles about the changing nature of work in the United States and about how many jobs are being changed. Indeed, because so much has been made of the shift toward service-sector and professional jobs, many people assumed that the number of unpleasant an undesirable jobs has declined.

In fact, nothing could be further from the truth. Millions of Americans work in gleaming air-conditioned facilities, but many others work in dirty, grimy, and unsafe settings. For example, many jobs in the recycling industry require workers to sort through moving conveyors of trash, pulling out those items that can be recycled. Other relatively unattractive jobs include cleaning hospital restrooms, washing dishes in a restaurant, and handling toxic waste.

Consider the jobs in a chicken-processing facility. Much like a manufacturing assembly line, a chicken-processing facility is organised around a moving conveyor system. Workers call it the chain. In reality, it’s a steel cable with large clips that carries dead chickens down what might be called a “disassembly line.” Standing along this line are dozens of workers who do, in fact, take the birds apart as they pass.

Even the titles of the jobs are unsavory. Among the first set of jobs along the chain is the skinner. Skinners use sharp instruments to cut and pull the skin off the dead chicken. Towards the middle of the line are the gut pullers. These workers reach inside the chicken carcasses and remove the intestines and other organs. At the end of the line are the gizzard cutters, who tackle the more difficult organs attached to the inside of the chicken’s carcass. These organs have to be individually cut and removed for disposal.

The work is obviously distasteful, and the pace of the work is unrelenting. On a good day the chain moves an average of ninety chickens a minute for nine hours. And the workers are essentially held captive by the moving chain. For example, no one can vacate a post to use the bathroom or for other reasons without the permission of the supervisor. In some plants, taking an unauthorised bathroom break can result in suspension without pay. But the noise in a typical chicken-processing plant is so loud that the supervisor can’t hear someone calling for relief unless the person happens to be standing close by.

Jobs such as these on the chicken-processing line are actually becoming increasingly common. Fuelled by Americans’ growing appetites for lean, easy-to-cook meat, the number of poultry workers has almost doubled since 1980, and today they constitute a work force of around a quarter of a million people. Indeed, the chicken-processing industry has become a major component of the state economies of Georgia, North Carolina, Mississippi, Arkansas, and Alabama.

Besides being unpleasant and dirty, many jobs in a chicken-processing plant are dangerous and unhealthy. Some workers, for example, have to fight the live birds when they are first hung on the chains. These workers are routinely scratched and pecked by the chickens. And the air inside a typical chicken-processing plant is difficult to breathe. Workers are usually supplied with paper masks, but most don’t use them because they are hot and confining.

And the work space itself is so tight that the workers often cut themselves—and sometimes their coworkers—with the knives, scissors, and other instruments they use to perform their jobs. Indeed, poultry processing ranks third among industries in the United States for cumulative trauma injuries such as carpet tunnel syndrome. The inevitable chicken feathers, faeces, and blood also contribute to the hazardous and unpleasant work environment.

Question:

1.                    How relevant are the concepts of competencies to the jobs in a chicken-processing plant?

2.                    How might you try to improve the jobs in a chicken-processing plant?

3.                    Are dirty, dangerous, and unpleasant jobs an inevitable part of any economy?

CASE: III    On Pegging Pay to Performance

“As you are aware, the Government of India has removed the capping on salaries of directors and has left the matter of their compensation to be decided by shareholders. This is indeed a welcome step,” said Samuel Menezes, president Abhayankar, Ltd., opening the meeting of the managing committee convened to discuss the elements of the company’s new plan for middle managers.

Abhayankar was am engineering firm with a turnover of Rs 600 crore last year and an employee strength of 18,00. Two years ago, as a sequel to liberalisation at the macroeconomic level, the company had restructured its operations from functional teams to product teams. The change had helped speed up transactional times and reduce systemic inefficiencies, leading to a healthy drive towards performance.

“I think it is only logical that performance should hereafter be linked to pay,” continued Menezes. “A scheme in which over 40 per cent of salary will be related to annual profits has been evolved for executives above the vice-president’s level and it will be implemented after getting shareholders approval. As far as the shopfloor staff is concerned, a system of incentive-linked monthly productivity bonus has been in place for years and it serves the purpose of rewarding good work at the assembly line. In any case, a bulk of its salary will have to continue to be governed by good old values like hierarchy, rank, seniority and attendance. But it is the middle management which poses a real dilemma. How does one evaluate its performance? More importantly, how can one ensure that managers are not shortchanged but get what they truly deserve?”

“Our vice-president (HRD), Ravi Narayanan, has now a plan ready in this regard. He has had personal discussions with all the 125 middle managers individually over the last few weeks and the plan is based on their feedback. If there are no major disagreements on the plan, we can put it into effect from next month. Ravi, may I now ask you to take the floor and make your presentation?”

The lights in the conference room dimmed and the screen on the podium lit up. “The plan I am going to unfold,” said Narayanan, pointing to the data that surfaced on the screen, “is designed to enhance team-work and provide incentives for constant improvement and excellence among middle-level managers. Briefly, the pay will be split into two components. The first consists of 75 per cent of the original salary and will be determined, as before, by factors of internal equity comprising what Sam referred to as good old values. It will be a fixed component.”

“The second component of 25 per cent,” he went on, “will be flexible. It will depend on the ability of each product team as a whole to

show a minimum of 5 per cent improvement in five areas every month—product quality, cost control, speed of delivery, financial performance of the division to which the product belongs and, finally, compliance with safety and environmental norms. The five areas will have rating of 30, 25, 20, 15, and 10 per cent respectively.

“This, gentlemen, is the broad premise. The rest is a matter of detail which will be worked out after some finetuning. Any questions?”

As the lights reappeared, Gautam Ghosh, vice-president (R&D), said, “I don’t like it. And I will tell you why. Teamwork as a criterion is okay but it also has its pitfalls. The people I take on and develop are good at what they do. Their research skills are individualistic. Why should their pay depend on the performance of other members of the product team? The new pay plan makes them team players first and scientists next. It does not seem right.”

“That is a good one, Gautam,” said Narayanan. “Any other questions? I think I will take them all together.”

“I have no problems with the scheme and I think it is fine. But just for the sake of argument, let me take Gautam’s point further without meaning to pick holes in the plan,” said Avinash Sarin, vice-president (sales). “Look at my dispatch division. My people there have reduced the shipping time from four hours to one over the last six months. But what have they got? Nothing. Why? Because the other members of the team are not measuring up.”

“I think that is a situation which is bound to prevail until everyone falls in line,” intervened Vipul Desai, vice president (finance). “There would always be temporary problems in implementing anything new. The question is whether our long term objectives is right. To the extend that we are trying to promote teamwork, I think we are on the right track. However, I wish to raise a point. There are many external factors which impinge on both individual and collective performance. For instance, the cost of a raw material may suddenly go up in the market affecting product profitability. Why should the concerned product team be penalised for something beyond its control?”

“I have an observation to make too, Ravi,” said Menezes, “You would recall the survey conducted by a business fortnightly on ‘The ten companies Indian managers fancy most as a working place’. Abhayankar got top billings there. We have been the trendsetters in executive compensation in Indian industry. We have been paying the best. Will your plan ensure that it remains that way?”

As he took the floor again, the dominant thought in Narayanan’s mind was that if his plan were to be put into place, Abhayankar would set another new trend in executive compensation.

Question:

But how should he see it through?

CASE: IV Crisis Blown Over

November 30, 1997 goes down in the history of a Bangalore-based electric company as the day nobody wanting it to recur but everyone recollecting it with sense of pride.

It was a festive day for all the 700-plus employees. Festoons were strung all over, banners were put up; banana trunks and leaves adorned the factory gate, instead of the usual red flags; and loud speakers were blaring Kannada songs. It was day the employees chose to celebrate Kannada Rajyothsava, annual feature of all Karnataka-based organisations. The function was to start at 4 p.m. and everybody was eagerly waiting for the big event to take place.

But the event, budgeted at Rs 1,00,000 did not take place. At around 2 p.m., there was a ghastly accident in the machine shop. Murthy was caught in the vertical turret lathe and was wounded fatally. His end came in the ambulance on the way to hospital.

The management sought union help, and the union leaders did respond with a positive attitude. They did not want to fish in troubled waters.

Series of meetings were held between the union leaders and the management. The discussions centred around two major issues—(i) restoring normalcy, and (ii) determining the amount of compensation to be paid to the dependants of Murthy.

Luckily for the management, the accident took place on a Saturday. The next day was a weekly holiday and this helped the tension to diffuse to a large extent. The funeral of the deceased took place on Sunday without any hitch. The management hoped that things would be normal on Monday morning.

But the hope was belied. The workers refused to resume work. Again the management approached the union for help. Union leaders advised the workers to resume work in al departments except in the machine shop, and the suggestions was accepted by all.

Two weeks went by, nobody entered the machine shop, though work in other places resumed. Union leaders came with a new idea to the management—to perform a pooja to ward off any evil that had befallen on the lathe. The management accepted the idea and homa was performed in the machine shop for about five hours commencing early in the morning. This helped to some extent. The workers started operations on all other machines in the machine shop except on the fateful lathe. It took two full months and a lot of persuasion from the union leaders for the workers to switch on the lathe.

The crisis was blown over, thanks to the responsible role played by the union leaders and their fellow workers. Neither the management nor the workers wish that such an incident should recur.

As the wages of the deceased grossed Rs 6,500 per month, Murthy was not covered under the ESI Act. Management had to pay compensation. Age and experience of the victim were taken into account to arrive at Rs 1,87,000 which  was the amount to be payable to the wife of the deceased. To this was added Rs 2,50,000 at the intervention of the union leaders. In addition, the widow was paid a gratuity and a monthly pension of Rs 4,300. And nobody’s wages were cut for the days not worked.

Murthy’s death witnessed an unusual behavior on the part of the workers and their leaders, and magnanimous gesture from the management. It is a pride moment in the life of the factory.

Question:

1.                    Do you think that the Bangalore-based company had practised participative management?

2.                    If your answer is yes, with what method of participation (you have read in this chapter) do you relate the above case?

3.                    If you were the union leader, would your behaviour have been different? If yes, what would it be?

CASE: V    A Case of Burnout

When Mahesh joined XYZ Bank (private sector) in 1985, he had one clear goal—to prove his mettle. He did prove himself and has been promoted five times since his entry into the bank. Compared to others, his progress has been fastest. Currently, his job demands that Mahesh should work 10 hours a day with practically no holidays. At least two day in a week, Mahesh is required to travel.

Peers and subordinates at the bank have appreciation for Mahesh. They don’t grudge the ascension achieved by Mahesh, though there are some who wish they too had been promoted as well.

The post of General Manager fell vacant. One should work as GM for a couple of years if he were to climb up to the top of the ladder, Mahesh applied for the post along with others in the bank. The Chairman assured Mahesh that the post would be his.

A sudden development took place which almost wrecked Mahesh’s chances. The bank has the practice of subjecting all its executives to medical check-up once in a year. The medical reports go straight to the Chairman who would initiate remedials where necessary. Though Mahesh was only 35, he too, was required to undergo the test.

The Chairman of the bank received a copy of Mahesh’s physical examination results, along with a note from the doctor. The note explained that Mahesh was seriously overworked, and recommended that he be given an immediate four-week vacation. The doctor also recommended that Mahesh’s workload must be reduced and he must take physical exercise every day. The note warned that if Mahesh did not care for advice, he would be in for heart trouble in another six months.

After reading the doctor’s note, the Chairman sat back in his chair, and started brooding over. Three issues were uppermost in his mind—(i) How would Mahesh take this news? (ii) How many others do have similar fitness problems? (iii) Since the environment in the bank helps create the problem, what could he do to alleviate it? The idea of holding a stress-management programme flashed in his mind and suddenly he instructed his secretary to set up a meeting with the doctor and some key staff members, at the earliest.

Question:

1.                    If the news is broken to Mahesh, how would he react?

2.                    If you were giving advice to the Chairman on this matter, what would you recommend?

CASE: VI    “Whose Side are you on, Anyway?”

It was past 4 pm and Purushottam Mahesh was still at his shopfloor office. The small but elegant office was a perk he was entitled to after he had been nominated to the board of Horizon Industries (P) Ltd., as workman-director six months ago. His shift generally ended at 3 pm and he would be home by late evening. But that day, he still had long hours ahead of him.

Kshirsagar had been with Horizon for over twenty years. Starting off as a substitute mill-hand in the paint shop at one of the company’s manufacturing facilities, he had been made permanent on the job five years later. He had no formal education. He felt this was a handicap, but he made up for it with a willingness to learn and a certain enthusiasm on the job. He was soon marked by the works manager as someone to watch out for. Simultaneously, Kshirsagar also came to the attention of the president of the Horizon Employees’ Union who drafted him into union activities.

Even while he got promoted twice during the period to become the head colour mixer last year, Kshirsagar had gradually moved up the union hierarchy and had been thrice elected secretary of the union. Labour-management relations at Horizon were not always cordial. This was largely because the company had not been recording a consistently good performance. There were frequent cuts in production every year because of go-slows and strikes by workmen—most of them related to wage hikes and bonus payments. With a view to ensuring a better understanding on the part of labour, the problems of company management, the Horizon board, led by chairman and managing director Aninash Chaturvedi, began to toy with idea of taking on a workman on the board. What started off as a hesitant move snowballed, after a series of brainstorming sessions with executives and meetings with the union leaders, into a situation in which Kshirsagar found himself catapulted to the Horizon board as work-man-director.

It was an untested ground for the company. But the novelty of it all excited both the management and the labour force. The board members—all functional heads went out of their way to make Kshirsagar comfortable and the latter also responded quite well. He got used to the ambience of the boardroom and the sense of power it conveyed. Significantly, he was soon at home with the perspectives of top management and began to see each issue from both sides.

It was smooth going until the union presented a week before the monthly board meeting, its charter of demands, one of which was a 30 per cent across-the board hike in wages. The matter was taken up at the board meeting as part of a special agenda.

“Look at what your people are asking for,” said Chaturvedi, addressing Kshirsagar with a sarcasm that no one in the board missed. “You know the precarious finances of the company. How could you be a party to a demand that can’t be met? You better explain to them how ridiculous the demands are,” he said.

“I don’t think they can all be dismissed as ridiculous,” said Kshirsagar. “And the board can surely consider the alternatives. We owe at least that much to the union.” But Chaturvedi adjourned the meeting in a huff, mentioning, once to Kshirsagar that he should “advise the union properly”.

When Kshirsagar told the executive committee members of the union that the board was simply not prepared to even consider the demands, he immediately sensed the hostility in the room. “You are a sell out,” one of them said. “Who do you really represent—us or them?” asked another.

“Here comes the crunch,” thought Kshirsagar. And however hard he tried to explain, he felt he was talking to a wall.

A victim of divided loyalities, he himself was unable to understand whose side he was on. Perhaps the best course would be to resign from the board. Perhaps he should resign both from the board and the union. Or may be resign from Horizon itself and seek a job elsewhere. But, he felt, sitting in his office a little later, “none of it could solve the problem.”

Question:

1.                    What should he do? 

Note: Solve any 4 Cases Study’s

CASE: I    Managing the Guinness brand in the face of consumers’ changing tastes

1997 saw the US$19 billion merger of Guinness and GrandMet to form Diageo, the world’s largest drinks company. Guinness was the group’s top-selling beverage after Smirnoff vodka, and the group’s third most profitable brand, with an estimated global value of US$1.2 billion. More than 10 million glasses of the popular stout were sold every day, predominantly in Guinness’s top markets: respectively, the UK, Ireland, Nigeria, the USA and Cameroon.

However, the famous dark stout with the white, creamy head was causing some strategic concerns for Diageo. In 1999, for the first time in the 241-year of Guinness, sales fell. In early 2002 Diageo CEO Paul Walsh announced to the group’s concerned shareholders that global volume growth of Guinness was down 4 per cent in the last six months of 2001 and, more alarmingly, sales were also down 4 per cent in its home market, Ireland. How should Diageo address falling sales in the centuries-old brand shrouded in Irish mystique and tradition?

The changing face of the Irish beer market

The Irish were very fond of beer and even fonder of Guinness. With close to 200 litres per capita drunk each year—the equivalent of one pint per person per day—Ireland ranked top in worldwide per capita beer consumption, ahead of the Czech Republic and Germany.

Beer accounted for two-thirds of all alcohol bought in Ireland in 2001. Stout led the way in volume sales and accounted for 40 per cent of all beer value sales. Guinness, first brewed in 1759 in Dublin by Arthur Guinness, enjoyed legendary status in Ireland, a national symbol as respected as the green, white and gold flag. It was by far the most popular alcoholic drink in Ireland, accounting for nearly one of every two pints of beer sold. Its nearest competitors were Budweiser and Heineken, which held 13 per cent and 12 per cent of the market respectively.

However, the spectacular economic growth of the Irish economy since the mid-1990s had opened up the traditional drinking market to new cultures and influences, and encouraged the travel-friendly Irish to try other drinks. Beer and in particular stout were losing popularity compared with wine or the recently launched RTDs (ready-to-drinks) or FABs (flavoured alcoholic beverages), which the younger generation of drinkers considered trendier and ‘healthier’. As a Euromonitor report explained: Younger consumers consider dark beers and stout to be old fashioned drinks, with the perceived stout or ale drinker being an old, slightly overweight man and thus not in tune with image conscious youth culture.

Beer sales, which once accounted for 75 per cent of all alcohol bought in Ireland, were expected to drop to close to 50 per cent by 2006, while stout sales were forecast to decrease by 12 per cent between 2002 and 2006.

Giving Guinness a boost in its home market

With Guinness alone accounting for 37 per cent of Diageo’s volume in the market, Guinness/UDV Ireland was one of the first to feel the pain caused by the declining popularity of beer and in particular stout. A Euromonitor report in February 2002 explained how the profile of the Guinness drinker, typically men aged 21-plus, was affected: The average age of Guinness drinkers is rising and this is bringing about the worrying fact that the size of the Guinness target audience is falling. The rate of decline is likely to quicken as the number of less brand loyal, non-stout drinking younger consumers increases.

The report continued:

In Ireland, in particular, the consumer base for Guinness is shrinking as the majority of 18 to 24 year olds consistently reject stout as a product relevant to their generation, opting instead to consume lager or spirits.

Effectively, one-third of young Irish men and half of young Irish women had reportedly never tried Guinness. A Guinness employee provided another explanation. Guinness is similar to coffee in that when you’re young you drink it [coffee] with sugar, but when you’re older you drink it without. It’s got a similar acquired taste and once you’re over the initial hurdle, you’ll fall in love with it.

In an attempt to lure young drinkers to the somewhat ‘acquired’ Guinness taste (40 per cent of the Irish population was under the age of 24) Diageo had invested millions in developing product innovations and brand building in Ireland’s 10,000 pubs, clubs and supermarkets.

Product innovation

Until the mid-1990s most Guinness in Ireland was drunk in a pint glass in the local pub. The launch of product innovations in the form of a new cooling mechanism for draft Guinness and the ‘widget’ technology applied to cans and bottles attempted to modernize the brand’s image and respond to increasing competition from other local and imported stouts and lagers.

‘A perfect head’ for canned Guinness

In 1989, and at a cost of more than £10 million, Guinness developed an ingenious ‘widget’ device for its canned draft stout sold in ‘off-trade’ outlets such as supermarkets and off-licences. The widget, placed in the bottom of the can, released a gas that replicated the draft effect.

Although over 90 per cent of beer in Ireland was sold in ‘on-trade’ pubs and bars, sale of beer in the cheaper ‘off-trade’ channel were slowly gaining in importance. The Guinness brand manager at the time, John O’Keeffe, explained how home drinkers could now enjoy a smoother, creamier head similar to the one obtained in a pub thanks to the new widget technology:

When the can is opened, the pressure causes the nitrogen to be released as the widget moves through the beer, creating the classic draft Guinness surge.

Nearly 10 years later, in 1997, the ‘floating widget’ was introduced, which improved the effectiveness of the device.

A colder pint

In 1997 Guinness Draft Extra Cold was launched in Ireland. An additional chilled tap system could be added to the standard barrel in pubs, allowing the Guinness to be served at 4ºC rather than the normal 6ºC. By serving Guinness at a cooler temperature, Guinness/UDV hoped to mute the bitter taste of the stout and make it more palatable for younger adults, who were increasingly accustomed to drinking chilled lager, particularly in the summer

A cooler image for Guinness

In October 1999 the widget technology was applied to long-stemmed bottles of Guinness. The launch was supported by a US$2 million TV and outdoor board campaign. The packaging—with a clear, shiny plastic wrap, designed to look like a pint complete with creamy head—was quite a departure from the traditional Guinness look.

The objective was to reposition Guinness alongside certain similarly packaged lagers and RTDs and offer younger adults a more fashionable way to drink Guinness: straight from the bottle. It also gave Guinness easier access to the growing number of clubs and bars that were less likely to serve traditional draft Guinness easier access to the growing number of clubs and bars that were less likely to serve traditional draft Guinness, which could be kept for only six to eight weeks and took two minutes to pour. The RTDs, by contrast, had a shelf-life of more than a year and were drunk straight from the bottle.

 However, financial analyst remained sceptical about the Guinness product innovations, which had no significant positive impact on sales or profitability:

The last news about the success of the recently introduced innovations suggests that they have not had a notably material impact on Guinness brand performance.

Brand building

Euromonitor estimates that, in 2000, Diageo invested between US$230 and US$250 million worldwide in Guinness advertising and promotions. However, with a cost-cutting objective, the company reduced marketing expenses in both Ireland and the UK up to 10 per cent in 2001 and the number of global Guinness agencies from six to two.

Nevertheless, Guinness remained one of the most advertised brands in Ireland. It was the leading cinema advertiser and, in terms of advertising, was second only to the national telecoms provider, Eircom. Guinness was also heavily promoted at leading sporting and music events, in particular those that were popular with the younger age groups.

The ultimate tribute to the brand was the opening of the new Guinness Storehouse in Dublin in late 2000, a sort of Mecca for all Guinness fans. The Storehouse was also a fashionable visitor centre with an art gallery and restaurants, and regularly hosted evening events. The company’s design brief highlighted another key objective:

To use an ultramodern facility to breathe life into an ageing brand, to reconnect an old company with young (sceptical) customers.

As the Storehouse’s design firm’s director, Ralph Ardill, explained:

Guinness Storehouse had become the top tourist destination in Ireland, attracting more than half a million people and hosting 45,000 people for special events and training.

The Storehouse also had training facilities for Guinness’s bartenders and 3000 Irish employees. The quality of the Guinness pint remained a high priority for the company, which not only developed pub-like classrooms at the Storehouse but also employed teams of draft technicians to teach barmen how to pour a proper pint. The process involved two steps—the pour and the top-up—and took a total of 119.5 seconds. Barmen also needed to learn how to check that the pressure gauges were properly set and that the proportion of nitrogen to carbon dioxide in the gas was correct.

The uncertain future of the Guinness brand in Ireland

Despite Guinness/DUV’s attempt to appeal to the younger generation of drinkers and boost its fading image, rumours persisted in Ireland about the brand future. The country’s leading and respected newspaper, the Irish times, reported in an article in July 2001:

The uncertainty over its future all adds to the air of crisis that is building around Guinness Ireland Group four months ago…The review is not complete and the assumption is that there is more bad news to come.

In the pubs across Ireland, the traditional Guinness drinkers looked on anxiously as the younger generation drank Bacardi Breezers, Smirnoff Ices or Californian wines. Could the goliath Guinness survive another two centuries? Was the preference for these new drinks just a fad or fashion, or did Diageo need to seriously reconsider how it marketed Guinness?

A quick solution?

In late February 2002, Diageo CEO Paul Walsh revealed that the company was testing technology to cut the waiting time for a pint of Guinness from 1 minute 59 seconds to 15-25 seconds. Ultrasound could release bubbles in the stout and form the head instantly, making a pint of Guinness that would be indistinguishable from one produced by the slower, traditional method.

‘A two-minute pour is not relevant to our customers today,’ Walsh said. A Guinness spokeswoman continued, ‘We have got to move with the times and the brand must evolve. We must take all the opportunities that we can. In outlets where it is really busy, if you walk in after nine o’clock in the evening there will be a cloth over the Guinness pump because it takes longer to pour than other drinks. Aware that some consumers might not be attracted by the innovation, she added ‘It wouldn’t be put everywhere—only where people want a quick pint with no effect on the quality.’

Although still being tested, the ‘quick-pour pint’ was a popular topic of conversation in Dublin pubs, among barmen and customers alike. There were rumours that it would be introduced in Britain only; others thought it would be released worldwide.

Some market commentators viewed the quick-pour pint as an innovative way to appeal to the younger, less patient segment in which Guinness had under-performed. Others feared that the young would be unconvinced by the introduction, and loyal customers would be turned off by what they characterized as a ‘marketing u-turn’.

Question:

1.                  From a marketing perspective, what has Guinness done to ensure its longevity?

2.                  How would you characterize the Guinness brand?

3.                  What could Guinness do to attract younger drinkers? And to retain its older loyal customer base? Can both be done at the same time?

CASE: II    The grey market

Introduction

The over-50s market has long been ignored by advertising and marketing firms in favour of the market. The complexity of how to appeal to today’s mature customers, without targeting their age, has proved just too challenging for many companies. But this preoccupation with youth runs counter to demo-graphic changes. The over-50s represent the largest segment of the population, across western developed countries, due largely to the post-Second World War baby boom. The sheer size of this grey market, which will continue to grow as birth and mortality rates fall, coupled with its phenomenal spending power, presents enormous opportunities for business. However, successfully unleashing its potential will depend on companies truly understanding the attitudes, lifestyles and purchasing interests of this post-war generation.

Demographic forces

Following the Second World War many countries experienced a baby boom phenomenon as returning soldiers began families. This, coupled with a more positive outlook on the future, resulted in the baby boom generation, born between 1946 and 1964. Now beginning to enter retirement, this affluent group globally numbers approximately 532 million. In Western Europe they account for the largest proportion of the total population at 14.9%, followed closely by 14.2% in North America and 13.5 % in Australia.

Table 1: Global population aged 45-54 by region: baby boomers as a % of the total population 1990/2002

Baby boomers as a % total population	1990	2002	% point change
Western Europe	12.9	14.9	2.0
North America	9.9	14.2	4.3
Australasia	10.4	13.5	3.1
Eastern Europe	9.7	13.0	3.3
Asia-Pacific	7.8	9.8	2.0
Latin America	6.6	8.4	1.8
Africa/Middle East	2.6	2.3	20.3
WORLD	7.9	9.5	1.6

The grey market is big and getting bigger. Between 1990 and 2002 the global baby boomer population increased by 41%. The rate of growth is predicted to decrease to 35% between 2002 and 2015. Particularly noteworthy is the predicted increase in the proportion of baby boomers in many Western European countries, such as Austria, Spain, Germany, Italy, and the UK. In developed countries, according to the United Nations, the percentage of elderly people (60+) is forecast to rise from one-fifth of the population to one-third by 2050. The growth in the elderly population 

Attempt Only 4 Case Study

CASE – 1    MANAGING HINDUSTAN UNILEVER STRATEGICALLY

Unilever is one of the world’s oldest multinational companies. Its origin goes back to the 19^th century when a group of companies operating independently, produced soaps and margarine. In 1930, the companies merged to form Unilever that diversified into food products in 1940s. Through the next five decades, it emerged as a major fast-moving consumer goods (FMCG) multinational operating in several businesses. In 2004, the Unilever 2010 strategic plan was put into action with the mission to ‘bring vitality to life’ and ‘to meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good, and get more out of life’. The corporate strategy is of focusing on bore businesses of food, home care and personal care. Unilever operates in more than 100 countries, has a turnover of € 39.6 billion and net profit of € 3.685 billion in 2006 and derives 41 per cent of its income from the developing and emerging economies around the world. It has 179,000 employees and is a culturally-diverse organisation with its top management coming from 24 nations. Internationalisation is based on the principle of local roots with global scale aimed at becoming a ‘multi-local multinational’.

The genesis of Hindustan Unilever (HUL) in India, goes back to 1888 when Unilever exported Sunlight soap to India. Three Indian, subsidiaries came into existence in the period 1931-1935 that merged to form Hindustan Lever in 1956. Mergers and acquisitions of Lipton (1972), Brooke Bond (1984), Ponds (1986), TOMCO (1993), Lakme (1998) and Modern Foods (2002) have resulted in an organisation that is a conglomerate of several businesses that have been continually restructured over the years.

HUL is one of the largest FMCG company in India with total sales of Rs. 12,295 crore and net profit of 1855crore in 2006. There are over 15000 employees, including more than 1300 managers. The present corporate strategy of HUL is to focus on core businesses. These core businesses are in home and personal care and food. There are 20 different consumer categories in these two businesses. For instance, home and personal care is made up of personal wash, laundry, skin care, hair care, oral care, deodorants, colour cosmetics and ayurvedic personal and health care, while food businesses have tea, coffee, ice creams and processed food brands. Apart from the two product divisions, there are separate departments for specialty exports and new ventures.

Strategic management at HUL is the responsibility of the board of directors headed by a chairman. There are five independent and five whole-time directors. The operational management is looked after by a management committee comprising of Vice Chairman, CEO and managing director and executive directors of the two business divisions and functional areas. The divisions have a lot of autonomy with dedicated assets and resources. A divisional committee having the executive director and heads of functions of sales, commercial and manufacturing looks after the business level decision-making. The functional-level management is the responsibility of the functional head. For instance, a marketing manager has a team of brand managers looking after the individual brands. Besides the decentralised divisional structure, HUL has centralised some functions such as finance, human resource management, research, technology, information technology and corporate and legal affairs.

Unilever globally and HUL nationally, operate in the highly competitive FMCG markets. The consumer markets for FMCG products are finicky: it’s difficult to create customers and much more difficult to retain them. Price is often the central concern in a consumer purchase decision requiring producers to be on continual guard against cost increases. Sales and distribution are critical functions organisationally. HUL operates in such a milieu. It has strong competitors such as the multinationals Procter & Gamble, Nivea or L’Oreal and formidable local companies such as, Amul, Nirma or the Tata

FMCG companies to contend with. Rivals have copied HUL’s strategies and tactics, especially in the area of marketing and distribution. Its innovations such as new style packaging or distribution through women entrepreneurs are much valued but also copied relentlessly, hurting its competitive advantage.

HUL is identified closely with India. There is a ring of truth to its vision statement: ‘to earn the love and respect of India by making a real difference to every Indian’. It has an impeccable record in corporate social responsibility. There is an element of nostalgia associated with brands like Lifebuoy (introduced in 1895) and Dalda (1937) for senior citizens in India. Consequently Indians have always perceived HUL as an Indian company rather than a multinational. HUL has attempted to align its strategies in the past to the special needs of Indian business environment. Be it marketing or human resource management, HUL has experimented with new ideas suited to the local context. For instance, HUL is known for its capabilities in rural marketing, effective distribution systems and human resource development. But this focus on India seems to be changing. This might indicate a change in the strategic posture as well as recognition that Indian markets have matured to the extent that they can be dealt with by the global strategies of Unilever. At the corporate level, it could also be an attempt to leverage global scale while retaining local responsiveness to some extent.

In line with the shift in corporate strategy, the focus of strategic decision-making seems to have moved from the subsidiary to the headquarters. Unilever has formulated a new global realignment under which it will develop brands and streamline product offerings across the world and the subsidiaries will sell the products. Other subtle indications of the shift of decision-making authority could be the appointment of a British CEO after nearly forty years during which there were Indian CEOs, the changed focus on a limited number of international brands rather than a large range of local brands developed over the years and the name-change from Hindustan Lever to Hindustan Unilever.

The shift in the strategic decision-making power from the subsidiary to headquarters could however, prove to be double-edged sword. An example could be of HUL adopting Unilever’s global strategy of focussing on a limited number of products, called the 30 power brands in 2002. That seemed a perfectly sensible strategic decision aimed at focusing managerial attention to a limited set of high-potential products. But one consequence of that was the HUL’s strong position in the niche soap and detergent markets suffering owing to neglect and the competitors were quick to take advantage of the opportunity. Then there are the statistics to deal with: HUL has nearly 80 per cent of sales and 85 per cent of net profits from the home and personal care businesses. Globally, Unilever derives half its revenues from food business. HUL does not have a strong position in the food business in India though the food processing industry remains quite attractive both in terms of local consumption as well as export markets. HUL’s own strategy of offering low-price, competitive products may also suffer at the cost of Unilever’s emphasis on premium priced, high end products sold through modern outlets.

There are some dark clouds on the horizon. HUL’s latest financials are not satisfactory. Net profit is down, sales are sluggish, input costs have been rising and new food products introduced in the market have yet to pick up. All this while, in one market segment after another, a competitor pushes ahead. In a company of such a big size and over-powering presence, these might still be minor events developments in a long history that needs to be taken in stride. But, pessimistically, they could also be pointers to what may come.

Questions:

1.                    State the strategy of Hindustan Unilever in your own words.

2.                    At what different levels is strategy formulated in HUL?

3.                    Comment on the strategic decision-making at HUL.

4.                    Give your opinion on whether the shift in strategic decision-making from India to Unilever’s headquarters could prove to be advantageous to HUL or not.

CASE: 2    THE STRATEGIC ASPIRATIONS OF THE RESERVE BANK OF INDIA

The Reserve Bank of India (RBI) is India’s central bank or ‘the bank of the bankers’. It was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1935. The Central Office of the RBI, initially set up at Kolkata, is at Mumbai. The RBI is fully owned by the Government of India.

The history of RBI is closely aligned with the economic and financial history of India. Most central banks around the world were established around the beginning of the twentieth century. The Bank was established on the basis of the Hilton Young Commission. It began its operations by taking over from the Government the functions so far being performed by the Controller of Currency and from the Imperial Bank of India, the management of Government accounts and public debt. After independence, RBI gradually strengthened its institution-building capabilities and evolved in terms of functions from central banking to that of development. There have been several attempts at reorganisation, restructuring and creation of specialised institutions to cater to emerging needs.

The Preamble of the RBI describes its basic functions like this: ‘….to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.’ The vision states that the RBI ‘….aims to be a leading central bank with credible, transparent, proactive and contemporaneous policies and seeks to be a catalyst for the emergence of a globally competitive financial system that helps deliver a high quality of life to the people in the country.’ The mission states that ‘RBI seeks to develop a sound and efficient financial system with monetary stability conductive to balanced and sustained growth of the Indian economy’. The corporate values of underlining the mission statement include public interest, integrity, excellence, independence of views and responsiveness and dynamism.

The three areas in which objectives of the RBI can be stated are as below.

1.              Monetary policy objectives such as containing inflation and promoting economic growth, management of foreign exchange reserves and making currency available.

2.              Objectives set for managing financial sector developments such as supervision of systems and information access and assisting banking and financial institutions to become competitive globally.

3.              Organisational development objectives such as development of economic research facilities, creating information system for supporting economic decision-making, financial management and human resource management.

Strategic actions taken to realise the objectives fall under four categories:

1.               The thrust area of monetary policy formulation and managing financial sector;

2.               Evolving the legal framework to support the thrust area;

3.               Customer service for providing support and creation of positive relationship; and

4.               Organisational support such as structure, systems, human resource development and adoption of modern technology.

The major functions performed by the RBI are:

·               Acting as the monetary authority

·               Acting as the regulator and supervisor of the financial system

·               Discharging responsibilities as the manager of foreign exchange

·               Issue currency

·               Play as developmental role

·               Related functions such as acting as the banker to the government and scheduled banks

The management of the RBI is the responsibility of the central board of directors headed by the governor and consisting of deputy governors and other directors, all of whom are appointed by the government. There are four local boards based at Chennai, Kolkata, Mumbai and New Delhi. The day-to-day management of RBI is in the hands of the executive directors, managers at various levels and the support staff. There are about 22000 employees at RBI, working in 25 departments and training colleges.

The RBI identified its strengths and weaknesses as under.

·               Strengths    A large body of competent officers and staff; access to key data on the economy; wide organisational network with 22 regional offices; established infrastructure; ability to attract talent; and financial self sufficiency.

·               Weaknesses    Structural rigidity, lack of accountability and slow decision-making; eroded specialist know-how; strong employee unions with rigid industrial relations stance; surplus staff; and weak market intelligence.

Over the years, the RBI has evolved in terms of structure and functions, in response to the role assigned to it. There have been sweeping changes in the economic, social and political environment. The RBI has had to respond to it even in the absence of a systematic strategic plan. In 1992, the RBI, with the assistance of a private consultancy firm, embarked on a massive strategic planning exercise. The objective was to establish a roadmap to redefine RBI’s role and to review internal organisational and managerial efficacy, address the changing expectations from external stakeholders and reposition the bank in the global context. The strategic planning exercise was buttressed by departmental position papers and documents on various subjects such as technology, human resources and environmental trends. The strategic plan of the RBI emerged with four sections dealing with the statement of mission, objectives and policy, a review of RBI’s strengths and weaknesses and strategic actions required with an implementation plan. The strategic plan reiterates anticipation of evolving external environment in the medium-term; revisiting strengths and weaknesses (evaluation of capabilities); and doing away with the outdated mandates for enhancing efficiency in operations in furtherance of best public interests. The results of these efforts are likely to manifest in attaining a visible focus, reinforced proficiency, realisation of shared sense of purpose, optimising resource use and build-up of momentum to achieve goals.

Historically, the RBI adopted the time-tested technique of responding to external environment in a pragmatic manner and making piecemeal changes. The dilemma in adoption of a comprehensive strategic plan was the risk of trading off the flexibility of the pragmatic approach to creating rigidity imposed by a set model of planning.

Questions:

1.                    Consider the vision and mission statements of the Reserve Bank of India. Comment on the quality of both these statements.

2.                    Should the RBI go for a systematic and comprehensive strategic plan in place of its earlier pragmatic approach of responding to environmental events as and when they occur? Why?

CASE: 3    THE INTERNATIONALISATION OF KALYANI GROUP

The Kalyani Group is a large family-business group of India, employing more than 10000 employees. It has diverse businesses in engineering, steel, forgings, auto components, non-conventional energy and specialty chemicals. The annual turnover of the Group is over US$2.1 billion. The Group is known for its impressive internationalisation achievements. It has nine manufacturing locations spread over six countries. Over the years, it has established joint ventures with many global companies such as ArvinMeritor, USA, Carpenter Technology Corporation, USA, Hayes Lemmerz, USA and FAW Corporation, China.

The flagship company of the Group is Bharat Forge Limited that is claimed to be the second largest forging company in the world and the largest nationally, with about 80 per cent share in axle and engine components. The other major companies of the Group are Kalyani Steels, Kalyani Carpenter Special Steels, Kalyani Lemmerz, Automotive Axles, Kalyani Thermal Systems, BF Utilities, Hikal Limited, Epicenter and Synise Technologies

The emphasis on internationalisation is reflected in the vision statement of the Group where two of the five points relate to the Group trying to be a world-class organisation and achieving growth aggressively by accessing global markets. The Group is led by Mr. B.N. Kalyani, who is considered to be the major force behind the Group’s aggressive internationalisation drive. Mr. Kalyani joined the Group in 1972 when it was a small-scale diesel engine component business.

The corporate strategy of the Group is a combination of concentration of its core competence in its business with efforts at building, nurturing and sustaining mutually beneficial partnerships with alliance partners and customers. The value of these partnerships essentially lies in collaborative product development with the partners who are the original equipment manufacturers. The foreign partners are not intended to provide expansion in capacity, but to enable the Kalyani Group to extend its global marketing reach.

In achieving its successful status, the Kalyani Group has followed the path of integration, extending from the upstream steel making to downstream machining for auto components such as crank-shafts, front axle beams, steering knuckles, cam-shafts, connecting rods and rocker arms. In all these products, the Group has tried to move up the value chain instead of providing just the raw forgings. In the 1990s, it undertook a restructuring exercise to trim its unrelated businesses such as television and video products and concentrate on its core business of auto components.

Four factors are supposed to have influenced the growth of the Group over the years. These are mentioned below:

·               Focussing on core businesses to maximise growth potential

·               Attaining aggressive cost savings

·               Expanding geographically to build global capacity and establishing leading positions

·               Achieving external growth through acquisitions

The Group companies are claimed to be positioned at either number one or two in their respective businesses. For instance, the Group claims to be number one in forging and machined components, axle aggregates, wheels and alloy steel. The technology used by the Group in its mainline business of auto components and other businesses, is claimed to be state-of-the-art. The Group invests in forging technology to enhance efficiency, production quality and design capabilities. The Group’s emphasis on technology can be gauged from the fact that in the 1990s, it took the risky decision of investing Rs. 100 crore in the then latest forging technology, when the total Group turnover was barely Rs. 230 crore. Information technology is applied for product development, reducing production and product development time, supply-chain management and marketing of products. The Group lays high emphasis on research and development for providing engineering support, advanced metallurgical analysis and latest testing equipment in tandem with its high-class manufacturing facilities.

Being a top-driven group, the pattern of strategic decision-making within seems to be entrepreneurial. There was an attempt to formulate a five-year strategic plan in 1997, with the participation of the company executives. But no much is mentioned in the business press about that collaborative strategic decision-making after that.

Recent strategic moves include Kalyani Steels, a Group company, entering into a joint venture agreement in may 2007, with Gerdau S.A. Brazil for installation of rolling mills. An attempt to move out of the mainstream forging business was made when the Group strengthened its position in the prospective business of wind energy through 100 per cent acquisition of RSBconsult GmbH (RSB) of Germany. Prior to the acquisition, the Group was just a wind farm operator and supplier of components.

Questions:

1.                    What is the motive for internationalisation by the Kalyani Group? Discuss.

2.                    Which type of international strategy is Kalyani Group adopting? Explain.

CASE 4:     THE STORY OF SYNERGOS UNFOLDS

Synergos is a young management and strategy consulting firm based at Mumbai. It was established in 1992 at a time when there were a lot of expectations among the industry people from the liberalisation policies that were started the previous year by the Government of India.

The consulting firm is an entrepreneurial venture started by Urmish Patel, a dynamic person who worked with a multinational consulting firm at the time. He left his comfortable position there to venture into the management consultancy industry. The motivation was to be ‘the master of his own destiny’ rather than being an employee working for others. Urmish comes from an upper middle-class Gujarati family, settled in a small town in Rajasthan. His father was a government servant who retired with a meagre pension. His mother is a housewife. His other siblings are all educated and well-settled in their respective careers and professions. Urmish is a creative individual, uncomfortable with the status-quo. During his student days at a college at Jaipur, he was continually coming up with bright ideas that some of his friends found to be preposterous. To him, however, these were perfectly achievable ideas. He studied biotechnology and then went to the US on a scholarship to do his Masters. After a semester at a well-known university there, he lost interest and switched to pursue an MBA. He liked it and soon settled down to work with an American consultancy firm and toured several countries on varied assignments during the seven years he worked there.

In 1992 came the urge to Urmish to chuck his job and be on his own. It was risky, yet an exciting step to take. His accumulated capital was limited—just enough to rent office space, buy a few computers and hire an assistant. There were no consultancy assignments for the first three months. But an acquaintance soon came to his aid, introducing him to the CFO of a major family business group who needed advice on a performance improvement project they wanted to launch. The opportunity came in handy though the returns were nothing to write home about. That project was the first step to

many more that came gradually. Synergos started gaining presence in the competitive management consultancy industry and attracting attention from the people whom they worked for. Word-of-mouth publicity led them from one project to another for the first three years till 1995. Synergos took up whatever came its way, delivering a cost-effective solution to its clients. A team of four had formed by now, each member of the team specialising in services rendered to the clients. For instance, one of the members is a specialist in engineering projects, while another has expertise finance. The third one is a service sector specialist, also having experience in dealing with government matters.

The phase of rapid growth started some time in 1995 when the Synergos team decided to focus on the small and medium enterprises (SMEs). These were firms that realised they had problems needing specialist advice, but were apprehensive to approach the big firms on account of their limited outlay and inexperience of dealing with such firms. Synergos came to their aid by tailoring their services as near as possible to their needs. Another differentiation platform Synergos offered to its client was a fully-integrated consultancy service where it got involved right from the stage of planning down to its implementation and monitoring.

Presently, Synergos has grown to be a medium-sized consultancy firm, serving clients in India and abroad, working for industries ranging from auto components to financial services and for manufacturing organisations to service providers. Some-how, nearly half of the assignments it has worked on have been for mid-sized, upcoming, family-owned businesses, a niche it has served well. These organisations typically need a boutique sort of consultancy that can offer customised services dealing with a broad range of practices related to strategy, organisation design, mergers and acquisitions and operational matter such as logistics and supply-chain management. Synergos fits in with their requirements owing to its personalised service and reasonable commission structure.

The organisational structure at Synergos has a board at the top, consisting of seven people, including the four founding members and three independent directors. One of the independent directors is the chairman of the board. Urmish, as the founder CEO, also heads an executive management committee with each of the founding members, leading three other top-level committees dealing with business portfolio, service management and executive recruitment.

The management team is called the professional group. The rest of the employees are referred to as the staff. The professional group has young women and men who are graduates from some of the best institutions in India and abroad. They are assigned to taskforces based on their qualifications, experience and interests. The departmentation at Synergos is flexible, based on an interplay of the three categories: skill, service and specialty. For instance, a professional may have IT skills, may have worked to provide supply-chain management services and developed expertise in handling operational assignments for medium-sized food and beverage firms. There is a lot of multi-tasking however, to utilise the wide range of skills and special expertise that the professionals have. For administrative matters, the professionals are assigned to client-service departments of industry solutions, enterprise solutions and technology solutions. The flexibility that such an organisational arrangement affords seems to have been the major reason for the evolution of the organisation structure at Synergos over the years.

The staff group of employees consists of the support people who provide a variety of services to the professionals. Among these are research assistants, industry analysts, documentation experts and secretarial staff. There is no set pattern for assignment of staff to the administrative departments and generally, a need-based approach is followed, depending on the workload at a particular time.

Recruitment for professionals is stringent. Synergos typically looks for a good combination of education and experience and lays much emphasis on the compatibility of the prospective employee with the shared values. Creativity, broad range of professional interests, intellectual acumen, team-working and physical fitness to undertake demanding tasks and work for long hours are the criteria for hiring. There are not many training opportunities except the on-the-job learning. New professionals are assigned to a mentor for some time till they are ready to handle assignments autonomously. The staff members are usually recruited from fresh graduates, with good degrees from reputed institutions, in arts, sciences and commerce. The staff positions are also open for persons wanting to work on part-time or project-bases. Emphasis is given to the ability of the prospective staff to undertake multi-tasking and work with documentation and word processing and presentation software packages.

The compensation system consists of a base salary with commission and bonus depending on performance. There are other usual elements such as medical reimbursement, loan facility and gratuity and retirement benefits. the performance appraisal is informal, with at least one of the four founding members being part of the evaluation committee for a professional. Usually, the founding member closest to the work area of the employee is involved in determining the rewards to be given. The time-cycle for appraisal is one year. Management control is discreet and performance-based rather than behaviour-based. The means for control are informal, such as direct supervision.

Urmish is a strong proponent of the emergent strategy and is not in favour of tying Synergos to a fixed strategic posture. So are the other founder members, though at times they do talk about deciding on a niche such as SME organisations as clients and enterprise solutions as the core competence. In the highly fragmented consultancy industry where it is possible for even one person to set up an office in a commercial area and leverage connections to secure projects, Synergos is open to opportunities as they emerge, while trying to maintain the flexibility that has made it successful till now.

Questions:

1.      Identify the type of organisation structure being used at Synergos and explain how it works. What are the benefits of using this type of structure? What are the pitfalls?

2.      Express your opinion about whether the structure is in line with the recruitments of the strategy that Synergos is implementing.

3.      Based on the information related to the information, control and reward systems available in the case, examine whether these systems are appropriate for the type of strategy being implemented.

CASE: 5    EXERCISING STRATEGIC AND OPERATIONAL CONTROLS AT iGATE GLOBAL SOLUTIONS

The Bangalore-based iGATE Global Solutions is the flagship company of iGATE Corporation, a NASDAQ-listed US-based corporation. Known earlier as Mascot Systems, it was set up in India in 1993, to offer staffing services. It acquired business process outsourcing (BPO) and contact centre businesses in 2003, making it an end-to-end IT and ITES service provider. Its service portfolio includes consulting, IT services, data analytics, enterprise systems, BPO/BSP, contact centre and infrastructure management services. iGATE has over 100 active clients and centres based in Canada, China, Malaysia, India, the UK and the US. Chairman, Ashok Trivedi and CEO Phaneesh Murthy, an ex-Infosys IT professional and their partners hold a major stake, with some participation by institutional and public investors. The revenues for 2006-2007 are over Rs. 805 crore and net profits, Rs. 49.6 crore.

The corporate strategies of iGATE are offering integrated IT services and divesting the legacy IT staffing business and possibly making acquisitions in the domain expertise for financial services businesses. The business strategy is focused differentiation based on the focal points of testing, infrastructure management and enterprise solutions. The competitive tactic is avoiding head-on competition with the formidable larger players in the industry by carving out a niche. The business definition is serving large customers and staying away from sub-contracting work.

iGATE adopts a differentiation business model based on an integrated technology and operations model which it calls as the iTOPS model. This is an advancement over the prevalent model in the ITES industry based on low-cost arbitrage model. iTOPS is based on transaction-based pricing for services and supporting the clients by providing the platform, processes and services.

The strategic evaluation and control has both the elements of strategic as well as operational controls.

The functional and operational implementation is aimed at achieving four sets of objectives:

(a)               Shifting from small customers to large customer (Fortune 1000 companies)

(b)               Shifting away from stocking to project-consulting assignments

(c)               Working directly with clients rather than with system integrators

(d)               Moving from a local to international markets

Some illustrations of the performance indicators that reflect these objectives are:

1.              On-shore versus off-shore mix of business revenues: In 2004, this ratio was 55:45 and in 2007, it has improved to 27:73, indicating a much higher revenue generation from off-shore business.

2.              Billing rates:  Revenue charged from clients on assignments. With project consulting assignments from off-shore clients, where the revenues are typically higher, with lower costs and higher productivity in India, the realisations from billing have to be higher. The industry norms for ITES are US$18-25 per hour for off-shore and US$ 55-65 per hour for on-shore assignments.

3.              The number of large clients from Fortune 1000 companies: Presently, iGATE has nearly half of its more than 100 clients from Fortune 1000 companies, of which the top 10 account for 70 per cent of its business.

4.              Controlling employee costs:  This is an area where concerted effort is required from the HR and finance functions. Hiring less experienced employees lowers the compensation bill. In the IT and ITES industry, attracting and retaining well-qualified and experienced employees is a critical success factor. The performance indicator for this objective is the cost per employee.

5.              Human resource metrics such as the hiring and attrition rates: In the IT and ITES industry, the human resource metrics such as hiring and attrition rates are critical indicators. Increasing the number of employees and lowering the attrition rate by retaining the employees is a big challenge. There are presently about 5800 employees, likely to go up to 8500 in the next two years. The attrition of 20 per cent presently at iGATE is on the higher side. But such attrition is common in the industry where the employee mobility is high and employee pinching a widespread trend.

The human resource management function being critical in an industry where so many challenges exist, needs a strong emphasis on training and development, motivation, autonomy and attractive incentives. iGATE has an integrated people management model focusing on developing technical, behavioural and leadership competencies. The three metrics by which the HR function is assessed are: human capital index, work culture and employee affective commitment. The reward system at iGATE consists of meritorious employees across all levels being granted restricted stock options, thus providing an incentive to remain with the company till they become due. The company, though, is an average paymaster, which disadvantage it tries to trade-off offering a more challenging work environment, quicker promotions and chances for practising innovation.

Critics say that that iGATE lacks the big-brand appeal of the larger players such as Infosys and Wipro, cannot compete on scale and is still under the shadow of its original business of body-shopping IT personnel.

Questions:

1.      Analyse the iGATE case to highlight how it could apply some of the strategic controls such as premise control, implementation control, strategic surveillance and special alert control.

2.      Analyse and describe the process of setting of standards at iGATE.

3.      Give your opinion on the effectiveness of the role of reward system in exercising HR performance management at iGATE and suggest what improvements are possible, given the environmental conditions in the IT/ITES industry in India at present.