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Business Law

Attempt any 10 Questions

1. How are right of lien and stoppage-in-transit affected by sub-sale or pledge by the buyer?

2. Discuss the rule regarding duration of transit. When does it come of an end?

3. Comment on the statement, “Delivery does not amount to acceptance of goods”?

4. State the exceptions to the rule that no one can convey a better title than what he has.

5. When are the goods said to be unascertained? What are the rules as to the transfer of property in the unascertained goods to the buyer?

6. Discuss the implied condition relating to sale by sample?

7. Discuss the doctrine of caveat emptor and state its exceptions.

8. What is the effect of perishing of goods on the contract of sale?

9. Explain the various methods of creating agency?

10. Pledge can be created only of movable property. Comment.

11. Discuss the position of guarantee in respect of loans to a minor.

12. Does the release by the creditor of one of the sureties discharge the others?

13. Explain the provisions relating to appointment of directors in Producer Company.

14. Two separate company wish to amalgamate. State the steps which they must take for this purpose.

15. Does the failure of inspector to submit his or her report in time amount to an end to investigation?

16. A, the secretary of the company is also a minority shareholder. He is removed from the post of secretary. He brings complaint on the ground of oppression? Advise

17. A single member of a company wishes to challenge the decisions of the majority. Can he succeed?

18. What new provisions have been made for the protection of interests of debenture holders?

19. Write a short note on Consumer Protection Councils.

20. Describe the powers of SEBI relating to the working of the depository system.

IIBMS QUESTION PAPER

Subject – General Management

Marks - 100

Attempt Any Four Case Study

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

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

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

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

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

Questions

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

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

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

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?

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

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IIBMS QUESTION PAPER

Subject – Managerial Economics

Marks - 100

Attempt Any Four Case Study

CASE – 1 Dabur India Limited: Growing Big and Global

Dabur is among the top five FMCG companies in India and is positioned successfully on the specialist herbal platform. Dabur has proven its expertise in the fields of health care, personal care, homecare and foods.

The company was founded by Dr. S. K. Burman in 1884 as small pharmacy in Calcutta (now Kolkata), India. And is now led by his great grandson Vivek C. Burman, who is the Chairman of Dabur India Limited and the senior most representative of the Burman family in the company. The company headquarters are in Ghaziabad, India, near the Indian capital New Delhi, where it is registered. The company has over 12 manufacturing units in India and abroad. The international facilities are located in Nepal, Dubai, Bangladesh, Egypt and Nigeria.

S.K. Burman, the founder of Dabur, was trained as a physician. His mission was to provide effective and affordable cure for ordinary people in far-flung villages. Soon, he started preparing natural remedies based on Ayurved for diseases such as Cholera, Plague and Malaria. Due to his cheap and effective remedies, he became to be known as ‘Daktar’ (Indianised version of ‘doctor’). And that is how his venture Dabur got its name—derived from Daktar Burman.

The company faces stiff competition from many multi national and domestic companies. In the Branded and Packaged Food and Beverages segment major companies that are active include Hindustan Lever, Nestle, Cadbury and Dabur. In case of Ayurvedic medicines and products, the major competitors are Baidyanath, Vicco, Jhandu, Himani and other pharmaceutical companies.

Vision, Mission and Objectives

Vision statement of Dabur says that the company is “dedicated to the health and well being of every household”. The objective is to “significantly accelerate profitable growth by providing comfort to others”. For achieving this objective Dabur aims to:

· Focus on growing core brands across categories, reaching out to new geographies, within and outside India, and improve operational efficiencies by leveraging technology.

· Be the preferred company to meet the health and personal grooming needs of target consumers with safe, efficacious, natural solutions by synthesising deep knowledge of ayurveda and herbs with modern science.

· Be a professionally managed employer of choice, attracting, developing and retaining quality personnel.

· Be responsible citizens with a commitment to environmental protection.

· Provide superior returns, relative to our peer group, to our shareholders.

Chairman of the company

Vivek C. Burman joined Dabur in 1954 after completing his graduation in Business Administration from the USA. In 1986 he was appointed Managing Director of Dabur and in 1998 he took over as Chairman of the Company.

Under Vivek Burman’s leadership, Dabur has grown and evolved as a multi-crore business house with a diverse product portfolio and a marketing network that traverses the whole of India and more than 50 countries across the world. As a strong and positive leader, Vivek C. Burman has motivated employees of Dabur to “do better than their best”—a credo that gives Dabur its status as India’s most trusted nature-based products company.

Leading brands

More than 300 diverse products in the FMCG, Healthcare and Ayurveda segments are in the product line of Dabur. List of products of the company include very successful brands like Vatika, Anmol, Hajmola, Dabur Amla Chyawanprash, Dabur Honey and Lal Dant Manjan with turnover of Rs.100 crores each.

Strategic positioning of Dabur Honey as food product, lead to market leadership with over 40% market share in branded honey market; Dabur Chyawanprash is the largest selling Ayurvedic medicine with over 65% market share. Dabur is a leader in herbal digestives with 90% market share. Hajmola tablets are in command with 75% market share of digestive tablets category. Dabur Lal Tail tops baby massage oil market with 35% of total share.

CHD (Consumer Health Division), dealing with classical Ayurvedic medicines has more than 250 products sold through prescription as well as over the counter. Proprietary Ayurvedic medicines developed by Dabur include Nature Care Isabgol, Madhuvaani and Trifgol.

However, some of the subsidiary units of Dabur have proved to be low margin business; like Dabur Finance Limited. The international units are also operating on low profit margin. The company also produces several “me – too” products. At the same time the company is very popular in the rural segment.

Questions

1. What is the objective of Dabur? Is it profit maximisation or growth maximisation? Discuss.

2. Do you think the growth of Dabur from a small pharmacy to a large multinational company is an indicator of the advantages of joint stock company against proprietorship form? Elaborate.

CASE – 2 IT Industry: Checkered Growth

IT industry is now considered as vital for the development of any economy. Developing countries value the importance of this industry due to its capacity to provide much needed export earnings and support in the development of other industries. Especially in Indian context, this industry has assumed a significant position in the overall economy, due to its exemplary potentials in creating high value jobs, enhancing business efficiency and earning export revenues. The IT revolution has brought unexpected opportunities for India, which is emerging as an increasingly preferred location for customised software development. Experts are estimating the global IT industry to grow to US$1.6 million over the coming six years and exports to reach Rs. 2000 billion by 2008. It is envisaged that Indian IT industry, though a very small portion of the global IT pie, has tremendous growth prospects.

Stock Taking

The decade of 1970 may be taken as the stage of introduction of the Indian IT industry. The early years were marked by 75 per cent of software development taking place overseas and the rest 25 per cent in India. Exports of Indian software until the mid-1970s was mainly Eastern Europe, followed by US. Tata Consultancy Services (TCS) was among the pioneers in selling its services outside India, by working for IBM Labs in the US. The hardware segment lagged behind its software counterpart. With instances of exports worth US$ 4 million in 1980, the software segment of the industry has shown an uneven profile. It was not until 1980s that vigorous and sustained growth in software exports begun, as MNCs like Texas Instruments started to take serious interest in India as a centre of software production. Destinations of export also underwent changes, with US dominating the main export market with 75 per cent of the exports. The IT Enabled Services (ITeS) segment, however, had not emerged at this stage.

It was also during the mid to late 1980s that computer firms shifted focus from mainframe computers (the mainstay of MNCs) to Personal Computers (PCs). In March 1985, Minicomp installed the first ever PC at CSI, Delhi; this changed the entire industry for good. With the entry of networking and applications like CAD/CAM, PC sales soared in 1987-88, touching 50,000 units.

From a modest growth in the mid-1980s software exports moved up to Rs. 3.8 billion in 1991-92. Since then, it grew at an incredible rate, up to 115 per cent in 1993. The hardware could also register an annual growth of 40 per cent in this period, backed by a surging demand for PCs and networking. Growth of the industry was also driven by the emergence and rapid growth of the ITeS segment.

IT sector’s share of GDP rose steadily in this period, rate of increase being the highest at 44.91 per cent in 2000-01. It was in the same year that the size of the total IT market was the biggest in the decade, at Rs. 56,592 crore. The overall IT market was also found to increase till 2000-01. The overall IT market was also found to increase till 2000-01, with the only exception of 1998-99. The domestic market also showed an overall increase till 2000-01, registering a spectacular CAGR of 50.39 per cent. Aggregate output of software and services also increased in this period, though at an uneven rate. Of approximately $1 billion worth of sales in 1991-1992, domestic hardware sales constituted 37.2 per cent (13.4 per cent growth over the previous year), exports of hardware 6.6 per cent.

During 2000-01 the growth in the hardware segment was driven mainly by PCs, which contributed about 58 per cent of the total hardware market. This period also witnessed the phenomenon of increasing share of Tier 2 and cities in PC sales, thereby indicating PC penetration into the hinterland. PC shipments had increased by 35 per cent every year from 1997 till 2000-01 when it reached 1.8 million PCs. The commercial PC market saw a growth of 23.5 per cent mainly due to slashing of prices by major vendors.

It was in 2001-02 that the industry had a sharp fall in rate of growth of its share of GDP to 5.90 per cent, from 44.91 per cent in the previous year. The total IT market also showed a fall in growth rate from 56.42 per cent in 2000-01 to a mere 16.24 per cent in the next year, growing further at the rate of 16.25 per cent in the next year. Software export was also affected, registering a low growth of 28.74 per cent and failed to maintain its growth rate of 65.30 per cent in the previous year. It got further lowered to 26.30 per cent in 2002-03. CAGR of total output of software and services (in Rs. crore) came down to 25.61 in 2001-02 and further to 25.11 in 2002-03. The domestic market showed a steep decline in growth to 3 per cent in 2001-02 from an outstanding 50.39 per cent in 2000-01. It could, however, recover by growing at 4.11 per cent in the next year.

Table 1: Indian IT Industry: 1996-97 to 2002-03

Year

1996 97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

1.22

1.45

1.87

2.71

2.87

3.09

18,641

25,307

36,179

56,592

65,788

76,482

3,900

6,530

10,940

17,150

28,350

36,500

46,100

6,594

10,899

16,879

23,980

37,350

47,532

59,472

9,438

12,055

14,227

18,837

28,330

29,181

30,382

*A: share of GDP of the Indian IT market, B: size of the Indian IT market (in Rs. crore), C: software and services exports (in Rs. crore), D: size of software and services (in Rs. crore), E: size of the domestic market (in Rs. crore)

Questions

1. Try to identify various stages of growth of IT industry on basis of information given in the case and present a scenario for the future.

2. Study the table given. Apply trend projection method on the figures and comment on the trend.

3. Compute a 3 year moving average forecast for the years 1997-98 through 2003-04.

CASE – 3 Outsourcing to India: Way to Fast Track

By almost any measure, David Galbenski’s company Contract Counsel was a success. It was a company Galbenski and a law school buddy, Mark Adams, started in 1993; it helps companies find lawyers on a temporary contract basis. The growth over the past five years had been furious. Revenue went from less than $200,000 to some $6.5 million at the end of 2003, and the company was placing thousands of lawyers a year.

At then the revenue growth began to flatten; the company grew just 8% in 2004 despite a robust market for legal services estimated at about $250 billion in the United States alone. Frustrated and concerned, Galbenski stepped back and began taking a hard look at his business. Could he get it back on the fast track? “Most business books say that the hardest threshold to cross is that $10 million sales mark,” he says. “I knew we couldn’t afford to grow only 10% a year. We needed to blow right through that number.”

For that to happen, Galbenski knew he had to expand his customer base beyond the Midwest into large legal supermarkets such as Boston, New York, and Washington, D.C. He also knew that in doing so, he could run into stiff competition from larger publicly traded rivals. Contract Counsel’s edge has always been its low price, Clients called when dealing with large-scale litigation or complicated merger and acquisition deals, either of which can require as many as 100 lawyers to manage the discovery process and the piles of documents associated with it. Contract Counsel’s temps cost about $75 an hour, roughly half of what a law firm would charge, which allowed the company to be competitive despite its relatively small size. Galbenski was counting on using the same strategy as he expanded into new cities. But would that be enough to spur the hyper growth that he craved for?

At that time, Galbenski had been reading quite a bit about the growing use of offshore employees. He knew companies like General Electric, Microsoft and Cisco were saving bundles by setting up call and data centers in India. Could law firms offshore their work? Galbenski’s mind raced with possibilities. He imagined tapping into an army of discount-priced legal minds that would mesh with his existing talent pool in the U.S. The two work forces could collaborate over the Web and be productive on a 24-7 basis. And the cost could be massive.

Using offshore workers was a risk, but the payoff was potentially huge. Incidentally Galbenski and his eight-person management team were preparing to meet for their semiannual review meeting. The purpose of the two-day event was to decide the company’s goals for the coming year. Driving to the meeting, Galbenski struggled to figure out exactly what he was going to say. He was still undecided about whether to pursue an incremental and conservative national expansion or take a big gamble on overseas contractors.

The Decision

The next morning Galbenski kicked off the management meeting. Galbenski laid out the facts as he saw them. Rather than look at just the next five years of growth, look at the next 20, he said. He cited a Forrester Research prediction that some 79,000 legal jobs, totaling $5.8 billion in wages, would be sent offshore by 2015. He challenged his team to be pioneers in creating a new industry, rather than stragglers racing to catch up. His team applauded. Returning to the office after the meeting, Galbenski announced the change in strategy to his 20 full-timers.

Then he and his team began plotting a global action plan. The first step was to hire a company out of Indianapolis, Analysts International, to start compiling a list of the best legal services providers in countries where people had comparatively strong English skills. The next phase was vetting the companies in person. In February 2005, just three months after the meeting in Port Huron, Galbenski found himself jetting off on a three months trip to scout potential contractors in India, Dubai, and Sri Lanka. Traveling to cities like Bangalore, Chennai and Hyderabad, he interviewed executives from more than a dozen companies, investigating their day-to-day operations firsthand.

India seemed like the best bet. With more than 500 law schools and about 200,000 law students graduating each year, it had no shortage or attorneys. What amazed Galbenski, however, was that thanks to the Web, lawyers in India had access to the same research tools and case summaries as any associate in the U.S. Sure, they didn’t speak American English. “But they were highly motivated, highly intelligent, and extremely process-oriented,” he says. “They were also eager to tackle the kinds of tasks that most new associated at law firms look down upon” such as poring over and coding thousands of documents in advance of a trial. In other words, they were perfect for the kind of document-review work he had in mind.

After a return visit to India in August 2005, Galbenski signed a contract with two legal services companies: QuisLex, in Hyderabad, and Manthan Services in Bangalore. Using their lawyers and paralegals, Galbenski figured he could cut his document-review rates to $50 an hour. He also outsourced the maintenance of the database used to store the contact information for his thousands of contractors. In all, he spent about 12 months and $250,000 readying his newly global company. Convincing U.S. based clients to take a chance on the new service hasn’t been easy. In November, Galbenski lined up pilot programs with four clients (none of which are ready to publicise their use of offshore resources). To help get the word out, he launched a website (offshore-legal-services.com), which includes a cache of white papers and case studies to serve as a resource guide for companies interested in outsourcing.

Questions

1. As money costs will decrease due to decision to outsource human resource, some real costs and opportunity costs may surface. What could these be?

2. Elaborate the external and internal economies of scale as occurring to Contract Counsel.

3. Can you see some possibility of economies of scope from the information given in the case? Discuss.

CASE – 4 Indian Stock Market: Does it Explain Perfect Competition?

The stock market is one of the most important sources for corporates to raise capital. A stock exchange provides a market place, whether real or virtual, to facilitate the exchange of securities between buyers and sellers. It provides a real time trading information on the listed securities, facilitating price discovery.

Participants in the stock market range from small individual investors to large traders, who can be based anywhere in the world. Their orders usually end up with a professional at a stock exchange, who executes the order. Some exchanges are physical locations where transactions are carried out on a trading floor. The other type of exchange is of a virtual kind, composed of a network of computers and trades are made electronically via traders.

By design a stock exchange resembles perfect competition. Large number of rational profit maximisers actively competing with each other, trying to predict future market value of individual securities comprises the main feature of any stock market. Important current information is almost freely available to all participants. Price of individual security is determined by market forces and reflects the effect of events that have already occurred and are expected to occur. In the short run it is not easy for a market player to either exit or enter; one cannot exit and enter for few days in those stocks which are under no delivery. For example Tata Steel was in no delivery from 29/10/07 to 02/11/07. Similarly one cannot enter or exit on those stocks which are in upper or lower circuit for few regular trading sessions. Therefore a player has to depend wholly on market price for its profit maximizing output (in this case stock of securities). In the long run players may exit the market if they are not able to earn profit, but at the same time new investors are attracted by rise in market price.

As on 01/11/07 total market capital at Bombay Stock Exchange (BSE) is $1589.43 billion (source: Business Standard, 1/11/2007); out of this individual investors account for only $100bn. In spite of the fact that individual investors exist in a very large number, their capital base is less than 7% of total market capital; rest of capital is owned by foreign institutional investor and domestic institutional investors (FIIs and DIIs), which are very small in number. Average capital owned by a single large player is huge in comparison to small investor. This situation seems to have prompted Dr Dash of BSE to comment ‘The stock market activity is increasingly becoming more centralised, concentrated and non competitive, serving interest of big players only.” Table 2 shows the impact of change in FII on National Stock Exchange movement during three different time periods.

Table 2: Impact of FIIs’ Investment on NSE

Wave

Date

Nifty

Change in Nifty Index

FLLS Net Investment

(Rs.Cr.)

Change in Market Capitalisation

(Rs.Cr.)

Wave 1

From

17/05/04

26/10/05

1388.75

2408.50

1019.75

59520

5,40,391

Wave 2

From

27/10/05

11/05/06

2352.90

3701.05

1348.15

38258

6,20,248

Wave 3

From

12/05/06

13/06/06

3650.05

2663.30

-986.75

-9709

-4,60,149

By design, an Indian Stock Market resembles perfect competition, not as a complete description (for no markets may satisfy all requirements of the model) but as an approximation.

Questions

1. Is stock market a good example of perfect competition? Discuss.

2. Identify the characteristics of perfect competition in the stock market setting.

3. Can you find some basic aspect of perfect competition which is essentially absent in stock market?

CASE – 5 The Indian Audio Market

The Indian audio market pyramid is featured by the traditional radios forming its lower bulk. Besides this, there are four other distinct segments: mono recorders (ranking second in the pyramid), stereo recorders, midi systems (which offer the sound amplification of a big system, but at a far lower price and expected to grow at 25% per year) and hi-fis (minis and micros, slotted at the top end of the market).

Today the Indian audio market is abound with energy and action as both national and international majors are trying to excel themselves and elbow the others, ushering in new concepts, like CD sound, digital tuners, full logic tape deck, etc. The main players in the Indian audio market are Philips, BPL and Videocon. Of these, Philips is one of the oldest and is considered at the leading national brands. In fact it was the first company to introduce a range of international products such as CD radio cassette recorder, stand alone CD players and CD mini hi-fi systems. With the easing of the entry barriers, a number of new international players like Panasonic, Akai, Sansui, Sony, Sharp, Goldstar, Samsung and Aiwa have also entered the arena. This has led to a sea of changes in the industry and resulted in an expanded market and a happier customer, who has access to the latest international products at competitive prices. The rise in the disposable income of the average Indian, especially the upper-income section, has opened up new vistas for premium products and has provided a boost to companies to launch audio systems priced as high as Rs. 50,000 and beyond.

Pricing across Segments

Super Premium Segment: This segment of the market is largely price-insensitive, as consumers are willing to pay a premium in order to obtain products of high quality. Sonodyne has positioned itself in this segment by concentrating on products that are too small for large players to operate in profitably. It has launched a range of systems priced between Rs. 30,000 to Rs. 60,000. National Panasonic has launched its super premium range of systems by the name of Technics.

Premium Segment: Much of the price game is taking place in this segment, in which systems are priced around Rs. 25,000. Even the foreign players ensure that the pricing is competitive. Entry barriers of yester years compelled the demand by this segment to be partially met by the grey market. With the opening up of the market, the premium segment is witnessing a rapid growth and is currently estimated to be worth Rs. 30 crores. Growth of this segment is also being driven by consumers who want to upgrade their old music systems. Another major stimulating factor is the plethora of financing options available, bringing more and more consumers to the market.

Philips has understood the Indian listener well enough to dictate the basic principles of segmentation. It projects its products as high quality at medium price. In fact, Philips had successfully spotted an opportunity in the wide price gap between portable cassette players and hi-fi systems and pioneered the concept of a midi system (a three-in-one containing radio, tape deck and amplifier in one unit). Philips has also realised that there is a section of the rich consumer which values not just power but also clarity and is willing to pay for it. The pricing strategy of Philips was to make the most of its image as a technology leader. To this end, it used non-price variables by launching of a range of state of art machines like the FW series, and CD players. Moreover, it came up with the punch line in its advertisements as, “We Invent For You”.

BPL stands second only to Philips in the audio market and focuses on technology as its USP. Its kingpin in the marketing mix is its high technology superior quality product. It is thus at being the product-quality leader. BPL’s proposition of fidelity is translated in its punchline for its audio systems as, ‘e-fi your imagination’ (d-fi stands for digital fidelity). The company follows a market skimming strategy. When a new product was launched, it was placed in the top end of the market, and priced accordingly. The company offers a range of products in all price segments in the market without discounting the brand.

Another major player, Videocon, has managed to price its products lower even in the premium segment. The success of the Powerhouse (a 160 watt midi launched by Philips in 1990) had prompted Videocon to launch the Select Sound range of midi stereo systems at a slightly lower price. At the premium end, Videocon is making efforts to upgrade its image to being “quality-driven” by associating itself with the internationally reputed brand name of Sansui from Japan, and following a perceived value pricing method.

Sony is another brand which is positioning itself as a premium product and charges a higher price for the superior quality of sound it offers. Unlike indulging into price wars, Sony’s ad-campaigns project the message that nothing can beat Sony in the quality and intensity of sound. National Panasonic is another player that has three products in the top end of the market, priced in the Rs. 21,000 to Rs. 32,000 range.

Monos and Stereos: Videocon has 21% share I the overall audio market, but has been a major player only in personal stereos and two-in-ones. Its history is written with instances where it has offered products of similar quality, but at much lower prices than its competitors. In fact, Videocon launched the Sansui brand of products with a view to transform its image from that of being a manufacturer of cheap products to that of being a company that primes quality, and also to obtain a share of the hi-fi segment. Sansui is being positioned as a premium brand, targeting the higher middle, upper income groups and also the sensitive middle class Indian consumer.

The objective of Philips in this segment is to achieve higher sales volumes and hence its strategy is to expand its range and have a product in every segment of the market. The pricing method used by Philips in this segment is providing value for money.

National Panasonic offers products in the lower end of the market, apart from the top of the range. In fact, it reduced the price of one of its small two-in-ones from Rs. 3,500 to Rs. 2,400, with the logic that a forte in the lower end of the market would help in building brand reliability across a wider customer base. The company is also guided by the logic that operating in the price sensitive region of the market will help it reach optimum levels of efficiency. Panasonic has also entered the market for midis.

These apart, there also exists a sector in the Indian audio industry, with powerful regional brands in mono and stereo segments, having a market share of 59% in mono recorders and 36% in stereo recorders. This sector has a strong influence on price performance.

Questions

1. What major pricing strategies have been discussed in the case? How effective these strategies have been in ensuring success of the company?

2. Is perceived value pricing the dominant strategy of major players?

3. Which products have reached maturity stage in audio industry? Do you think that product bundling can be effectively used for promoting sale of these products?

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IIBMS QUESTION PAPER

Subject – Human Resource Management

Marks - 100

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?

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