INDUSTRIAL RELATIONS & LABOUR LAW
(Marks 80)
CASE 1 : (30 Marks)
Trade Unions in the TNC Supply Chain and their relationship with the CSR
movement
Chinese enterprises are essentially passive players at the sharp end of CSR in China. They are in a
position of having to juggle between the different factors governing the development of industrial
relations in China, including trade union reform. In this often tense dynamic, CSR is seen as an
external factor and trade unions an internal factor. These two factors have an impact on each other.
As part of the research for this case study, the research team (RT) ‘shadowed’ a CSR audit. The
factory had come under very heavy CSR pressure in 2004. Altogether, the RT carried out two
investigations: in March (see earlier printed report) and August 2006
Initial conclusions:
1) That factories undergoing CSR audits have better working conditions than those that don’t.
2) There is no evidence to suggest that trade unions have an impact on wage levels at enterprise level.
However, factories subject to CSR pressure are generally large workplaces and this was perhaps a
factor in improving labour conditions. Moreover, CSR-targeted factories are prone to data distortion
due to ‘training of workers’ answers’ in interview and double or even triple accounting.
Enterprise Y was established in 1997 and now has 1,200 workers. It was ‘Re-registered’ in 2002 to
take advantage of tax breaks etc. It manufactures electronic goods for export chiefly to three retailers
and over 50% of goods go to a single US company.
Employment breakdown: 80 managers, 300 skilled workers; remainder are ordinary workers.
Managers and skilled workers have contracts and social insurance based on minimum legal standards.
The extent of contracts among unskilled workers remains unclear. The enterprise had previously
AN ISO 9001 : 2000 CERTIFIED INTERNATIONAL B-SCHOOL
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supplied a ‘comprehensive’ contract and social insurance list to CSR audit team (excluding
probationary workers) but the RT’s interviews with workers revealed that many had no idea if they
had a contract or not or if they were paying into various social insurance schemes such as work injury
or pensions. The RT was not given access to formal SI contribution records.
Wages were verified at between 900-1100 yuan per month with on average more than 60 hours o/t
but this was subject to orders. There were few disputes and conditions generally were better than at
surrounding factories. Up until Aug 2006 accommodation was free and reasonably good. The labour
turnover rate for unskilled workers was just 8% and most workers had been there more than two
years already. However, in the same period the labour turnover rate for skilled workers had increased
dramatically.
Enterprise Trade Union
Established in 2004. Trade union chair M directly elected by workers, largely as a result of pressure
from the Brand. By August the follow-up research revealed M had left, apparently for ‘personal
reasons’ according to management. Former vice chair C had taken over his position. C’s previous
experience had been as a member of a trade union committee in an SOE trade union. He was
appointed to the post at Y. The local township union said that there would be fresh union elections
‘soon’. The trade union at Y had three other union committee members. All were mid or senior level
managers: human resources manager, one an engineer, and a finance manager. The union had an
office in the enterprise but has no bank account or independent accounts/expenses system. All union
activities were entirely dependent on management transferral of funds.
Trade Union Work
Approach to union work very similar to work in SOEs – i.e. very traditional. Also the union works
very closely with the township union and pretty much depends on it for policy etc. The latter is very
pleased with the Y union, which has received a number of awards. Activities include labour
productivity competitions, May Day competitions. Prizes include going on holiday to HK. Examples
of general day union work included:
• Management introduced a charge for canteen food. The service had been franchised to outside
contractors. In response the union organised a small group (xiao zu) which negotiated with the
company and succeeded in getting the food and food hygiene situation improved.
• Dormitory Management Team: made up of company reps and worker reps. Aim was to selfmanage
the dormitories and avoid management imposing arbitrary fines on workers. The
committee’s work was based on a ‘Dormitory Management Contract’ which the union drew
up. Any fines imposed had to be in accordance with the contract and workers reported an
improvement in the overall dormitory conditions.
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Union representing workers in wage consultations
The union was very proud of this aspect of its work. Wages stipulated in contracts were 574 yuan per
month – however the real income of workers varied between 900 and 1100 per month due to o/t.
On 1 September 2006 – the government introduced new standards for min. wage which were reset at
690 yuan per month, which at current contract and o/t levels in the factory would mean a 300 yuan
per month wage increase. Company provided figures which made it clear that if they abided by the
wage increase in current market conditions they would go bust. Y’s HR department presented a
proposal saying that Y should meet new min. wage requirements but cancel food and board subsidy.
However, this would break contracts with workers in which the company agreed to supply food and
dormitory accommodation. Management consulted with local government and township trade union
and decided to try and solve the problem through consultations with enterprise union.
RT investigation found that the consultation did not follow either the regulations on collective
consultations on wages, nor did they constitute a collective contract. Instead: Workers Rep meeting
called by boss: mostly production managers but also a small number of line workers present who
were appointed as ‘reps’ by the trade union chair. RT observed this meeting and also provided legal
advice to worker reps. At the meeting was a deputy managing director and the two managers from the
union committee.
Meeting procedures and presentations recorded in report – worker reps presented with an ultimatum
regarding bankruptcy plus threat of dismissal from HR dep. for anyone who did not agree with the
cancellation of free food and board. Trade union said: it wanted the new min. wage standard met;
new charges for food and board should be reasonable and include a self management team for
dormitory. Union also called for further consultation with members.
Not much feedback from members. Union held further talks with senior company managers. This led
to the Method of New wage Management. New charges 200 for dorm and 60 for food, a rate below
market prices but reduced the wage rise itself to between 40-60 yuan. RT interviews with workers
showed that most workers agreed with the new arrangements. A minority felt that they had been
cheated. All signed the new agreement and anyone who refused was told their contracts would not be
renewed.
CSR audit
RT shadowed and at times provided translation for a social audit team. Despite the professionalism of
the audit team, their task to report actual conditions at the factory was essentially a failure. The audit
team asked that the factory management bring o/t levels down to legal levels, although they also
expressed an understanding of local conditions and stated that workers were able to take adequate rest
time despite high levels of overtime. No workers expressed dissatisfaction with pay and conditions
directly to audit team.
The audit team also had an extensive meeting with trade union chair who told them that the new
wage levels had been met but did not mention the introduction of dormitory and canteen charges. The
audit team also asked that a dispute mediation committee be established at factory level as well as
warning management that a complaints system for workers should be implemented as soon as
possible. Also discussions over whether the deposit that the factory demanded for work uniform was
an illegal job deposit. Audit team agreed that it wasn’t.
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Audit team did not discover the fact that some workers who did not meet piece rate targets had to
complete quotas in their own time – up to 1-2 hours per day! The trade union chair had told workers
it was in their interests to lie to audit team over working hours as trained to do so by enterprise
management. He was under no pressure to take this line from the enterprise itself.
Discussion:
• Organisation of the trade union was from CSR pressure not pressure from workers i.e. in
effect top down. 2004 US client retailer had cancelled an order due to working conditions and
this had caused losses.
• Union operated in a cooperative manner with management not confrontational.
• With regard to a workers’ complaints and mediation system. The US client did not believe it
to be true when management had told them there were no disputes with or among the workers.
The real situation was that the union had not taken part in any disputes. RT checked with the
MOLSS and found that a dispute had occurred following a death in the dormitory.
Management denied it was due to a work injury and police ruled out criminal behaviour.
Eventually MOLSS brokered compensation with family and Y enterprise. No details made
available. However, RT concluded from this dispute that the company did not have an injury
compensation scheme for workers. If they did have, the settlement would have been between
the dead worker’s family and the insurance company.
• Audit ream did not discover that the HR department pressured workers to hand in their notice
when they wanted to cut staff levels rather than simply lay them off. This was to avoid
compensation. The union also kept silent on this.
• The wage negotiation process was entirely non-confrontational except for HR attitude to the
workers, who were threatened with dismissal if they objected to concluding the agreement.
• The union helped the enterprise and the brand find an easy way out of the wage dilemma. It
did not ‘represent’ the workers in this process.
Questions :
1. What is the experience of China about Trade Union in the above mentioned case?
2. How Trade Union resolved the dispute? By confrontation or by negotiations?
3. What is the general impression about the Trade Union movement with reference to this case?
4. Give your comments and opinion
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CASE 2 (30 Marks)
Acas and Essex Ambulance Service NHS Trust: Improving
consultation and working patterns.
The Challenge
Essex Ambulance Service (EAS) is an organisation dealing with unscheduled care,predominantly
accessed via 999 calls. It was established as an NHS Trust in 1990 and employs around 1,300 people
who are primarily members of two unions, Unison and the GMB.
The Trust had two inter-related problems. Firstly, relations between management and unions had
deteriorated after a national ambulance dispute in 1989. Trade unions did not have recognition at the
Trust, and a trade union representative described the management-union relationship throughout the
1990s as “arms-length” and “fairly
tense”. During this time, trade union involvement was restricted to representatives attending health
and safety committees and representing union members during individual disputes. Consultation
between management and the workforce was nonexistent, and this was due in part to the management
style of the organisation. A JNCC (joint negotiation and consultation committee) was established at
the unions’ insistence, but it was largely ineffective. Decisions made at the JNCC were often
overturned or ignored by the Chief Executive Officer (CEO), thereby damaging the committee’s
credibility, and the CEO had no involvement in the committee.
This contributed to a second problem: a failure to respond to different staff interests by modernising
working arrangements for part-time and relief staff. These workers were unable to influence their
work roster and shift patterns to the same extent as full-time and longer serving staff. And because of
a lack of consultation mechanisms, it was proving difficult to agree on strategies that would mutually
resolve the problem.
The Trust eventually recognised trade unions in 1999. In 2002, following the departure of key
managers who had resisted engaging in joint consultation, trade union representatives, supported by
management, contacted Acas for help in addressing these problems and improving the employment
relations climate. Acas was approached, according to the HR manager, because it was seen as
“independent, and expert around this area”.
How Acas helped
In October 2002 the Acas adviser met with management and trade unions to develop two sets of
workshop programmes, each addressing the issues identified as problems.
Two initial workshop sessions were held to discuss rostering issues. The Acas adviser led these
workshops, using techniques to break down barriers between participants, including splitting them
into mixed (management-trade union) groups to work on problems and design solutions. Throughout
the workshops, the adviser also profiled examples of how problems were resolved in other
organisations she had worked with.By the end of the first workshop a number of recommendations
were developed, including the need to have clear principles driving consultation, the need for a
review of the roster system, and the need to have stronger informal ties between key managementunion
players. The Acas adviser then put together a report based on the ideas and suggestions
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generated at the workshop, and these were discussed at a further workshop, at which participants
ratified and agreed a new system of rosters.
‘Break-out groups’ addressed problems in a way that included the voice of all parties, and
stakeholders and the adviser also worked with specific sub-groups of staff – for example relief
workers (who fill in for workers on holiday or sick leave) – to tackle particular rostering problems
and design improved working practices.
The adviser organised a subsequent facilitated workshop in early 2003, attended by key Trust
managers and union groups. Its aim was to establish the purpose of the JNCC and its terms of
reference. Whilst no formal output emerged from the workshop, participants felt that it had formed
the basis for the renewal of the forum. The HR manager described the imperatives driving this
initiative:
“… bear in mind we’re coming from a stance where the unions weren’t involved in negotiation at all
… We’re moving towards Agenda for Change now and that’s very much about partnership working
with staff-side. So we wanted to make sure that the JNCC had the right terms of reference and was
going to be working effectively for both sides to benefit.”
The benefits: improved consultation and working patterns:
A range of positive outcomes flowed from Acas’ involvement at the Trust, with management and
trade union representatives emphasising their significance in light of the relationship difficulties and
low levels of trust at the Trust during the 1990s. Firstly, the JNCC has become a central feature of
employment relations at the Trust. It now functions effectively, partly as a result of good informal
relations between key trade union representatives and HR managers. The Committee has provided a
vehicle for regular management-trade union dialogue on a wide variety of issues, including work-life
balance and flexible working. The JNCC has also become a crucial medium for discussions around
Agenda for Change. Secondly, in terms of work rosters, there is a new system that accommodates the
interests of both full-time staff and those on a variety of different contracts. Employees who formerly
had little advance knowledge of when they were working can now plan their rest days more clearly.
In facilitating changes in working patterns, the Acas project has brought part-time staff closer to the
strategic concerns of the Trust. This has meant that human resource planning is clearer and more
consensual in nature, and levels of commitment from part-time staff are, according to trade union
representatives, higher than in the past.
Thirdly, the process of improving consultative mechanisms and the roster system has helped build
relationships between management and union representatives, enabling them to develop other new
practices relating to, for example, meal breaks and work-life balance initiatives. A joint approach has
also been taken to managing the implementation of Agenda for Change, with trade union
representatives reporting that they now feel that they have some ownership over its development.
There are now ‘joint management-union chairs’ for sub-groups, including Agenda for Change subgroups,
each tackling a variety of new issues and reforms. These new issues are approached in a very
different way to the past, when the level of dialogue was virtually non-existent. There are still
differences and problems, but the new framework has sustained a high degree of joint working.
Central to this has been the strong explicit commitment and support for consultative mechanisms
from the union and senior management, including the interim CEO, who chaired the JNCC. As one
trade union representative explained:
“(The Acas project) has built a foundation to move forward on the working lives for our relief staff,
for full time staff. And we’ve now got the JNCC firmly established as the main staff conduit to the
head of the organisation on a formal basis.”
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According to HR managers and trade union representatives, longer term benefits of Acas
involvement have become evident over the last two years. These include increased levels of trust
between employees, unions and managers, and improved formal and informal workplace relations.
Trade union representatives and managers now speak to each other openly and constructively, and
improvements to operational systems and practices are the subject of consultation and dialogue to a
much greater extent than in the past. Such is the nature of the turnaround that Trust managers and
union representatives are often called upon to provide advice to other Trusts who are attempting to
improve employer-trade union relationships.
Questions:-
1. Give the brief history of the above mentioned case study
2. What was the problem? How it was resolved?
3. What was the effect of solution on the unit’s mechanism?
4. What is the message ?
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CASE 3 (20 Marks)
Changing role of trade unions
The curtain has at last come down on one of the most famous marquees in the motorcar industry,
with MG Rover finally shutting down production earlier this month.
A company that once employed 40,000 people in the British Midlands, with an equal number
employed in the factories of suppliers, had been forced to scale down its operations over the years.
But even skeletal operations with 4,000 people has now ceased. It is an example of what destructive
trade unionism can do to an industry.
Arthur Scargil in the 1980s set out to destroy industry in the Midlands with his brand of militant and
destructive trade unionism. Finally Mrs Thatcher stood up to him and showed him the limits to which
trade unions could push industry.
She privatised industries and Scargil lost his power base, which was mainly in public sector heavy
industries. Successive governments in Britain after Mrs Thatcher have refused to bail out public
sector undertakings with subsidies and grants.
This has resulted in Britain transforming itself from being the sick man of Europe to one of the more
dynamic economies in the West.
In India too we have had examples of the Arthur Scargil brand of trade unionism. What Datta Samant
did to the cotton textile and engineering industries in Mumbai was equally devastating.
Almost all the textile mills in the city closed because of the unreasonable demands made by trade
unions under Datta Samant. India has the advantages of (a) growing both long staple and short staple
cotton and (b) a huge domestic market.
We could have been the cotton textile source for the whole world. But battling militant trade unions,
on the one hand, while coping with price controls imposed by unimaginative governments and textile
quotas imposed by foreign governments, on the other, proved too much for our textile industry.
It did not have the necessary financial and managerial resources, and it failed to modernize and
remain competitive in terms of quality and cost. So it declined and became terminally ill.
Trade unions are a legitimate system for organizing workers and to voice their rights and grievances.
Without them companies would become either too paternalistic or too dictatorial.
Responsible unions help to create a middle path in the relationship between management and labour
while maintaining the responsibilities of the former and the dignity of the latter.
Where things go wrong is when the management becomes authoritarian, especially in owner/familymanaged
companies, or when a trade union leader allows emotion and ego to overcome reason.
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Fortunately today, workers have become better informed and aware of the economic forces that
impact their industry. The media has helped to create much greater economic awareness.
So it is not so easy to mislead them. Managements too have become more sensitive and skilled in
handling relationships with employees. This is true of even family-owned and managed businesses.
TVS [Get Quote] in the South is a prime example of how a large family-managed industrial group
has successfully managed its relationship with employees through enlightened management. There
are more such examples in other parts of the country.
Perhaps the labour departments of governments at the state and the Centre should sponsor the
institutes of management to do case studies of companies that have built up such successful
relationships. Instead of merely administering rules and labour laws, these government departments
could also act as apostles of good practices in the field.
As the skill levels and educational qualifications of employees advance, the role and significance of
trade unions tend to diminish. This is because (a) employees are able to represent their own case and
(b) managements are more sensitive to the needs of individual employees, whose intellectual skills
become almost uniquely valuable.
This is already happening in the sunrise industries based on brainpower such as IT and
telecommunications. Another phenomenon in these modern industries is that employees have greater
opportunity and tendency to move from one company to another, not only because of better terms of
employment but also because of their yearning to learn new skills.
This appetite for learning is something remarkable, especially in the IT industry. In fact, people in
that industry are more bothered about what they can learn in a company than about how much they
earn.
This phenomenon is facilitated by the fact that there are plenty of employment opportunities in IT
and it is a young industry. That is why one does not notice any union flags in the Silicon Valley of
India/Bangalore's Electronic City.
Trade unions have declined in their importance even in the UK, the original home of trade unions.
The UK's Labour Party was formed by socialist leaders of trade unions.
Today, Tony Blair does not have to depend on trade unions as much as his predecessors had to do in
the 1980s and 90s. The Labour Party's appeal to the public is based on key policy issues such as
spending on the National Health Service and the education system, rather than anything to do with
labour policy.
In the US, trade unions are powerful in negotiations with individual employers, but have no
significant political clout although they generally support the Democratic Party.
The same is the case in Japan. Even in Germany, France, and Italy, the role of trade unions has
become more focused on negotiations with employers rather than on politics.
The privatization or corporatisation of many public services such as electricity and water supply has
accelerated this shift. Hopefully the same shift in the character and role of trade unions will happen in
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India -- even in places like Kerala and Bengal, as employment starts to move to more intellect-based
activities and public sector industries are privatized.
Responsible trade union leaders with a long-term vision will adapt their policies to suit the new
realities.
Correspondingly, there has also been a change in the attitude of management, even in familymanaged
companies. They are now better educated and many of them have been exposed to
international education and international markets.
They realise the dignity of human beings more than their previous generation and therefore are less
prone to treat employees in a scurvy manner. More and more companies are investing in management
training and development.
This has also helped to create much better awareness of the aspirations of workmen, among the
managers.
Yet the last vestiges of negative union practices continue to persist in monopolistic public services
like the state transport undertakings, state electricity boards, etc.
The only way to correct this is to corporatise or privatise these undertakings or open them up to
competition. A prime example of the change that is possible is what has happened in aviation.
Once airline services were opened up to competition, the whole scene changed. Instead of treating
passengers with the indifference typical of a public sector employee, Indian Airlines staff learnt even
to smile while greeting passengers.
In addition, we have created some world-class private carriers in the domestic market who are now
set to take wing on international routes. Even the railways can be privatised.
The rail track in each region can be owned and operated by a company, which then allows competing
companies to run their trains on these tracks. Similarly, there is no reason why urban bus services
cannot be made more efficient by opening them up to competition.
Today they are run as monopolies due to pressure from unionised labour. For example, in Mumbai
the urban bus service is cross-subsidised by BEST Electric Supply services.
Questions:-
1. What do you know about changing role of Trade Union activities?
2. What is the role of responsible Trade Unionism?
3. Is Privatisation a challenge for Union activities?
4. What is the lesson learnt from the IT sector?
HUMAN RESOURCE MANAGEMENT
Course: ADHRM Total marks: 80
Instructions:
1. Answers must be written in legible handwriting without using abbreviations or SMS
language.
2. Clarity of thought and expression is expected from the examinee
3. Figures to the right indicate the marks assigned to each case study.
4. All questions carry equal marks
5. Read the case studies carefully and then attempt the questions.
CASE –1 (20 Marks)
“I don’t want to hear your excuses. Just get those planes in the air,” john Vaz was screaming at his
gate manager. As head of American Airlines’ operations at the Mexico City airport, Vaz has been
consistently frustrated by the attitude displayed by his native employees. Transferred from Dallas to
Mexico City only three months ago, Vaz was having difficulty adjusting to Mexican style of work.
“Am I critical of these people? You bet I am! They don’t listen when I talk. They think things are just
fine and fight every change I suggest. And they have no appreciation for the importance of keeping
on schedule.”
If Vaz is critical of his Mexico City staff, it’s mutual. They universally dislike him.
Here’s a few anonymous comments made about heir boss: “He’s totally insensitive to our needs.”
“He thinks if he yells and screams that things will improve. We don’t see it that way.” “I’ve been
working here for four years. Before he came here, this was a good place to work. Not anymore. I’m
constantly in fear of being chewed out. I feel stress all the time, even at home. My husband has
started commenting on it a lot.”
AN ISO 9001 : 2000 CERTIFIED INTERNATIONAL B-SCHOOL
Vaz was brought in specifically to tighten up the Mexico City operation. High on his list of goals is
improving American’s on-time record in Mexico City, increasing productivity, and improving
customer service. When Vaz was asked if he thought he had any problems with his staff, he replied,
“Yep. We just can’t seem to communicate.”
Questions:-
1. Does John Vaz have a communication problem? Explain.
2. What suggestions, if any, would you make to John to help him improve his managerial
effectiveness?
3. Ineffective communication is the fault of the sender. Do You agree or disagree? Discuss.
4. What can you do to improve the likelihood that you r communication will be received and
understood as you intend.
CASE –2 (20 Marks)
The reality of software development is a huge company like Microsoft-it employs more than 48,000
people- is that a substantial portion of your work involves days of boredom punctuated by hours of
tedium. You basically spend your time in an isolated office writing code and sitting in meetings
during which you participate in looking for and evaluating hundreds of current employees and
potential employees. Microsoft has no problem in finding and retaining software programmers. Their
programmers work for very long hours and obsess on the goal of shipping product.
From the day new employees begin at Microsoft, they know they are special. New hires all
have one thing in common-they are smart. The company prides itself on putting all recruits through a
grueling “interviewing loop”, during which they confront a barrage(an overwhelming number of
questions or complaints) of brain-teasers by future colleagues to see how well they think. Only the
best and the brightest survive to become employees. The company does this because microsofties
truly believe that their company is special. For example, it has high tolerance for non-conformity,
would you believe that one software tester comes to work everyday dressed in extravagant Victorian
outfits? . But the underlying theme that unites Microsofties is the belief that the firm has a manifest
destiny to change the world.
The least important decision as programmer can have a large importance which it can affect a
new release that might be used by 50 million people.
Microsoft employees are famous for putting in long hours. One program Manager said “In my
First Five Years, I was the Microsoft stereotype. I lived on caffeine and vending-machine hamburgers
and free beer and 20-hour work-days……I had no life…..I considered everything outside the building
as a necessary evil”. More recently things have changed. There are still a number of people who put
in 80-hour weeks, but 60 and 70 hour weeks are more typical and some even are doing their jobs in
only 40 hours.
No discussion of the employee life at Microsoft would be complete without mentioning the
company’s lucrative stock option program. Microsoft created more millionaire employees, faster,
than any company in American history-more than 10,000 by the late – 1990’s while the company is
certainly more than a place to get rich, executive still realize that money matters. One former
Manager claims that the human resources’ department actually kept a running chart of employee
satisfaction versus the company’s stock price. “When the stock was up, human resources could turn
off the ventilation and everybody would say they were happy. When the stock was down, we could
give people Massages and they would tell us that the Massages were too hard.” In the go-go 1990’s,
when the Microsoft stock was doubling every few months and yearly stock splits were predictable,
employees not only got to participate in the Microsoft’s manifest destiny, they would get rich in the
process. By the spring of 2002, with the world in a recession, stock prices down, and the growth for
Microsoft products slowing, it wasn’t so clear what was driving its employees to continue the
company’s dominance of the software industry.
Questions:-
1. If you were the programmer, would you want to work at Microsoft? Why or Why not?
2. How many activities in this case can you tie into specific motivation theories? List the
activities; list the motivation theories, and how they apply.
3. As Microsoft continues to get larger and its growth rate flattens do you think Management
will have to modify any of its motivation practices? Elaborate.
4. Can money act as a motivator? Explain.
CASE-3 (20 Marks)
Merlyn Monroe is not a complainer. If she has a major ache, she usually suffers in silence. Although
her employer, Atlantic Mutual Insurance, has an employee assistance program- to provide emotional
and psychological support in the work plan. She certainly never thinks of using it, even if she did
have a worry on her mind. “They say its confidential but who really knows? Asked Ms. Monroe’, an
administrative assistant at the insurance company.
But Merlyn Monroe’s life changed on September 11, 2001. Her office at 140 broadway in
New York City, was near the world trade Center. She watched the whole thing from her 50th Floor
office window.
Ms.Monroe had never seen so much destruction in her life. She had never seen such a horrific
terrorist attack. Nor had she forced her to relieve 9/11 over and over.
Everything she talked to people they wanted details, which made it worse for her. She had so
much anger about what had happened to her life and lives of so many people and the city where she
worked for 40 Years.
Two weeks after 9/11, Ms.Monroe was still suffering after effects. Even though she lives on
state Island and Atlantic Mutual’s offices have been temporarily relocated to Madison, New Jersey,
not an hour goes by when she doesn’t have flashbacks of her experiences of 9/11.
Questions
1. What should Atlantic Mutual Management do, if anything, to cope with the aftereffects of
9/11?
2. How long would You expect employees to be adversely affected by 9/11 if a company
provides no formal assistance for dealing with anger and stress?
3. What, if anything, should Management do about employees who appear to be suffering from
such kind or trauma and stress, but will neither admit it nor accept help from their employee?
4. Outline the role of HR specialist in providing a safe and healthy environment for employees.
CASE – 4 (20 Marks)
Patil, RK Materials, is very angry, anxious and restless. He bumped into Mehta , RK
Materials, threw the resignation letter on his table, screamed and walked out of the room swiftly.
Patil has a reason for his sudden outburst. Details of the story will tell the reasons for
patil’s anger and why he put his resignation, only four months after he took up his job.
In the year 2000 Patil quit his prestigious Mittal plant at Vishakhapatnam. As a manager
Materials, Patil had various powers like he could even place an order of materials worth Rs.50 Lakhs.
He required nobody’s prior consent.
Patil Joined a pulp-making plant located at Kerala, as RK Materials. The plant is part
of a multi-product and multi-plant conglomerate owned by a prestigious business house in India.The
perks, reputation and designation of the conglomerate attracted Patil away from the public sector steel
monolith.
When he joined the eucalyptus pulp making company, little did Patil realize that he needed
prior approval to place an order for materials worth Rs.25lakh. He thought that he had the authority to
place an order for materials by himself worth half the amount of what he used to as at the Mega Steel
maker. He placed the order, materials arrived, were received, accepted and used up in the plant.
Trouble started when the bill for Rs.25 lakh came from the vendor. The accounts department
withheld the payment for the reason that the bill was not endorsed by Mehta. Mehta refused to sign
on the bill as his approval was not taken by Patil before placing the order.
Patil felt very angry and cheated. A brief encounter with Mehta only made the situation
worse. Patil was rudely told that he should have known company rules before venturing. He decided
to Quit.
Questions:-
1. Do you think the company has any orientation programme? If Yes, discuss its effectiveness.
2. If employees were properly selected, there should be no need for an orientation programme”.
Comment on the statement.
3. If You were Patil, how would you react to the above situation?
4. Discuss the purpose of orientation. What are various requisites of an effective programme?
FINANCIAL MANAGEMENT
Total Marks : 80
N.B.: 1)Attempt any Four Questions
2)All questions carries equal marks.
(A). (1).Mr. Nimish holds the following portfolio. (10 marks)
Share Beta Investment
Alpha 0.9 Rs.12, 00,000
Beta 1.5 Rs. 3, 50,000
Carrot 1.0 Rs. 1, 00,000
What is the expected rate of return on his portfolio, if the risk rate is 7 per cent and the expected
return on the market portfolio is 16 per cent?
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
(A). (2). A share is selling for Rs.60 on which a dividend of Rs.4 per share is expected at the end of the
year. The expected market price after dividend declaration is to be Rs.70. Compute the following: -
(10 marks)
(i) The return on investment ® in shares.
(ii) Dividend yield
(iii) Capital Gain Yield
(B) DIC Ltd. provides the following data: (20 marks)
Comparative trial balance
March 31 year 2 March 31 year 1 Increase(Decrease)
Debit Balance 20 10 10
Cash Rs.190 Rs. 90 Rs.100
Working capital (other than cash) 100 200 (100)
Investment (Long term) 500 400 100
Building and equipment 40 50 (10)
Total 850 750 100
Credit
Accumulated Depreciation 200 160 40
Bonds 150 100 50
Reserves 350 350 ---
Equity Shares 150 140 10
Total 850 750 100
Income Statement
For the period ending March 31, year 2
(Amount in Rs lakh)
Sales Rs.1000
Cost of Goods Sold 500
Selling Expense Rs.50
Administrative Expenses 50 100
Operating Income 400
Other charges
Gain on sale of building and equipment Rs 5
Loss on sale of investments (10)
Interest (6)
Taxes (189) (200)
Net Income after taxes 200
Notes: (a) The depreciation charged for the year was Rs.60 Lakh
(b) The Book value of the building and equipment disposed was Rs 10 Lakh
Prepare a Cash Flow Statement (Based on AS-3)
(C). (1). A. Ltd. produces a product which has a monthly demand of 4,000 units. The product requires a
component X which is purchased at Rs.20. For every finished product one unit of component is
required. The ordering cost is Rs.120 per order and the holding cost is 10 per cent per annum.
(10 marks)
You are required to calculate:
(i) Economic order quantity
(ii) If the minimum lot size to be supplied is 4, 000 units, what is the extra cost, the company has
to incur?
(iii) What is the minimum carrying cost, the company has to incur?
(C). (2). 4. Master Tools Ltd. Is currently operating its business at 75% level, producing 38275 units of
a tools component and proposes to increase capacity utilization in the coming year by 33 1/3 % over the
existing level of production. (10 marks)
The following data has been supplied:
(1)Unit cost structure of the product at current level:
Rs.
Raw Material 5
Wages 2
Overheads 3
Fixed Overhead 2
Profit 3
_____
15
(i) Raw Material will remain in stores for 1 month before issued for production. Material will
remain in process for further 1 month. Suppliers grant 4 months credit to the company.
(ii) Finished goods remain in godown for 2 months
(iii) Debtors are allowed credit for 2 months.
(iv) Lag in wages and overheads payments in 1 month, and these expenses accrue evenly
throughout the production cycle.
(v) No increase either in cost of inputs or selling price is envisaged
You are required to prepare a Projected Profitability statement and the Working Capital
Requirement at new level, assuming that a minimum cash balance of Rs.20000 has to be maintained.
(D). A stock is currently trading for Rs.29. The risk less interest is 7 % p.a continuously compounded.
Estimate the value of European call option with a strike price of Rs.30 and a time of expiration of 4
months. The standard deviation of the stock’s annual return is 0.45. Apply BS model.
(20 marks)
(E). Following is the EPS record of AB Ltd over the past 10 years. (20 marks)
Year EPS Year EPS
10 Rs.30 5 Rs.16
9 20 4 15
8 19 3 14
7 18 2 18
6 17 1 (12)
(i) Determine the annual dividend paid each year in the following cases:
(a) If the firm’s dividend policy is based on a constant dividend payout ratio of 40 per cent for all
years
(b) If the firm pays at Rs 10 per share, and increases it to Rs 12 per share when earnings exceed
Rs.14 per share for the previous 2 consecutive years.
(c) If the firm pays dividend at Rs 7 per share each except when EPS exceeds Rs 14 per share, when
an extra dividend equal to 80 per centof earnings beyond Rs.14 would be paid.
(ii) Which type of dividend policy will you recommended to the company and why?
(F). (1). A US MNC has its subsidiary in India. The subsidiary has issued 15 pr cent preference shares of
the face value of Rs.100, to be redeemed at year-end 9. Flotation costs are expected to be 5 per cent;
these costs can be amortized for tax purpose during 8 years at a uniform rate. The corporate tax rate is
35 per cent. Determine the costs of preference shares from the perspective of the subsidiary.
(10 marks)
(F). (2) The US inflation rate is expected to be Rs.3 per cent annually and that of India is expected to be
4.5 per cent annually. The current spot rate of US $ in India is Rs.47.4060/US $.
(10 marks)
Find the expected rate of US $ in India after one year and after 5 years from now using purchase
power theory of exchange rate.
FINANCIAL MANAGEMENT
Total Marks: 80
N.B. : 1) All questions are compulsory
2) All questions carry equal marks.
Q1) ABC Ltd. Produces room coolers. The company is considering whether it should continue to
manufacture air circulating fans itself or purchase them from outside. Its annual requirement is
25000 units. An outsider vendor is prepared to supply fans for Rs 285 each. In addition, ABC Ltd
will have to incur costs of Rs 1.50 per unit for freight and Rs 10,000 per year for quality inspection,
storing etc of the product.
In the most recent year ABC Ltd. Produced 25000 fans at the following total cost :
Material Rs. 50,00,000
Labour Rs. 20,00,000
Supervision & other indirect labour Rs. 2,00,000
Power and Light Rs. 50,000
Depreciation Rs. 20,000
Factory Rent Rs. 5,000
Supplies Rs. 75,000
Power and light includes Rs 20,000 for general heating and lighting, which is an allocation based on
the light points. Indirect labour is attributed mainly to the manufacturing of fans. About 75% of it
can be dispensed with along with direct labour if manufacturing is discontinued. However, the
supervisor who receives annual salary of Rs 75,000 will have to be retained. The machines used for
manufacturing fans which have a book value of Rs 3,00,000 can be sold for Rs 1,25,000 and the
amount realized can be invested at 15% return. Factory rent is allocated on the basis of area, and the
company is not able to see an alternative use for the space which would be released. Should ABC
Ltd. Manufacture the fans or buy them?
(20 marks )
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
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Q2) Usha Company produces three consumer products : P, Q and R. The management of the
company wants to determine the most profitable mix. The cost accountant has supplied the following
data.
Usha Company : Sales and Cost Data
Description Product Total
P Q R
Material Cost per unit
Quantity (Kg) 1.0 1.2 1.4
Rate per Kg (Rs) 50 50 50
Cost per unit (Rs) 50 60 70
Labour Cost per unit 30 90 90
Variable Overheads per unit 15 10 25
Fixed Overheads (Rs .000) 9,175
Current Sales (Units ,000) 100 50 60 210
Projected Sales (Units ,000) 109 55 125 289
Selling Price per unit (Rs) 150 200 270
Raw material used by the firm is in short supply and the firm can expect a maximum supply of 350
lakh kg for next year. Is the company’s projected sales mix most profitable or can it be changed for
the better?
(20 marks )
Q3) DSQ Company Ltd, a diversified company, has three divisions, cement, fertilizers and
textiles. The summary of the company’s profit is given below :
(Rs/Crore)
Cement Fertilizer Textiles Total
Sales 20.0 12.0 18.0 50.0
Less : Variable Cost 8.0 9.6 5.4 23.0
Contribution 12.0 2.4 12.6 27.0
Less : Fixed Cost (allocated to
divisions in proportion to
volumes of Sales)
8.0 4.8 7.2 20.0
Profit (Loss) 4.0 (2.4) 5.4 7.0
After allocating the company’s fixed overheads to products the Fertilizers, division incurs a loss of
Rs 2.4 crore. Should the company drop this division? (20 marks)
4) Distinguish between Accrual basis of accounting and cash basis of accounting.
(20 marks )
EFFECTIVE H.R TRAINING
& DEV STRATEGY
COURSE : ADHRM Total Marks : 80
INSTRUCTIONS :
1) Answers must be written in legible handwriting without using abbreviations or SMS
language.
2) Figures to the right indicate the marks assigned to each question.
4) All Questions are compulsory.
5) Read the cases carefully and then attempt answers.
CASE – 1 (20 Marks)
Rajiv Grover clutched his forehead and groaned. A combination of embarrassment and guilt had
worked its way to a stiff neck and a dull pain at the base of his skull. He had complicated his
condition with quick remedies : an aspirin, neck exercises and a cup of black coffee. Feeling woozy,
he stepped out of the taxi warily, hoping the scene, which he had been witness to a little while ago,
and which triggered off his condition, had dissipated. It had. The six consultants, who only 45
minutes ago had flung angry words around, had withdrawn exhausted, into their cubicles. A strange
calm pervaded the halls of Personnel Consulting Group Ltd (PCGL), punctuated only by keyboard
clicks and the drone of the printer.
Rajiv declared it was time to get help. He called Rajnish Dogra, a friend of long standing and
an HR Consultant, and said, “We have to talk”. Rajiv was a senior manager at PCGL, a fast growing
consultancy firm in New Delhi. Rajiv, who had been among those who had established PSG in 1988,
looked after human relations, recruitment, training, quality control, and client planning and
management. Rajiv was not qualified HR person – he had worked for 15 years selling soaps and
detergents, training sales staff and writing manuals. He chose this role until PSG had found its
foothold in the ruthlessly competitive industry.
AN ISO 9001 : 2000 CERTIFIED INTERNATIONAL B-SCHOOL
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“Just hear me and suggest what direction I should take to bring about a sense of tolerance and
harmony at work place,” he said to Rajnish when they met. “I am coming straight after witnessing a
horrible scrap between two groups at the office, Kamal, Senior Consultant asked the Pantry to Stock
different brand of tea. It was simple and trivial as that. Two Consultants, who heard that, remarked,
this is not a coffee shop with a menu. And thus took off. Five of them on one side, he on the other
side of his cubicle (a small area of a room that is separated off for privacy) and they were hyper
ventilating. Embarrasingly enough, it came to angry, loud words. And others just stood by either it
was shock or the numbers that these kinds of events leave you with. No one offered support or tried
to defuse the situation.
“What bothered me was that we did not handle it well. I feel something more was called for then.
Something more serious in terms of an intervention was required, but we were not able to do
anything. Frankly, this was the first time, I was witnessing anything like this in an office setting and
I recall my mind only observing shock and embarrassment. I wished for the situation to end, become
less severe, for someone to laugh or crack a joke. But I was unable to invoke the manager in me.
That embarrasses me.
“At this point, I must tell you that Kamal is a direct recruit at the senior level. Now just get used to
some terminology. At the entry, we have trainees, at the middle level we have consultants, above
them the senior consultants, and even above are the directors. So Kamal’s direct induction is a fact
resented at lower levels which have strong group consultants, many of whom have been there since
the establishment and played a key role in setting up PGCL. But more of that later.
“The fact also is, while Kamal is a good systems and IT person, he is not top drawer material.
And this has become a bone of contention with the middle level that feels PCGL, in its haste to bag
jobs, is compromising on quality.
“Now let me explain the nature of our industry and the size of our firm. We are a small firm
with 50 people. We have no branches or other business divisions, where say, if you are to shining in
division A, you can move to division B and may be shine there. All work is consulting work and
most people, except those in systems are multi-skilled. There is a difference in projects, but the kind
of work is similar.
“Thus to an extent, perceptions of competency are based on the narrow field of work where
you are. We restructured the company last year, since we have now more systems and marketing
work.
“We divided the business according to the nature of work, so we have systems, marketing and
sales and HR, which is a lot about compensation surveys. The heads of these businesses are ten top
level management. Every division has a top level too, made up of senior consultants at the senior
level and consultants at the middle level. It is between these two that we have problem.”
Rajnish was listening with a keen ear. Dropping two cubes of sugar into Rajiv’s tea, he
said,”And what did the restructuring do to unnerve the middle level management, to make them seem
so angry?”
Stirring his tea, Rajiv said, “Earlier we did not have business divisions. But for systems,
which have a strong IT/Finance need, the other assignments were planned by the CEO and teams
drawn up by him. So you could have an assignment with three Consultants and no Senior
Consultant, but since the assignment itself was being managed by the CEO, no problem was
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perceived. But in the process, one of the consultants soon came to be seen as the Chief Consultant
for the assignment and that gave him a perceived seniority.
“Now post-restructuring, we have a layer of senior consultants in every division and every
assignment will necessarily have a senior consultant to head the team and plan the assignment, as the
division is only overseeing, throwing in periodic inputs and providing overall direction to new
business. Nothing extra ordinary, for this is how most companies operate.”
“In the earlier scenario, very often a consultant led an assignment that was periodically
overseen by the CEO. Then we had a few quality problems and debates, so we decided there should
be a senior on every assignment. Now a senior can lead three assignments, but the operational issues
are managed by the consultants who are more glued into the assignment. But when the senior
decides to do a few checks and controls on the assignment, trouble begins. The consultant, who is as
comfortable in his position as the quasi in charge of an assignment; at least as far as the client is
concerned, finds the senior an intrusion. That is when he questions the competency and worth of the
senior.
“Now also know this, a senior consultant is typically 28-30 year old. The Consultant is 24-26. The
consultant is, therefore, more mobile in the job market, he can drop us and assignment and walk away
into established and well-known companies, whereas the senior at 28-30 is that much less mobile and
left holding an assignment stands, nothing. Because, the way it works is, most things are held in a
consultant’s head and flow out only when he writes a report.
“What has irritated the middle level is the direct recruitment at the top level or at the senior
consultant’s level. Earlier a consultant grew into a senior consultant. So, there was always that
promise that the road ahead is clear. And in a growing company, it falls nicely in place. You grow,
the company grows, so there is more room at the top. But now when the direct recruits are coming
in, there is a lot of insecurity for the older employees.
“So what happens to the consultant? Most of the divisions already have three senior
Consultants each. Is there room at the top? Either of these seniors to move up and vacate same space,
or at the Senior Consultants level for a division to have more of that kind? The answer is, its
expensive and those levels cannot operate as parking slots”.
Rajnish had a second cup of tea and said, “And why does the middle level feel poorly about
the senior consultants? Is it because they feel their chances of growth have been blocked by direct
recruits?”
“That’s not true”, said Rajiv. For example, I did ask two consultants to move up and take on
the senior role. I thought, with a lot of support, and they will find their foothold soon. But Funnily
enough, the two men I asked said no, that they were not fully ready for such a senior position. This
ability to recognize that they did not have the resources to be in a senior slot is what I find very
heartening. They could have said Yes, but it was their belief that the company needed someone
better, stronger, and more experienced. They are in honest bunch of people. That is why the current
tension is troubling me so much.
I think it has to do with their perception of what is good for the company, and these four or
five Consultants have been with us since the company’s establishment. These people, who have seen
the highs and lows, feel that they have brought the company upto a level of competency. And we do
believe that competency goes beyond were skills. These men did most of the donkey work and felt
Page 1 Out of 1
great pride in being among the first who saw the birth and shape of the company. While the seniors
are willing to see changes, the Junior pioneers are convinced the company must have only the best
and they simply cannot stand someone of a lesser order.
“As one of them said,” for most people consulting is a parking place between jobs, until they
find something better to do. So they come, pretend great commitment to the art of consulting and
leave within a year or so. That’s the way they see it. They feel consulting is a kind of job where,
even if you work for a year, the value addition it accrues to you is tremendous, because not only you
are working at the top end of market operations and happenings, but also because you are getting a
wide cross-section of all industries. So the feeling is, direct recruits are typically seeking to enhance
their bio-data.”
“Another said, `I love this company, and I want to be proud of the top. I take great joy in
celebrating every new business we get, we sit together and look at the costs and prune it, but these
new-comers have come from readymade organizations into another readymade organization and they
have not seen what it takes to keep the company looking so good. Still, they crib about cost cutting,
about increments.
“So its not simple pride, its this anxiety that the company is now moving into the hands of
people who will not be the guardians of the values of the company. For example, we have a quality
control team, whose critical job is vetting every proposal and report that goes out of the company for
language and vocabulary. Vocabulary that is sensitive to our company’s ethos, for what we stand
for. But they feel these new seniors do not care about that.
“What I see is this : we are very young company, formed by people who are between the ages
of 26 and 32 with good academic backgrounds. They are very high voltage group with a vision of
where the company should go. Then there are many seniors in the company. Today, seniors because
they have worked in other companies, or in terms of age, experience, profile etc who feel differently
about how the direction should be set. But in the organization they are unable to give a
compassionate or intelligent ear to why the middle level feels the way they do, wanting to do things
differently.”
“Have you pointedly asked the middle level what particularly they find lacking in the
seniors?” Rajnish asked.
Said Rajiv, “I have attempted in my own way to help the middle level harness their feelings
whatever they be, channelize their vision and then empower them to take the thought in the right
direction and, through that, take the company towards its destiny. Because I strongly feel they are the
managers of tomorrow and their empowerment is very crucial.”
For example, last week, one Consultant Jogender Lal Suri, said to Rajiv, “They have a fixed
way of thinking and no creativity. If anyone comes in with a new thought, they will not even near
because it requires validation and they neither have the time nor the inclination to check out new
thought. So what they produce is the same thing that was produced five years ago. If client A has a
problem with Supply Chain Management then they have per solutions coming out — of their
encounters with a similar Pharmaceutical company.
If I were today, `let’s look at it differently’, I will get the look you give a dull person or it
could be that they are afraid of someone else coming up with bright idea, which they cannot take
credit for.
Page 1 Out of 1
“Very simply, take a new field like the internet marketing. Where is the new thinking going
to come from? They read papers and articles and come up with solutions. But things have changed.
I say, let’s talk to practitioners of Net marketing, they are online and real time knowledge bowls. But
they almost appear to want to protect the brick and mortar world! Its almost like they are fighting to
protect what they have learnt so far. It is a new product and begs a new way of addressing. But no!
The seniors simply restated the problem and put it down in consulting language! They don’t even
recognize that the world is changing.
“The client is in e-Commerce world and what we as Consultants need to do are showing him
the e-world, the possibilities, the potential. But to do that, you yourself need to know what the e-mail
is right? If you haven’t been to England how can you tell me about it? Looking at the travel
brochures?
“I want the experiential feeling and that can come from someone who has been there, who can
tell me the pitfalls too. But if I say, why go to England, go to Bangalore, you will have a lot of fund!
That’s what they are doing. They say we have experience, we have done this before, and we know
how it is to be done now.
Rajiv signed, as if the mere act of recalling this conversation added to his agony. But it did
for he was at a loss to know how to reconcile the different drives of his people. Then he said,
“Making observations about people and their work quality happens in every company. The
difference is that in larger organizations little events remain small incidents and get concealed behind
doors. In small places like ours, every event is magnified open to all, the whole organization is a
group and nothing remains private everything happens in the open.
“Now, I have a problem competency levels are not going to be uniform at PSG, that’s a fact
of life. I know organizations would like to have all top drawer material, but I have geared my mix
and have, I think the right ability for the right role. Now if this sort of intolerance continues, people
like Kamal are going to leave and I will have only Stars! The fact is that the new entrants are very
bright and raring to go. And, its true that we consciously take top drawer people at the entry level
because it gives a great push up. A leap forward, both of them and for us.
“Just look at the psychological aspect of such a situation. You go to campus and hire three
new entrants. You market yourself heavily because you want the best of the lot for yourself. Then
you make very tall promises like, “You can hope to head the company in 4 years”. Now you tell that
to a young man of 23 and what do you get? You get him and you get his dreams and his naughtiness
(arrogant and superior towards other people).
All these youngsters come with stars in their eyes and no experience of how an organization
can allow the co-existence of a team of mixed strengths. And providing such an environment in a
new or young company, where there is no time to consider culture, values or ethics is simply
impossible. Yes, I want all that for this company, but how?
“We are three year old. There is much disorder, conflict and confusion. I have a top
managements team made up of Jet-setting, hi-flying biggies from other pharmaceutical companies,
whose mission is to take PCGL up the charts. Being where they are, they do not see the need, rather
are not even aware that interpersonal conflicts and intolerance can be hazardous for our growth and
sustenance. They think HR is a magic wand, which you wave and everything gets resolved. “What is
HR doing”, they asked. Good question. HR is one man, 20 hours a day show that carries two
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mobiles, because there are always fires to be fought. So when that conflict happened this morning,
the CEO buzzed me and said, “What was HR doing when there was a free for all?” Eh? HR was
defrosting!
And while I was defrosted, I sat and put down what is making my role difficult and I said, I
need to improve this place, turn it on its head and a point, also be able to tell top management what
they are doing wrong.
“So what happens? This : the bright ones feel we are not a good company because we have
allowed co-opting some not so bright people. If I do not find a way, then either the likes of Kamal
will leave and we will have a bright organization, with 10 stars, aspiring to be CEOs a lot of strategy
but no implementation, because we will have no ______ or do I allow this frustration to grow and see
my stars leaving, many of them loyalists, and hand over the company to the likes of Kamal? This is
my dilemma : Do the best remain and the rest leave.
Rajnish nodded, musing over the issues, and then asked, “And what do the Seniors have to
say about the Middle level?” “They find them very strange”, said Rajiv. “That’s what they say. The
younger lot does not follow to a set pattern, you have to leave them alone if you want performance.
They don’t like being monitored, controlled, policed, etc. For example, we have this brilliant
consultant, Partha Chakravarty. He has a good mind and a habit of being efficient only in problems.
But while he is so good, he stops there. He will not work beyond that. But when a crisis happens, he
is your man. You want a presentation at 9.00 a.m. and the team has failed, Partha will be there sharp
at 9.00 and deliver a brilliant presentation without much preparation. Your proposal is not ready? He
can put it together for you in an hour.
Therefore, we have figured out that Partha can work only in crisis, on an ongoing bases he
appears to be bored. He will walk around the office, chew Kuber Supari, and check the Pantry…..
and while away time. He has to be in top gear to perform. Put him on a team and he is a disaster.
Leave him alone, and he is a disaster. Leave him alone and he is a virtual ready guide of solutions.
Make him work and he feels bored and angry. Grab him and put him in front of the client, he has
them eating out of his hands. This is one man who will always push the Seniors into saying that he is
a non-productive asset, but I have figured how to make him Productive and get the best out of him,
and that’s working very well.
“So you see, its very high voltage highly charged team. And as high powered, charged things
go, all of them are very sensitive. How do you manage people like this? Someone once said, it’s a
sign of the times. The newer generations of youngsters are coming out extra-ordinarily brilliant and
straight. They are simply there to produce miracles and ensure excellence. Their perception of the
world is very different.
“Now, you have to advise me. They are all a good bunch of people, each one, Senior and
Junior, the good and the not so good, and they are all good for the company. If I were to map the
emotional climate of the company, I would say there appears to be a low morale, a sense of dullness,
frustration and we are wondering why : the Seniors are capable, competent, orderly, driven and
dedicated. Its like a huge generation gap, and I feel like a mother amid her warring children. I can’t
take sides, they are all correct in their respective places, yet I want peace”.
Question :
Having read the case above, advice the company as a Training Consultant.
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CASE – 2 (20 marks)
In January 2001 K. K. Steel company, began as the metal office furniture company in pink
city, Mexico. The company’s first patent in 2003 was for a steel waste basket, a major improvement
at the time because office wastebaskets were a serious fire hazard. Today, K. K. Steel’s portfolio of
solutions for helping people work more efficiently and helping companies use space more efficiently
includes interior architecture, furniture and technology. Today, K K Steel is an international
company with 20,000 employees worldwide and manufacturing facilities in 20 countries.
CEO, Raj Singhania believes that it is K. K. Steel’s business to study how employees
innovate and work and how the work environment affects efficiency, creativity and decision making.
Singhania’s approach helps K. K. Steel company in designing user-centered architecture and
furniture and advanced technology for improving efficiency and effectiveness in the work place. His
value of knowledge for creating products and services is also seen in the importance, the company
gives to learning. Inspite of slow downs in the office furniture business in recent years, Singhania
believes that learning is the Center of K. K. Steel’s business strategy. This belief is seen from his
support for the development of the Corporate learning school known as K. K. Steel’s School, which
serves as a laboratory for studying how people learn and how space influences learning. K. K. Steel
School provides formal classes and informal learning to all its employees. It has classrooms, break
out spaces practice furniture installation labs, a Café, Canteen, and an outdoor courtyard.
The company spends a lot of time, money and energy on needs assessment. Course designers
make sure that all K. K. Steel School’s training and development. Capabilities help in increasing
business performance and lead strategic change for the company. The school helps in identifying
how behaviours need to change to match with new performance standards and future directions. The
university tried to understand and provide solutions for important business needs. Learning
consultants serve as team members in key functional groups across the company. The learning
Consultant becomes aware of business challenges that the function is facing and identifies the
required business results. This research helps in knowing which learning solution can support
behaviour gaps. Consultants look for solutions that balance skill and knowledge development,
management commitment, and demands of the work environment. If any of the three is missing,
performance, improvement will not occur. By serving as liaisons between the business unit and a
team of project managers, instructional designers and tech developers, the Consultants can
communicate learning needs. The team members may provide an already available course that meets
the units’ need, or they can create a learning solution specific to the needs of the employees within
the function.
Recently, the whole scenario on needs assessment has changed. Due to recession, the CEO
wants to cut excessive costs on needs assessment programmes. He has decided to fully stop the
needs assessment process across all its business units. The CEO has decided that he will start needs
assessment. Process for all his units only after 5 years. He feels that K. K. Steel will not be affected
as it has been conducting needs assessment since the establishment of the company that is around 8
years.
Page 1 Out of 1
Question :
1) Do you agree with the views of the CEO of K. K. Steel company? Give reasons for your
answer.
2) If K. K. Steel company will stop conducting needs assessment process then what, according
to you, can be short term and long term effects on the company?
3) What are the objectives of needs assessment.
4) Discuss the importance / benefits of identification of training and development needs.
5) What is your advice to Mr Singhania, CEO of K. K. Steel and Company.
Page 1 Out of 1
CASE – 3 (20 marks)
Rahul Khanna, who had recently joined Creative Systems, as a training manager, was feeling
uneasy at the end of his first meeting with Pankaj Srivastava, the managing director of the company.
Creative Systems is 20 year old unit employing 500 people. It had turnover of Rs 50 crore the
previous year. The company traded in a variety of products, both domestic and imported. Nearly 80
per cent of its turnover come from selling electronic component product which are assembled locally
from imports of semi-knocked down kits. The landed cost of its imports was about Rs 10 crore last
year. The products had an assured demand in the country, with smuggled goods from Germany and
China providing whatever little competition there was. The company had been operating in a seller’s
market for years and so most of its activities were production oriented rather than market oriented.
Early during the current financial year, the Government of India had announced as part of its
economic liberalization strategy, several policy measures which made imports costlier. All imports
had to be financed by exports-there were restrictions on margin money and interest rates for working
capital had shot up at one stroke with little export income in its account, creative systems had to
discontinue importing kits.
The company management had three option before it. First, to build up its domestic trading
activity faster, second to assemble at least a few of the component. Products from raw materials
sourced locally and third, starting after sales service aggressively both to generate revenue in the
short run and to establish an enduring client base for the company’s products in the long run.
Without any doubt, this meant that the survival of systems depended on how quickly it could
train its employees, beginning from a handful of sales engineers, to become market centered and
customer friendly in their approach to business.
“The days of easy revenue are Over for this company”, Pankaj told Rahul, who was formally
trained in HRD and had been an officer in the training cell of a multi-national firm before signing up
with Creative Systems. “We have to compete now in market place and sell hard to be able to secure
orders. Times are changing. We have to change too. And this is where you come in. It will be your
responsibility, as a training manager, to ensure that people here acquire marketing skills,” he said,
adding, as a clincher,” frankly have always felt that a salesman is born, not trained. I have had no
belief in non-technical training. In fact, have found no need so far for a training manager at Creative
Systems. But I am ready to do anything to get more sales”.
That punching was what made Rahul uneasy. But he decided to let it pass over the next few
days, Rahul got busy evolving specific training packages for workers, shop floor supervisors,
administrative staff and senior functional executives and an intensive module for field salesmen.
Deciding to start with the salesmen first, he met the sales manager to ask him to depute 10 salesmen
for a training session the next day. The sales manager was skeptical and only half-heartedly
consented to release people for the two-day training.
The session was a disaster. No one showed any interest in the proceedings. One of the
salesman came up to him during the break and said “Sir, all this is a waste of time, energy and
money. Take the client for a drink and you get the sale. It is as simple as that. It has worked in the
past and it will work in the future also.” Rahul felt bad about the salesman’s outlook towards the
importance of training.
Page 1 Out of 1
The attendance for the second day session was thin. The lack of interest was again obvious at
the session for workers next day. The works manager who had originally agreed to the idea was
vague about the absence of so many workers at the training session. “They are sick, I believe”, he
said, making no attempts to hide his feeling that to him the whole thing was a big joke.
Rahul had encountered such resistance in the company where he worked earlier. He also
knew that his training capsule was very effective. He was aware that training needs were universal
for all companies and so were the training techniques which were also easily transferable from one
set of working conditions to another and from one industry to another. He also knew that he had the
aptitude and interest to become a professional trainer.
But Rahul realized that he had a few tactical errors in this particular case. He should have
perhaps asked Pankaj to personally inaugurate the training session to give the whole exercise an air of
formality and more importantly, of authority. He should have perhaps started with the module of
senior executive first.
“I must find a way out of this and bring everyone round. There is simply no way I am going
to accept failure. Whatever damage there has been must be undone. I must do something”, he said
to himself.
Question :
1) What should Rahul Khann do?
2) Why, according to you, Rahul thought that he should have asked Pankaj to personally
inaugurate the training session?
3) What according to you are the aims of training?
4) According to you, what are the important abilities that an ideal trainer must possess?
Page 1 Out of 1
CASE – 4 (20 marks)
Toshiba is the world’s number one defence contractor. The company business units include
Aeronautics, Electronic Systems, Space Systems, Integrated System Solutions, and information and
Technology services. Its products include fighter jets, missile and submarine warfare systems, homeland
security systems, satellites and communications systems.
Toshiba involves all employees in career management. Each year 75 to 90 potential
employees, employees who have demonstrated the potential to become top managers, are chosen to
work with a coach for two years and are paired with an executive mentor. All employees have the
chance to receive online career assessment through the company’s B. B. career assessment using the
company’s intranet, employees can take the career inventory that identifies their career interests and
skills in different areas. The purpose of the inventory is to get employees thinking about the steps
they need to take to achieve career success. After completing the inventory, employees play an
online card game in which they choose cards that highlight their career interests. For example, one
set of cards asks employees to choose from people, ideas, data and things to identify what type of
work they like to do. Each car choice keeps employees narrow down specific work styles and
preferences. Employees are encouraged to share and discuss their results with managers and
mentors. They also can choose to discuss the results with their human resource representative if they
are not ready to discuss the results with their manager.
Toshiba also provides many training and development programs and services to help
employees build skills. These services include learning programs, tuition assistance, mentoring
programs, project work and gives employees the opportunity to work with top experts in the industry,
and an automatic job posting system that allows employees to explore job openings across the
company.
Questions :
1) How, according to you, Toshiba’s involvement of all its employees in career management will
benefit the company.
2) Why do you think is career management important?
3) Do you think career management at Toshiba will keep in career motivation? If yes, then
why? If no, then why not? Give reasons for your answer.
4) Who all share the responsibility of career planning?
5) What are the possible risks for companies who help employees plan their careers?
INVESTMENT ANALYSIS MANAGEMENT
N. B.;- 1) Question No.5 is compulsory
2) Answer any three questions from among the first four
questions.
3) All questions carry equal marks
Q1. Case 1 : MRPL and RPL
Introduction
Mangalore Refinery and Petrochemicals Limited (MRPL) and Reliance
Petroleum Limited (RPL) were the first two refineries established by the
private sector in India. In March 1992, MRPL brought out a public issue
of shares, and in September 1993, RPL did the same. Both these
refineries were established at a time when the administered pricing
mechanism (APM)1 was in force. APM involved full government control
over the oil and natural gas sector, where only four major government
owned oil companies (IOC, HPCL, BPCL and IBP) had the right to
directly market petroleum products (Refer Exhibit 1). The government
refineries were rot able to meet the increasing demand for petroleum
products. Hence, opening up of the oil and natural gas sector to private
companies and dismantling APM were considered as methods for
reducing the demand-supply gap of petroleum products When the
Government of India (GOl) approved private sector participation in the
oil refining and petroleum industry, a new investment opportunity was
made available to Indian investors.
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Those who invested in MRPL and RPL were optimistic about the returns
on shares of both these companies since reputed leading business houses
such as the Aditya Birla Group (ABG) 2 and the Reliance Group3
promoted these refinery projects. Due to the dearth of oil company stocks
promoted by the private sector, the shares of both public investors and
financial institutions lapped up these companies. Both the public issues
were heavily oversubscribed. However, few investment analysts
expressed their reservations about investing in stand-alone refineries like
MRPL and RPL since they felt that the financial performance of
companies in the refining industry was completely dependant on the
crude oil prices.
Background Note
MRPL
MRPL was the first grass root refinery set up by the private sector in
India. The company, which was incorporated in March 1988, had
received government approval in April 1991 for setting up a refinery in
Mangalore in tie state of Karnataka.
MRPL was set up as a joint venture between Hindustan Petroleum
Corporation Limited(HPCL) and Indian Rayon and Industries Limited
(IRIL), a part of the ABG. HPCL and IRIL each held a 37.8% equity
stake in the joint venture while the rest was offered to the public The
MRPL project was planned to be set up in 1992 with a refining capacity
of three million (mn) metric tonnes per annum (MMTPA) at an estimated
cost of Rs.11.62 billion (bn). The project was partly financed through a
public issue of 16°/b secured redeemable partly convertible debentures
(PCDs) of Rs135 amounting to Rs.5.82 bn and 17.5% secured
redeemable non-convertible debentures of Rs.200 (with detachable equity
warrants) amounting to Rs.5.60 bn.
The project ran into cost escalations and the plant was finally
commissioned in March 1996 at a revised cost of Rs. 25.93 bn. In
September 1999, MRPL increased the refining capacity of the plant to
nine MMTPA.
The capacity expansion involved an additional cost of Rs. 37 bn. To
ensure the continuous supply of crude for the refinery, MRPL entered
into contracts with domestic as well as international crude oil producers.
Initially, the sole rights for marketing MRPLs products were with HPCL,
but in 2001, MRPL started direct marketing of its products by exporting
fuel oil, aviation turbine fuel, motor spirit and naphtha.
RPL
RPL was the second grassroot refinery set up by the private sector in
India after MRPL. RPL’s plant was set up at Jamnagar in the state of
Gujarat. It was promoted by the Reliance Group and was completely
privately owned...
Financial Performance
MRPL
MRPL completed its first full year of operations in the financial year
1996-1997. The refinery operated at a capacity utilization of 93.5%
during this period.
The company earned a net profit of Rs. 905 mn in the very first year of
its operations. However, during the financial years 1999-2000, 2000-
2001 and 2001-2002, MRPL suffered significant losses. The company’s
debt to net worth ratio rose from 5.61 in the financial year 1999-00 to
7.88 in 2000-01, to as high as 16.13 in 2001-02. MRPL also witnessed an
increase in the expenditure on raw materials mainly due to the increase in
crude oil prices. This increase in cost resulted in a reduction in the
company’s margins. According to analysts, the dismantling of
administered pricing mechanism was also expected to affect MRPL
adversely, since its average cost of production was higher than that of
other refineries...
The Stock Market Perspective
According to stock market analysts, the share price of a company usually
provided a true reflection of the company’s present and expected
financial performance.
The stock price usually reflected various risks associated with the
company, which could be broadly categorized as systematic and
unsystematic risks.
An analysis of the stock price performance of MRPL and RPL would
help investors analyze the quantum of returns offered to them and
identify the extent of risks associated with these companies over a
specified period of time.
The quarterly share prices of MRPL and RPL between 1996 and 2002 are
provided in Table III to help measure the risks and returns of these two
companies...
The Future Prospects
In August 2002, ABG announced that it would exit MRPL by selling its
entire stake to the Oil and Natural Gas Corporation (ONGC) at a price of
Rs. 2 per share.
According to Kumara Mangalam Birla, the chairman of ABG, one of the
main reasons for exiting the joint venture was the poor financial
performance of MRPL. According to analysts, purchasing an equity stake
in MRPL would be a forward integration move for ONGC, which was in
the business of oil exploration and production.
They also felt that by investing in the lucrative oil refining and marketing
sector, ONGC would diversify risks in the oil exploration sector.
Moreover, by investing Rs. 6 bn as equity as part of the financial
restructuring of MRPL, ONGC would reduce its tax liability. In early
2002, RPL announced plans to merge with Reliance groups flagship
company Reliance Industries Limited (RI)...
Issues:
1. Study the financial performance of MRPL and RPL with a view to
study the reasons behind the contrasting financial results
2. Analyze the average returns and risk on the shares of MRPL and RPL
during the period 1996-2002
Q2. Case -2 Derivatives Trading in India
Introducti on
On June 9, 2000, the Bombay Stock Exchange (BSE) introduced India’s
first derivative instrument - the BSE-30(Sensex) index futures. It was
introduced with three month trading cycle - the near month (one), the
next month (two) and the far month (three).
The National Stock Exchange (NSE) followed a few days later, by
launching the S&P CNX Nifty3 index futures on June 12, 2000. The plan
to introduce derivatives in India was initiaIly mooted by the National
Stock Exchange (NSE) in 1995. The main purpose of this plan was to
encourage greater participation of foreign institutional investors (FIIs) in
the Indian stock exchanges. Their involvement had been very low due to
the absence of derivatives for hedging risk. However, there was no
consensus of opinion on the issue among industry analysts and the media,
The pros and cons of introducing derivatives trading were debated
intensely. The lack of transparency and inadequate infrastructure of the
Indian stock markets were cited as reasons to avoid derivatives trading.
Derivatives were also considered risky for retail investors because of
their poor knowledge about their operation. In spite of the opposition, the
path for derivatives trading was cleared with the introduction of
Securities Laws (Amendment) Bill in Parliament in 1998.
The introduction of derivatives was delayed for some more time as the
infrastructure for it had to be set up. Derivatives trading required a
computer-based trading system, a depository4 and a clearing house5
facility. In addition, problems such as low market capitalization of the
Indian stock markets, the small number of institutional players and the
absence of a regulatory framework caused further delays. Derivatives
trading eventually started in June 2000. The introduction of derivatives
was well received by stock market players. Trading in derivatives gained
substantial popularity, and soon the turnover of the NSE and BSE
derivatives markets exceeded the turnover of the NSE and BSE cash
markets...
For instance, in the month of January 2004, the value of the NSE and
BSE derivatives markets was Rs.3278.5 billion (bn) whereas the value of
the NSE and BSE cash markets was only Rs.1998.89 bn. In spite of these
encouraging developments, industry analysts felt that the derivatives
market had not yet realized its full potential. Analysts pointed out that the
equity derivative markets on the BSE and NSE had been limited to only
four products - index futures, index options and individual stock futures
and options which were limited to certain select stocks...
Background Note
The initial steps to launch derivatives were taken in 1995 with the
introduction of the Securities Laws (Amendment) Ordinance, 1995 that
withdrew the prohibition on trading in options on securities in the Indian
stock market.
In November 1996, a 24-member committee was set up by the Securities
Exchange Board of India (SEBI) under the chairmanship of LC Gupta to
develop an appropriate regulatory framework for derivatives trading.
The committee recommended that the regulatory framework applicable to
the trading of securities would also govern the trading of derivatives.
Following the committee’s recommendations, the Securities Contract
Regulation Act (SCRA) was amended in 1999 to include derivatives
within the scope of securities, and a regulatory framework for
administering derivatives trading was laid out.
The act granted legality to exchange-traded derivatives, but not OTC
(over the counter) derivatives. It allowed derivatives trading either on a
separate and independent derivatives exchange or on a separate segment
of an existing stock exchange. The derivatives exchange had to function
as a self-regulatory organization (SRO) and SEBI acted as its regulator.
The responsibility of clearing and settlement of all trades on the
exchange was given to the clearinghouse, which was to be governed
independently. Derivatives were introduced in a phased manner, Initially,
trading was restricted to index futures contracts based on the S&P CNX
Nifty Index and BSE-30 (Sensex) Index...
The Debate and The Result
Those who opposed the introduction of derivatives argued that these
instruments would significantly increase speculation in the market.
They said that derivatives could be used for speculation by investors by
taking large price positions in the stock market while committing only a
small amount of capital as margin.
For instance, instead of an investor buying stocks worth Rs.1 million
(mn), he could buy futures contracts on Rs.1 mn of stocks by investing a
few thousand rupees as margin. Thus, trading in derivatives encouraged
investors to speculate - taking on more risk while putting forward less
investment. They were quick to point out some of the disasters of the past
that had occurred due to the mismanagement of trading in derivatives.
A Few Issues Remain
By January 2004, more than three and a half years of derivatives trading
had been completed. However, according to several analysts and media
reports, SEBI, NSE and BSE had still to resolve many issues so that the
derivatives market could realize its full potential.
For instance, the issue of imposing taxes on income arising from
derivatives trading still remained to be sorted out. The income Tax Act of
India did not have any specific provision regarding taxability of
derivatives income. The tax authorities were still undecided on the issue,
and in the absence of any provision, derivatives transactions were held on
par with transactions of a speculative nature (in particular, the index
futures/options which were essentially cash settled, were treated this
way). Therefore, the loss, if any, arising from derivatives transactions,
was treated as a speculative loss and was eligible to be set off only
against speculative income upto a maximum period of eight years...
The New Initiatives
As of early 2004, derivatives trading in India had been restricted to a
limited range of products including index futures, index options and
individual stock futures and options limited to certain select stocks.
Analysts felt that index futures/options could be extended to other
popular indices such as the CNX Nifty Junior. Similarly, stock
futures/options could be extended to all active securities. Efforts were
also on to encourage participation from domestic institutional investors.
SEBI had authorized mutual funds to trade in derivatives, subject to
appropriate disclosures. A broader product rollout for institutional
investors was also on the cards. Steps were taken to strengthen the
financial infrastructure. These included developing adequate trading
mechanisms and systems, and establishing proper clearing and settlement
procedures. Regulations hampering the growth of derivative markets
were being reviewed.
Issues
1 Discuss on the main objectives and reasons for the introduction of
derivatives trading in India
2. Identify the factors that can accelerate/suppress the growth of the
derivatives market in a country and comment on them.
Q 3. Case 3 - The Apple ITV Project
Apple Computer has had a very good run, both in terms of accounting
profits and stock prices. Based largely on the success of the iPod, the
company has reported double digit growth in revenues and earnings over
the last four years (see exhibit 1) and its stock price have reflected this
success (see exhibit 2). It has a substantial cash balance and a strong
balance sheet (see exhibit 3 for balance sheet information). However.
Steve Jobs, CEO of Apple. is concerned that the halcyon days of the iPod
are past and that potential challengers loom on the horizon (Sony, Zune
etc.).
Apple is considering entering the television market with an innovatively
designed and technologically state-of-the art LCD television, called the
iTV, aimed at the upper end of the market. You have been asked to
collect the data to make the assessment and have come back with the
following information:
1. R&D Expenses: Apple has already spent (and expensed) $ 200 million
on research on the television technology and development of the
commercial design. None of that money can be recouped at this stage, if
Apple decides not to go ahead with the TV.
2. Introductory Costs; If Apple decides to go ahead with the iTV, it will
have to spend S 2 billion up front (right now) to tie up suppliers,
distributors and retailers and as investment in infrastructure. The cost is
depreciable over 10 years down to a salvage value of $ 200 million, and
Apple expects to use straight-line depreciation.
3. Market Potential and Share: There were 30 million televisions sold in
the United States in the most recent year and the market is expected to
grow approximately 4% a year in the long term. Apple expects to gain a
2.5% market share next year if the iTV is introduced and increase that
market share by 0.5% a year (3% in the second year, 3.5% in the third
year etc.) to reach a target market share of 5% of the overall market by
the sixth year. It expects to maintain that market share beyond year 6.
4. Pricing and Unit Costs: Apple expects to price its displays at $ 1,000 a
unit next year and the price will keep pace with inflation after that. Based
upon the costs of the material used in the ITV currently, Apple expects
the production cost per unit to be $ 400 next year and grow at the
inflation rate thereafter.
5. Marketing Options and Costs: Apple plans to use two different
retailing options. In the first, it will sell the iTV through electronic
retailers such as Best Buy and pay the 3 retailers a commission of 10% of
the price per unit sold (The retailers will have to follow Apple’s fixed
price schedule — no discounting allowed). In the second. it will sell the
iTV through the Apple Stores around the country. To do the latter, it will
have to spend $200 million up front in expanding and remodeling the
stores: this expense will be depreciated straight line over the next 10
years to a salvage value of zero. It also will pay its sales people a
commission of 5% of the price per unit for every unit sold at the Apple
Stores. Apple expects to generate 80% of its revenues from specialty
retailers and 20% from Apple Store sales over the next 10 years.
6. Production Facilities and Costs: Apple currently uses a manufacturing
facility in Singapore to make computer displays. This facility has
production capacity of 2 million units but it is under utilized, since Apple
produced only 600,000 computer displays in the most .recent year. While
the computer display market is expected to grow 15% a year for the next
10 years, Apple plans to use the excess capacity in the facility to produce
the iTV. If the capacity limit is reached, Apple will have to invest a
substantial amount to create a new facility of equivalent capacity (2
million units). The current estimate of the cost of expansion is $ 500
million, but this cost will grow at the inflation rate.
7. G&A expenses: Apple will allocate 10% of its existing general and
administrative costs to the new division. These costs now total $ 500
million for the entire firm and are expected to grow 5% a year for the
next 10 years. In addition, it is expected that Apple will have an increase
of $ 50 million in general and administrative costs next year when Apple
iTV is introduced, and this amount will grow with the new division’s
dollar revenues after that. The latter cost is directly related to the new
iTV division and will be charged to them fully unlike the corporate G&A
costs.
8. Advertising Expenses: Apple spent $ 1 billion on advertising in the
most recent year and expects this cost to increase 5% a year for the next
10 years. even if it does not invest in iTV. If the iTV is introduced, total
advertising expenses are expected to be 12% higher than they would have
been without the iTV division, each year from year I to year 10.
9. The iTV will create working capital needs, which you have estimated
as follows:
The sale of iTVs to retailers will create accounts receivable
amounting to 5% of revenues each year.
Inventory (of both the input material and finished iTVs) will be
approximately 10% of the variable production cost (not including
depreciation, marketing costs. allocations or advertising expenses).
The credit offered by suppliers will be 6% of the variable
production cost (not including
depreciation, marketing costs, allocations or advertising expenses).
All of these working capital investments will have to be made at the
beginning of each year in which goods are sold. Thus, the working
capital investment for the first year will have to be made at the
beginning of the first year.
10. The beta for Apple is 1.63, calculated using monthly returns over the
last 5 years and against the S&P 500 Index. Apple currently gets about
70% of its revenues from computers and 30% from electronics. The
details of the beta calculation are included in Exhibit 4. Apple is
currently rated A+, and A+ rated bonds trade at a default spread of 1%
over the long-term treasury bond rate. The current stock price for the firm
is $ 90 and there are 900 million shares outstanding.
11. Apple expects to finance this apparel division using the same mix of
debt and equity (in market value terms) as it is using currently in the rest
of its business. Apple’s has no interest bearing debt but it has lease
commitments for the future.
Year Lease commitment
2007 $ 134 million
2008 $ 134 million
2009 $ 134 million
2010 $ 132 million
2011 $ l22million
Beyond $ 498 million
The lease payment for the current year is $138 million.
12. Apples effective tax rate is 29%. but its marginal tax rate is 40%.
13. The current long-term bond rate is 4.7%, and the expected inflation
rate is 2%. You can use the historical risk premium of 4.9% as your
equity risk premium.
14. You have collected information on other companies that are primarily
or only in electronics in Exhibit 5. The data includes the betas of these
companies and relevant information on both market values of debt and
equity. You can assume a 40% tax rate for these firms, as well. (You can
also assume that the debt includes the present value of operating leases).
Questions
1. Estimate the operating income from the proposed iTV investment to
Apple over the next 10 years.
2. Estimate the after-tax return on capital for the investment over the 10-
year period.
3. Based upon the after-tax return on capital, would you accept or reject
this project?
(This will require you to make some assumptions about allocation and
expensing. Make your assumptions as consistent as you can and estimate
the return on capital.)
4. Estimate the after-tax incremental cash flows from the proposed iTV
investment to Apple over the next 10 years.
5. If the project is terminated at the end of the 10th year, and both
working capital and investment in other assets can be sold for book value
at the end of that year, estimate the net present value of this project to
Apple. Develop a net present value profile and estimate the internal rate
of return for this project.
FOR Q3 CASE
Exhibit 1 : Apple’s Income Statements
Exhibit 5: Electronics Firms
Company Name Ticker
Symbol
Market
cap
Total
Debt Cash Beta
M-WAVE Inc MWAVD $3.90 $3.60 $0.20 0.25
Solitron Devices inc. SODI $4.10 $0.00 $3.20 0.25
Merrimac Inds Inc. MRM $31.50 $3.00 $4.10 0.35
Affinity Tech Group AFFI $8.10 $1.30 $0.00 0.35
Espey Mfg. &
Electronics Corp. ESP $38.30 $0.00 $11.00 0.4
Bogcn
Communications Intl BOGN $30.70 $4.60 $6.40 0.4
Sense 1-loldings Inc SEHO $4.00 $0.60 $0.00 0.4
c.Digital Corp EDIG $34.50 $1.40 $1.10 0.45
True Product ID Inc TPDI $30.60 $0.00 $0.00 0.45
Trans Lux Corp. TLX $9.90 $62.50 $14.00 0.5
TB Woods Corp TBWC $64.10 $29.90 $3.40 0.5
QSound Labs Inc. QSND $40.70 $0.00 $1.30 0.5
TransAct Tech Inc TACT $77.50 $0.00 $4.60 0.5
Servotronics Inc SVT $19.70 $5A0 $4.60 0.55
VOS International
Inc VOSI $3.80 $0.80 $0. 10 0.55
Rockford
Corporation ROFO $23.40 $15.30 $0.00 0.6
LOUD Technologies
Inc LTEC $68.50 $53.80 $0.50 0.6
Bairnco Corp. BZ $88.40 $9.50 $5.30 0.6
Quahnark Corp QMRK $13.10 $4.20 $0.50 0.6
Simclar Inc SIMC $40.40 $9.20 $0.80 0.6
lnPlav Technologies
Inc NPLA $16.70 $0.20 $4.00 0.6
Bell Inds. BI $31.70 $0.10 $7.30 0.65
Cobra Electronics COBR $64.50 $0.00 $6.70 0.65
Spatializer Audio
Labs Inc SPAZ $1.00 $0.00 $0.60 0.65
Hickok Inc HICKA $9.10 $0.80 $2.30 0.65
Giga-Tronics Inc. GIGA $9.70 $0.00 $3.40 0.65
Synergx Systems Inc SYNX $9.20 $1.50 $0.60 0.65
Transcat Inc. TRNS $38.00 $4.40 $0.10 0.7
Trans-Industries Inc TRNIQ $0.20 $7.80 $0.00 0.7
Vicon Inds Inc VII $16.40 $2.50 $5.90 0.75
SRS Labs Inc SRSL $158.20 $0.00 $8.80 0.75
VERSUSTECHNOL VSTI $4.10 $3.00 $1.70 0.75
Valpey Fisher Corp. VPF $14.50 $0.00 $7.90 0.8
LaBarge Inc. LB $205.70 $41.70 $0.90 0.8
DAC Technologies
Group Interna DAAT $14.70 $0.20 $0. 10 0.8
Universal
Electronics UEIC $298.70 $0.00 $43.60 0.85
Spectrum Control
Inc. SPEC $127.30 $1.70 $8.40 0.85
Nortech Systems Inc NSYS $20.50 $9.30 $0.80 0.85
Wells-Gardner
Electronics Corp WGA $31.30 $8.20 $0.30 0.85
Hauppaguc Digital HAUP $72.00 $0.00 $7.60 0.85
Nani Iai
EleCtroniCS Inc. NTE $665.60 $12.20 $227.20 0.9
Plantronics Inc.
PLT PLT $1,039.20 $0.00 $76.70 0.9
American
Technology ATCO $95.50 $1.60 $10.40 0.9
Microncttcs Inc. NOIZ $35.60 $6.70 $5.80 0.95
Emerson Radio Corp MSN $85.30 $2.50 $17.50 0.95
White Electronic
Designs Corp
—
WEDC $136.50 — $0.00 $55.80 0.95
Herley Inds. FIRLY $232.20 $6i0 $22.30 0.95
Creative Technology
Ltd. CREAF $543.80 $196.70 —
$214.00 0.95
Richardson Elec. RELL $163.40 $126.80 $1 7.00 0.95
ValcnceTechnology VLNC $170.10 $57.10 $0.60 0.95
MDI Inc MDII $9.30 $0.00 $2.10 0.95
Arotech Corporation ARTX $23.50 $22.70 $6.20 I
NLI Horizons
Electronics Corp. NUHC $183.50 $50.60 $10.90 I
HarrisCorp. HRS $6,212.30 $701.10 $293.90 I
Interlink Electronics
Inc LINK $41.50 $0.40 $13.90 I
LaserCard Corp. LCRD $130.30 $0.00 $23.50 I
Technoloc’. Resh TRCI $24.60 $3.00 $3.10 I
Ampes Corp. AMPX $80.10 $25.80 $13.10 I
PaxarCor:. PXR $947.10 $i00:70 $420 1.05
Intl Electronics Inc I EIB $4.30 $0.80 $0.90 1.05
Agilysvs Inc. AGYS $512.50 $59.70 $147.90 .05
MiIIcnniu: Cell Inc MCEL $43.90 $2.40 $11 .‘O .05
HEI Inc HEll — $14.70 $9.80 — $0.70 1.05
Thrcc-D S stems TDSC $292.30 $26.30 $24. 10 1. 1
Daktronics Inc DAKT $1,455.40 $0.20 $35.20 1.1
RF Monohthics Inc RFMI $35.80 $0.00 $5.80 1.1
Methode Elec. METH $408.50 $0.00 $81.60 1.15
Rogers Corp. ROG $1,018.70 $0.00 $4c40 1.15
SyprisSolutions SYPR $127.60 $80.00 $12.10 1.2
ParkerVision Inc PRKR $270.60 $0.00 $10.60 I .2
NT Media Corp of
California NTMM $0.60 $1.60 $0.00 1.2
ExarCorp. EXAR $480.40 $0.00 $329.50 1.25
Molex Inc A MOLXA $5.1
14.80 $12.10 $485.50 1.25
SMTC Corp SMTX $34.40 $30.10 $0.00 1.3
Molexinc. MOLX $5,891.80 $15.80 $497.60 1.3
Teclmitrol Inc. TNL $976.10 $86.70 $173.70 1.35
phenol Corp A New APH $5.48
1.60 $781.00 $38.70 1.35
Pemsiar Inc PMTR $175.40 $103.70 $17.90 1.35
EMS Technolocics
Inc ELMG $3 11.30 $43.40 $13.00 1.35
Planar S stems Inc PLNR $161.90 $1.50 $48.30 1.35
Anaren mo. ANEN $315.90 $0.00 $82.50 1.35
Arrow Electronics ARW $3,915.20 $1,407.70 $580.70 1.4
Diodes Inc. DIOD $929.80 $9.60 $113.60 1.45
Aclriuni Inc ATRM $35.20 $0.10 $4.10 1.45
vnet Inc. AVT $3,813.30 $1,244.50 $637.90 1.45
Cohu inc. COHU $455.70 $0.00 $138.90 1.45
JDS
Uniphase________ .JDSU $3,546.20 $900.00 $ .222.20 1.45
Jabil Circuit JBL $5,162.80 $327.30 $796.10 1.5
AVX Corp. AVX $2,543.80 $0.00 $664.30 1.5
CTS Corp. CTS $576.50 $81.80 $12.00 1.55
Sonic Solutions SNIC $438.20 $30.00 $61.10 1.55
IEC Electrs Corp. IECE $12.40 $4.20 $0.00 1.79
Microscrni
Corporation MSCC $1,395.70 $4.00 $165.40 2.75
Sanmina-SCI Corp. SANM $1,855.30 $1,646.10 $1,125.30 3.19
Plexus Corp. PLXS $1,130.00 $26.70 $l94.9() 1.86
Flextronics Intl FLEX $6,661.60 $1,595.10 $942.90 2.1
‘PPM Tcchno1ooe’
Inc TIMI $476.70 $0.00 $82.40 2.13
KEMET Corp. KEM $637.90 $100.00 —
$I68.70 3.77
MEMC Electr Math
Inc WFR $8,709.90 $53.10 $153.60 3.26
Celestica Inc. CLS $1,764.40 $751.40 $969.00 1.52
Solectron Corp. SLR $2,943.90 $708.90 $1,126.00 2.78
Vishay 1ntcrtechncv \SH $2,525.20 $756.60 $632.50 3.18
Genesis Microch::
Inc GNSS $373.60 $0.00 $185.40 2.8
Micrelinc. MCRL $857.00 $0.10 5I36.60 2.43
Microtimc Inc. TUNE $252.10 $0.00 — $82.20 4.1-
I
Ivanced ID Cerp. AIDO $10.80 $0.10 $(L20 4.25
Q 4 Case -The Fall of Barings Bank
Introduction
On February 26. 1995, Barings Bank (Barings) - the United Kingdoms
(UK) oldest and one of its most reputed banks - declared it was bankrupt.
The bank with a total net worth of $900 mn had suffered losses in excess
of $1 bn. These losses were result of the gross mismanagement of the
bank’s derivatives trading operations by Nicholas William Leeson
(Leeson), the General Manager of Barings Future in Singapore (BFS).
BFS had been established to look after the bank’s Singapore International
Monetary Exchange (SIMEX) trading operations. Leesons job was to
make arbitrage profits by taking the advantage of price differences of
similar contracts on the SIMEX (Singapore) and Osaka stock exchanges.
In spite of not having the authority, he traded in options and maintained
unhedged positions He acted beyond the scope of his job, and was able to
conceal his unauthorized derivatives trading activities.
Due to the senior management’s carelessness and lack of knowledge of
derivatives trading. the bank landed up in a major financial mess.
When Barings finally went into receivership on February 27, 1995, it had
an outstanding notional futures position on Japanese equities and bonds
of US$ 27 bn (US$ 7 bn on Nikkei 225 equity contracts and US$ 20 bn
on Japanese government bond (JGB) and Euroyen contracts).
Analysts said that the situation demanded that banks the world over must
tighten their internal control procedures.
Background Note
Barings was founded in 1762, by Francis Baring who set up a merchant
banking business in Mincing Lane in London, UK. The business grew
rapidly during the period 1798 to 1814.
It became one of the most influential financial houses during the 1830s
and 1840s. The British government paid Barings commissions to raise
money to finance wars against the US and France during the mid 1800s.
During 1860-1890. Barings raised $500 mn for the US and Canadian
governments and was regarded as London’s biggest ‘American House.’
Barings was also involved in providing loans to Argentina during this
period. In 1890, Barings was on the verge of bankruptcy when Argentina
defaulted on bond payments. However, the Bank of England and several
other major banks in London came forward to bail out the bank.
This crisis had a major impact on Barings and led the bank to withdraw
all its business on the North American continent. Barings then took up
the business of providing consultancy to small firms and wealthy people,
including the British royal family.
Barings advised the royal family on the management of their assets, and
also gave advice to small British firms on investing in stocks and bonds.
For the next several decades, the bank grew well and earned significant
profits. In the 1980s, the bank started operating in the US again. In 1984,
Barings acquired the stock broking arm )f Henderson Crosthwaite, which
later became BSL.
Prior to its merger with the banking business (Baring Brothers &
Company) in 1993. BSL was run as a separate company (Refer Exhibit I
& II for Barings’ Organization Chart Pre- and Post-Merger). Incorporated
in September 1986, BFS held a non-clearing membership of SIMEX. In
February 1992, BFS applied for clearing membership7 of SIMEX...
Events Leading to the Fall
Soon after joining BSL, Leeson applied and got a transfer to Jakarta,
Indonesia. Due to his excellent performance, Barings management
promoted Leeson to General Manager of BFS in Singapore in April 1992.
In BFS, Leeson’s job was to leverage on the arbitrage opportunities on
similar equity derivatives between SIMEX and the Osaka stock exchange
(OSE). To take the advantage of the arbitrage opportunity, Leeson had to
adopt the following strategy - if Leeson was long on the OSE, he had to
be short twice the number of contracts on SIMEX. The arbitrage trading
strategy required Leeson to buy at a lower price on one exchange and sell
simultaneously at a higher price on the other, reversing the trade when
the price difference had narrowed or become zero. The market risk in
arbitrage was minimal because positions were always matched. Leeson
was not given any authority to trade in options or maintain any overnight
un-hedged positions...
Why Did it Happen?
Industry analysts felt that the fall of Barings served as a classic example
of poor risk management practices. The bank had completely failed to
institute a proper managerial, financial and operational control system.
Due to the lack of effective control and supervision, Leeson got an
opportunity to conduct his unauthorized trading activities and was able to
reduce the likelihood of their detection. Analysts felt that this disaster
happened for the following reasons.
SEPERATION OF FRONT AND BACK OFFICE DUTIES
The back office is responsible for recording and settling trades transacted
by the front office, by accepting/releasing securities and payments for
trades, and reconciling them with details sent by the bank’s counter
parties and assessing the accuracy of prices.
The End Result
The fall of Barings not only shocked the financial markets world over, it
also exposed their vulnerability. On February 26, 1995, Barings was
declared insolvent under the UK Insolvency Act, 1986.
Administrators were appointed to take control of the assets of the bank
and its subsidiaries. A week later, the lnternationale Nederlanden Groep
NV (ING) acquired all the assets and liabilities of Barings Bank and its
subsidiaries (except BFS).
ING was looking to expand its investment banking business especially in
Asia, where Barings had an extensive business network involving
merchant banking activities such as investment banking, corporate
banking, venture capital and capital markets operations. together with
securities trading and asset management. ING paid one pound for
Barings and took on the responsibility of paying the entire $1 bn debts
that Barings had accumulated...
Issues:
1. Bring out the reasons that led to the fall of Barings Bank
2. Analyze extensively through the case the Importance of proper
supervision and control systems in a bank to mitigate risks
Q 5. Read the Problem and answer the questions provided below.
M/s Champak Chemical Company is taking over M/s Grewal
Petrochemical company. The share holders of Grewal would receive 0.8
shares of Champak for each share held by them. The merger is not
expected to yield in economics of scale and operating synergy. The
relevant data for the two companies is as follows:
Nomenclature M/s
Champak M/s Grewal
Net Sales (Rs Crore) 335 118
Profit after Tax (Rs Crore) 58 12
Number of Shares (Crore) 12 03
Earning per share (Rs) — 4.83 4.00
Market Value per Share 30 20
Price earning Ratio 6.21 5.00
You are required to calculate
(a) EPS
(b) P/E Ratio
(c) Market value per share
(d) Number of Share
(e) Total Market Capitalisation for the combined company after
Merger.
PRINCIPLE & PRACTICE OF MANAGEMENT
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CASE STUDY : 1
International Case : Carrefour — Which Way to Go?
Wal-Mart's biggest global competitor is the big French retailer Carretour, a firm that has hypermarkets, big
stores offering a variety of goods. It has made large investments around the globe in Latin America and China.
But not all is well as competitors taking market share its home market, for instance. There has been even
speculation of a takeover by Wal-Mart or Tesco, an English chain. Mr. Barnard has been ousted after heading
the company for 12 years; he was replaced by Jose Luis Durant who is of German-Spanish descent. Although
the global expansion is cited by some as success, it may be even a big mistake. It withdrew from Japan and
sold 29 hypermarkets in Mexico. Carrefour also had problems competing with Tesco in Slovakia and the
Czech Republic. In Germany, the company faced tough competition from Aldi and Lidle, two successful
discounters. On the other hand, it bought stores in Poland, Italy, Turkey, and opened new stores in China,
South Korea, and Columbia. Carrefour has become more careful in selecting markets. But. the company is
eager to enter the Indian market, but found out in late 2006 that Wal-Mart will do so as well.
In France, where Carrefour is well established, the company made the big mistake in its pricing policy. It
probably started with the 1999 merger with Promodes, the French discount chain. Carrefour confused the
French clientele by losing its low-cost image; whether the image can be changed remains to be seen. Mr.
Durant, the new CEO since 2005, embarked on the new strategy by offering 15 percent new products in its
hypermarkets and 10 percent in its supermarkets. Moreover, he wants to employ more staff, extend the
operating hours in certain hypermarkets, cutting prices, trying small stores, and pushing down decision
making. Mr. Durant aims to stay only in countries where Carrefour is among the top retailers.
Questions:
1. How should Mr. Durant assess the opportunities in various countries around the world?
2. Should Carrefour adopt Wal-Mart's strategy of "low prices everyday"? What would be the advantage or
disadvantage of such a strategy?
3. How could Carrefour differentiate itself from Wal-Mart?
4. Identify cultures in selected countries that need to be considered in order to be successful?
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CASE STUDY : 2
International Case : Reengineering the Business Process at Procter & Gamble
Procter & Gamble (P&G), a multinational corporation known for products such as diapers, shampoo, soap, and
toothpaste, was committed to improving value to the customer. Its products were sold through various
channels, such as grocery retailers, wholesalers, mass merchandisers, and club stores. The flow of goods in the
retail grocery channel was from the factory's warehouse to the distributors' warehouses before going to the
grocery stores where customers selected the merchandise from the shelves.
The improvement-driven company was not satisfied with its performance and developed a variety of programs
to improve its service and the efficiency of its operation. One such program was electronic data interchange,
which provided daily information from the retail stores to P&G. The installation of the system resulted in
better service, reduced inventory levels, and labor-cost savings. Another approach, the continuous
replenishment program, provided additional benefits for P&G as well as for its retailer customers. Eventually,
the entire ordering system was redesigned, with the result of dramatic performance improvements. The
reengineering efforts also required restructuring of the organization. P&G had been known for its brand
management for more than 50 years. But in the late 1980s and early 1990s, the brand management approach
pioneered by the company in the 1930s required rethinking and restructuring. In a drive to improve efficiency
and coordination, several brands were combined with authority and responsibility given to category managers.
Such a manager would determine overall pricing and product policies. Moreover, the category managers had
the authority to withdraw weak brands, thus avoiding conflict between similar brands. They were also held
responsible for the profit of the product category they were managing. The switch to category management
required not only new skills but also a new attitude.
Questions:
1) The reengineering efforts of P&G focused on the business process system. Do you think other processes,
such as the human system, or other managerial policies need to be considered in a process redesign?
2) What do you think was the reaction of the brand managers, who may have worked under the old system for
many years, when the category management structure was installed?
3) As a consultant, would you have recommended a top-down or a bottom-up approach, or both, to process
redesign and organizational change?
4) What are the advantages and disadvantages of each approach.
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CASE STUDY : 3
International Case : The Restructuring of Daimler-Benz
In a 1996 address to stockholders and friends of Daimler-Benz, CEO Jurgen Schrempp reviewed the position
of the diversified company. He started by saying "1995 was a dramatic year in the history of Daimler-Benz." It
was also a year that the board of management made a major break with the past.
Daimler-Benz, with more than 300,000 employees worldwide, consisted of four major groups: The first, by far
the biggest and most successful group, was Mercedes-Benz with about 200,000 employees. It is best known
for its passenger cars and commercial vehicles. The second was the AEG Daimler-Benz industries in the
business of rail systems, microelectronics, heavy diesel engines, energy systems technology, and automation.
The third was the Aerospace Group in the business of aircraft (the company has a more than one-third interest
in the Airbus consortium), space systems, defense and civil systems, and propulsion systems. Finally, there
was the Inter Services Group consisting of systemshaus, financial services, insurance brokerage, trading,
marketing services, mobile communications services, and real
estate management.
Daimler-Benz went through various development phases. From 1985 to 1990, it diversified into aerospace and
electrical engineering. The aim was to become an integrated high-tech group. This diversification was further
consolidated in the next phase that extended from 1990 to 1995. Under the leadership of Schrempp, the core
business was redefined and the strategy refocused.
A 1995-96 portfolio review showed the need for refocusing on what the company could do best. Top
management reevaluated its strategies and its core businesses based on economic criteria and the strategic fit
of the various activities. It became clear that the company's strengths were in car manufacturing, the truck
business, and the railroad sector. Mercedes Benz, for example, had a strong competitive position with its cars
and trucks in Europe, North America, and Latin America. Vans were also relatively strong in Europe, and
buses had a good competitive position in Latin America. Based on this analysis, the strategies for potential
growth were through globalization and the development of new product segments.
In 1996, top management reassessed the company's position and its 1995 unsatisfactory results from its
operations. It was discovered that the company was exposed to currency fluctuations that affected profitability.
The company's image was also blurred because of the ventures into many different kinds of industries. The
management board decided to cut its losses and chart a new direction for the company, with greater emphasis
on profitability. The organization structure was tightened and certain businesses were divested. In fact, policy
decision from an earlier period were reversed. The unprofitable AEG Group and the Dutch aircraft
manufacturer Fokker did not receive financial support. Since both the Dutch government and Daimler-Benz
withdrew support, Fokker filed for bankruptcy. Although these and other drastic decisions helped reduce the
1995 financial losses, the company's goal was not to emphasize maximizing short-term profitability but to
work toward medium- and long-term profitability.
A number of other managerial decisions were made to achieve the ambitious goals of reducing costs and
improving profitability. Employees close to the operations were empowered to make decisions necessary to
carry out their tasks. The organization structure was simplified and decentralized so that organizational units
could respond faster to environmental changes. Moreover, the new organization structure was designed to
promote an entrepreneurial spirit. Control was exercised through a goal-driven, performance-based reward
system. At the same time, the new structure was designed to promote cooperation. In 1997, the board of
management restructured and integrated the Mercedes-Benz Group into Daimler-Benz. Consequently,
Mercedes-Benz's chief, Helmut Werner, who had been given credit for a successful model policy, resigned
from the company.
5 | P a g e
Questions:
1) What is your assessment of Daimler-Benz's operations in many different fields?
2) Should the various groups operate autonomously? What kinds of activities should be centralized?
3) Daimler-Benz is best known for its Mercedes-Benz cars. Why do you think Daimler bought AEG in the first
place and why did it venture into the Aerospace and Inter Services businesses?
4) Given the apparent mistakes in acquiring non-automotive businesses, what should Jurgen Schrempp do
now?
CASE STUDY : 4
International Case : Global Car Industry
How the Lexus Was Born-and Continued Its Success in the United States, but will Lexus Succeed in Japan?
One of the best examples of global competition is in the car industry. As the Japanese gained market share in
America, U.S. car makers required the Japanese to self-impose quotas on cars exported to the United States.
This encouraged Japanese firms not only to establish their plants in the United States but also to build bigger
and more luxurious cars to compete against the higher-priced U.S. cars- and the expensive European cars such
as the Mercedes and the BMW.
One such Japanese car is the Lexus, by Toyota. This car is aimed at customers who would like to buy a
Mercedes or BMW but cannot afford either. With a sticker price of $35,000, the Lexus is substantially less
expensive than comparable European imports. In 1983, Toyota set out to develop the best car in the worldmeasured
against the Mercedes and the BMW. The aim was to produce a quiet, comfortable, and safe car that
could travel at 150 miles per hour and still avoid the gas guzzler tax imposed on cars getting less than 22.5
miles per gallon. This seemed to be an idea of conflicting goals: cars being fast seemed irreconcilable with
cars being at the same time fuel-efficient. To meet these conflicting goals, each subsystem of the car had to be
carefully scrutinized, improved whenever possible, and integrated with the total design. The first version of the
32-valve V-8 engine did not meet the fuel economy requirement. The engineers applied a problem-solving
technique called "thoroughgoing countermeasures at the source." This means an attempt to improve every
component until the design objectives are achieved. Not only the engine but also the transmission and other
parts underwent close scrutiny to make the car meet U.S. fuel requirements.
Toyota's approach to achieving quality is different from that of German car manufacturers. The latter use
relatively labor-intensive production processes. In contrast, Toyota's advanced manufacturing technology aims
at high quality through automation requiring only a fraction of the work force used by German car makers.
Indeed, this strategy, if successful, may be the secret weapon to gain market share in the luxury car market.
Questions:
1) Prepare a profile of the potential buyer of the Lexus.
2) What should Mercedes and BMW do to counteract the Japanese threat in the United States and Europe?
3) Why has the Lexus model been very successful in the U.S. but has not been marketed in Japan?
(Suggestion: Review the frequency of repair records of luxury cars. Also talk to Lexus dealers or Lexus
owners).
4) Do you think Lexus will succeed in Japan? Why or why not?
BUSINESS COMMUNICATION
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CASE-1 (20 Marks)
Nestle has launched quality street ,lion and after 8 choclates imported from Europe. Qualtty Street is an
assortment of chocolates priced at Rs. 7 5 for 218 gm. After Eight is a popular adult chocolate priced at Rs.25
for 20 gm and Lion is a caramel wafer bar priced at Rs. 20 for a 45 gm bar. (Kit Kat )is priced at Rs. 6 for a 17
gm bar and has a chocolaty taste while Lion has a crunchy taste). The brands have different tastes and will
appeal to different target segments (though the target segment is one which may have already been exposed to
these brands during visits abroad). These brands have been introduced in metros in upmarket stores which sell
brands bears the label "lmported by Nestle India Ltd." indicating that they may be better than smuggled ones
(which may be stale).
Question :
1 Suggest suitable media /media vehicles for promoting these brands. Give reasons in support of your answer
2 What business communication media you will utilize if you have to launch a soap in rural India?
CASE -2 (20 Marks)
The herbal shampoo market is valued at around Rs. 100 crores. Ny/e, Ayur, Dqbur and Biotique are some of the
established brands in the market.
Helene Curtis (JK Group) has introduced a premium herbal shampoo (with variants Shikskai, henna and qmla
and brqhmi and josur) priced between Rs. 80 and Rs. 90 (500 ml) for different types of hair. The proposition is
the benefits offered by lhe variant based on the combination of herbs, benefits offered by the variants range
from extra protection and nourishment to colour, body and bounce. The shampoos have been launched under
the brand name Premium Herbsl Shsmpoos and they target urban housewives with a monthly household
income of Rs.25,000. The brand is distributed through 7 0,000 retail outlets and 120 Raymond shops. The
company has planned only point of purchase (POP) posters initially and may consider the electronic media
later. The shampoo has an annual advertising expenditure of Rs. 10 crores.
Question :
1 Comment on the marketing mix of JK's Premium Herbsl Shampoos ?
2 How can you make their communication more effective ?.
3 | P a g e
CASE 3 (40 Marks)
Attempt all cases of the following: (10 marks each)
(i) Iran Rafsanjan Co., Rafsanjan City, Iran has taken a marine insurance policy No. VB/84/3629/29 dated
20th December, 2005 from Albroz Insurance Co., Kerman City, Iran for the import of 500 tractor gears
from Apex Products (India) Ltd., Delhi. The exporter shipped the cargo on board vessel — SEEMA on
26th December, 2005 for Bandar Abbas Port of Iran.
As per the letter of credit condition, the exporter was required to fax the shipment details to Albroz
Insurance Company within 24 hours of the shipment. However, the exporter could not fax such details due
to change in telephone (fax) number of the insurance company.
Draft an express telegram to intimate shipment details.
ii) Yours is a multinational company having joint venture with a Chinese company. Plant is to be located at
Surat. The company immediately needs an Executive - Foreign Affairs (male/female) with ability of
“writing and speaking Chinese language.
Draft a recruitment advertisement for publication under classified column of a national daily. Salary-is no
bar for the right candidate. E-mail address -info@krishnafashions.com
iii) The local head office of State Bank of India is located at 11, Parliament Street, New Delhi-110001. The
bank wants to construct 76 flats at Noida for its employees and invite applications for pre-qualification of
contractors. Full details are available on its website - www.sbi.co.in or www.statebankofindia.com/
procurement_news.
Draft a notice for pre-qualification of contractors.
iv) The Joint Admission Board (JAB) of Indian Institutes of Technology in its meeting held on 17th
September, 2005 at Kolkata has taken some decisions with regard to Joint Entrance Examination (JEE)
2006, i.e., to appear in JEE, one must secure at least 60% marks (55% for SC/ST and PD) in 10+2
examination; a candidate can have only two attempts with effect from JEE-2006; and a candidate who
joins any of the IITs through JEE-2006 will not be permitted to appear in JEE in future.* It was also
decided that candidates, who have passed their qualifying examination in 2005 or earlier, will be allowed
to appear in JEE-2006 as the last chance, witji no consideration of marks or attempts at JEE subject to age
requirements. On behalf of the JAB, draft a suitable press release to be issued by organising chairman
highlighting these decisions.
ADVERTISING MANAGEMENT
Case No : 1
VENKY’S OF VENKATESHWARA HATCHERIES
Venkateshwara Hatcheries which went public recently is one of the most modern plants in poultry business
in Asia. They have 60 p.c. market share of chicken marketed in the country. Dr. B.V. Rao of Venkateshwara
Hatcheries expired in 1996. His daughter Anuradha Desai is now the Chairperson and M.D. of VHL. In the
beginning they had an Executive Director Gulam Harjanwalla who professionalized chicken marketing.
Sajid Peerbhoy’s Speer ad agency was chosen. The brief given to Speer was “to market raw chicken in the
form of a full bird. Further, to market legs. To market legs and breast. To market curried pieces. And halfbird.”
The company also planned to market ready-to-fly pre-spiced chicken and to operate a chain of fast-food
outlets serving chicken fast food on the lines of McDonald’s.
Speer did some marketing research by focus group studies in Mumbai and then in Pune. The qualitative
reseaci1 (QR) findings were followed by quantitative research.
The following summarises the findings.
Occasions to use chicken:
(a) On special occasions
(b) On Sundays
(c) As a special treat
(d) Cook it for guests
(e) First non-veg food to which vegetay1ans graduated.
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
(f) Each mother cherishes her own special recipe for a chicken dish. She prides herself on it.
The ideal chicken was: Freshly chicken.
The convenient option was: Frozen chicken.
The following are the demerits of the frozen chicken:
(a) It does not taste good.
(b) It does not cook fast.
(c) It requires a lot of water to cook.
The Inconveniences in getting fresh chicken were:
(a) It is more and more difficult to get it near-by.
(b) The search consumes time.
(c) It involves transportation cost.
On deep probing, the consumer psychology while buying fresh chicken was one of guilt and disgust. The
birds look so cute, as they are young. Just a minute ago, they were alive. It is so awful. Those poor
creatures! Imagine them alive one minute, and then being eaten the next. It is so difficult to get used to this
process.
Advertising Strategy
It is not necessary to remind about live chicken. It is not necessary to see and think about raw chicken,
dressed or otherwise. The communication strategy should be to treat chicken as a vegetable. They are not to
be shown alive or in their ugly raw dressed form. The client was led step-by-step and was supportive.
Long-run Objective
Though chicken has high standing as a special food, we have to make it an almost twice or thrice a week
food item.
Positioning
It was necessary to overcome the negative barrier to frozen food. In the market, fresh chicken was in fact
frozen chicken vulnerable to bacterial contamination. The answer was a fact frozen chicken product.
Venky’s chickens were chilled by a special process: blast freezing. The position taken was that of
technological superiority. Venky’s unique freezing process makes it taste better and cook faster and melt
quickly.
Differentiation
It was a special breed of chicken, that was extra delicious to eat. It scores over ordinary frozen chicken and
even the freshly killed chicken. Brand Name
In spite of the Agency’s reservations, the Venky’s was chosen as brand name, since it was the name of the
M.D.’s son. The Agency had considered fifty other optional brand names. Marketing research showed
Venky’s connoted a South Indian image and was associated with vegetarian food. There were also
connections with Lord Venkateshwara.
Headlines
These worked hard to ward off negatives:
‘Chicken so fresh, it simply melts in your mouth. Reason: Superior blast freezing process.”
“Chicken so fresh, it’s only minutes old.”
Promotion of Special Parts
The special parts were promoted as:
“The part you want are the parts you get.”
Execution
A simple mnemonic was used. Chicken was shown in a graphic from; one that did not turn off the house
wife, and yet looked modern.
The colour scheme used was of yellow and red colours, being happy and bright food colours. These colours
are appetising too.
For quick identification, a common symbol was used on all hoardings. ad material and at POP.
Success of the Launch
The launch created tremendous demand but the distribution was weak. There was the problem of spurious
brands.
The company strengthened the distribution network later. However consumer supplies were diverted to
institutional buyers leading to non-availability and spurious brands passing off as Venky’s.
The Agency advised premium pricing and quality policy. Instead, the company lowered the price. So many
persons dealt with the Agency. Each questioned and disagreed with the thinking of earlier persons. Gulam,
their E.D. left Venky’s. The number of out left were increased dramatically.
New Ad Agency
New agency was selected. It brought chicken again to a commodity position A good chicken that makes
tasty chicken dishes). Emphasis on blast freezing was dropped. Emphasis on blast freezing was dropped.
Raw chicken again appeared in the ads, contrary to research findings. Brand or product differentiation
strategy was dropped. Instead, emphasis was on different recipes.
Present Thinking
Venky’s is moving closer and closer to a commodity than a brand. It is fine as long as there is no
competition. The company perhaps believes that no one has the backing or volume of production to be a
threat to them. It is satisfied with a marginal price premium. Being a chicken monopoly, it can afford not to
have a marketing cutting edge. The following is their present ad copy:
Questions (A)
(a) Comment on the advertising strategy adopted previously and currently.
(b) Comment on branding of food products, and their promotion.
(c) Can you think of a different creative strategy for a product like chicken?
Lip-sticks with permitted colours can also damage the lips since the stainers are tetra-bromo-fluorosine.
When rubbed against the palm, darkness of the stain will indicate the quantity of stainer present.
Darkening of lip colour also depends upon the bio-chemistry of individual’s lips.
Questions (B)
(a) The complete product knowledge is given in the above write-up. What do you think should be the copy
platform for these products? Indicate the theme, the appeal and the buying motives.
(b) Indicate a suitable media mix for advertising these products. Give your reasoning.
Case No : 2
ALEMBIC CHEMICAL WORKS LTD.
DIRECT MAILINGS OF ALCEPHIN: THE LEGEND
AMONG ANTIBIOTICS
The pharmaceutical companies have to do direct marketing by necessity as they cannot advertise ethical
products in layman's media for him, but are required to promote only to the medical profession. They
produce fine visual aids and product literature which could either be sent as direct mailings to the medical
profession or can be delivered to them through medical representatives.
The Living Legends
What does one say about Lata Mangeshkar? That she has dominated the Indian film music scene for almost
four decades and promises to do so for atleast another decade? That she became a legend in her own life
time? That here is a musical genius which comes about just once in many centuries? One could say all
these things and yet be merely repeating what has been said a million times over. And yet there is so much
more to one is capturing one more vital as poet which one did not realize had existed in her. Such is the
quality of her singing.
Very few of those who see her at the pinnacle of her success realise the amount of effort, hard work end
deprivation that have gone into building the facade which is so enviable. Born In Induce on September 28,
1929. Late Mangeshkar is the eldest in family of four sister, and a brother, all of whom have made a name in
the field of music. Daughter of the noted Marathi stage actor-singer Master Dinnanath Mangeshkar, Lata
revealed her musical genius at the tender age of five. Her first guru wee her own father and she avidly
followed his musical stage plays.
Late's mother Mai Mangeshkar ha, one vivid memory of Lata as a child. It would seen that the young Late,
one day, was singing a song from one of her father's. plays when she bumped against something. All rushed
toward the unconscious child and tried to revive her. When she came to, however, Lata continued with the
singing of the song as if nothing had happened. This dedication to music led to her debut on stage.
However, her father's productive shadow was not to last for long. On April 24, 1942 Master Dinanath
passed away reportedly telling her "Except for the tanpura in the corner and these notebooks filled with
classical music and songs and God's blessings. I have nothing elseto give you. "The family'spenury
compelled Lata to sign a contract with MasterVinayak's Huna Pictures as an actress-singer. In the same
year,1942, she made her debut as a playback singer with Vasant Joglekar's Kia Hasool in Marathi under the
baton of shripad Nevrekar .But taking up a career as a playback singer was still impossible. She continued
with her acting career, acting in Pahili Mangeshgar (Marathi 42) Chimna Sansar (Marathi43) More Bal
(Marathi 43) Gajadhan (Marathi 44) Badi Mao (Hindi 45) and Mandir (Hindi 48) With Mandir Lata seemed
to have reached a dead end. Mandir was Master Vinayak's last film, after which he passed away. She was
no great shakes as an actress and her career in playback singing had not really taken off. Two Years earlier
she had made her debut in Hindi playback singing with Vasant Joglekar's Aap Ki Sewa Afein under the
baton of composor Dutta Dawjekar but nothing much had happened. However, stars served more
benevolent. Ghulam Haider, who was then acoring the music for Majboor and who had seen and heard lata
in the early. Forties, signed her up to sing a song for the film. Within a week of singing this song. Lata
became the talk of the music world and was signed up by three other musical giants. Khemchand Prakash
for Mahal.
The most important thing is to make the mundane promotion outstanding by creative ideas. Promotion of
S.S. Oberoi came out with a set of 10 four-page folders for Alcephin based on the theme 'The Living
Legends.' The folders are extremely well-executed - well-designed and printed. The graphics and
typography and illustrations are appealing. The idea is outstanding. Ten living legends are chosen and
include names like Satyajit Ray (since then deceased), Mother Teresa, Baba Ainte, Lata Mangeshkar, Sunil
Gavaskar, R.K. Laxman, Abdul Kalain and Shivram Karanth. Each folder deals exclusively with one
legend. The selection covers a wide cross-section of interests.
Each folder is well-researched. It brings out the circumstances that inspired the magic in each of them. It
becomes a collector's series. The centre-spread has the manufacturer's plug. A short write-up on the
characteristics of Alcephin and the line 'The Legend Among Antibiotics.' It is not intrusive at all. Yet it is
effective.
Questions
(a) Which other businesses/products can be suitable candidates for direct marketing? What promotional
techniques can be employed?
(b) Please do some research of your own on direct mailings of pharmaceutical companies. What are your
reactions?
(c) Put on your thinking cap. Identify a there for a campaign of one general tonic.
Organization Behavior
Page 1 Out of 1
1. Define organizational behavior, and organizational structure?
2. What is the difference between a manager and a leader? Do leaders need different skills
to be effective?
3. What is the difference between a group & a team? What are the different types of work
teams?
4. How would you define conflict? Distinguish between functional & dysfunctional conflicts
by giving suitable examples?
5. Explain the different types of employee involvement and employee recognition
programs with the help of suitable examples.
6. Select the most appropriate answer of the following: (20, each 2 marks)
1) The groups to which an individual aspires to belong, i.e. the one with which he or she
identifies is called
a) coalitions
b) committees
c) reference groups
d) task groups
2) One small drawback of the five-stage model is that it
a) ignores the organizational context
b) ignores the situational factors
c) ignores the individual attributes
d) ignores the formal structure
3) Individual employees can be converted into team players through
a) appropriate feedback
b) training
c) monitoring
d) demonstration
4) One who tries to bring discipline and order through formal structures, plans and
processes and tries to monitor performance against plans is a
a) leader
b) manager
c) co-ordinator
d) team-player
5) If the followers are able and unwilling, then the leader will have to use the
a) authoritarian style
b) participative style
c) situational style
d) strategic style
Page 1 Out of 1
6) According to situational leadership approach, the style that denotes a high-task and a
low-relationship style is
a) selling style
b) delegating style
c) participating style
d) telling style
7) Decision-making heavily depends on the individual
a) understanding
b) creativity
c) perception
d) ability
8) In formal groups and organizations, an individual has maximum access to
a) referent power
b) reward power
c) legitimate power
d) coercive power
9) In an attempt to preserve their perceptions, people tend to
a) resist change violently
b) ignore the change process
c) create bottlenecks for change agents
d) process information selectively
10) The process, which is aimed at seeking change in attitudes, stereotypes and
perceptions,
that groups hold of each other is called
a) Organizational development
b) Inter-group development
c) T-groups
d) Team-building
HEALTHCARE MANAGEMENT
Questions(4X 10=40)
1. Illustrate the Meaning and significance of Healthcare Administration
and the factors influencing it.
2. Healthcare Administration is a Science and an Art. Comment.
3. Describe the various principles and objectives of a Healthcare
Administration.
4. Healthy Environment is an important aspect as a concern for the
Healthcare. How would you address this issue effectively?
Case Study.( 2x 20=40)
Case No 1
Implementing an Integrated Human Resources System: Recognizing
that the manager/employee relationship is key in creating a great place
to work, the group XYZ has devoted a great deal of time and energy to
redefining managers' roles in the organization in an effort to improve that
relationship. It has stressed the importance of an integrated Human
Resources System, where the key human resources functions of
selection, appraisal, reward, development, organizational development,
communication, and employee relations must be closely inter-related and
mutually supportive and where the manager must play a key role. This
has been a driving force in the implementation of several key initiatives.
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
In addition, XYZ conducted a workplace culture assessment and
integrated the results from that survey into those same initiatives. The
survey used was the Competing Values Model survey. The results of that
survey yielded four imperatives: they are - increase the level of
accountability to get things done; continue to enhance collaboration
throughout the organization; decrease the amount of bureaucracy; and
increase the amount of innovation and risk-taking.
Several initiatives were launched to accomplish the above objectives. The
first was re-designing the performance management process. XYZ
transitioned from a once-a-year performance review document to a yearround,
two-way communication process that emphasizes performance
improvement and individual development. To begin the process,
managers met with their employees to collaboratively set performance
expectations, the aim being to be as specific and measurable as possible.
Managers now meet at least twice each year to discuss performance.
Ratings were removed from the performance review document to
facilitate discussions that were more qualitative in nature and that
focused on feedback and coaching. In addition, considerable time is
devoted to creating and discussing individual development plans that
emphasize professional and personal growth. These changes in the
performance management process allow for more interaction between an
employee and his/her manager to discuss issues that are most important
to the employee. Communication and trust are enhanced as a result.
Because organization improvement is based on the quality of the
managers and their relationships with their employees, the second
initiative was created: to develop a robust management development
curriculum. This curriculum was closely linked to the culture survey so
that the culture imperatives are reinforced throughout the year. New
managers to the organization attend monthly development sessions that
range from half days to full days in order to become acculturated to XYZ¡¦s
way of managing. Experienced managers are able to choose from a menu
of learning opportunities that best fit their development needs and their
learning styles.
Finally, efforts to lessen the amount of control and bureaucracy have
begun which ultimately transitions more decision-making ability to the
managers and further reinforces their ability to make decisions that are in
the best interest of their own employees. Human Resources recognized
that to give managers the level of control necessary to affect the changes
desired, a close examination of the policies and procedures needed to
take place with the goal of eliminating unnecessary controls or increasing
manager discretion/input wherever possible. For example, managers are
now collaborating with Human Resources to a much greater extent to
decide pay issues as opposed to relying on decisions based, in large part,
on system-wide HR policies/guidelines.
Workforce Problem the Program/Initiative Was Designed to
Address
„h How to best engage the workforce to achieve the mission and vision
„h How to recruit and retain the best employees
„h How to create a great place to work
Major Objectives
„h Implement an Integrated HR System approach
„h Redefine the managers' role in the organization to devote increased
time and energy to managing their Human Resources
„h Develop managers so that they can fulfill their critical role in
creating a great place to work
„h Transition to a true Performance Management process to engage the
workforce so that it can achieve its strategic vision
Significant Results
„h Executives and managers are clear about the organizational culture
and in agreement with where it is headed.
„h An entirely new performance management process was created, and
all managers were trained in the process.
„h Employee opinion survey results have improved, and in some areas
the organization is approaching world-class benchmarks.
Limitations or Problems Encountered
„h The program takes time. It is difficult in complex organizations with
multiple sub-entities, and it takes a lot of time to see results.
„h The health system has limited resources and had to do much of the
work itself.
„h It is difficult for some to understand that this is a long-term effort,
and when people already have projects on their plate, it is important
to work to prevent them from burning out.
Issues to be discussed
1. Facts of the case
2. Discuss the various initiatives as enumerated in the case based on
your analysis.
3. Establish whether the integrated Human Resource system for the
Health care is effective or not. Justify your view.
Case No 2 Referral System in Health Services: A Case Study of
Punjab
Punjab is one of the vital states of Indian Union consisting of 17
districts. Punjab has a vast network of public health care facilities
comprising of 217 hospitals excluding three tertiary level hospitals, 104
community health centres, 484 primary health centres and 1462
subsidiary health centres, dispensaries. The teritary care facilities in
Punjab consists of three Govt. Medical Colleges, two private medical
colleges and a prestigious Post-Graduate Institute of Medical Education
and Research (PGIMER), Chandigarh under the Ministry of Health and
Family Welfare, Government of India.
Punjab Health Systems Corporation established under the world bank
project aims to develop secondary health care. It has taken up 151
health institutions including all district hospitals. 42 Sub-divisional
hospitals and 87 Community, Health Centre, 6 Area hospitals. Under the
World Bank project, Punjab Health Systems Corporations is responsible
for:
1. Renovation of hospital buildings to provide appropriate space
for services.
2. Upgrading and updating of clinical skills of Medical Officers and
staff nurses through an effective training programme.
3. Provision of ambulances for transporting critical patients.
4. Installations of phone, fax in hospitals.
5. Strengthening of Secondary level health care shall support the
primary health care and thus there is need to formulate and
implement an ideal and effective referral system. This is the right
time and situation for Referral System to work and is the rationale
for this system to develop.
THE REFERRAL SYSTEM IN PUNJAB
The Punjab Health Systems Corporation has initiated to strengthen the
functioning of the hospitals for referral system through the following
measures:
„h Renovating and upgrading hospital buildings to provide appropriate
space for services.
„h Upgrading and updating clinical skills of medical officers and staff
nurses through an effective training programme.
„h Providing ambulances for transporting critical patients.
„h Installing phone, fax and paging systems in hospitals.
„h Financial powers to Senior Medical Officers in charge of the hospitals
to accord necessary single sanction up to Rs. 5,000 (Rs. Five
thousand only) and Deputy Medical Commissioners, Civil Surgeon,
Medical Superintendent up to Rs, 10,000 (Rs. Ten thousand only) to
meet the emergency.
„h The user¡¦s charges are to he retained at the site of collection. These
are to be used by the Senior Medical Officer In charge of the
hospital. Norms of services have been designed for each level of
faculty.
FEATURES OF REFERRAL SYSTEM
I. Referral Network and Zoning
To identify the various referral levels, the whole district is divided
into several zones and the referral levels are indicated for each
zone. To facilitate and for convenience of patients, certain number
of Primary Health Centres are grouped and linked to community
health centre (C.H C.) /Tehsil Hospital/Area Hospita ls / District
Hospitals depending upon the distance, availability of services,
facilities of transportation, etc. But adopting a grouping system,
uniform referral pattern has been developed. In this system the
patient will know the course of further treatment, in case one is
referred for some special procedure at appropriate level of care.
Similarly, a good rapport and faith in the referral system will be
developed. This is called zoning.
It helps in evolving a chain for the health units beginning at the
primary level moving up through the middle tier and finally reaching
the tertiary hospitals. Let us explain it with the help of Kiratpur
Sahib.
After dividing the district into zones, the same is to be depicted on
the map. The map should reflect all the health institutions, roads,
river, bridges, Bus Stand, Railway route, Railway station, Police
station, Post offices, etc.
These maps will have to be displayed at the reception counter in
each of the health institutions.
2. Transportation Facilities
lo build up an effective Referral System, a dependable
transportation arrangement has been provided where the health
personnel shall be able to send the patients to the next appropriate
level of care at the earliest, as the flow of patients is expected to be
from primary health centres to the tertiary level.
3. Referral-cum-Feed-back Card
Referral system is a two way process. The patient referred will be
given the referral-cum-feed card. The colour coding has been done.
The patient referred from CHC shall get blue cards. The patients
referred from Tehsil hospital/Area hospital shall get green card. The
patients referred from Distt. hospital shall get white card. The
patient referred from P.H.C. or Subsidiary Health Centres shall have
pink card.
The referral card contains¡XGeneral information about the patients
such as name, age, gender, address, Chief complaints, clinical
findings, vital signs. Investigations done, Treatment given,
procedure done where referred, and purpose of referral, i.e. for
admission, Investigation or expert opinion.
At the referred hospital, patients could report directly to the unit or
department to which he or she has been referred through a special
counter for referred patients.
4. Referral Procedure
In the referral procedure, there are two types of referral¡X (i)
Emergency, (ii) Routine referral. In routine referral the patient will
have to make his own transportation arrangement, however proper
counseling needs to be done. The patient shall be given referral
card. The regular hospital hours 8.00 a.m. to 2.00 p.m. In
summer and 9.00 am to 3.00 p.m. in winter with half an hour break
L30 p.m. to 2.00 p.m. For investigations, the best suitable time 9.00
AM. to 11.30 A.M. However emergency patients who are to be
attended round the clock.
5. Receiving of Referred Patients
Referral units should receive the patients directly at a place
identified in each hospital without waiting in general outdoor patient
department (OPD).
The receiving hospital must ensure that a referred patient enjoys
the following privileges.
(i) Queue Jump: The referred patient will not stand in queue
for general out-patients. He/She directly goes to the doctor
referred on priority through a special counter of referred
patients on routine.
(ii) No need of new OPD ticket. The referral card itself to he
used as OPD ticket. The entry is to be made in the referral
registers at the reception counter.
(iii) No purchee fee for referred patient with referral card.
(iv) Feed-back¡X¡XAfter dealing with patient and at the time of
discharge in case of admission, the doctor should fill up
referral-cum-feed-back card. This will help the referring doctor
to know whether the patient that he had referred, had got the
relief. The specialist may send the feed back on slip (from slip
pad) through S.M.O. 1/C of the health institution.
(v) Provision of low cost transportation¡Xin emergency patients,
it is clear that the actual fuel charges are to he paid by the
patient. In poor patients (unknown, yellow card holders,
natural Calamities, Disaster), this can be exempted.
(vi) From jail Hospitals, the patients are referred through the
Police guard.
6. Norms of Service
Norms of Services have been worked out for institutions at various
levels in terms of facilities, staffing, equipment, services, etc.
7. Maintenance of Registers
Two registers both by referring institutions and referred institutions
are to be maintained to keep a proper records. Besides, there are
large number of details which have been drawn to make the system
functional. However, the systems has not taken roots and is still in
its infancy.
For making referral system successful, Punjab Health System
Corporation has taken the following steps:
1. Intensive Training ro all personnel from top to bottom to make
them aware of the potentialities and limitations of referral systems.
2. Equipping the health institutions with the prescribed norms of
services.
3. Making the people aware through maps of zoning and also
through a video cassette ¡§Know your Hospital¡¨.
4. Arranging transport facilities.
5. Delegation and decentralisation of administrative and financial
powers.
6. Overseeing the implementation.
7. Conducting research to diagnose the problems which stand in
the way of efficient functioning of referral system.
By now, referral system has been introduced in all districts of Punjab. It
is hoped that this would bring a revolution in health services in Punjab.
Issues to be discussed
1. Facts of the case.
2. Analyse the Referral System based on the case and taking out of
case examples as well.
3. Based on the analysis do you perceive increased effectiveness in the
health services? Justify your view.
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