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Case No. 1 SALONI CHOCOLATES Objectives After going through this case, you will be able to : recognise how concepts are converted into skills. identify the planning of the marketing channels. explain business expansion limitations. relate consequential effects on marketing strategies. When she was 11 years old, Saloni sampled chocolates at a candy-store and thought that she could do better. She made her own recipe and began selling small candy bars in her hometown. The effort was much like that of many youngsters who open lemonade-stands and earn a few rupees to spend on movies. People, however, began asking her for more. Using her meagre profits, Saloni began making large batches of candy in her mother's kitchen, designed her own wrappers and developed a commission system for friends who sold chocolates at schools. Business was so good that it became an obsession. Saloni worked hard, with grit, determination and tenacity after school hours, at week-ends, and holidays, aside from a brief period when the health department suspended her operations until she could obtain proper licence to cook candy. She made candy by hand until she graduated from high school. At first, she could meet demand without special equipment or by sacrificing other activities, but when she provided candy for a school fund-raising event, demand exceeded capacity. It was at this stage that Saloni found herself buying professional equipment, hiring helpers and purchasing bulk supplies.

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After going through this case, you will be able to :

• recognise how concepts are converted into skills.

• identify the planning of the marketing channels.

• explain business expansion limitations.

• relate consequential effects on marketing strategies.

When she was 11 years old, Saloni sampled chocolates at a candy-store and thought that she could do better. She made her own recipe and began selling small candy bars in her hometown. The effort was much like that of many youngsters who open lemonade-stands and earn a few rupees to spend on movies. People, however, began asking her for more. Using her meagre profits, Saloni began making large batches of candy in her mother's kitchen, designed her own wrappers and developed a commission system for friends who sold chocolates at schools.

Business was so good that it became an obsession. Saloni worked hard, with grit, determination and tenacity after school hours, at week-ends, and holidays, aside from a brief period when the health department suspended her operations until she could obtain proper licence to cook candy. She made candy by hand until she graduated from high school. At first, she could meet demand without special equipment or by sacrificing other activities, but when she provided candy for a school fund-raising event, demand exceeded capacity. It was at this stage that Saloni found herself buying professional equipment, hiring helpers and purchasing bulk supplies.

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Looking back,Saloni recalls the obsession, the long hours, the entrepreneurial risks and the vision and the challenge to learn about a business. Always on the initiative, Saloni set about placing orders with local stores and developing contacts with dozens of schools. Her business soon occupied her entire family and close friends and she registered the company and set up a chocolate boutique. During the first month alone, she had 18,000 orders. By now, Saloni was distributing speciality chocolates to retail stores in three districts.

At 21, Saloni repositioned her company as a major distributor of speciality candies and began planning a chain of upscale chocolate shops. The chain would complement her candy manufacturing and distribution system, but it would also mean major changes in her organisational strategies. She paused to think about her plans, realising that to launch a regional or national chain would mean a corporate endeavour. She and her family could not handle all the responsibilities. This was not a pleasant thought, although the idea of pursuing a major business was exciting.

Reflecting on her business, Saloni realised that she had fun and made a great deal of money, but many people considered her success no more than the luck of a personable young lady who made good candies and had accidentally stumbled into a good market. On the other hand, Saloni knew that she had worked extremely hard to win over the clients. Most of her customers were not comfortable buying from a young high school student, and she was seldom taken seriously by customers until they had dealt with her over a period of time. Winning over her customers had always been a challenge to Saloni, not a road block, and creating unusual candies had been a joy, not a job.

About her plans : she was not anxious to become a corporate manager. And although she had always worked well with others, Saloni liked the feeling of independence. Running a company would mean sacrificing her autonomy. Yet the idea of a chain of stores selling her specialty candies had been a dream for years. At the same time, expansion would mean financial risks and Saloni had always avoided debt; she dealt in cash and had always carefully calculated her expenses to avoid even the slightest loss. She realised that she was at a major crossroads in her young career, and the choice seemed to be whether to follow her dream and expand or to be content with her existing business.

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Case No. 2


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After going through this case, you will be able to :

• evaluate new technology product benefits

• assess marketing policy projections

• determine if report reorientation essential

• write your ''own'' report

Mr. Rajan took his MBA Degree from a reputed University in the U.K., specialising in marketing. He was then appointed as a Marketing Director of a newly established company in the Nagpur region, manufacturing fans, pressure cookers, air-conditioners, etc. These products are operated with the help of solar energy - a substitute for electricity.

The company adopted this new technology for the benefit of consumers. The production commenced recently. The Board of Directors entrusted all the responsibilities - formulation and implementation of marketing policies and programmes - to Mr. Rajan. He prepared a preliminary report in respect of the long-term marketing policies of the company which mainly emphasised the following aspects:

a) Efficient after-sales service should be initiated.

b) Intensive market research programme should be instituted.

c) Efficient methods of sales promotion and advertising should be adopted.

d) Intensive training programme for the sales force should be organised.

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e) Consumer-oriented pricing policies should be adopted.

f) Efficient sales organisation on the basis of product lines should be set up.

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Case No. 3


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After going through this case, you will be able to :

• recognise a company' s record performance.

• analyse exports-agreement gains.

• evaluate re-entry in Indian market.

• identify quality, pricing and brand-name problems.

• list out alternative strategies.

Atul Chocolates Ltd was registered in 1982. After achieving a 60% share in the domestic market by 1987, it entered into an an agreement with Market Dairy Products Inc. a United States multinational, in 1987.

The agreement was to last for ten Years. The essential term of the agreement was : total exports of Atul's entire production to the United States.

In 1997, the agreement expired. During the last 10 years, the company had established a brand name and reputation in the Indian market.

Despite fierce competition, the company could manage to increase its market share by 2% annually.

In these 10 years, the company developed a sophisticated export grade chocolates technology in consultation with Market Dairy Products, Inc.

Now that the agreement is over, Atul is free to use the same technology for the products to be sold in the Indian market.

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The Atul management is wondering how the export quality products, obviously having better quality than the prevailing Indian chocolates, will be received by the existing customers.

Secondly, the export quality chocolates were sold in the foreign market under the brand name of Market Dairy Products, Inc.

The Atul Management is in two minds about :

a) Using sophisticated technology (which is now free of cost) and producing higherquality chocolates for the domestic market.

b) Exporting the chocolates to other countries, by using the cost-free technology.

c) Making a proper mix of both the strategies.

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Case No. 4



After going through this case, you will be able to :

• recognise a company's monopolistic market status.

• find diversification in production.

• identify management weaknesses.

• explain product failure causes.

The Indian Aluminium Company with an annual turnover of Rs.800 crores was established in 1951, at Calcutta. The company had set up Foil Division in 1980 at Lonawala, near Bombay. The Foil Division commenced manufacture of Superwrap in 1982-83. The demand for aluminium foil by pharmaceutical, cigarette and other industries was what the company initially had in mind when the Foil Division was set up.

The decision to manufacture household foil for wrapping foodstuffs was basically an offshoot of its British partner. Since the British company was already making the product, it was decided to do the same in India. The product was packaged in white paper and no advertising was done from 1982 to 1992 during which time, it sold just 2500 rolls per month. The company had always been catering to the needs of institutional bulk buying. The distributor for the aluminium foils was given the rolls Superwrap which he would hand over to retailers or sub-distributors to sell as part and parcel of a whole consignment, in addition to what the distributor's sales personnel could sell. The Indian Aluminium Company was the first to launch the product in India and the target audience was the housewives with an income group of Rs.3000 and above.

The product was launched in Bombay and its availability extended beyond Bombay during the last two-three years only.

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In 1986, the Foils Division requested for money to be allocated for market research but was turned down by the management, as it did not think it worthwhile. It was only in the 90's after two to three proposals were turned down, that the division got the go-ahead.

In 1990, another company started manufacturing household foils. It was at this time that the Indian Aluminium Company started facing problems as the new company did systematic market research and advertising. The management of the Indian Aluminium Company now wonders where they went wrong and had to push the product in the market in the view of the growing competition.

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Case No. 5



After going through this case, you will be able to :

• justify an equipment's unique advantages.

• recognise the emergence of health-clubs.

• identify the causes of declining sales.

'Fit-Kit' is the brand name of a popular whole-body exerciser equipment. It is meant to be used by individuals at home. Its utility is proven and its clientele belongs to the 'higher-middle to high-income' segment. Growth in its sales had been steady and adequate for the manufacturer. The equipment was sold through all the major sports shops in urban localities. Over the last two years, however, a large number of health-conscious people are registering with the rapidly mushrooming health clubs. This has adversely affected the 'Fit-Kit' sales. A recent survey conducted by 'Fit-Kit' showed:

a) Individuals often experienced low/no motivation to exercise alone. They preferredcompany.

b) An instructor's guidance while exercising was felt to be important.

c) A range of services/facilities like diet-consultancy and weight-loss guidance wereconsidered as additional advantages of a health-club membership.

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Case No. 6



After going through this case, you will be able to :

• relate consumer concerns to environmental issues.

• identify measures to combat problem areas.

• underline a retail chain's lead through green marketing.

Mr. Ashok has been keenly studying a survey report on Environmental Issues, Buyer's Behaviour : Opinions and Attitudes, for quite sometime now.

The survey revealed a number of realities. Some of the prominent ones are:

A) Out of 1000 adults, 65% are ready to pay extra, for a product packaged withrecyclable or biodegradable materials.

B) 40% and more avoided the product which was packed in materials, not protectedfrom pollutants and toxins.

C) Consumers have become concerned and sensitive about quality of land, water, airand other environmental factors, in general.

Mr. Ashok, a member of Nature Club, was thinking seriously about the new trend. On one hand, he was happy about the upcoming trend. And on the other, he had realised that his firm now needs a change in its marketing focus on consumer satisfaction.

Mr. Ashok is also the Managing Director of a retail chain shop, known as Samadhan Sakhali Udyog, a firm engaged in production and marketing ready to eat food products under brand-name 'Samadhan'.

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In his capacity as MD, he constituted an Advisory Committee seeking suggestions regarding APs focus on Green Marketing. He expected changes in three areas - Manufacturing, Use and Disposal of the product.

Samadhan Sakhali Udyog was established in 1986. Presently, it was operating through 4800 own retail stores in the widespread markets covering Mumbai, Pune and other towns in Maharashtra, Gujarat, Karnataka, Uttar Pradesh, Madhya Pradesh and Tamil Nadu. Advisory Committee will comprise of :

a) Heads of all functional departments.

b) Marketing consultant from each state.

c) Presidents of environmental safety Councils, as members.

d) Mr. Ashok as Chairman of this Committee.

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Case No. 7



After going through this case, you will be able to :

• recognise LSL's lubricants market-leadership.

• underline single product marketing strategy.

• relate market-leadership to strategy.

"Don't look for A-19 or A-21, it won't be available-because there is only A-20" is the advertising message from Lubri-Smooth Ltd.

The company's target group is household/ domestic users. However, A-20 is used for bicycles, scissors, sewing- machines, consumer durables, tiny mixers and even nuts and bolts.

Lubri-Smooth commands a tight grip with 80% market share, and has a solid standing in household sector during the last 25 years. It is used at farms, in factories, garages and even in offices.

It has remarkable household penetration, despite competition from other five brands.

However, Atul Jumale, Managing Director, is inclined to sell only one product, with a view to keep distribution and promotion expenses, manageable. He believes in Free Sampling as an excellent tool of product promotion and gives 5 ml samples generously.

Lubri-Smooth has increased the price only twice, with a gap often years, during the last twenty five years.

Ironically, Mr. Atul has been receiving a number of suggestions for changes in packaging, separate labels for different users, brand extension, price increase, changing the product

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width etc. He, however, has strong convictions that Single Product Marketing is the formula for 'success'.

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Case No. 8

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After going through this case, you will be able to :

• realise the meaning of a leader yesterday, a loser to-day.

• analyse strategies and management failures.

• identify strengths - including R & D.

• use failures as challenges for turnaround.

Fluid Control Devices Ltd. is celebrating its Golden Jubilee Year in 1998. Fifty years ago when the organisation commenced its operations (1948) for manufacturing pumps, it was considered a pioneering venture. It consolidated the business till 1968. In 1968, out of total pumps-market of Rs.24 crores, it alone produced pumps worth Rs. 8 crores . Today, however, in 1998, out of the total pumps-market of Rs. 120.00 crores, the company's share is only Rs. 16.00 crores. This shows that the demand level has grown much faster and that the company has missed the bus. Users, moreover, carry an image about the company as a producer of agricultural pumps, simple in construction and design and made out of cast iron which three hundred other units in the country can produce. The company's R & D department has developed alloy steel pumps for industrial applications but the company's share of industrial pumps market, too, is very small.

On the export front, too, the situation is not at all encouraging. The company has paid little or no attention to the export sector.

All this is reflected in reduced profitability and cash balances for the company. In 1968, on a turnover of Rs.8.00 crores the company had a gross profit of Rs. 1.5 crores; while in 1998 the gross profit increased to only Rs.60.00 lacs on a turnover of Rs. 16.00 crores. If this trend continues, the company will face losses in the coming years. The company has


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already started facing the problem of working capital and payment to its creditors is getting delayed.

Still, the company has at its command the excellent resources which include, perhaps, the best manufacturing and testing base possible, a wide distribution network and most important, trained manpower. Moreover, with 50 years standing, the Company has generated considerable goodwill in the market. Based on the above credentials, a complete turnaround may be possible if appropriate strategies are worked out and implemented at all the levels.

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Case No. 9



After going through this case, you will be able to :

• explain the leather industry's low profile abroad.

• recognise differing marketing strategies.

• analyse low performance causes.

• underline export promotion measures.

Mr. Chinmaya is the Managing Director of Seema Leather Goods Ltd. He had returned from Germany only two days ago. His company had participated in an exhibition there.

His observations of and experiences in the exhibition have, nonetheless made him restless. Some of the observations were: Italian leather goods enjoy a good reputation in the Western market. The goods, however, sold by Italy are imported from India and re-exported with their brand name.

Conventional Kolhapuri chappals sold at German stalls seemed to sustain higher prices than at Indian stalls

Some of the countries had not used interior leather. These stalls, however, could command good sales.

The scale of operations of companies in Western countries is very large. As against this, the leather industry in India is facing the problem of modernisation - because the majority of the units in India are in the small sector.

He also observed a low preference for Indian leather goods by Western customers.


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After going through this case, you will be able to :

• identify multipronged global- leadership strategies.

• recognise "acquisition" and "exports" as strategic thrust areas.

• justify low manufacturing costs and domestic market demand.

Tata Motors is going places. The company is in the process of becoming a global player. The initiative followed by the company in this strategy is unique as far as the Indian industrygoes.

The Company has signed an agreement with Rovers U.K. to sell 1,00,000 cars to them in the next five years, to be sold under the brand name of Rovers at the Rovers distribution outlets in Europe. At the same time, the company is going to sell Indica cars in the European markets at its own distribution outlets in Europe and under its own brand name, as well. Selling cars in Europe is a tough job as it is a well-developed market. Tatas are, however, confident that this strategy, that they are follwing, will definitely work. They have a presence in Europe and have been selling Tata Safari and other brands in these markets, for quite sometime now, and have a dealers network and service back-up in some countries in this region.

On the other hand, the company has just acquired a unit of Daewoo Motors in Korea for manufacturing the trucks. The acquisition is the first of its kind for the company. This gives the company unrestricted use of Daewoo's brand name which is popular in China and the South East Asian countries. This acquisition will also help the company take on the challenge posed in the Indian market by Volvo in trade and passenger bus segments. The company can import the higher range vehicles to India from the Korean facility. The Indian market is on the threshold of growth due to the road projects that are being implemented in the


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country and also due to the fact that old vehicles are being phased out due to environmental problems.

The company also is seriously planning to enter the Chinese markets soon, and has been negotiating a big tender for a supply of trucks to South Africa.

Following facts give an idea as to what the company is up to :

New-age Tata trucks in a range to roll out of emerging markets like South Africa, China, Brazil and Indonesia.

Global sales to contribute 10% of total commercial vehicles business by 2010.

Low cost manufacturing base to be leveraged to offer models at prices that are expected to be at least 25% lower than those offered by global majors.

A six member team with Italian experts is simultaneously working on a new design for the cabins.

Focus on fuel efficiency, something that American and European manufacturers do not focus on.

Offerings will be in the range of 9 to 49 tonnes payloads.

Acquisition of local companies, wherever required.

Thus, Tata Motors has developed strategies to be a global player, in the near future.

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After going through this case, you will be able to :

• recognise Marico's edible oils market leadership

• classify brand extensions with a health-care accent

• find a growing thirst for volume extensions

• explain a Rupee 821 crores hair-care market entry.

Marico Industry is a leading player in a Rs. 821 crores hair-care market. Its flagship brand is Parachute coconut hair oil, having market share of 54%. In the cooking oil market, its brands like SAFOLA and SWEEKAR have established new standards. Marico's 65% turnover comes from only two brands - Parachute and Saffola.

Saffola, known for health, now extended or say relaunched as a kardi-cum-Sunflower variant, offering taste and health benefits rolled into one. Further extensions are Saffola-Salt and Saffola Atta. Both these brand extensions are a premium segment of Salt and Atta. Saffola Oil is also respositioned - from cardiac problems affected members - to the entire family.

Recently, Marico took over the anti-lice shampoo, medikar, by paying Rs. 10 crores to P & G. Marico has 60 thousand retail outlets in the rural market. It thinks that the problems of lice infestation are rampant in rural India and if cheaper versions of Medikar are launched, it could work. Marico's "BCG matrix", looks like this : stars-parachute, cashcows-soffola and sweekar question mark - SIL Jam and Medikar.

Marico's marketing strategy is :

a) Acquire more FMCG brands such as Medikar to spur volumes and topline growth.


Case No. 11

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b) Leverage its distribution strength in rural markets to drive sales volumes.

c) Build on the equity of strong brands like Saffola and Parachute by launching moreextensions.

d) Distribute third party brands like Smoodles, Old Spice, Clearasil, to build volumes.

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Case No. 12



After going through this case, you will be able to :

• find a "trust" becoming a "pvt. ltd. company"

• recognise hostile criticism from the community.

• list out the management's justifications and claims.

Sushrut Seva Kendra hard been a reputed charitable organisation in the medical field, serving thousands of patients for over 50 years. Many well-known doctors practising allopathy, homoepathy and ayurveda were attached to this Kendra. Over a period of time, the Trustees felt they would serve a much larger section of the society, if they could bring professionalism as well as modern/diagnostic equipment. In line of this thinking, they took an extraordinary decision of dissolving the Trust of the Kendra. Due sanction was obtained from the concerned authorities. Soon after this, a new venture was started under the new name and form: Sushrut Hospitals (P) Ltd. The earlier set of doctors was retained by the new hospital, which was located in the same place as that of former Kendra. More funds enabled the purchase of more medical/diagnostic equipment as also a larger capacity of housing/handling/treating of patients. The goodwill of the organisers and the doctors constituted a strong asset. But somehow the common people around feel that this new outfit is there to loot the people, whereas the former Kendra was not viewed so.

The management of the hospital has made the following observations :

a) A more positive image of the hospital needs to be built up quickly.

b) There is a rising public demand for services in the area of hygiene, fitness and routinemedical check-up. The management doesn't know whether to offer this as a combinedpackage or individually.


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c) A couple of medical/pharmacy colleges have shown interest in linkage with the College.

d) There is no other hospital of this capacity and standard in the whole district.

The management has appointed you as the marketing manager.

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Case No. 13



After going through this case, you will be able to :

• find the first Indo-American private sector joint-venture in Indian aviation history.

• identify the phased programme under license-agreement.

• assess the product's performance and characteristics.

• recognise the export obligations.

Indian Aviation Company (IAC) has won the unique distinction of being the first private sector aviation company to have been granted Government clearance for the manufacture of light-duty helicopters in India under the license-agreement with the U.S. aviation major, Blue Bird Incorporated.

Mr. M. D'souza, Marketing Director I.A.C. who was on his way to attend the pre-launch strategic meeting for the finalisation of marketing plans for the first batch of "flyaway" category of helicopters, disclosed that the license-agreement constituted a part of the Government's initiative in inviting NRIs with investments in India alongwith their expertise. His company, set up with a project proposal of Rs. 1000 crores for the joint venture, envisaged the manufacturing programme in a phased manner, starting with a flyaway, major assemblies, sub-assemblies, details and parts and culminating in the raw materials series by 2010. The U.S. designed lightweight series with brand name "Eagles" would be assembled at the company's base in Puna under the supervision of U.S. aeronautical engineers. The Government obligation under the clearance demands that the company embarks upon the exports markets, following the completion of raw materials series helicopters. The state-of-the-art six-seater Eagles possess outstanding landing capabilities and low fuel consumption costs. The company projected an annual domestic demand of 60 and the Puna plant would have 120 units as the annual production capacity.

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After going through this case, you will be able to :

• analyse Switchex's share in the all-India market.

• recall efforts to establish presence in the western region.

• underline quota pressure as a weapon to increase sales.

• identify dealer problems affecting sales.

• judge the situation for remedial measures.

SWITCHEX is an eight-year-old organisation, manufacturing the entire range of switchgear products. It has a foreign collaborator. Its manufacturing unit is near Delhi, but sales are spread all over the country. The switchgears market is dominated by two major companies having market share of 40% and 37% respectively. SWITCHEX has established 14% market share and the remaining 9% divided among three other manufacturers. The competition among the first three organisations is quite fierce. During the initial years, SWITCHEX concentrated on the Northern region and established itself as a reputed manufacturer of switchgears. Since the last two years, the company is trying to establish its presence in the Western region.

The pricing strategy of the company has always been to be lower than two major competitors by about 8-10%. It's discounting policy is also flexible and, sometimes, it deals directly with the customers and offers them discounts.

It has appointed dealers in its markets, usually, district based, for servicing its dealers in the Western region. SWITCHEX has opened up a Regional Office at Bombay and Branch Offices at Pune, Vadodra and Indore.


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Its Pune Office is headed by Mr. Patil, a competent electronics engineer with a postgraduate in management. Since the company wants to establish itself in the Western region. Mr. Patil is pressurised to 'accept' higher quotas. In turn, he has no option but to increase the quotas of his dealers. These days, Mr. Patil is faced with tough decisions. His dealer at Kolhapur is the major cause of his concern. The dealer is M/s Kadam Brothers, a partnership firm. This dealer has been with Mr. Patil since the last two years, except for the last six months when one of the partners decided to leave the partnership and had to be paid his share in cash, causing financial problems. Mr. Patil believes that this is one of the reasons for the untimely payments to SWITCHEX for the sales. Moreover, the sales, themselves have suffered. It is reported that the remaining two partners are also concentrating on their other business activities and consequently have less time for developing business of S WITCHEX. These partners have been assuring Mr. Patil that they will soon have another competent partner and thus will come out of their problems soon. But no progress is reported in the matter, till now. In the meantime, another dealer from the same area has approached Mr. Patil for the dealership. He is dealing with the electric panels, till now, and has good contacts with the switchgear buyers from Kolhapur Region.

Mr. Patil knows that given the time, M/s. Kadam Brothers will recover from the crisis situation and because of their experience and reputation as well as contacts, will serve S WITCHEX satisfactorily. But he has no time as the Regional Sales Manager is pressuring him to increase quotas of his dealers fast or get them replaced. "We want quick sales", is the motto of his sales manager.

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After going through this case, you will be able to:

• underline JEWL's market leadership.

• find out how the father's death instigated the sons into a "new ventures" mode.

• recognise how sudden changes in strategy spell failures.

Jay Engineering Works Ltd., was founded by Lala Shriram in the forties to manufacture the well known Usha Ceilling Fans and Sewing Machines at a factory in Calcutta. The products under the able leadership of Lala Shriram became very popular and soon acquired the status of a market leader. On the death of Lala Shriram his sons, Mr. Charat Ram and Mr. Bharat Ram, took over the company. They soon went into an expansion and diversification spree. As part of expansion, they set up ceiling fan factories at Hyderabad and Agra. As part of their diversification, they went into various other fields like textiles, automobiles, gensets, etc. Ideally speaking, these measures should have improved the sales of the company and made their market standing better. The sales, however, started falling. And the reputation of the company took a big nose dive.

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After going through this case, you will be able to :

• assess leadership potential

• formulate the pattern of the readership survey

• identify "news" and "advertising" content percentage

• select state-of-the art technology and machines

• measure effectiveness of strategies

The month of June was equally hot for the print media in Ahmedabad with scorching heat proving menacing for the launch of Divya Bhaskar-the third Gujarati daily newspaper to be launched in Gujarat. Gujarat offered huge market potential with a total adult reading population of 31.32 lakhs out of which the Gujarati reading population comprised of 25.7 lakhs. There was a scope for substantial readership growth and new opportunities as the current net readership of 15.66 lakhs was monopolized by two existing players: Gujarat Samachar and Sandesh.

Divya Bhaskar : Pre Launch Activities and Strategies

Divya Bhaskar was launched with a clear objective of involving the people of Ahmedabad to make their own newspaper. The strategy was to create awareness for Divya Bhaskar and establish a brand image to give a newspaper to the people of their own choice. It was important to know the expectations of the people from a newspaper. It was planned to reach out 12 lakh households in Ahmedabad and surrounding districts in a time frame of 45 days. This task was to be carried out by dividing the city into four divisions to target 8 lac households by 1500 surveyors.


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Key Findings of Survey

The survey resulted in useful insights in making of the newspaper as they indicated their current newspaper just average in all respects. Further, the respondents had given importance to local news, they wanted a newspaper to be colourful with a daily supplement for the entire family. Around 85% of people wanted not more than 25% advertisements on the front page alongwith due importance to business updates and career guidance material. The most important finding, as indicated by 90%, was that the readers felt the need for an unbiased and ethical newspaper.

Post Survey Phase

The second round of the door-to-door contact programme was initiated in order to meet the 12 lac households once again. Findings of the survey were shared with readers and product offerings of Divya Bhaskar were explained. Order bookings confirmation, received before a month of the launch, crossed a record mark of 2 lakh.

With all marketing insights in line, Divya Bhaskar installed the most advanced software and state-of-art high speed printing machines with 5 lakh copies run. To their credentials, they had largest newspaper office in Ahmedabad (1.25 lac sq.ft.). The process was streamlined and transparent to surprise checks and audits on circulation. The strategies resulted positively, signifying the circulation numbers achieved on the launch of the paper. It continues to grow and validate strongly the effectiveness and efficacy of identifying consumer needs and expectations. Well begun is half done but a long way to go. Divya Bhaskar has a long road ahead to make Divya Bhaskar the People's Newspaper.

Exhibit 1: Circulation Numbers

Divya Bhaskar 3,00,000 + copies

Gujarat Samachar 2,29,415 copies

Sandesh 1,54,136 copies

Exhibit 2 : Order received till 18th May 2003

Ahmedabad City 1,75,168 copies

Surrounding Area 32,811 copies

Total Paid Copies 2,07,979 copies

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Case No. 17



After going through this case, you will be able to:

• underline the company's social welfare schemes.

• analyse the vision statement for progress and prosperity.

• recognise quality production and social upliftment.

A and S Ltd. Company, engaged in the manufacture of processed food products and established at the grassroots level, in 1995, enjoys an impressive market share in major Indian metros. The company spends ten percent of its post tax earnings on social welfare programmes. Its mission is:

Mission Statement

A and S strives to create an example of corporate culture - linked prosperty. It seeks to find out innovative ways and means to touch Product, Economic and Social Prosperity alongwith dignity, grace and honour for human values within the organisation and outside as well.

Product: To offer food products endowed with the highest standards of quality and with a wide variety, using inputs from its own farms.

Economic: It aims its operations to achieve a sound financial base, creation of more options for development, enhancing value for stockholders and the creation of financial rewards and career opportunities for its employees.

Social: With the utmost integrity and social responsibility, to initiate innovative ways to enhance the quality of life of the society at large, at all levels, local, regional, national and global.


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Case No. 18



After going through this case, you will be able to :

• recognise the time management which dominates the division of labour.

• argue that bored workmen do repetitive jobs,

• identify the ways for enhancing motivation levels.

The factory layout in Indian Microscopes Ltd. is such that each workman only manufactures one minute item of the microscope in the production department. A single operator later on assembles these minute items in the assembly shop. This system has been operational since the last 12 years, i.e. since the inception of the company.

You have joined the company as a Personnel Manager and are full of innovative ideas. You find that each and every workman feels bored. In fact, one of the workmen confides that ever since he joined the company, 12 years ago, all that he has been doing, every day, is the threading operation on one of the nuts used to assemble the microscope.

Strict supervision has always been maintained and productivity is high. The motivation level, however, needs improvement.

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After going through this case, you will be able to :

• recognise the agricultural background of the soap workers.

• identify absenteeism during the farming season.

• assess a processing unit's working and transfer problems.

• evaluate legal or infarmal measures.--,*-

I am a supervisor at a modern soap factory, built ten years ago, at Koregaon - a fast developing industrial area 18 miles away from Pune. The factory is situated in the beautiful rural surroundings. The factory is itself surrounded by cultivable land and many of the factory - workers own family properties here. In most cases, their living pattern is that of a joint family system. I feel that production at our factory has never come up to the management's expectations for several reasons. One of them is heavy absenteeism. During the agricultural season, the workers stay at home to work on their own land. As the worker is also a farmer, there is no dearth of food for him and his factory job provides him with extra income. Since he does not depend entirely upon the factory wages, the workers take things easy. This results in severe absenteeism in the Factory.

About six years ago, inside the same factory compound, a fruit processing unit was added by the company. The jobs in this unit are seasonal. That is, it works to full capacity only during the fruit-growing season. The unit employs 22 workers. All of them are given semi-skilled, Grade E jobs.

During the season, besides the bottling of fruit products, fruit juices are also filled in wooden casks and stored, so that they could be bottled later in lean periods. Some of the jobs done in this unit are: peeling fruit, extracting juice, boiling juice, adding other ingredients in syrups/jams, bottling, capping, labeling, preservation and keeping the premises clean.

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During the lean period, a major portion of this unit is closed. As a result, part of the workforce is transferred to the soap plant and other allied sections, to make good of labour shortages there. However, a small number of workers who remain in the fruit-processing plant are given light jobs, such as, keeping the premises clean, rolling the barrels and the like. The only exceptions to this are two workers who are engaged in filling and capping bottles. They have an obvious job title: Bottle Filler and Capper.

When these two workers-Bottle Filler and Capper- see others having an easy time, they became disgruntled and demanded higher wages; expecting that others should also do the filling and capping jobs.

They cannot be given higher grades because workers in the soap factory doing almost similar jobs are in E grade. They, too, will then claim higher grades.

The other workers cannot be asked to do these jobs because the quality of work would be badly affected. Both these, Bottle Filler and Capper, have been doing the jobs for years; have attained great skills in doing it. Others cannot match those skills and pace.

I first cajoled those workers and also counseled them; but without success. Finally, I threatened them with disciplinary action. This has only resulted in a 'go slow' response from them.

I am faced with a dilemma. I am convinced that so far as my unit is concerned, the demands of these two workmen are just and fair, since their workload is definitely more than the others. Their job also calls for greater skills than the rest of the workers. However, in the context of the whole organisation, their demands cannot be granted.

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Case No. 20



After going through this case, you will be able to:

• recognise the industrialist's skills background.

• recall his early childhood experiences.

• underline the human approach in dealings.

• justify team spirit as the fountainhead of a success story.

Mr. Sampat Patil, who came to Bombay in search of a job with a diploma in electrical engineering, rose to the status of an industrialist engaged in the manufacture of electric transformers.

During his term with the Maharashtra State Electricity Board as ajunior engineer, Mr. Patil had gained adequate experience in the field of repairing various kinds of electrical instruments, transformers and sub-stations.

Mr. Patil had a short stint as a consultant engaged in repairs of electrical transformers and allied job work, before setting up a company under the banner of 'Patil Electrical Industries' for the manufacture of 33 kV to 5000 kV transformers.

Realising the financial constraints, his company also undertakes jobs related to power distribution transformers, drop-out fuses, operating rod, high tension sub-stations, etc.

Having had his childhood in an area with no supply of electricity in Katarge in Karnataka, Mr. Patil always noticed a lit streetlight, at taluka headquarters at the age of 14. And, now in the electrical industry, he deploys the experience of darkness felt during his childhood as a parallel for the economic weaknesses of his colleagues to bring in team spirit his company.

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By concentrating more on the reasons responsible for absenteeism of any of the members of his staff than on the managerial action against those who were absent, he has been able to bring in a small-scale enterprise that functions as a small family striving not merely for their own growth but also of their clients.

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Case No. 21



After going through this case, you will be able to :

• identify economies of scale in intermetro air service.

• underline HEH's efficient flight operations and service.

• evaluate HEH's aircraft passenger capacity and limitations.

• assess link-factors in entry into unfamiliar routes.

'Hawa-E-Hind' is the new airline operating as an intermetro air-service in India since (lie-last seven years. Their planes are small in capacity (16, 50, 70 seats). Their service is well-known and the flights absolutely punctual. 'HEH' obviously cannot compete with bigger airlines on international routes. Major inland aviation players are, however, seen to concentrate on Metro-to-Metro routes. They, in fact, are pulling out of Metro-to-non-Metro routes, saying that these are becoming unviable for them, with their bigger planes whose passenger capacity remains underutilised. 'HEH' is studying this situation carefully.

They see a ray of hope here. But 'HEH' is unsure of stepping into a not so familiar non-metro segment.

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Case No. 22



After going through this case, you will be able to :

• analyse LMT customer survey findings.

• underline safe and accident-free operations

• identify weaknesses in service.

Chandra Prakash is a senior administrator, appointed recently to head the newly formed Marketing Department of the Local Municipal Transport (LMT) of a fast developing north Indian city. On assuming the office, he initiated a customer survey. Salient observations are as follows :

a) The LMT is safe, fewer accidents per year.

b) Fleet of buses is inadequate, no punctuality.

c) Buses are often unclean.

d) LMT is regarded as unduly expensive over short distances, especially as comparedto options like 6-seater rickshaws, 'tam-tams' etc.

Besides this, Chandra Prakash is also aware of an ideal Bus: Employees ratio of 1:11. But in LMT, it is 1:17. Chandra Prakash wants to revamp the LMT and believes that marketing holds the key to the LMT's success.

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After going through this case, you will be able to :

• analyse the root cause of indiscipline.

• identify the problem are of loss of control over staff.

• state failures of corrective measures.

Mr. H. B. Vatia, Branch Manager, Kenya Main Branch of Kamini Bank was wondering as to what could be done to restore the punctuality of the staff in his branch. A majority of the staff members were taking time off from the work, on a number of occasions, during the day, which resulted in work remaining incomplete, and in the payment of overtime wages for its completion. The problem was generally not faced by other banks in Kenya, except the Bharat Bank, another Indian bank having branches in Kenya. Other local and British banks were able to exercise sufficient control over their staff to ensure proper attendance and maintain office decorum.

Initially, Mr. Vatia tried to persuade the staff to be punctual. He sermonised them on several occasions. None of this, however, made any dent on the problem. Failing in these methods, he resorted to punishment of the erring members of the staff. This led to some improvement but not to the desired levels. He also felt that prolonged use of this method may, indeed, lead to more serious trouble. He therefore thought of analysing and identifying the root cause to the problem.

His investigation in the habits formed, revealed that the unauthorised "time off' was used mainly for personal work which included shopping, personal errands, meeting friends, going for coffee, etc. When caught, the general explanation given by the staff member was that he had gone out for a cup of coffee. Mr. Vatia noticed that no canteen facilities were available in the branch nor was there any space, where it could be set up. The British and other local banks, however, had made adequate provision for the purpose.


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An automatic coffee vending machine was installed, but the move did not succeed as the stall complained that the coffee given was not up to the standard. The members of the staff protested and refused to use the machine.

Days passed by. One day, it occurred to Mr. Vatia that the muster-roll of the branch did not have any provision of marking the period of the absence by the members of staff in the event they had to go out for coffee. It was not possible to know or to control the period of their absence. To overcome this, he decided to install a "time-clock" at the maingate with in & out" trays for attendance cards. The staff was advised to use these cards for marking their arrival and departure and also the absence periods. Authorised outside work could be authenticated by the immediate Supervisor.

The idea was brought to the notice of the branch union by the staff members. There was resistance to the idea initially. Mr. Vatia, however, pointed out to them that this was a scientific method of recording the attendance and it was not possible to falsify the same. As it happened, during that period only, the services of three members of the staff were terminated for dishonesty and fraud. They had altered the time marked in their muster-roll for departure, thereby, claiming overtime for a period in which they did not work. This was proved by the photocopy of the day's musterroll taken by Mr. Vatia, from time to time, by an unscheduled visit to the branch late at night without any indication to any one in the branch.

Mr. Vatia pointed out to the union representatives that by the introduction of "time clock," the temptation to alter time by members of the staff would be removed and that it would he of long-term benefit to the staff. The union members almost came round to accepting (he idea but, still, were not fully convinced.

At this stage. the Regional Manager, who came to know of the proposal of installing the Clock, suggested to Mr. Vatia that as no other bank in Kenya was adopting this procedure, he should have this scheme approved by the Secretary of the Kenya Bankers Association.

The meeting with the Secretary was failure. He was a man of old British tradition and was shucked a! the idea of introduction of a time-clock in the banking industry there. All efforts by Mr. Valia to convince him that there was nothing wrong in it and that most officers of major corporations had this system did not move him. Other bankers, when individually contacted, also did not favour the idea.

Not willing to go all alone, the Regional Manager advised Mr. Vatia to shelve the idea.

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Case No. 24

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After going through this case, you will be able to :

• find ITI apprentices promoted to foreman' s grade

• differentiate one of them as formen-in-charge

• identify two, indulging in an indisciplinary act.

• determine the action against the erring foremen.

The Supreme Engineering Company in the Bhosari area near Poona was established in 1973. It's main production was spareparts and small parts required for automobile and two wheeler companies. The company used to employ apprentices from ITI. Sudhir, who had worked as apprentice with this company, was a qualified hand from ITI and was employed by them in January' 75 and confirmed in April' 75 as an Assistant Foreman. Ashok and Manoj who were also from ITI from the same batch of Sudhir, were employed by this company from June 75. By January 83, all the three were promoted as foremen. In December 85, Sudhir was promoted as Foreman-in-charge. The working-hours of the company were from 8 a.m. to 1 p.m. and then from 2 p.m. to 5 p.m. The company allowed 10 minutes at the end of the day for washing and cleaning purposes (from 4.50 to 5p.m.).

On 18 December 85, at about 4.15 p.m., Sudhir noticed that Ashok and Manoj were already in the Washing Room. He shouted at them that there are still 35 minutes of working time left and that they should go back to their work-spots and commence work. Furthermore, he personally escorted them to their work-place. While on way to the workshop, Ashok and Manoj told Sudhir that at one time they all were Assistant Foreman together. That time, Sudhir also used to join them in avoiding work by going to the canteen and washing rooms.


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Sudhir told them that as a Foreman-in-Charge, he had to maintain discipline in the Workshop and he could not allow his own friends to take liberty with him. He would, otherwise, find it difficult to control others.

From that day, Ashok and Manoj did not co-operate with Sudhir and did the minimum amount of work and created imaginary problems for Sudhir. Sudhir reported the situation to his Departmental Head who asked him to go and meet the Personnel Manager for his advice.

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After going through this case, you will be able to :

• find the company' s market leadership and foreign collaboration.

• evaluate product differentiation.

• recognise the relation of cricket stars to exports and sales.

Indeed, the success or failure of a sports-star need not have a direct effect on the sales of a company. M/s. Shree Siddhi Vinayak Arts & Commerce Manila Mahavidyalaya 'Challenger Sports of Srrenagar (J&K), have realised this, at their cost.

As it is, M/s. Challenger is a leader in the sports-goods, specially in cricket bats. They command 60% of the market-share. Their production started 25 years ago in technical collaboration with M/s. Hammonds of Great Britain. Since the expiry of the collaboration agreement, through their own experience in the field and thanks to the best quality of wood available in plenty in the Kashmir valley, the company has launched new models at regular intervals. So much so that, they not only continue to be the leaders in Indian market, but also export their products to over 20 countries, including the U. K., West Indies, Sri Lanka and Australia. The exports accounted for 30% of the company's sales of Rs. 10 crores last year.

The company is, however, facing certain peculiar problems. These relate to the product differentiation. As per the present catalogue, the company has 55 models of cricket bats in different sizes, designs and quality. Prices range from Rs. 50 to Rs. 750 per piece. Some of the models use pictures of international cricket stars. Aroyalty is paid to these stars for this. The pictures are known to popularise each particular model. However, if a particular cricket star fails in his performance during the season, bats bearing his picture don't sell at all, leading to a large inventory. Besides, some of these stars belong to countries which do not have good relations with India at present. This has also adversely affected the sales.



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Case No. 26



After going through this case, you will be able to :

• recognise the emergence of second generation computers.

• identify the ensuing price war and losses.

• underline the changing nature of advancing technology.

The second generation computers were first introduced in the U.S. markets in early 1983. These computers were having 4 to 16 times higher storage capacity than the first generation computers. These could also operate more sophisticated programmes and could be used as word-processors as well.

The prices of these computers were slashed to US $ 200 per equipment to beat competitors from the first generation computers which were sold around US $ 100 per equipment and which were useful only for playing video games, for making relatively simple calculations and graphic display. These could not be used as word-processors due to limited memory.

A price war ensued and all companies selling first and second generation computers simultaneously engaged in price cutting. Those who did not, lost the market share heavily.

As a result, all competitors lost profit margins. In 1984, the threat of Alfa Computers and Info Tech Corporation introducing second generation computers was looming large over all the competitors. This would put enormous pressure on them because of the strong brand name appeal of both these companies. The home computer market was changing rapidly. While first generation computers lasted five years before new models came along, subsequent models were expected to have a life of two years or less due to the fast changing technology.


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Case No. 27

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After going through this case, you will be able to :

• find the first Indo-American private sector joint-venture in Indian aviation history.

• identify the phased programme under license-agreement.

• assess product's performance and characteristics.

• recognise the export obligations.

Mr. Wagle, the Marketing Director of Bharat Aviation Company (BAG) was on his way to attend a pre-launch strategic meeting which had a special importance as it was to open the marketing plans of his company for a new helicopter, the first from a private sector company in this category in India. BAG was the first in the private sector to have got, licence besides Indian Aircrafts Ltd. (IAL), a public limited co. The project was in response to Indian Government's initiative in inviting non-resident Indians (NRIs) to bring home their expertise. The company was set up with a project proposal of Rs. 2 crore in 1992. As per the terms of joint venture, the helicopter was to be designed originally by the U.S. partner and assembled in India under the supervision of U.S. experts. As per the exports regulations of India, 75% of the output was to be exported out of the country. The company decided to manufacture two models - one with a carrying capacity of two passengers and the other with five. These helicopters could land anywhere without requiring helipad. Further, the fuel efficiency was amazingly low, working out to Rs. 2000 per hour of flying. The company projected an annual demand of 60 and the plant had a production capacity of 120 per annum.


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After going through this case, you will be able to :

• find that small units can compete with organised business.

• recognise that the small units' low overheads lead to low prices.

• identify the areas of new product planning

"Crunchy and Crispy Ltd.," who are in the processed food business for a fairly long time have now been facing severe competition from the unorganised sector. The sale of their major potato chips brand has been badly affected due to the mushrooming growth of smaller units. With the lower overheads, these smaller units can afford to keep the prices low and competitive.

Mr. D K Roy, Marketing Manager of Crunchy and Crispy Ltd., is a worried man. For the last six months, he has been toying with the idea of introducing a new product, 'Honey Coated Peanuts' in the market.

Case No. 28

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Case No. 29



After going through this case, you will be able to :

• find that liberalisation encourages foreign investments.

• underline the fact that desi businessmen feel threatened about their survival.

• formulate reorganisation with new strategies.

Mr. Dinesh Kulhan has had been a worried man of late. After a comfortable living for almost two decades, he is increasingly getting restive over the kaleidoscopic changes in the fundamentals of the soft-drink business, following the enunciation of liberalisation and new economic reforms. He, however, still continues to be numero uno in the soft-drink business. With the opening up of the domestic markets for foreign investments under the liberalisation programme, new foreign brands have started flooding the Indian markets. To cite an example: one estimate predicts India to be a more than 3 billion (in volume terms) market.

In particular, Kulhan is deeply concerned about the ambitious marketing exercise of some of the foreign companies which, in turn, could neutralise the advantage painstaingly built up by Indian companies like his own. In the light of these developments, he appoints a consultant to devise future strategies in regard to

1) Segmentation

2) Rural markets and

3) Long term strategic planning


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Case No. 30



After going through this case, you will be able to :

• recall Pratima' s market-leadership in films and cameras

• recognise it's plans for ''WDC-3'' with unique features

• identify existence of a similar product already being sold in the market.

Pratima Ltd., a leading company, was controlling nearly 75% of the market of films and cameras in India.

Pratima markets seven models. The price range of its cameras is between Rs. 15000 and Rs.60000. The production department of Pratima Ltd., is now ready to manufacture a new product, 'WPDC-3', which is a Waterproof Disposal Camera (WDC) with a price tag of Rs.300.You can have ten snaps and then just hand it over to a Developing Shop. It is extremely simple and convenient to operate. You can take a picture with camera submerged upto 12 feet underwater.

There is another product, TAMTOOM-2, already in the market and which was launched just one month before. This disposable camera price is Rs.700. You can take five snaps with it but it has an auto-development facility.

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After going through this case, you will be able to :

• find the questioning of the CB research expenditure by the finance department

• recognise the need for educating finance personnel

• underline the presentation on CB -related marketing mechanism.

You are working in the Marketing Department of 'Ice-Kool', a large ice-cream manufacturing company. One of your colleagues, an accountant, likes to tease you about how much the marketing people spend on research in buyer behaviour. He has invited you to make a presentation to the Finance Department about why it is necessary to study consumer behaviour, before your research budget for the coming year receives acceptance for allocations. He says that he and his colleagues think that members of their families are so fickle in choosing ice-cream that it hardly seems worthwhile establishing what they might think. "The company should decide what to make and stick to it", they assert.

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After going through this case, you will be able to :

• find RIL' s entry in the competitive TSP market.

• recognise a wide consumer choice for technology and handsets.

• identify the consumer expectations from TSP's.

Reach India Limited (RIL), one of the well-known companies, was relatively new to the Indian market as a Telecom Service Provider (TSP). With a boom in the telecom market and tough competition, it was important for the company not only to grow but to grow sustainably. The consumer had a wide choice between GSM and CDMA technologies for service provision. Different handsets were available for different technologies and so the consumers had a choice for handsets too! The consumers are in a dilemma about service attributes, benefits provided by the telecom service providers and handset features.

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Case No. 33

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After going through this case, you will be able to :

• analyse the entry of global players in Indian markets

• underline joint ventures, alliances growth, the engines of progress

• recognise the globalisation of the Indian automotive industry

Seven months after taking over as President of General Motors Asia-Pacific, Frederick Henderson came for a visit to India and announced that his dream was to turn the world's biggest car manufacturer into the biggest car marketer in India.

GM.India is a small player in India right now. It has a plant to produce 25,000 cars, but at the last fiscal sold only 8,473 cars. It seems stuck in the slow lane in India.

In what will be a first in the Indian automotive industry, G.M. plans to use its 21 -year-old global alliance with Suzuki and a more recent one with Fiat to move into gear. What helps is that GM. owns a 20% stake in both the companies. Combined in India, their purchasing will soar over Rs.6,100 crores a year, the dealership and service network will jump to 360, and make it an alliance with the widest range of passenger cars.

Apparently, the idea is to create an Indian version of the Global Alliance that the three already have. They can now develop new products, sell each other's cars in various markets, source components together and even enter into joint ventures. In India, the alliance will form on the companies sharing each other's products, buying components together in order to cut both, components and sourcing costs, working on engines and transmissions together, and entering into cross branding agreements.

The Indian automobile industry is in for a big change. In the new scenario, three players out of 12 would play the game as one, for all practical purposes. The alliance could bring


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to India the world's largest car maker's vast portfolio of brands. And the volumes of Maruti will give the alliance the leeway with vendors to source components at lower costs and expand markets through Maruti's wide network.

Fiat can help Maruti with its quest for diesel engines for cars. G.M. and Fiat auto plan to invest $100 million at Fiat's Ranjangaon facility in order to produce new models and powertrains.

The joint venture with equal ownership, the details of which are being worked out, could also become a global source of powertrains for small and mid-sized cars. Thus, there is little reason to doubt the partnership rolling in India. The Asia-Pacific region is after all, the fastest growing car market.

According to Mr.Ravi Khanna, Country President and M.D., Delphi Automotive Systems (INDIA),Globally, the auto industry is now more agile as a result of consolidation. In India, circumstances may be peculiar or unique. But the pattern can be seen quite clearly."

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After going through this case, you will be able to :

• spot the Indian firms aspiring for entry in global markets

• consider the consultant's advice against such a move

• analyse the firm's weaknesses in quality and packaging of products

Think Global and Act Local, the screaming headline of an advertising campaign triggered off a thought process in Mr. Vilas Borde's mind. His company, 'Natural Remedies' has gone in various segments viz. Ayurvedic cosmetics, toiletries, toothpastes and vanishing cream markets. Vilas's single minded perseverance ensured that 'Natural Remedies' saw a rapid rise in sales in 70's and 80's.

But in the wake of five years of sluggish growth and faced with the prospects of intense competition, Vilas was toying with the idea of going global against the advice of his consultant friend, Pradip Vyas.

Mr. Vyas thought that to increase sales, he ought to concentrate on toothpaste marketing as both, urban and rural customers, both, consume it. During the initial stages, however, the packaging and the tube gave problems, spilling the paste on the user. Complaints began to mount. Burden of this disastrous launch began to show on other product lines. He thought, learning from these mistakes, he would have been better off in global market.

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After going through this case, you will be able to :

• find a Indo-German electronic goods partnership deal in the offing

• identify export-import proposal details/options

• criticise the Indian partner's ignorance of IT practices

• recognise change in the product-line, exposing tie-up chances

Harish Patel of Kandla port town is a dealer in electronic goods. His present turnover is in the range of Rs. 15 lakhs. In course of time, he steadily built business contacts in the electronics market and industry.

Recently, Harish got an attractive offer from Naresh Mistry, his NRI friend in Germany. The proposal runs like this :

A) Harish and Naresh will form a partnership firm in India. For the first five years, it willserve as a representative firm of a German electronics manufacturing firm owned byNaresh. [ Percentage level of partnership is yet to be finalised.]

B) Harish will receive booklets, brochures and sales literature from Germany about theelectronic components to be sold by their partnership firm in India.

C) Products will be high-tech in nature ranging from PCBs , modem cards tocomponents / spares for computers and fax machines.

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Harish has two options.

1) The Indian firm will import items from Germany and then sell these in the Indianmarkets.


2) The Indian firm only establishes contacts with customers in India. Interested partiesthen directly import goods from Germany. For each consignment under such an option,the Indian firm receives commission from the German firm.

Harish has no experience, however, in such a business. His knowledge of export- import formalities is limited. He doesn't know how to raise the foreign exchange, if the 'Indian firm' decides to settle for the first option of importing the goods by itself. Naresh suggests that Harish can start exporting Indian (classical) music instruments to Germany, which are in great demand there. Foreign exchange earned from this can be utilised for importing electronic goods. Harish is further confused. Musical instruments is an altogether new line of business for his firm.

Naresh, further, suggests that Kandla Port town has a 'Seepz Zone', which itself is a great advantage to Harish. Harish doesn't understand this at all.

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After going through this case, you will be able to :

• find the foreign job-seekers' growing interest in BPO firms

• recognise language skills and knowledge-base as assets

• underline globalisation: Indian BPO business breakthrough

29-year-old Ethel Graff worked with an international firm in Paris drawing about $3000 per month, till four months ago. Today, however, to the surprise of her friends, she flew into Delhi on a one year work Visa to work with a Delhi-based BPO firm Technovate Evolutions at Okhla for under 25% of her European salary.

The arrival of Graff and 29 other Europeans at the company, which is a subsidiary of the London headquartered online travel agency "ebookers Pic" has given new dimensions to the evolution of Indian BPO industry. So far, the European and US companies were outsourcing only English language BPO work to India. In the last few months, however, when BPO firms got non-English business, they set up centers in that geography and hired natives to cater to the business. For instance, Msource has set up a center in Mexico to deliver Spanish work. In some cases, BPO firms even hired Indians proficient in foreign languages. However, the Technovate experiment in hiring foreigners to work in India on Indian wages has been distinct and remarkable. If this trend grows, India could well be looking to bite into the $ 65 billion European BPO market, by 2005.

The question is what brings the Europeans to India to work? Some say it is the challenge of working in the unfamiliar emerging markets, others come because new work experience in India matters. As BPO people, they serve their own people from India and also get opportunities for travel in the country. The Europeans are interested in coming to India, which is evident from the fact that one company received 100 applications for five posts that it had advertised for in the newspapers in Scandanavia.


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Technovate has a BPO center in Ireland too. Why then are they more interested in India? The most important reason is that Ireland is three times more expensive than India. The Irish center employs 60 people; while the Indian center employs 650 people, including 30 Europeans. The company plans to increase its intake of Europeans to 100 by December 2003. The foreign staff in India costs the company 25 % of the European wages. Its rate of attrition is 15% compared to the industry average of 40%. This kind of model is important for the company on three counts, according to its CEO. Firstly, Indians can learn the foreign languages but they do not match up on skills that can get additional bookings for the company. Europeans also have a significant effect on Indians working with them as it helps the Indians to hone their skills in the foreign language. Foreigners' distinctive and vast knowledge is another area where foreign professionals score naturally. BPO companies spend a few months and Rs. 25,000- 35,000 on the training of each employee on countries, time zones, people, habits and culture. Here again, the Europeans score as they have better knowledge about the environment they come from.

On the other hand, another Indian BPO firm, e-Daksh, has decided to set up operations in the Philippines, as it finds that the cost in that country is lesser than in India. These operations will be managed by the local CEO and the staff will also be local.

All these developments mean an interesting mode in the development of Indian BPO business. The times are going to be challenging, in the future.

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After going through this case, you will be able to :

• find out how US law and import bans affect other countries' interests

• identify the WTO platform for the settlement of disputes

• identify the WTO verdict against US' s import ban threats

There are seven species of sea-turtles in the world, six of them are on the US list of endangered species. A major cause of the decline of sea-turtles has been the poor fishing practices, particularly by shrimp boats. An estimated 1,50,000 sea-turtles are trapped and drowned in the nets of shrimp boats every year. In an effort to limit this carnage, the US Congress passed a bill in 1989 that required shrimp boats to be equipped with a turtle excluder device, a simple grate that fits over the mouth of shrimp trawling nets and prevents sea turtles from being trapped. The law also banned the import of shrimp from countries that fail to mandate the use of turtle excluder devices by their shrimp fleet.

As with many such laws, the US government dragged its heels on enforcing the import ban. It wasn't until 1996 that the United States placed an embargo on the import of shrimp from countries that failed to mandate the use of excluder devices. Even then, it did so only because environmental groups in the United States had sued the Government to compel it to enforce its own law. Three countries were targeted by the 1996 ban - India, Pakistan and Malasia. The three responded to the ban by filling a complaint with the World Trade Organisation. They were joined by Thailand, which decided as a matter of principle to pursue the WTO case (Thailand had already satisfied the United States that its turtle protection methods were adequate.)

The WTO formed an independent arbitration panel composed of three experts from countries not involved in the dispute. The panel was charged with reviewing the US position


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to see whether it conflicted with the WTO rules. In its defense, the United States claimed there are provisions in the WTO rules for using restrictive measures if they are related to the conservation of exhaustible natural resources and if such measures are made effective in conjunction with restrictions on domestic production or consumption. The United States was supported by a number of environmental organisations, including the World Wildlife Fund (WWF). In a brief submitted to the panel, the WWF argued that marine turtles are migratory animals, a global resource that should be subject to stewardship by international society. Even though no multilateral body or resolution had authorised the United States to enact its ban, the WWF claimed that the United States acted in a manner consistent with its obligations and took reasonable measures that reflected the will of the international community.

The four countries that brought the complaint argued that the US ban represented an unfair restraint on trade that was illegal under WTO rules. According to these countries, the United States was violating WTO rules by applying domestic legislation outside its boundaries and by applying it in a discriminatory manner. Influential voices in all these countries accused the United States of hypocrisy. An article in the Hindu, an Indian newspaper, stated, "Compared to what the US as a nation is doing to other global shared resources, the world's climate and atmosphere, what complainant nations like India are doing to the marine turtle is a contemptuously small problem." The US leadership has, unfortunately, always put its national interests before global concerns in its global environmental policies. Its behaviour on the climate change issue is one example. Its refusal to sign the bio-diversity treaty is another. Its refusal to pay dues to the United Nations is yet another.

The World Trade Organisation panel issued its ruling on April 6, 1998. The WTO ruled that the United States was wrong to prohibit shrimp imports from countries that failed to protect sea-turtles from entrapment in the nets of shrimp boats. The WTO stated that while environmental considerations were important, the primary aim of international agreements on trade remained the promotion of economic development through unfettered free trade. Further, the WTO stated that even under WTO treaty provisions that allow environmental exceptions, the United States would not be allowed to force other nations to adopt policies to protect an endangered species such as the turtle.

While the WTO has no power to overturn US law, the United States must pay a penalty to the WTO if it keeps its law and imposes a ban in place. Environmental groups responded with outrage to the WTO's ruling. A Sierra Club spokesman noted : this is the clearest slap at environmental protection to come out of the WTO to date." Similarly, a spokeswoman for the Washington, DC based Center for Marine Conservation stated, "It is unthinkable

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that we should not be allowed to mitigate the impacts of our own shrimp markets on endangered sea-turtles. This entire life form is threatened with extinction".

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Case No. 38 COCA-COLA

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After going through this case, you will be able to :

• find Coke consumption by children leads to illness

• analyse fierce controversy over Coke' s lapses

• evaluate Coke's justification about its standards

• justify European Commission's observations

The Coca-Cola recalled over 15 million cans and bottles on June 13, 1999 after the Belgian Health Ministry announced a ban on Coke beverages, which were suspected to be responsible for the sudden illness of more than 100 school children in the preceding six days. This recall was in addition to the 2.5 million bottles that had already been recalled in the previous week. The Company's products had been bottled in Antwerp, Ghent and Wilruk in Belgium, while some batches were also produced in Dunkirk, France.

The children in 6 schools in Belgium had complained of headache, nausea, vomiting and shivering which ultimately led to hospitalisation after drinking Coke beverages. Most of them reported an "unusual odour" and an off - taste in the drink.

In the same week, the Governments of France, Spain, and Luxembourg also banned Coke products; while Coke's Dutch arm recalled all products that had come from its Belgium plant. The entire episode left more than 200 Belgiuns and French school children ill. The Company had to assure its British customers that the products made in its UK factories were safe. By June 15, 1999, Coke had recalled about 30 million cans and bottles, the largest ever recall in its 113 year history. For the first time, the entire inventory of Coke products from one country were banned from sale.

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Analysts felt that the Belgium recall was one of the worst public relations disasters in Coke's history. It was alleged that the Company had information about people who had become ill weeks , prior to the above incidents. Coke had an opportunity to disclose this information but chose not to do so and was accused of being unethical. Another issue, that worried analysts was the illness caused to the innocent school children. They blamed coke's promotion strategy to sell soft drinks to school children, which had raised a lot of controversies in the U.S.

After the crisis, Coke investigated the problem by testing the suspect batches for chemicals. The Company claimed that the tests showed nothing toxic in the beverages. The Company said that there had been separate errors in two plants. The products from Antwerp plant had a strange odour as some fungicide had accidentally fallen on the exterior of the cans. In addition, they had determined that the strange taste was the result of a substandard gas used to carbonate the products.

Analysts said that Coke had not handled the situation well and its media messages were confusing, inconsistent and muddled. Coke alternately claimed that pesticide residue on the can or bottle, or a bad batch of Carbon dioxide was to be blamed for the "off taste. On the other hand, the Company also insisted that there was never any health threat. A Company spokesman assured consumers "It may you feel sick, but it is not harmful".

In August 1999, the European Commission reprimanded Coke, asserting that the Company had not cooperated adequately and its explanations were not entirely satisfactory. It also said that errors were committed in the selection of plants or the dosage of extracts in Coke's own concentrate. While no deaths were linked to the Coke problems , it had a significant negative impact on the public confidence in Europe.

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After going through this case, you will be able to :

• find Coca-Cola's innovative promotional strategies, since 1893

• recognise ''vision'' in expansion plans

• identify image-building advertising campaigns all over the world

• underline global player's varying marketing strategies

The most recognised brand name in the world got its start in an Atlanta pharmacy, where it sold for five cents a glass. The name Coca-Cola, registered as a trademark on January 31, 1893, was based on two of the drink's ingredients; extracts from coca leaves and the cola nut. In its early days, when the drink contained a form of cocaine, a drug made from coca leave extracts, the Coca-Cola was marketed as an "Esteemed Brain Tonic and Intellectual Beverage". The company's first President, Asa Candler was a savvy businessman who implemented numerous marketing strategies to increase consumption. At Candler's behest, the company printed coupons offering complimentary first tastes of Coca-Cola and outfitted distributing pharmacists with clocks, calendars and scales bearing the Coca-Cola brand. The drink soon became a national phenomenon by 1895, the company had established syrup plants in Chicago, Dallas, and Los Angeles.

Coca-Cola expanded beyond the American borders in the early 1900s into numerous countries including Cuba, Puerto Rico, and France. In the 1920s, Coca-Cola pursued aggressive global branding, finding creative placements for its logo such as on dogsleds in Canada and on the walls of bullfighting arenas in Spain.

During World War II, the US Army shipped bottles of the beverage abroad to supply American soldiers in Europe and Asia. Its popularity throughout the world was fuelled by colorful and persuasive advertising that cemented its image as the "All-American" beverage


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when the Vietnam War tarnished the American image. Coke developed more globally aware advertising. In 1971, the company ran its legendary "I'd like to buy the world a Coke" television spot, in which a crowd of children sang the song from atop a hill in Italy. Coke's moves into formerly restricted markets such as China in 1978 and the Soviet Union in 1979, bolstered its image as a global company. By 1988, Coca-Cola was voted the best known and most admired brand in the world. One ad agency executive said," There are about two products that lend themselves to global marketing and one of them is Coca-Cola".

Still, Coca-Cola did not institute a uniform marketing program in each of its global markets. Rather, the company often tailored the flavor, packaging, price and advertising to match the tastes in specific markets. For example, Coke's famous "Mean Joe"Green TV ad from the United States-in which the tired, weary football star reluctantly accepts a coke from an admiring young fan and then unexpectedly tosses the kid his jersey in appreciation - was replicated in a number of different regions using the same format but substituting famous athletes from those regions (e.g. ads in South America used the Argentine soccer star, Maradona, while those in Asia used the Thai soccer star, Niat). Additionally, local managers were assigned responsibility for sales and distribution programs of Coke products to reflect the marked differences in consumer behavior across countries. In Spain, coke has been used as a mixer with wine. In Italy, Coke is served with meals in place of wine or cappuccino, in China the beverage is served at special government occasions. The company used the phrase " think global, act local" to describe its marketing strategy, during the 1990s.

Today, Coca-Cola conducts business; with more than 230 brands in 200 countries. More than two-thirds of Coca-Cola's revenues come from outside the United States, a fact which makes the company vulnerable to downturns in international economies, as evidenced by shallow earnings during the global economic upheaval in the late 1990s. In response to the depressed sales brought by international recessions, the company pursued a restructuring plan that would recast the beverage gaint as a collection of smaller, locally run businesses. "When Douglas Daft took over as Chairman and CEO in 2000, he expressed his desire for Coca-Cola managers to adopt a new mantra; "think locally and act locally".

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After going through this case, you will be able to :

• examine this case study and note various internal and external factors affecting thefortune of the company.

• analyse the importance of various factors responsible for shaping the company'spolicies over the years.

The Coca-Cola company started out as an insignificant one man business and over the last one hundred and ten years it has grown into one of the largest companies in the world. The first operator of the company was Dr. John Pemberton and the current operator is Roberto Goizueta. Without the help of society, Coca-Cola could not have become over a 50 billion dollar business.

Coca-Cola was invented by Dr. John Pemberton, an Atlanta pharmacist. He concocted the formula in a three legged brass kettle in his backyard on May 8, 1886. He mixed a combination of lime, cinnamon, coca leaves, and the seeds of a Brazilian shrub to make the fabulous beverage (Things go better with Coke 14). Coca-Cola debuted in Atlanta's largest pharmacy, Jacob's Pharmacy, as a five cent non-carbonated beverage. Later on, the carbonated water was added to the syrup to make the beverage that we know today as Coca-Cola. Coca-Cola was originally used as a nerve and brain tonic and a medical elixir.

Coca-Cola was named by Frank Robinson, one of Pemberton's close friends. He also penned the famous Coca-Cola logo in it's unique script. Dr. John Pemberton sold a portion of the Coca-Cola company to Asa Candler, after Pemberton's death the remainder was sold to Candler. Pemberton was forced to sell because he was in a state of poor health and was in debt. He had paid $76.96 for advertising, but he only made $50.00 in profits.


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Candler acquired the whole company for $2,300. Candler achieved a lot during his time as the owner of the company.

On January 31, 1893, the famous Coca-Cola formula was patented. He also opened the first syrup manufacturing plant in 1884. His great achievement was the large scale bottling of Coca-Cola in 1899. In 1915, The Root Glass Company made the contour bottle for the Coca-Cola Company. Candler aggressively advertised Coca-Cola in newspapers and on billboards. In the newspapers, he would give away coupons for a free Coke at any fountain. Coca-Cola was sold after the Prohibition Era to Ernest Woodruff for 25 million dollars. The Company was then passed on to his son, Robert Woodruff, who would be president for six decades. Robert Woodruff was an influential man in Atlanta because of his contributions to area colleges, universities, businesses and organisations. When he made a contribution, he would never leave his name, this is how he became to be known as Mr. Anonymous. Woodruff introduced the six bottle carton in 1923. He also made Coca-Cola available through vending machines in 1929 and that same year, the Coca-Cola bell glass was made available.

He started advertising on the radio in the 1930s and on the television in 1950. Currently, Coca-Cola is advertised on over five hundred TV channels around the world. In 1931, he introduced the Coke Santa as a Christmas promotion and it caught on. Candler also introduced the twelve ounce Coke-can in 1960.

Before and during WWII, Coca-Cola adopted an apparent policy of ignoring the practice of eugenics and anti-semitism by Nazi Gemany. Several of Coke's top executives in Germany were prominent members of the National Socialist German Workers Party. When the United States entered World War II, Coke began to represent itself as a patriotic drink by providing free drinks for soldiers of the United States Army.

The United States Army permitted Coca-Cola employees to enter the front lines as "Technical Officers" when in reality they rarely if ever came close to a real battle. Instead, they operated Coke's system of providing refreshments for soldiers, who welcomed the beverage as a reminder of home. As the Allies of WWII advanced, so did Coke, which took advantage of the situation by establishing new franchises in the newly occupied countries. Coca-Cola set up bottling plants in several locations overseas to assure the drink's availability to soldiers, setting the stage for the company's post-war overseas expansion. The popularity of the drink exploded as American soldiers returned home from the war with a taste for the drink.

The Coca-Cola contour bottle was patented in 1977. The two litre bottle was introduced in 1978 and the same year the company also introduced plastic bottles. Woodruff did

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have one dubious distinction; he raised the syrup prices for distributors. But he improved efficiency at every step of the manufacturing process. Woodruff also increased productivity by improving the sales department, emphasising quality control, and beginning large-scale advertising and promotional campaigns.

Woodruff made Coke available in every state of the Union through the soda fountain. For all of these achievements he earned the name, The Boss. In 1985, the Coca-Cola Company made what has been known as one of the biggest marketing blunder. The Coca-Cola company stumbled onto the new formula in efforts to produce diet Coke. They put forth 4 million dollars of research to come up with the new formula. The decision to change their formula and pull the old Coke off the market came about because taste tests showed a distinct preference for the new formula. The new formula was a sweeter variation with less tang, it was also slightly smoother.

Robert Woodruff's death was a large contributor to the change because he stated that he would never change Coca-Cola's formula. Another factor that influenced the change was that Coke's market share fell 2.5 percent in four years. Each percentage point lost or gain meant 200 million dollars. A financial analyst said, Coke's market share fell from 24.3 percent in 1980 to 21.8 percent in 1984. This was the first flavor change since the existence of the Coca- Cola Company. The change was announced April 23, 1985 at the Vivian Beaumont Theater at the Lincoln Center. Some two hundred TV and newspaper reporters attended this very glitzy announcement. It included a question and answer session, a history of Coca-Cola, and many other elements. The debut was accompanied by an advertising campaign that revived the Coca-Cola theme song of the early 1970s, I'd Like to Buy the World a Coke. The Jingle read like this:

"I'd like to teach the world to sing In perfect harmony. I'd like to buy the world a Coke And keep it company ".

The change to the world's best selling soft drink was heard by 81 percent of the United States population within twenty-four hours of the announcement. Within a week of the change, one thousand calls a day were flooding the company's eight hundred number (1 -800-GET-COKE). Most of the callers were shocked and outraged, many said that they were considering switching to Pepsi. Within six weeks, the eight hundred number was being jammed by six thousand calls a day. The company also fielded over forty thousand letters, which were all answered and each person got a coupon for the new Coke. A retired Air Force officer explained in a letter to the Coca-Cola company that he wanted to be cremated and interred in a Coke can, but now that this change had come about, he was reconsidering his decision.


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Sharlotte Donneally, a thirty-six year old anthropologist said, "I hate the new stuff". Wendy Koskela, a thirty-five year old vice president of an insurance company said, "It's too sweet. It tastes like Pepsi". She also stated, that Real Coke had punch. This tasted almost like it's flat. Many American consumers of Coca-Cola asked if they would have the final say. When Pepsi heard that the Coca-Cola company was changing its secret formula, they said that it was a decision that Pepsi tastes better. Roger Enrico, the president and CEO of Pepsi-Cola wrote a letter to every major newspaper in the U.S. to declare the victory. The letter read like this:

"It gives me great pleasure to offer each of you my heartiest congratulations. After eighty-seven years of going at it eyeball to eyeball, the other guy just blinked. Coca-Cola is withdrawing their product from the marketplace, and is reformulating brand Coke to be more like Pepsi...There is no question that the long-term market success of Pepsi has forced this move...Maybe they finally realised what most of us have known for years, Pepsi tastes better than Coke. Well, people in trouble tend to do desperate things...and we'll have to keep our eye on them. But for now, I say, victory is sweet, and we have earned a celebration. We're going to declare a holiday on Friday. Enjoy!" Best Regards, Roger Enrico President, CEO Pepsi-Cola USA.

Coca-Cola officials said, the new formula will boost Coke's share by 1 percent. That is worth 200 million dollars a year. Coca-Cola management had to decide: Do nothing or buy the world a new Coke. They decided to develop the new formula. Roberto Goizueta, the president of the Coca-Cola Company stated, The old Coke formula, with its secret flavoring ingredient, called Merchandise 7X, will stay locked in the Trust Company of Georgia bank vault in Atlanta, never to be used again. This is what many Coke officials said and thought that this was the most significant soft drink development in the company's history. The change back to the old Coke was known as the Second Coming. Roberto Goizueta said,

"Today, we have two messages to deliver to the American consumer, first, to those of you who are drinking Coca-Cola with its great new taste, our thanks...But there is a second group of consumers to whom we want to speak to today and our message to this group is simple: We have heard you".

On July 10, 1985, eighty-seven days after the new Coke was introduced, the old Coke was brought back in addition to the new one. This was greatly due to dropping market share and consumer protest. The market share fell from a high of 15 percent to a low of 1.4 percent.

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Roberto Goizueta and Donald Keough took full blame for this failed product launch. Don Keough, Coca-Cola president, said in response to the comeback, "the truth is we are not dumb and we are not that smart". This was said to be a classic marketing retreat. Coca-Cola executives admitted that they had goofed by taking the old Coke off the market. One old Coke loyalist said that the company had spoiled the taste of its ninety nine year old soft drink and betrayed a national trust. Ike Herbert, a Coke marketer said, "You would have thought we had invented a cure for cancer". The Coca-Cola company's eight hundred number received eighteen thousand calls of gratitude. One caller said they felt like a lost friend had returned home. The comeback of old Coke drove stock prices to the highest level in twelve years. This was said to be the only way to regain the lead on the cola wars. In 1979, fifteen hundred employees moved to the new corporate headquarters in Atlanta located on North Avenue.

The new corporate headquarters came to be known as The Tower. During the time when the research for the new formula was taking place, it was known as The Bunker. The known ingredients in present day Coca-Cola are water, caffeine, phosphoric acid, vanilla, various oils and essences and extracts of the coca leaf and the kola nut. The one in four hundred part of cocaine was removed from Coca-Cola in 1903. Five years after the infamous Coke fiasco, the Coca-Cola company tried to bring back the reformulated Coke. The effort to phase in Coke II into the soda market was quite unsuccessful.

During the Woodruff era, Mr. Woodruff made a promise to the armed forces of the United States to supply Coca-Cola to every serviceperson. He said that costs and location did not matter, he supplied 5 billion bottles to the service. In the mid-1970's, more than half Coca-Cola sold was outside of the U.S. Coca-Cola products outsell it's closest competitors by more than two to one. One in every two colas and one in every three soft drinks is a Coca-Cola product. The best-known trademark in the world is sold in about one hundred and forty countries to 5.8 billion people in eighty different languages. This is why Coca-Cola is the largest soft drink company in the world. Coca-Cola is worth more than 58 billion dollars on the stock market. For more than 65 years, Coca-Cola has been a sponsor of the Olympics.

The 1996 Summer Olympics was to be held in Atlanta, Georgia, the home of Coca-Cola. One great earmark that the Coca-Cola Company had been helping the people of Atlanta. They accomplished this through scholarships, hotlines, donations and contributions, etc. Another large accomplishment was that Coca-Cola was the first company to make and use recycled plastic bottles. It still houses a collection of memorabilia, samples of the products, exhibits, and many other exciting items. All of what has been said is the basis of what Coca-Cola was built on.


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Turn of Events; Cola in the Box?

In 2000, a United States federal judge dismissed an antitrust lawsuit filed by PepsiCo Inc. accusing Coca-Cola Co. of monopolising the market for fountain-dispensed soft drinks in the United States. In June 2005, Coca-Cola in Europe formally agreed to end deals with shops and bars to stock its drinks exclusively after a European Union investigation found its business methods stifled competition. In November 2005, Coca-Cola's Mexican unit - Coca-Cola Export Corporation - and a number of its distributors and bottlers were fined $68m for unfair commercial practices. Coca-Cola is appealing the case.

In November 2000, Coca-Cola agreed to pay $192.5 million to settle a class-action race-discrimination lawsuit and promised to change the way it manages, promotes and treats minority employees. In 2003, protesters at Coca-Cola's annual meeting claimed that blacks remained under represented in top management at the company, paid less than white employees and fired more often. In 2004, Luke Visconti, a co-founder of Diversity Inc., which rates companies on their diversity efforts, said: "Because of the settlement decree, Coca-Cola was forced to put in management practices that have put the company in the top 10 for diversity."

In 2004, the United Kingdom government launched a wide-ranging review into food promotion and childhood obesity. One survey found that Coca-Cola did not broadcast a high proportion of their advertisements during children's television. The company removed its branding from vending machines in Scottish schools in December 2003, replacing it with a graphic of an urban scene.

In India, there exists widespread concern over how Coca-Cola is produced. In particular, it is feared that the water used to produce Coke may contain unhealthy levels of pesticides and other harmful chemicals. It has also been alleged that due to the amount of water required to produce Coca-Cola, acquifiers are drying up and forcing farmers to relocate.

Although numerous court cases have been filed against the Coca-Cola Company since the 1920s alleging that the acidity of the drink is dangerous, no evidence corroborating this claim has been found. In some of these cases, evidence has been presented showing Coca-Cola is no more harmful than comparable soft drinks or acidic fruit juices like apple juice. Under normal conditions, scientific evidence indicates that Coca-Cola's acidity causes no immediate harm. However, the beverage does contain high fructose corn syrup, and the frequency of which teeth are exposed to cariogenic (acidic) environments affects the likelihood of tooth decay through caries development. Like most other colas, Coca-Cola contains phosphoric acid. One study has shown that this hastens bone loss, contributing to illnesses such as osteoporosis.

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In 2003, the Centre for Science and Environment (CSE), an NGO in New Delhi, said that aerated waters produced by soft drinks manufacturers in India, including multinational giants Pepsico and Coca-Cola, contained toxins including lindane, DDT, Malathion and Chlorpyrifos-pesticides that can contribute to cancer and a breakdown of the immune system. Tested products included Coke, Pepsi, and several other soft drinks (Seven -Up, Mirinda, Fanta, Thums Up, Limca and Sprite) are among the many produced by The Coca-Cola Company.

CSE found that the Indian-produced Pepsi's soft drink products had 36 times the level of pesticide residues permitted under European Union regulations; Coca-Cola's 30 times. CSE said it had tested the same products in the US and found no such residues.

Coca-Cola and PepsiCo angrily denied allegations that their products manufactured in India contained toxin levels far above the norms permitted in the developed world. But an Indian parliamentary committee in 2004 backed up CSE's findings and a government-appointed committee is now trying to develop the world's first pesticide standards for soft drinks. Coke and PepsiCo oppose the move, arguing that lab tests aren't reliable enough to detect minute traces of pesticides in complex drinks like soda.

The Coca-Cola Company and PepsiCo angrily denied the allegations; David Cox, Coke's Hong Kong-based communications director for Asia, accused Sunita Narain, CSE's director, of "brandjacking" -—using Coke's brand name to draw attention to her campaign against pesticides. Narain defended CSE's actions by describing them as a natural follow-up to a previous study it did on bottled water. In 2004, an Indian parliamentary committee backed up CSE's findings, and a government-appointed committee was tasked with developing the world's first pesticide standards for soft drinks.

The Coca-Cola Company has responded that its plants filter water to remove potential contaminants and that its products are tested for pesticides and must meet minimum health standards before they are distributed. Coca-Cola had registered a 15 percent drop in sales after the pesticide allegations were made in 2003. As of 2005, Coke and Pepsi together hold 95% market share of soft-drink sales in India.

Another issue that plagued the Coca Cola company was one of ecological degradation. Environmental degradation in the form of depletion of the local ground water table due to the utilisation of natural water resources by the company poses a serious threat to many communities.

In March 2004, local officials in Kerela shut down a $16 million Coke bottling plant blamed for a drastic decline in both, the quantity and quality of water available to local


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farmers and villagers. In April 2005, Kerala's highest court rejected water use claims, noting that wells there continued to dry up last summer, months after the local Coke plant stopped operating. Further, a scientific study requested by the court found that while the plant had "aggravated the water scarcity situation," the "most significant factor" was a lack of rainfall. Critics respond that Coke shouldn't be locating bottling plants in drought-stricken areas.

In 2006, the Indian state of Kerala banned the sale and production of Coca-Cola, along with other soft drinks, due to concerns of high levels of pesticide residue. On Friday, September 22, 2006, the High Court in Kerala overturned the Kerala ban ruling that only the federal government can ban food products.

The company has been trying to regain the plant's license, fighting a case that has gone all the way to India's Supreme Court. Meanwhile, near the holy city of Varanasi in North India, a local water official blames a Coke plant — which has been the scene of many protests by NGOs and local residents — for polluting the groundwater by releasing wastewater into surrounding land. A Coke official confirms there had been a drainage problem with treated wastewater several years ago but says that the company built a long pipeline to correct it. Indian environmental activists Vandana Shiva has stated that it takes nine litres of clean water to manufacture a litre of Coke though Coca-Cola says it is only an average of 3.12 litres. The case has been appealed and a decision is pending.

Moreover, the packaging used in Coca-Cola's products have a significant environmental impact but the company strongly opposes attempts to introduce mechanisms such as container deposit legislation. These controversies are a reminder of India's sometimes acrimonious relationship with huge multinational companies. Indeed, some argue that Coke and Pepsi have been major targets in part because they are well-known foreign companies that draw plenty of attention.Coca-Cola was India's leading soft drink until 1977 when it left India after a new government ordered the company to turn over its secret formula for Coca-Cola and dilute its stake in its Indian unit as required by the Foreign Exchange Regulation Act (FERA). In 1993, the company (along with PepsiCo) returned in pursuance of India's liberalisation policy.

These issues are not restricted to environmental damage alone. Panamerican Beverages (Panamco), Coca-Cola's main bottler in Latin America, has been criticised for its relationship with unions. In Columbia, it has been alleged that the bottling company hired paramilitary mercenaries to assassinate union leaders. These charges have resulted in several court cases and boycott actions against The Coca-Cola Company.

In July 2001, the United Steelworkers of America and the International Labour Rights

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Fund filed suit in a US court against Coca-Cola and some bottlers in Colombia on behalf of their workers. According to the plaintiffs, the companies "hired, contracted with or otherwise directed paramilitary security forces". The companies denied the charges. In April 2003 District Judge Jose E Martinez in Miami excluded The Coca-Cola Company and its Colombian unit because its bottling agreement did not give it "explicit control" over labor issues in Colombia. On September 4th, 2006, Judge Martinez dismissed the remaining claims against Panamco and the Colombian bottler Bebidas y Alimentos. In Summer 2003, the SINALTRAINAL trade union, which represents the majority of workers at Coca-Cola bottling plants in Colombia, called for an international boycott of Coca-Cola products.

In October of that year, the Students' Union at University College, Dublin, the largest university in Ireland, controversially decided to ban the sale of Coca-Cola products (in the Student Union shops; Coca-Cola is still available from vending machines and other non-SU controlled outlets on campus) as a result. A later attempt to reverse the ban at UCD failed, and the boycott has spread to other colleges in Ireland, most notably Trinity College, Dublin and the National College of Art and Design, as well as a number of bars and restaurants. Motions in support of the boycott have been passed by the Union of Students in Ireland, which represents the 250,000 students on the island of Ireland, as well as the Teachers' Union of IReland and the Irish National Teachers Organisation and a number of other trade unions and political organisations. The boycott is opposed by some branches in the SIPTU trade union (who represent the majority of Coca-Cola workers in Ireland) and by the Coca-Cola Company themselves.

In January 2004, the New York City Fact-Finding Delegation on Coca-Cola in Colombia confirmed the workers' allegations. They found: To date, there have been a total of 179 major human rights violations of Coca-Cola's workers, including nine murders. Family members of union activists have been abducted and tortured. Union members have been fired for attending union meetings. The company has pressured workers to resign their union membership and contractual rights, and fired workers who refused to do so. Most troubling to the delegation were the persistent allegations that paramilitary violence against workers was done with the knowledge of and likely under the direction of company managers. The physical access that paramilitaries have had to Coca-Cola bottling plants is impossible without company knowledge and/or tacit approval.

As way back as 1970s the scene was not very different. In the 1970s, a Coca-Cola franchised bottling plant in Guatemala suffered a spate of mysterious murders of union-affiliated employees leading to the non-renewal the bottling plant's license in 1981 .Coca-Cola found a new owner, and following repair work and construction on the plant, work resumed at the Guatemala bottling plant on March 1, 1985. The company's decisions


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were made after pressure from several groups, including a shareholders resolution filed in 1979. The Company argued that "it had no right to interfere in labor disputes between independent parties and asserting that such an intrusion would be improper". In Sivaganga District of Tamil Nadu state there were several protests and rallies opposing the proposed Coca-Cola bottling plant in fear of water depletion and contamination.The president of the Gangaikondan panchayat, Mr. V. Kamson died under mysterious circumstances two days after going back and forth in his resentment against the upcoming Coca-Cola bottling plant in the village. When asked about the conflicting statements, he said: "I am under immense pressure from the public, police and other quarters. So I have issued this statement. " Five other Indian states have announced partial bans on the drinks in schools, colleges and hospitals.

In 1949 Coca-Cola attempted to open a plant in Israel but was refused a permit. Eager to avoid the Arab League boycott and sell to the much larger Arab market, Coca-Cola was content not to sell in Israel. In 1961 the issue came up again when an Egyptian civil servant mistook Amharic writing on a Coca-Cola bottle for HEBREA, and accused Coca-Cola of doing business with Israel. The manager of Egypt's Coca-Cola bottling operations quickly informed the press that Coca-Cola would never do business with Israel; forced to explain this, Coca-Cola officials invented the excuse that Israel was too small a market for a Coca-Cola operation.

Along with Mc Donald's, Coca-Cola has become an international symbol of American culture, and especially of American consumerism. While the company still enjoys widespread popularity, some backlash has occurred, mostly in the form of boycotts in the Middle East. One such instance in 2000 saw a claim that the Coca-Cola label, created in 1886, actually contained hidden anti-Islamic phrases ("No Muhammad, No Makkah" in its mirror image in Arabic.) The Coca-Cola Company claimed sales dropped 10 to 15% in Egypt after the rumor began spreading in 2000. The controversy became so widespread that the Grant Mufti of Egypt — who has proudly admitted in related interviews that he himself indulges in at least one Coke daily—publicly addressed it, declaring that the logo "does not injure Islam or Muslims." The University of Michigan became the tenth US University to have put on hold the sale of Coca-Cola's products in its campus, with effect from January 01, 2006. Other prominent US universities that have banned Coca-Cola are New York University, the largest private university in the US, Rutgers University in New Jersey, and the Santa Clara University in California. Both the University of Michigan and New York University were Coca-Cola's largest campus markets in the USA.

Coca-Cola's annual contracts with the University of Michigan alone were worth around US$ 1.4 million in sales. However, Michigan University officials mentioned that this was a

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temporary suspension and sales of Coca-Cola's products could resume if the company made satisfactory progress on addressing these problems. Both Coca-Cola and the university have agreed to keep the negotiations on. Kari Bjorhus, a spokesperson for The Coca-Cola Company said, "The University of Michigan is an important school, and I respect the way they worked with us on this issue".

As of December 2005, 20 North American campuses were "Coke free," but "hundreds more could follow suit soon in England," reported Associated Press. In early 2007, Britain's Manchester University banned Coke from its campus, "because of its behavior in Colombia, Turkey and India. ... Students are now expected to call for the National Union of Students to instruct its commercial arm NUS Services to end its supply contract with Coke at its national conference later this month."

Stung by a series of controversies, in late 2003, the Indian subsidiary of Coca-Cola hired Perfect Relations to help rebuild its damaged reputation and sales in ten states.The newly contracted PR specialists have so far successfully managed to play down anti-capitalist protests concerning the wider availability of 'Coca-Cola' in some areas, less affected by the new economy booms into south eastern Asia, than of clean drinking water. Corporate responsibilty towards its workers, it seems, was not a top priority.

"According to a news report the contract involved handling 'all external communications in addition to the regular marketing activities' as well as close cooperation with the company's advertising agency " McCann-Erikson.

After students at two Canadian universities, McMaster and the University of Guelph, voted down campus exclusivity deals with Coca-Cola, "the world's largest soft-drink company has launched a counter-offensive in hopes of heading off further boycotts." In December 2005, Coke reps visited McMaster and the University of British Columbia. Coke PR coordinator Kerry Kerr stressed that "these boycotts are actually affecting workers in the local area " and said that the allegations that the company is complicit in human rights violations in Colombia are false. Coke's PR manager in Colombia, Pablo Largacha Escallon, also took part in the Canadian tour. "There is a humanitarian crisis in Colombia, but [student activists] have made it a Coca-Cola-centric thing when it's a Colombia-centric thing," he said. Coke has also recently hired a labour-relations director and plans to issue a human-rights policy next year. "The Zero Movement" is an astroturf campaign by Coke to sell a new sugar-free drink called "coca cola zero" in Australia. The campaign has involved viral marketing strategies, including buying billboards and the backs of magazines for ads apparently by "The Zero Movement", as well as putting up posters in public places.

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After reentering India, Coca-Cola encountered problems one after the other. The company focused on establishing the Coke brand quickly, believing that its international image was well entrenched in the minds of the Indian consumers. However, the emergence of many local soft drink brands since the time it had left India and competition from Pepsi, made things difficult for Coca-Cola. To gain a quick entry into the market and neutralise Pepsi's early mover advantage, CCI decided to buy out a local soft drink company, Parle in 1993. Parle's popular brands like Thums Up, Limca, Maaza, Citra and Gold Spot had a 60% market share.

Between 1993 and 2000, CCI had five presidents, a clear reflection of the difficulties which the company faced in navigating through a challenging, unfamiliar business environment. During the tenure of the founding CEO, Jayadev Raja (1992-May 1995) and his successor, Richard Nicholas (June 1995- March 1997), the company struggled to establish itself.

It was also criticised for neglecting the Parle brands. Donald Short (April 1997-November 1999) streamlined the bottling operations and the supply chain. Douglas Jackson (November 1999-January 2000) had a short stint before being replaced by Alex Von Behr. Von Behr along with Sanjiv Gupta, then Vice President (Operations), launched a series of highly effective marketing initiatives. Von Behr decided to reposition CCI as a beverage company rather than as a carbonated soft drinks (CSD) company. The duo convinced the Atlanta headquarters about the need to introduce new affordable package sizes in India to increase beverage consumption.

Coke-Pepsi Rivalry; A New Twist?

The global sales competition between Coke and Pepsi has produced some of the catchiest tunes in advertising, as well as a lot of intricate high-level maneuvering in Washington, where the winner was sometimes determined by who sat in the Oval Office. PepsiCo Chairman Donald Kendall got the right to bottle and sell Pepsi in the Soviet Union in 1972, when his friend Richard Nixon was in the White House. After Jimmy Carter moved to Washington, his old Atlanta pal Coca-Cola Chairman J. Paul Austin captured the exclusive right to sell Coke to a billion Chinese.

However in recent years, the competition has led to rivalry. The Coke-Pepsi rivalry took a bizarre twist when several Coca-Cola employees who had reportedly tried to sell trade secrets were taken into custody by federal authorities Wednesday after Pepsi tipped Coke off to the scheme.

Three suspects were charged with stealing confidential information—including a sample of

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a new drink—from The Coca-Cola Co. and trying to sell it to PepsiCo, for $ 1.5 million, according to the Associated Press. More specifically, they are accused of going through Coke's files and stuffing documents and a sample of a new Coca-Cola product into a personal bag, the wire service elaborated. The three were charged with wire fraud and unlawfully stealing and selling Coke trade secrets. The scheme was uncovered when Pepsi notified Coke, according to The Wall Street Journal. Coke contacted the Federal Bureau of Investigation on May 24, 2006.

The bitter enemies, however performed an incredible act in 2007, when PepsiCo Inc. got a letter offering to sell Coke trade secrets, it went straight to its corporate rival. Six weeks later, three people face federal charges of stealing confidential information, including a sample of a new drink, from The Coca-Cola Co. and trying to sell it to PepsiCo Inc. "Competition can sometimes be fierce, but also must be fair and legal", Pepsi spokesman Dave DeCecco said. "We're pleased that the authorities and the FBI have identified the people responsible for this".

The arrests happened the day a $1.5 million transaction was to occur—when the F.B.I set up a sting operation. An undercover agent posing as a Pepsi spy says one of the suspected Coke thieves handed him an Armani bag containing the cola sample and documents, in exchange for a Girl Scout cookie box stuffed with cash. Those arrested include a Coke executive's administrative assistant who is accused of rifling through corporate files and pilfering information about a beverage that's so new it's still in the research phase. Joya Williams, 41, of Norcross, Ga., 30-year-old Ibrahim Dimson of New York and 43-year-old Edmund Duhaney of Decatur, Ga., were charged with wire fraud and unlawfully stealing and selling Coke trade secrets, federal prosecutors said.

Coke thanked Pepsi for its assistance. Chief executive Neville Isdell said,

"Sadly, today's arrests include an individual within our company. While this breach of trust is difficult for all of us to accept, it underscores the responsibility we each have to be vigilant in protecting our trade secrets. Information is the lifeblood of the company."

He said Coke will review its information-protection policies, procedures and practices to make sure it safeguards intellectual property.

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After going through this case, you will be able to :

• recall switch-over and marketing strategies of refined-oil.

• identify its selling concept and consumer acceptance.

• underline Kardai-Oil marketing strategy effects.

Rajan Kohali alongwith his brothers, embarked upon making and selling edible oils way back in 1910. In 1930, Rajan and his sons started Laxmi Mills with factories operating in Mumbai and Hyderabad. The change was not only in name but also in a major technological difference. The Laxmi Mills adopted a new process : refining. The Mill had to get people to accept a "tasteless" cooking medium because that is what the oil became after refining. However, Rajan had taken care of that. By generating an export market, he covered the risk of being left with excess stocks, while he experimented with the Indian Market. At that time, there were a large number of Europeans in India to form the base of his domestic market.

Rajan had chosen groundnut oil for the following reasons:

1. It was commonly used in Indian families. The potential customer - base was large

2. Groundnut was grown widely.

1. The oilseeds yielded an excellent quantity oil. The oil was sold in 15 and 50 Kgbarrels to cater both the nucleus and joint family needs.

Rajan sold the concept of refined oil as one that is pure, retaining the flavour of the foodstuff itself. It undergoes a thorough cleaning process. The concept being new, the buyers had to be convinced that it was not harmful.



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The company enjoyed 80 percent of the market-share, till 1970. Other companies saw the growing potential and entered the market. To remain in the market as a leader, the Laxmi Mills changed the pack-size to one, two, five, ten, fifteen and twenty-five kg. Competition, however became fairly intense in 1980. A number of big players entered the market. In 1980, Maruti Oil Mills launched refined Kardai Oil which helps to lower cholesterol levels, the primary cause of heartattacks.

Mumbai Oil mills exploited this to the hilt. Doctors also started prescribing Kardai Oil. Any person with a heart problem was immediately prescribed to change his cooking medium to Kardai Oil.

Consumer queries started pouring in to Laxmi Mills. People wanted to know if it was safe to use refined groundnut oil. The market share dropped sharply to 65 percent.

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Case No. 42

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After going through this case, you will be able to :

• underline conditional Government nod for tie-up

• recognise collaborator's stress on Market Research

• judge product-mix, training, fees etc.

• measure alternatives for Market Survey

• identify Indian Company's limitations

U.P Mini Computers Limited entered into technical collaboration with Zenith Mini Computers in India. The collaboration was approved by the Government of India. The approval was for a period of five years, during which the Company was expected to setup their own R&D cell and develop new models for future. As the computer technology is moving at a fast pace, the collaborators had agreed to these conditions with an option to renew the association subject to the Government approval.

Zenith Mini Computers had a wide range of computers. They were not sure whether all of them were required by Indian Industries. The standard models amounted to 30 types.

They were, however, undecided as to how this Market Survey should be conducted. They had two alternatives.

a) To give to a consultancy firm or

b) To do it themselves

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Based on present foreign exchange rates and on the basis of straight conversion, the price ranged between Rs.30,000/- to Rs. 3 lakhs. They, therefore, suggested to their Indian counterparts that detailed Market Survey should be carried out in India, which will help the company in deciding the product mix suitable to Indian industries and business, settle the know-how fees to be paid by Indian company, type of training and number of personnel required. U.P.Mini Computers agreed to this proposal.

Both the alternatives had their merits and demerits. The Chief Executive had received bad reports about performance of consulting firms, from his friends. He also thought that computers being a complicated equipment, the consultants may not have the right people to do the survey and may not do justice to the job. He was, therefore, thinking of doing it through his own staff. At present, he is working with a skeleton staff and he is not having any person experienced in Marketing or Market Research, in general, and Mini Computers, in particular.

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After going through this case, you will be able to :

• underline CSIR- controlled BRDC's multifarious services

• recognise entrepreneurs' demand for marketing data

• analyse BRDC's limitations in Market Research Services

• judge corrective measures for MR cell

Bharat Research Development Corporation (BRDC) was set up as an autonomous body under the supervision and control of Council of Scientific and Industrial Research. Its main function was to market the various products as processes developed by the different laboratories in the country. These covered such areas as electronics, metallurgy, chemistry, physics and so on.

BRDC publishes a monthly newsletter as "BRDC Bulletin". It lists different products and processes that have been developed by various research laboratories and which are now available on sale.

The entrepreneurs or industries interested in any of the items can write to BRDC and upon the payment of nominal sum (ranging from Rs.5 to 30) can get a printed report which is termed as a 'project profile'. This covers such details as product identification and specifications, potential applications, types of machinery and raw materials required, cost of the project and estimated profit levels. If and when an entrepreneur gets interested in a particular project, he can sign a contract with BRDC for buying the process. This normally consists of payment of a lumpsum fee and royalty on sales after the production commences, for a period of 5 to 11 years, depending on the product process. The royalty rates vary from2% to 5%p.a.


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Even after six years of its existence, BRDC is not considered as a successful venture for several reasons. There are lot many products or processes for which there are no buyers. On some of the sales effected earlier, complaints of one type or the other are mounting. These cover such areas as incorrect estimation of cost of the project, non-availability of raw materials recommended and many others. However, the major areas of dissent is on the lack of any marketing data. The entrepreneurs feel that BRDC, a marketing organisation has failed in marketing of its services.

The project profile which is given to the prospective entrepreneur is prepared by respective research laboratories. They are neither in touch with the markets nor have the machinery to compile the market data which could be provided in the project profile. As a result of this situation, the entrepreneurs cannot establish the marketing feasibility of the project before they enter into an agreement with BRDC. Suggestions are pouring with BRDC that before they decide to market a project, a detailed market research should be done; so that the entrepreneurs will have no doubt in their mind about the feasibility of the project. The entrepreneurs have even agreed to share the costs. The proposal has been accepted, in principle. BRDC, at present, does not have a market research cell. They are wondering whether they should set up their own cell or should utilise the services of professional market research agencies, from time to time, on assignment basis.

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Case NO. 44



After going through this case, you will be able to :

• state Consultancy's Firm's sphere of services

• recognise it's need for setting up Consumer Panel

• identify MR thurst on CB Surveys

• analyse CB Survey methodology problems

Raja Consultants Ltd. have been in the management consultancy, since the last 16 years. With a modest beginning in market research services, they diversified their activities in different areas of management consultancy. Today, they are in a position to offer turnkey assignments for different types of projects. Besides their Head Office in Bombay, they have opened a branch office in Bangalore.

Out of their total revenue earnings, the market research services still constitute a major share amounting to over 30%. Under this discipline itself, 60% share goes to industrial market research; while the rest is for consumer market research projects from various customers. For the latter, traditional methodology of market research is being practised.

It was young Mr. M. A.Virani, M.D. of Vitas Foods Pvt. Ltd. who got them interested; thinking about the establishment of a permanent consumer panel. Vitas Foods are facing a typical problem. They are in instant food business, manufacturing different types of ready mixes like gulab jamun, dosa, jalebi, different soups etc. Out of their total turnover of Rs.3 crores, almost 80% was through exports. The Company had made consistent efforts to increase the domestic sales for last 3-4 years without much success. For this purpose,

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they had once trained Raja to study the consumer behaviour and the apathy of these

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consumers towards the so called 'instant foods'. The exercise remained inconclusive for some reason or the other. However while talking with Mr.Mehta, Head of Market Research Division of Raja Consultants, Mr. Virani had suggested the setting up of consumer panel and making a regular use of that.

Dr. Mehta with his wide experience in market research was certainly not unaware of the use of consumer panels. During his few visits to U.S.A., he studied the working of such panels as Gallop Poll, Mielson's rating etc. He had also studied the working of Operations Research Group and their model of retail shop audit. This model, however, gave only quantitative data and no qualitative model was in operation in the country which could explain the consumer behaviour.

Dr. Mehta was seriously thinking of setting up of such consumer panel, to begin with, first in Mumbai and, then, in all metropolitan cities. He felt that there is a great potential in this idea and it could be made as ORG model on retail shop auditing.

However, it was easier said than done. The main question facing him was how to come up with a consumer sample which could be substantially considered as a representative of the population. The characteristics of this sample were to be used for predicting the behaviour of population. The other questions as to who should be his clients, who would be interested in the services of consumer panel, fees they will be willing to pay etc. were relatively minor.

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Case No. 45AIR - INDIA


After going through this case, you will be able to :

• identify AI Manager's "Unique Selling Feature" idea

• state "In-flight Telephone" facilities for passengers

• underline the need for research for correct assessment

Air India is constantly looking for newer ways to serve the needs of its passengers. One Manager came up with a bright idea to provide telephone facilities on board the aircraft. Other Managers got excited about the idea and felt that it should be implemented as a Unique Selling Feature. The Senior Manager, however, felt that research needs to be conducted on this issue.

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After going through this case, you will be able to :

• identify the novel features of Company's new product launch

• state accent on children, product varieties and Test Marketing

• analyse poor segment-response, declining sales

Tasty Biscuits, Pune are in the field of biscuits for the past few years. During this period, they have constantly been increasing their sales. This was possible mainly due to the high quality of the product, a good distribution network and creative promotion policy. The Company has always adopted innovative methods in bringing out newer varieties to cater to the changing tastes of the market.

A study made on biscuit industry by the 'Indian Biscuits Manufacturers Association, indicated that out of the total consumption of biscuits, almost 21 % is consumed by children below the age of 11. The Management of Tasty Biscuits decided to develop special biscuits to cater to this market segment. After due deliberations, it was decided that biscuits made in different animal shapes were prepared and the Company carried out a test marketing exercise in Pune. A sample size of 200 was selected, for this purpose. Majority of the sample-consumers showed their interest and informed that their children have liked the product.

With considerable publicity, the Company introduced this range of biscuits in four metropolitan cities of Mumbai, Chennai, Delhi and Calcutta, besides Pune. The results for first six months were encouraging. However, from the seventh month onwards, the sales started declining. In the twelth month, the total sales of the new range were reported only at 25% of the peak reached. The quality was maintained. The price right from the beginning was 10% higher than the other types of biscuits of the same weight.


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After going through this case, you will be able to :

• find MNC entry in processed-food-market with Hima Peas

• recognise product failure, despite massive efforts

• contrast its failure with success story of Maggi Noodles

Hindustan Lever Ltd., had entered the processed-food-market (PFM) in the early sixties with a unique product called 'Hima Peas', which was a ready-to-use Peas available round the year. The product was launched with a lot of funfare and publicity. However, in spite of all the promotional activities and advertising campaigns the product was a failure and HLL was forced to withdraw the product from the market. However, in eighties, Nestle entered the processed food market with Maggi Noodles, which proved to be a roaring success.

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After going through this case, you will be able to :

• find lamp-maker: planning "electronic ballast" based lamps

• recognise product-features : Savings in consumption and efficiency

• underline Market Research plans: Potential threat by CF tubes

Roshni Lamp Makers Ltd. (RLML) would like to introduce an electronic ballast for fluorescent lamps in this direction. In fluorescent lighting, a ballast and starter are essential for starting and running the lamp. The electronic ballast virtually eliminates this loss. The normal ballast consumes 12 watts power, the electronic ballast entails a loss of 2 to 3 watts. The energy consumption is, thus, reduced. The efficiency of lamp also goes up by 7 to 8 percent. The tube-life increases to about 2500 hours. The tube also does not have a flicker start. All this leads to a saving of Rs.450 during the life of the tube. Also the electronic ballast is useful in areas where voltage fluctuations are high and the tube fuses out in 6 to 8 months.

RLML would like to conduct a Market Research study to evaluate the new product opportunities that an electronic ballast offers. The organised sector accounts for 75 million fluorescent lamps production. The industry sources estimate that in the next five years, about 30 to 40 percent of the lamps will have electronic ballast. However, a potential threat is offered by the new compact fluorescent tube (CFT) introduced in the market but it has a high cost of installation compared to an electronic ballast fitted fluorescent tube. The presence of an electronic ballast would increase the price of fluorescent tube by Rs.200 or so.

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Case No. 49RAY LTD.


After going through this case, you will be able to :

• find firm's diversification into production and marketing of chocolates

• state Market Research findings and Test Marketing response

• analyse launch strategies and product features

• identify product failure causes and of consumers' negative response

Ray Ltd. was a reputed consumer product marketing organisation with branches throughout India. Neer, the Marketing Director of the Company made his proposal to Vithal, the Managing Director, for diversification into the manufacture and marketing of chocolates. The project involved considerable capital investment as well as high pressure advertising. Neer presented full details of the market potential, competitor's activities and market share expectations of the Company. Moon and Co., a leading market research organisation did the test marketing of the Company's chocolates in early winter in the metropolitan cities and reported the results, which were quite encouraging. Neer was very much impressed about the product's viability and the project was duly approved by him.

The Company decided to introduce milk chocolates of three sizes in the market under the name 'Super' to be followed by a series of other chocolates. The basic formulation of 'Super' was different from that of 'Crystal' the market leader. The packaing of 'Super' was attractive and novel and held edge over 'Crystal'. The price too was competitive.

The initial launching of 'Duper' milk chocolates was done on all India basis during early summer. Heavy advertising support with the help of various media with children and students as target audience was given. All these created a positive product image, resulting in tremendous consumer awareness.


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The sales were quite encouraging in the first month of the launch . In the subsequent months, however, there were frequent complaints of melting of chocolates at the retail outlets as well as packaging defects. The consumer off-take was badly affected. A detailed investigation by Neer revealed that the product formula was not suitable under the tropical conditions and the packaging has to be modified to fully protect the product. Due to these, the introduction of further varieties of chocolates also got delayed considerably.

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After going through this case, you will be able to :

• explain Elevator Grant's plans for India.

• relate entry in Indian Market : as linked to Market Research.

A world famous Elevator Grant with second largest market share in global market wishes to enter the Indian Market.

Market Research for elevators in India is considered as a pre-requisite by the Company, prior to its entry.

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After going through this case, you will be able to :

• find firm's diversification : from "Fans" to "Air Coolers"

• explain wrong Test Marketing period : proving positive results.

• recognise material shortages: delay in all-India launch.

• analyse design and manufacturing snags: cause for non-acceptance by customers.

Air Cool India Ltd. are the pioneers and leaders in electric fans manufacturing in India. As a part of their diversification plan, they decide to manufacture Air Coolers. The manufacturing plant of Air Cool is in Mumbai. They decide to test-market the product in Mumbai, mainly to see the performance of the product. Mumbai is chosen as R & D team is located in Mumbai and can exert better control on test-marketing activity. Test-marketing is done for two months i.e. December and January. Results come out to be positive. Based on these, they decide for an all-India launch in March. All India launch gets delayed to April due to raw material shortages. Dealers give overwhelming response to the launch.

Company faces complaints within one week of the launch, the complaints which they had not visualised during the test-marketing. Number of complaints start rising and dealers find it difficult to handle the irate customers. Some of the dealers take back the cooler and return money to customers to save their goodwill. Confused Design Department of Air Cool, acts, but dealers say "Midmay is too late".

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After going through this case, you will be able to :

• find a firm: specialising in ''Magnetic Disc Drives''.

• recognise unique product features.

• underline market leadership plans : through diversification.

• justify achievement: through new "Single Board Computer".

Rotomatic Electronics was a small company with product-lines in accessories for medium to large computers. The Company specialised in the manufacture and sale of magnetic disc drives, a complex product requiring extensive electric controls. As the product involved stringent compliances, it attracts high unit cost in meeting the customer satisfaction.

Rotomatic's business in the computer industry was highly competitive. Many bigger companies manufactured their own magnetic disc drives and there were also quite a large number of small manufacturers who had entered the field, recently. Rotomatic's disc drives offered large capacity and high speed and could interface with any existing computers. The company could expand its operations due to attractive features and flexibility.

However, as the Company, not occupying leadership position in the market, had to constantly come up with innovations to increase sales. In order to attain more corporate ability, the management decided to diversify into new product areas. They asked the R & D Department to design a single board efficient computer. Following six months of hard work, the R & D Department gave the prototype.

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After going through this case, you will be able to :

• find a chemical engineer-turned-entrepreneur develops detergent.

• analyse his market-entry, product and position amidst competitors.

• identify his weaknesses: lack of knowledge about marketing strategies.

• recognise need for marketing consultant's help.

"I always thought that innovating an excellent product would be key to success in business, but looks it's not beginning at all." These words of Mr. Sachin Acharya were a typical reflection of his mood, since last so many weeks.

Immediately after completing his degree in Chemical Engineering, Mr. Acharya concentrated all his energies in developing a Detergent that would be better in quality, cheaper in price and less harmful to the hands. He was also successful in adding a pleasant perfume that would stay on the clothes giving a fresh feeling to the wearer.

Confident of his technical abilities, Mr. Acharya never had a bit of doubt about achieving success in market. The Detergent Market almost being monopolised by a multinational and the remaining small demand shared by several small manufacturers having stiff competition, he decided to concentrate only on the Pune city to start with and formed a Company under the name Shree Ganesh Detergents.

He developed the detergents in two shades. The production cost of blue shade being Rs. 25 per kg while light yellow shade cost him Rs. 20 per kg. While all the characteristics of the two varieties were absolutely identical, he felt, despite the sufficient consumer education achieved over the years, the consumer will be more receptive to the blue shade which

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gives an impression of cleanliness rather than the yellow. He, however, wondered whether they would be prepared to pay the difference in cost for that.

Second problem that Mr. Acharya was facing was to decide whether to market the detergent in soap cakes of 200 gms. each or in a powder form. This decision was further linked with the problem of deciding suitable packaging for powder or wrapper for the soap. He also wondered what colour the packaging should have. Next, Mr. Acharya had to consider what different sales outlets he should use to market his product in the city. He realised that a proper distribution arrangement would be the cornerstone of his marketing success.

Mr. Acharya expected around 25% profit on cost and, thus, felt that he would be able to offer the blue variety at Rs. 32 per kg to trader and Rs. 38 per kg to consumer and yellow at Rs. 25 to trader and Rs. 30 per kg to consumer. The competing brand of multinational company was being sold at Rs. 36 per kg to traders and Rs. 41 per kg to consumers in blue powder form.

Mr. Acharya also had decided the type of advertising he should float and other promotional programmes he should adopt.

Faced with such numerous problems Mr. Acharya wondered how long it would take before he could really start marketing his product. He also wondered whether it would be worthwhile appointing a consultant or trying to test marketing.

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After going through this case, you will be able to :

• find a new herbal-based product planned for launch.

• assess consumer awareness level and perceptions through product-probe.

• identify causes of differing responses.

Health Products Ltd. is a Rs. 500 crore company. Mr. Vivek Malhotra, its Branch Manager, was a worried man with a market-probe, for whose market research, services were hired for studying awareness level and perceptions of new herbal addition 'Nat Potion' to combat cold and cough. He was shocked at the differing consumer responses to Nat Potion at Allahabad and Bangalore.

Market-probe initially told that Bangalore showed greater buying intention even though Bangalore customers had a better modern mindset than Allahabad. The Company, since its inception in 1965, has been selling laundry and detergent brands traditional balms and cough drops (known in herbal base).

Nat Potion was supposed to have provided instant relief from cold and or a cough.

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After going through this case, you will be able to :

• find a small firm producing electronic devices.

• recognise its development of AGDOD system.

• identify AGDOD system's market potential.

• explain firm's decision for marketing consultant's services.

A) Why is Case Study Method is important in marketing management education?

B) Read the following case and answer the questions given at the end.

Mr. Vijay Kumar had built up his small electronic-control-system business during the last five years. He was handling subcontract work for Government departments and large electronic companies. There was little in-house original research done as business mainly concerned with the production of small-control-devices (automatic time switches clocks etc.) in response to customer's requests.

One of Mr. Vijay kumar's engineers, however, had recently adopted some of the equipments produced by his firm to make an automatic-garage-door-opening-device (AGDOD). The idea, basically, was that when a vehicle, which contained a small electronic package, passed through a beam located on the garage forecourt, a switch was activated in a door-opening-mechanism, fitted to the garage door.

The engineer had seen a similar device in use in U. S. A. during his visit to a number of small electronic companies on a fact finding tour some months ago. Mr. Vijay kumar and the Engineer had, both, fitted the equipment in their own garages and cars and the system seemed to work very well.

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Mr. Vijay kumar was anxious about the follow up of this idea and was prepared to incur limited expenditure on developing the market. He, therefore, decided to invite a firm of marketing consultants to advise him regarding sale of this product.

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After going through this case, you will be able to :

• underline advantages of strategic alliance with MNC

• analyse business growth under new tie-up.

• recognise export potential for Indian brands.

With the enunciation of liberalization of economic policies by the Government of India, a large number of multinational companies are re-looking at India as the star market for their products. The ABC, a major beverage company in India, negotiated a mutually profitable proposal accruing strategic marketing advantages for their products with CCA an international brand leader of soft drinks, recently.

The total market for soft drinks in India is estimated at 120 million cases (one case contains 24 bottles) i.e. Rs. 1200 crores and is said to be growing @ 5% annually. Product-wise contribution to sales is Cola 30%, lemon 25% Orange 10% and others 15%. The per neighbouring capita consumption of soft drinks in India barely works out to 3 bottles; while in Bangladesh, it is 12 bottles. ABC has over 60% of the total domestic market with 60 franchise bottling plants in the country. Under the negotiated terms. CCA an international brand leader, will market ABC brands alongwith their international brands in the domestic as well as the world market.

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After going through this case, you will be able to :

• find a graduate-entrepreneur in detergent business.

• underline his products, prices and wholesaler commission.

• analyse his price-structure with MNC's.

Rajendra Kulkarni, a graduate with innovative mind and creative abilities, has developed a detergent which could wash clothes better and, at the same time, do no harm to thefabric.

The detergent is developed in two colours- the blue shade costing Rs. 5.00 per kg and ivory shade Rs. 4.00 per kg. Both the varieties are absolutely identical in properties-except the shades.

Rajendra was ready to offer 20% commission to wholesalers on the selling price of Rs. 7.50 per kg for blue shade powder and Rs. 6.00 per kg for ivory shade powder to consumers, respectively.

Competing brands of reputed multinationals were sold to the consumers in the range of Rs. 9.00 to 9.50 per kg and 10% commission was offered to wholesalers on these prices.

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After going through this case, you will be able to :

• find Biscuit Company planning a product launch

• identify animal shaped biscuits for children-segment

• underline Marketing Manager's anxiety about consumer acceptance

• recognise Marketing Consultant's guidance

M/s Ajanta Biscuits Ltd. is a Bangalore-based biscuit company. They market their product in Karnataka. At present, they sell three types i.e. Glucose, Salted and Plain. They are planning to introduce a novelty in the children-segment of the biscuit market. The Marketing Manager, though optimistic of the innovative appeal of proposed animal shaped biscuits for youngsters; is still anxious.

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After going through this case, you will be able to :

• find Ice-cream firm planning a product launch

• recognise frozen-fruit-based dessert's unique features

• identify a special discount offer during Test-Marketing period

The Cold Ice-Cream Company is planning a test-market for the new frozen-fruit-based dessert which is distinct from an ice-cream-based-dessert. The product would be test marketed in Nagpur. During the test-market, the Company wishes to evaluate the effectiveness of a "Rs.6/- off " coupon-the dessert would be priced at Rs.22/-.

The marketing team of the Company believes that the use of coupon would result in greater brand awareness and a larger product trial among those receiving the coupon, when compared to those not receiving the coupon. A larger proportion would buy the product at full price at least once during the test period, when compared to those not receiving the coupon.

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After going through this case, you will be able to :

• explain prickly heat powder launch plans by MNC.

• state the need for Market Research with planned objectives.

• analyse and compare Company's objectives with MR findings

• underline circumstances leading to product failure.

Thomson and Thomson, a multinational giant in the field of health care products has a fairly successful product mix, consisting of ready made dressing, baby powder, bath soap for children, diapers, etc. The Company developed a prickly heat powder (PHP) in early 90's. The Product Manager thought it fit to carry out a Market Research, before launching the brand. A professional marketing research firm was assigned the task with clearly laid down objectives, viz...

a) To study the potential for such product, as this was a new concept in India at thattime.

b) To study the awareness and reputation that the Thomson and Thomson brand enjoyed;as the Product Manager was thinking of extension of this brand.

c) To study the satisfaction level of consumers of Thomson and Thomson baby powder;while two products were considered similar.

The study revealed following facts:

1) Market for prickly heat powder was growing

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Cases in Maturing Alanagenient

2) Market was virtually dominated by Glaxo's Nycil Brand.

3) Thomson and Thomson enjoyed a high level of brand awareness and reputation.

4) Hotisewives were fairty satisfied with Thomson and thomson baby powder specially

its odour was liked by them. Marketing policies of Nycil were also studied. The survey was earned out in Bombay, Madras, Hyderabad, Calcutta, Nagpur and Delhi in the month of January 1990. Before the national launch, Company also went for Test Marketing in Nagpur. Delhi and Madras, for one mouth, retail off-take was recorded in these 3 cities. As the results ware encouraging, it was decided to launch the product on All-India-basis wilh die following specifications:

Chemical composition similar to Nycil

Odour similar to Thomson and Thomson baby powder

Packaging similar to its existing powders

Sizes similar to Nycil

Brand, Thomson and Thomson

It was decided to position this product as another high quality product from Thomson and Thomson''. With a view to encash on the brand equity of Thomson and Thomson', the ad and promotional campaigns were also centered around the image of Thomson and Thomson.

The product was channelised through existing wholesalers and retailed. Product came into the market on March 10, 1990 and first two months sales were satisfactory, only 10% below the target. However, from the third month, safe started declining. The Product Manager was optimistic till summer 1991. But when situation kept on deteriorating even in summer 1991, Company had on option but to think of withdrawing product from the market

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After going through this case, you will be able to :

• explain product differentiation with film-star picture links

• recognise potential risks to sales with fluctuating movie popularity

• underline sales in rural areas with dependence on release schedules.

Can you imagine a situation wherein the sale of Vacuum Flasks was dependent on the success or failure of a movie? Almost unbelievable! But this precisely was the problem faced by Peacock Vacuum Flasks of Chandigarh. For example, If CHINAGATE or OIL SE flops, should the sale of Vacuum Flasks go down too? Ideally, nobody can establish a relation between the two.

Peacock Vacuum Flask Co. is the market leader in this field with almost 70% market share. They established a state- of-the-art plant with Japanese collaboration in 1965. Since the expiry of the collaboration agreement they have, through their own R&D, come out with new models at regular intervals and developed exports as well.

The Company, however, is facing a peculiar problem. This is with regard to product differentiation. Presently, they are having different models and sizes whose price ranges from Rs.45 to Rs.350. Some of their models use pictures of the forthcoming popular Hindi movies. For this, the Company has to pay royalty to the producer. Obviously, they want to catch up with the popularity of the movie to boost their sales. However, this does not always happen. If the movie flops, they end with a huge inventory. Also, by the time the movie reaches the rural areas, it is, sometimes, as late as six months to one year. For this reason also, the particular brand fails to pickup.

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After going through this case, you will be able to :

• find a unique journey of an agent-turned-industrialist

• explain how pumpsets agency led to an Italian tie-up.

• recognise "pumpsets-to-diesel generator sets" problems

• identify areas of competition based by 3 KVA players.

• analyse risks with help from marketing consultants.

M/s. Instant Electrics are medium-scale-industry, situated at Indore, Madhya Pradesh. Earlier, they were operating as distributors of leading automobiles. In the course of business, they gained the experience in running a large fully equipped workshop. In view of the recession in automobile field, they also acquired an agency for portable diesel pumpsets. While serving the customers, they realised the scope for marketing portable generator sets running on diesel, instead of conventional fuel like petrol.

The elder son in their family had done graduation in Electrical Engineering with specialisation in design. So the family decided to open a new business line for him and acquired know-how to manufacture diesel generator sets from Italy. Prototypes were made, successfully tested and the results were comparable to the best in the market (both Imported diesel run and run on petrol). They set up a medium scale industry with a production plan of 1200 units per year to start with and to reach the target to manufacture 6000 units per annum in the following 3 years. This product is in competition with existing petrol/ kerosene run gen-sets in the market upto 3KVA. There are three major competitors. The estimated market size at present is about 15000 units which is expected to be around 20000 units per annum in next 3 years. M/s. Instant Electrics have plans to capture 30% market share by that time. However, being a new product, new line and of substantial risk, they have decided to seek a help of marketing consultants.


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After going through this case, you will be able to :

• Find a firm developing soap with therapeutic value.

• Recognise CEO's resistance to brand extension, however.

• Identify firm's internal problems and competitive scenario.

• Analyse if "TV" would suit" B and CC" platform for brand extension.

Shri Krishnan Ranganathan, the Vice-President of Sales and Marketing at Angar Ltd. was fighting a loosing battle. His R & D team had developed a soap with an anti-infection ingredient of therapeutic value (TV) which Ranganathan was convinced, should outperform Company's Star Brand, Glow. But his CEO, Manubhai Shah felt that extension of a brand that had become synonymous with beauty into the health-soap segment would do more harm than good. As the Company was confronted by resource constraints, rivals competing fiercely, and a marketing team ill-suited to launch an all-new brand, Ranganathan found himself in a dilemma. Company had adopted the beauty and complexion care (B and CC) Platform for Glow's marketing and advertising right from the beginning.

Glow! "it cares for you" became catchy campaign-making it synonymous with beauty and complexion care. However, it had taken several years before the Company was able to attain that enviable position.

Since Company's inception in 1978, till 1994, Glow was slotted through six brand extensions in beauty and complexion care segment which accounted for a turnover of Rs. 250 crores.

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After going through this case, you will be able to :

• find Company's "tablet-based soft drink" Test Marketing results encouraging.

• recognise high risks in entering fiercely competitive soft-drink market, however.

• analyse product strengths and Market Research findings.

• underline Company's plans for building brand image of the product.

Sounitro Gosh, M.D. Tabeffer India, felt that his company had developed a product with the potential to be a winner; a tablet based soft drink, branded Lorino. The results of the market research, that he had commissioned, indicated the consumers were not only interested in the concept, but also liked the flavours in which Lorino had been test-marketed. However, breaking into soft-drinks market would not be simple, while the concentrates segment was stagnant, the aerated drinks segment was dominated by global players with huge ad spends.

The product had two overriding advantages. It didn't have the inconvenience of mixing, sugaring and stirring and disposing of the package unlike tetrapack.

Company had worked out a third-party contract distribution arrangement with Gretas which is also distributing soaps, biscuits, and hair-creams.

Tabeffer India also hired the services of product profile, a leading market research firm. The initial research revealed the following facts:

a) The consumption pattern in volumes was: filter-coffee: 3.9%, malted drinks 2.2%, instant coffee 1.8%, and soft-drinks 1.1 % the soft-drink market though a low volume in comparison was far more impressive in terms of value Rs. 1300 crore per annum.

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b) Aerated Soft Drinks (or ASDs) accounted for Rs. 1100crores, tetrapacks Rs. 150crores, concentrates Rs.60 crore, branded squashes, Rs.25 crore.

c) ASDs consisted of Colas (70%), Lemon drink (20%), Orange( 10%)

d) There are three brands in the Cola segment of ASD: Life, Prime and Vic. Life is a100-year old global brand with a brand image built around fun, youth and groupsocialising, Prime is a close rival of life in several markets around the world. Vic hada near-monopoly position, with a 60% share of Cola market, with its macho image ithad tried to position directly against Prime.

e) In the lemon segment, Misty was the single largest selling brand in the 70's and 80'swhich initially used its hygienic and thirst quenching values.

Later it projected an 'anytime-drink' image highlighting the occasion-brand association. It's cloudy appearance was well received. Thus, the six broad conclusions were analyzed by the company.

1. The brand image during the launch will be vital.

2. ASD brands have enormous ad spends.

3. Global brands have been successful only in the Cola segment.

4. Tetrapacks have seen the largest number of failures, but also single-largest success.

5. Brands targeting several demographic and psychographic segments have not beensuccessful.

6. For five years, the concentrates market has defied all attempts of expansion.

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After going through this case, you will be able to :

• find MFIL's new "Escort" taking severe beating from Honda City.

• recognise that "Zetec" launch strategy correction did not change market perceptions.

• analyse the classical hedging strategy for petrol and diesel versions.

• underline special discount offer on the eve of Independence Day celebrations forpetrol version "Escorts".

• identify consumer preferences for diesel versions.

Not many could have found fault with the launch of Ford's launched vehicle Escort. In many ways, it was a dream launch. Within one year, Mahindra Ford India Ltd. (MFIL), CEO John Parker's team managed to roll out vehicle from makeshift plant at Nasik. Sales were impressive too! By the end of 1997, Ford had clocked bookings for nearly 60,000 cars.

But the smooth passage, so far, may well be interrupted. If it is any indication, between April-June 1998, Ford's sales fell from 2,546 cars, during the same period last year, to 982 cars. Ford's nemesis has been Honda City, which has bitten into its market share, cocking impressive sales of 2,720 cars, during the same period.

What's perhaps more worrying for Jim Johnston, MFIL's Vice-President for Marketing and Sales is that the sales dip is despite the recent launch of Ford's much-hyped Zetec. The Zetec powered by a 1.6 valve engine was meant to correct the market perception that the 1.3 litre petrol version of the Ford Escort was underpowered. Clearly, the strategy did not work.

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In some respects, notwithstanding the success of its diesel version, Ford's product selection has largely been at fault. As a launch strategy, Ford had chosen a classical hedging strategy. It launched four options on the Ford Escort. The Escort came in, both, petrol and diesel versions with standard and deluxe versions. The 1300CC petrol version was pitched against the Esteem, the benchmark car, in the category. The advice to launch a diesel version, says Parker, came from his partners. In the end, the diesel car may have prevented the JV from suffering a virtual wipeout.

But word soon got around that the petrol version was underpowered. With 70 percent of buyers demanding diesel versions, MFIL, now, had petrol cars piling up at the Nasik plant. Parker then had to use the occasion of Independence Day celebrations to introduce a cleverly masked discount offer. Placing freedom badges and lopping off Rs.One Lakh from the price tag, it managed to push out nearly 400 cars, mostly the petrol version.

Having overcome the initial hurdles, Parker's next target was to correct the negative connotations of its petrol version. As a launch pad vehicle, Escort could not simply afford to leave Ford with a stained reputation. The Zetec was supposed to do the trick. But the market is yet to respond to the offering.

Given obvious consumer preferences in India towards the diesel model, couldn't Ford consolidate its diesel models, instead of using a line extension like Zetec to correct consumer perception? The injury is still out on the one. The greenbacks are, however, expected from Zetec's smaller cousin Fiesta.

For the moment in his office at Anna Salai in Chennai, John Parker clearly won't be an amused man as he pores over figures of Honda City's surging volumes

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Case No. 66VRIDDHI 2000


After going through this case, you will be able to :

• find "Vriddhi 2000" a new rice seed variety developed by AAL.

• recognise its features in terms of cost and yield.

• underline "Vikas 1000" improving sales-AAL's earlier version.

• argue, new variety may kill demand level of "Vikas 1000".

'Vriddhi 2000' is the new seed variety of rice, developed by Ashok Agro Ltd (AAL).After five years of research in laboratory and in paddy fields, 'Vriddhi 2000' will be twice as costly as the present variety. 'Vikas 1000' being marketed by Ashok Agro Ltd. However, significantly the crop yield of 'Vriddhi 2000' expected to be thrice as 'Vikas 1000.'

'Vikas 1000' sales have been consistently improving, since it was launched three years ago.

Directors of Ashok Agro Ltd. fear that 'Vriddhi 2000' may cannibalise 'Vikas 1000.' 'Vikas 1000' is in the growth stage of its PLC.

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Case No. 67


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After going through this case, you will be able to :

• underline 3M's" Culture of Innovation" philosophy, since 1904

• identify its results through achievements in Sales and Patents

• recognise corporate environment, facilitating new discoveries

• analyse 3M's falling Sales in 1990s and restructured plans

Minnesota Mining and Manufacturing (3M) fosters a culture of innovation and improvisation evident in its very beginnings. In 1904, the Company's directors were faced with a failed mining operation, but they turned the leftover grit and wastage into a revolutionary new product: sandpaper. Today, 3M makes more than 60,000 products, including sandpaper, as well as adhesives, computer disks, contact lenses, and optical films. Each year, 3M launches scores of new products, and the Company earns about 35 percent of revenues from products introduced within the past five years. The Company regularly ranks among the top U.S. Companies each year in patents received. 3M have an annual R&D budget of $1 billion, which is a healthy portion of its annual $16.7 billion in sales.

3M has a long history of innovation. In addition to inventing sandpaper, the Company has developed numerous product innovations, in its 99-year history Here is a brief timeline:

1925-Scotch masking tape 1930-Scotch

transparent tape 1939-First reflective traffic sign

1956-Scotchgard fabric protector 1962-Tartan

Track, first synthetic running track

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1979-Thinsulate thermal insulation

1980-Post-it notes

1985-First re-fastening diaper tape

1995-First non-chlorofluorocarbon aerosol inhaler

2000-First laminating products that do not require heat

3M is able to consistently produce innovations, in part, because the Company promotes a corporate environment that facilitates new discoveries. The following are some tactics 3M uses to ensures its culture remains focused on innovation:

3M encourage everyone, not just engineers, to become "product champions". The company's "15 percent rule" allow all employees to spend up to 15 percent of their time working on projects of personal interest. Products such as Post-it Notes, masking tape, and the Company's micro replication technology were developed because of 15 percent rule activities.

Each promising new idea is assigned to a multidisciplinary venture team headed by an "executive champion."

3M accepts some failures and users failed products as opportunities to learn how to make products that work. Its slogan is "You have to kiss a lot of frogs to find a prince".

3M hands out its Golden Step awards each year to the venture teams whose new products earned more than $2 million in U.S. sales or $4 million in worldwide sales within three years of commercial introduction.

In the late 1990s, 3M struggled as sales stalled and profits fell. The Company restructured, shed several proprietary non-core businesses, and cut its work-force. Due to these moves, 3M had record sales and income in 2000, when 3M named GE executive James McNerney its new Chairman and CEO that year, he vowed he would continue to improve the Company's bottom line-while keeping its culture of innovation intact.

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After going through this case, you will be able to :

• find two partners in mandap-contract business

• recognise their one-type, one-size mandap limitations

• analyse "would be expert consultant" friend's success formula

Kamlesh and Laltu are two school drop-outs and friends, living in a small town bordering Surat city. They are partners in a Mandap (pandal) contracting business. Citizens of the town, as well as nearby villages, are mostly engaged in diamond cutting industry and most of them are quite well-to-do. Besides, the citizens are religious in nature. All the family functions, as also the social occasions are celebrated with zest. Kamlesh and Laltu supply mandaps on all such occasions. However, they have only one-type and one-size of 'mandap'. Ajay, a school cham, who has passed MBA with marketing elective, recently met Kamlesh and Laltu, and recommended a success-formula to them. Ajay said "Target marketing and product differentiation will do the magic to your business." Though impressed, Kamlesh and Laltu have not really understood what Ajay had told them.

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Case No. 69SCRIPTO


After going through this case, you will be able to :

• find a 55-year-old firm's continued losses in recent years

• recognise firm's revitalised strategies : stretched to unmanageable limits

• analyse restructured product-lines to regain market share

Scripto has been marketing pens and pencils for 55 years. It was, once, the best selling brand. In recent years, however, it's sales have declined steadily, while sales volume in the industry has increased in the last decade. Scripto has not made profits.

For many years, Scripto's mechanical pencils, ballpoint pens and cigarette lighters had a good market share. Over 20 years ago, Scripto had entered into unrelated product- areas like ceramics. Meanwhile, two big competitors, Bic and Paper Mate, brought out new writing products. Scripto then tried to meet or undersell Bic and Paper Mate by bringing out new items. However, this action resulted in more similar products and a broader line than the Company could handle. It recently lowered the number of its ballpoint pen models from nearly a dozen to three. It also dropped two un-profitable lines, refillable lighters and porous-point pens.

Scripto still sees mechanical pencils as one major area for future growth. It has increased its ultra-thin-lead line, the fastest-growing segment of the pencil market, from one model to four. With the introduction of its Easy Roller pens, Scirpto has entered the rapidly growing roller pen market. The hopes to command good market-share soon, are high. However, the competition is tough with many well-known brands in the field.

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After going through this case, you will be able to :

• find a baker with traditional baking techniques.

• recognise his products as non-branded, unpacked.

• underline someone's suggestion: for branding and packing the items.

• justify the acceptance of the idea, though worried about increase in costs.

Raghunath is a small-time baker. His bakery is located by the riverside on outskirts of the city with 10,00,000 population. He has a traditional brick oven in which he roasts and bakes his preparations viz, bread, bun, cake, pastries, toast, 'butter' and 'kharee'. All these are non-branded products. Someone strongly suggested that he should choose a name for his products. He should also be selling his products in a proper packing. Raghunath is, indeed, impressed with this idea and has cultivated special interest in this suggestion; but he is worried about the possible increase in the cost.


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After going through this case, you will be able to :

• find a poultry-owner with modern management practices.

• recognise his services to other poultry-operators.

• identify benefits to Society: reduction in costs, increased profits.

• explain Society-members' greed for profit maximization.

• identify poultry-owner' s working-philosophy : keep prices competitive and expandmarket base.

Saif runs a medium-size poultry in a Taluka place. He had completed a certificate course in Poultry and Hatchery. He employs all the efficient and modern techniques of poultry-keeping in his business. Being socially minded, he has further trained almost all poultry-operators in the Taluka. All of them, now, use hygienic and economic methods of poultry-management. Besides, subsidies on poultry-feed and medicines have resulted in the reduction in their costs.

Saif, like other poultry-keepers, is a member of Taluka Poultry Co-operative Society. All the members have to sell their produce to the Co-operative Society which, in turn, sells the products to the consumers, through its retail outlets. The Co-operative is governed by members whose focus is on profit-maximization, whereas, Saif knows that reduction in costs, should result in reduction in price. Sarif knows that by means of competitive pricing, the market can be expanded. But the Co-operative Society will not agree.

Secretly, Saif is curious to know what the local 'Grahak Manch' (Consumer's Forum) will be doing about this. He wonders if they will pressurize the 'Co-operative' in accepting

Case No. 71SAIF RUNS

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lower profits. Saif believes that if such a thing happens, it will be good for the poultry -keepers.

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Case No. 72



After going through this case, you will be able to :

• find TL's drug manufacturing tie-up with a German counterpart

• assess TL products' strengths and weaknesses

• identify TL's problems : arising out of a product, already commanding the market

• recognise competitor's price-increase decision

• analyse TL's counter strategy to beat impending price-war threats and challenges bycompetitor

Tushar Laboratories (TL) have been in the Pharmaceuticals Industry for four decades. The Company has a sound manufacturing infrastructure, qualified personnel and has been supplying bulk requirements to the Government. ESI, defence etc. The Marketing Department is headed by an experienced Manager, who supervised a team of 25 field representatives in the Southern States and Orissa. Like all companies entering the market, Tushar too had to confront with heavy odds, in the initial stages.

The Company's Chairman toured Germany in the recent past and struck a deal with his German counterpart for the manufacture and marketing of a life-saving drug used extensively in surgery. Though the Company had a German back-up, it faced certain problems in the market.

These problems are:

a) A similar product based on indigenous technology was already being marketed in India by a giant company, at least ten times bigger and reputed than Tushar Laboratories.

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b) The giant company had not been concentrating on this product, with the result that the demand situation was very lukewarm and the market was small and expanding slowly. Though the product was a life-saving one, the Indian medical profession was not using it extensively as in Germany or the US because of its high price, the difficulty in assessing the need for the product and the fear about fatal reactions (though non-existent)

However, Tushar had a certain edge over its giant competitor. Apart from the fact that it had backing from a German Collaboration, the giant company's product had quality problems and was in and out of the market frequently. Thus, by projecting foreign name and quality, Tushar was able to launch the product with success in the Southern States.

It so happened that the market for this life-saving product was several fold bigger in Bombay than in any other city.

Hence, the giant competitor diverted all its stocks to Bombay, particularly starving the other markets in the country.

When Tushar entered the Bombay market, it was faced with the difficult task of marketing the drug because its competitors already enjoyed terrif patronage and brand reputation. However, dame fortune smiled on Tushar's face, the giant's product went out of stock for two months.

Being the only alternative brand available, the chemists were able to substitute all the giant's products with Tushar's brand. Thus, the latter became popular. This spell, however was brief and when giant's products reappeared, Tushar's sales slumped. Even though Tushar was a German collaboration, it was marketing its product at Rs.60 per unit, while the giant was charging Rs.64

Then, the unexpected happened. The giant suddenly revised its price from Rs.64 to Rs. 108. This took Tushar's marketing team by surprise.

The Tushar personnel attributed the sudden increase in the price of their competitor to the following reasons:

a) The giant wanted to make as much profit as possible by putting up a stiff price, since, in Bombay, costly drugs meant better quality. Moreover, the giant had major sales from Bombay

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Case 72 Tushar Laboratories

b) The revision in the retail price of the giant's products would enable the chemists to enjoy a better profit margin and lead them to substitute Tushar prescriptions with the giant's product since the latter enjoyed better brand image and gave more retail margin.

Tushar's marketing team was, thus, in fix. It had to evolve a suitable counter strategy and the options available to them were just two, namely :

1. Raise the price of Tushar Lab's product and bring it at par with or somewhere nearthe giant's product-Tushar 's product already enjoyed an excellent profit margin andany increase in price, while making the product less affordable, will add to the kitty ofthe company. At the same time, though the Bombay market may not be deterred bythe higher price, it will surely disturb the doctors from other parts of the country fromusing the product.

2. Launch a campaign highlighting the advantage of the economy in using Tushar's brandover that of the competitor. The strategy presupposes that the customer may equatethe cheaper price with inferior quality since in the pharmaceutical market cheaperbrands rarely become brand leaders. Moreover, if a market is slowly expanding,raising the prices may once again retard growth.

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After going through this case, you will be able to :

• find a firm marketing typewriter: with four fonts.

• recognise that customer appreciates unique features, fonts but not price

• underline that justification for'' quality-price relationship'' is disapproved

Suppose you are the Sales Executive of Excel Typewriters Ltd. One of your potential customers tells you that he will be happy to purchase a machine having different letter-styles or fonts. In fact, one of your machines, actually has four letter-styles/ fonts. This is appreciated by the customer. However, the customer mentioned here, is dissatisfied with Rs. 10,000 as price for this machine.

The customer feels this price is not justified. The fact is that this typewriter model is priced high, due to the variety of four letter-styles available.

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After going through this case, you will be able to :

• find a seed plantation firm promoted by specialists

• recognise their dealer-network and access to farmers

• underline joint research output: output within 3 months

• justify firm's efforts in marketing their achievement without loss of time

M/s Sue Seed Plantations (Pvt.) Ltd. is promoted and managed by a group of Agriculturists, Microbiologists and Researchers in applied chemistry; while they have consistently played to their strengths and turned out new varieties of crops and seeds every season. Over the years, they have steadily built a rapport with major dealers all over the country and have established a bond directly with farmers. M/s Sue Seed have always believed in "Excellence Through Innovation". They had recently sponsored a joint research project with a nationally reputed laboratory. The outcome of the flower once in 15/20 years, is now made to flower within % months as a direct fruit of this research. As per UNO report, 33% of world population is directly or indirectly dependant for their livelihood on "Bamboo" plant. Knowing this universal dimension of Bamboo plant, M/s Sue Seed have realised that they have some real "big thing" on their hand. They are basically innovator- manufacturers and not too expert in marketing techniques. At the same time, they do not want their new idea fall into rivals hands or waste by not using at all.

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After going through this case, you will be able to :

• find a BJ discount-offer to encash on sales during Sept-December period.

• recognise the firm stipulating offer conditions to retailers.

• indentify BJ scheme leakage, provoking B S competitor in launching a more profitableoffer.

• underline B S Company sales zooming; while those of B J falling.

• explain piquant situation as B J Managers refusing to take back leftover stocks.

Benson and Johnson Co. (BJ) manufacturing jams and sources, after survey, observed that there is maximum consumption of these product during the months of September to December. To take the advantage of this opportunity, the Company decided to float a very attractive discount offer as follows:

On purchase of 1 gross bottle- 5% cash discount in bill On

purchase of 2 gross bottles -12 % cash discount in bill On

purchase of 4 gross bottles -26 % cash discount in bill On

purchase of 8 gross bottles -55 % cash discount in bill On

purchase of 12 gross bottles -70 % cash discount in bill

To ensure this scheme to be a grand success, they planned their advertising campaigns in newspapers, magazines, radio and T.V. The Company had limited Sales Force and it was not possible for them to cover every district. Hence, it was decided that all the wholesalers


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will be contacted and booked with the large quantities. It was made clear to all the retailers that they should push these products maximum across the counter. It was also made clear that no stocks will be taken back after December. When the competitor, Blue Shield came to know about the Benson and Johnson scheme, they also declared a scheme to retailers and consumers as follows:

For Retailers-1 bottle free on purchase of 11 bottles. For

consumers- Rs. 1.50 free on every bottle purchased.

Considering the bumper scheme of Benson and Johnson, many retailers bought substantial bottles. However, in reality it was observed in the middle of September that people were demanding the jams and sauces of Blue Shield more; the retailers started selling these products. Many of these retailers clearly mentioned to the representative of Benson and Johnson that though the profits are more in Benson products, the investment in Blue Shield products is less and yet they get their extra profits.

After the season was over, many retailers in the town started telling the field force of Benson and Johnson that as they could not sell the entire stock purchased, the Company should take back the stocks and return the money by even deducting the scheme amount. When the representatives refused to do so, many retailers curtailed their purchases of other equally good moving products. As a result, the sales position declined in the next quarter.

The position of District Managers and Area Sales Managers became very embarrassing in the field. In spite of their telling to the retailers that the company will arrange a special campaign and help to liquidate the stocks, the retailers persisted to take back the stocks, which, the company refused.

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After going through this case, you will be able to :

• find a new Health Club (HC) in rapidly growing Pune

• recognise evils associated with City's industrial growth

• identify environmental pollution and serious health problems making HC, a saviour

• explain HC infrastructure to cater to different age-groups

• underline HC plans: optimum utilisation of facilities to build up membership strength

Shakti Fitness Centre is the new health club in Pune. The city has been developing rapidly as an industrial and commercial centre. A remarkable percentage of population, here, is either self-employed or having a job with adequate compensation packet. Being an educational centre as well; number of students is significantly large. So is the number of pensioners comfortably settled.

Effect of modern living and industrial environment is evident from the increasing number of people suffering from breathing problems, hypertension and such other disorders. Shakti Fitness Centre offers an opportunity to the citizens of maintaining good health through physical exercises.

Shakti Fitness Centre provides the following facilities :

a) Weight training

b) Aerobic

c) Sauna( steam) bath

d) Ground for jogging (running)


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e) Yoga

f) Swimming Pool and

g) Diet Consultancy

h) At present, Shakti has 200 members. It has lot of spare- capacity to take in new members. It also plans to recruit expert instructors for training the members.

Manager at Shakti has observed that:

i) Young members prefer weight training and aerobics

ii) Middle aged people prefer Sauna and Jogging

iii) Senior citizens like yoga sessions and diet consultancy

iv) Demand for swimming pool is seasonal

Shakti Fitness Centre wants to know how to promote its activities. Advise them about:

a) Possibilities of new schemes combining the various facilities, it offers.

b) Market Segmentation to generate

c) Promotion Schemes

d) The year-round demand for swimming pool

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After going through this case, you will be able to :

• find HBP in Mahabaleshwar known for excellent service standards.

• recognise, however, the neglect of service-standards, over years.

• identify Management's continued indifference: results in low occupancy rate.

• underline ensuing competition with another hotel coming up in neighbourhood.

Hotel Black Pearl is located at a scenic hill station Mahabaleshwar in Maharashtra. Tourist trade is flourishing at this hill-station, known for cool and pleasant climate, for its high mountains, deep valleys, lushgreen forests and the Venna Lake. Mahabaleshwar is also known for strawberry plantations, leather handicrafts and pure honey.

Hotel Black Pearl has earned a reputation for it's courteous service, comfortable accommodation and its locational advantage in being situated near a point of great scenic beauty. Patronage to the hotel comes from middle and upper middle class. Repeat customers are plenty.

However, during the last 5/6 years, the overall clientele are reduced. People still crowd at their restaurant, but occupancy of the lodge-rooms is declining. There were some murmurs of disapproval about leaking taps and toilets in the lodge, bugs and pests in the rooms and of minor damage to the tourist vehicles kept in hotel garage. Even couple of small thefts in the lodge were reported. But the Management did not consider these seriously.

Recently, a new hotel, 'Sapphire' came up in the neighbourhood. It seems to be doing well, indeed. Since its opening, business of Black Pearl has been remarkably affected.

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After going through this case, you will be able to :

• find a baggage manufacturing firm BBL suffering setbacks.

• underline dealer-promotion schemes of competitor HLL to be the prime factor

• recognise HLL's dealer tours abroad- commanding highest sales

• analyse BBL's confusion in future strategy to handle rival firm's aggressive stance

Bags and Baggages Ltd. (BBL) a wellknown baggage manufacturing company, is facing a serious setback in the market. Reason for this is seen to be a very strong, dealer-promotion schemes employed by 'Holyday Luggage Ltd. (HLL) a rival company. This company is even offering a week-long trip to Hongkong (for two) to the dealers, if they sell 20,000 pieces in a year.

M/s. Bags and Baggages Ltd. has always preferred to give discounts to the consumers, besides offering them superior product and service. Now, they do not know how to handle the aggressive promotion of their rival firm.

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After going through this case, you will be able to :

• find health club swimming pool reporting deaths last year.

• recognise hostile public criticism against inadequate facilities.

• explain declining membership resulting in the Fact-Finding Committee's oddsuggestions

• underline a deceitful recommendation at "C" to suppress the facts.

• judge Committee's irresponsible plea to absolve the management of genuine deathcauses.

You have been appointed as the Marketing Manager of a Health Club, having its own international grade indoor swimming pool. During the last one year, there were two deaths in this swimming pool. Public seriously doubts about the facilities at this pool. The membership has been adversely affected. The Management of the Health Club had appointed a Fact-Finding Committee. Their suggestions/ recommendations are not so helpful. These are:

a) reduce the Membership Fee to attract more members.

b) increase the Membership Fee to attract the up market membership

c) try and hide the fact of deaths at the swimming pool from the public' s notice

d) call the media and the eminent public personalities and convince them that 'deaths'were due to no fault of the Management or it's swimming pool facilities.

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Case No. 80AR SONS


After going through this case, you will be able to :

• find an old-furniture-dealer emerges to be a manufacturer.

• recognise his strengths: quality, service and professional integrity.|

• underline his new Corporate Status, new line and services.

• analyse his new tools of distribution: mail order and internet.

"AR Sons" made a modest beginning as a dealer for old and used furniture in 1970, offering furniture at low prices. After five years, it started its manufacturing unit at Bhosari in Pune. AR Sons soon won in enviable reputation for its commitment, quality, service, personnel and differentiation with marketing orientation. They built brand equity of its own style, with variety of designs, shapes and matching needs of large and small families, offices, professionals. AR Sons, thus, attained the heights of a big corporate.

Further, AR Sons entered into ready-to-assemble furniture- making and began to use mail-order channel for its distribution.

In 1998, it thought of using Internet for its hallmark of Fast, Friendly, Knowledgeable and Professional service.

'The internet plus mail-order delivery could attain popularity", is the prediction of its Vice President- Marketing, Mr.Sandeep.

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After going through this case, you will be able to :

• assess the situation with down-to-earth approach.

• recognise the seriousness and genuine needs.

• underline the appeal-strategy and background preparation.

• identify the audience and direct-mail campaign-thrust frequencies.

A powerful earthquake with the magnitude of 6.5 temblor struck your State, killing over 5000 and injuring hundreds of thousands of residents in X, Y and Z cities alone, and causing misery and massive destruction of life and property around the ABC District. Urgent humanitarian and public support constitute the need of the hour.

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After going through this case, you will be able to :

• underline A's strategy to use image-platform of celebrities.

• recognise ban on pharma companies' ethical products advertising in "lay press."

• recall legislative measures imposing restrictions.

• identify "Direct Mail" or "Representatives" as the most ideal medium to carry thedrug-message.

• state outstanding features of "The Living Legends".

Direct mailing of Alcophin constitutes the legend among antibiotics. The pharmaceutical companies have to do direct marketing by necessity, as they cannot advertise ethical products in the "lay" press under various legislative measures. They produce fine visual aids and product literature which could either be sent as direct mailing to the medical profession or can be delivered to them through medical representatives.

The most important thing is to make the mundane promotion outstanding with creative ideas. Mr. S.S. Oberai came out with a set of 10 four-page folders for Alcophin based on the theme 'The Living Legends'. The folders are extremely well-executed, well-designed and printed. The idea is outstanding. Ten living legends are chosen and include names like Satyajit Ray, Mother Teresa, BabaAmte, Lata Mangeshkar, Sunil Gavaskar, R. K. Laxman, Abdul Kalam and Shivaram 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.

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The Centre-Spread has the manufacturer's plug. A short write-up on the characteristics of Alcophin and the line 'The legend among antibiotics'. It is not intrusive at all. Yet it is effective.

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After going through this case, you will be able to :

t find K's market development plans : where neither any competition nor the sales exist.

• recognise need for cultivating breakfast habits: fundamental consideration.

• underline market creation and sales as the ''follow-up'' strategy.

• analyse JWT ad agency's campaigns to reach potential consumers.

• assess market-response and K's long-term strategy : based on nutrition, flavour andpreparation.

In 1980, Peter A. Horekens, Marketing Director for Kellog Company was faced with the problem of developing a market for ready-to-eat cereals in the Latin American 'region'. Although Kellog had no competition in the ready-to-eat cereal market in this region, they also had no market. Latin Americans did not eat breakfast as the Americans did. The problem was especially prominent in Brazil. To create a market and increase sales in this region, Horekens had to clear a nutritious breakfast habit.

Kellog Company, headquartered in Battlecreek, Michigan, was founded in 1906 by W.K.Kellog. The company continued to operate successfully with sales in 1980 amounting to 2,150.9 million U.S Dollars. The Kellog Company produced and marketed a wide variety of convenience foods with ready-to-eat cereals topping the distribution in 130 countries. The ready-to-eat cereals sales made up the majority of international sales.

In 1980, Kellog international operations accounted for 38 percent of Kellog company's sales of more then 52.0 billion. The United Kingdom was, by far, Kellog's largest market. Internationally, sales in the ready-to-eat cereal market continued to increase, although in

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the past few years the competition also had increased. But in Latin America, consumption of ready-to-eat cereals was negligible.

The Latin American Market

The Latin American Market, mainly Mexico and Brazil, showed great potential as a Kellog's ready-to-eat cereal market. The demographics fit the ready-to-eat market; the only problem was Latin Americans did not eat the traditional style breakfast. The Latin American market included a growing number of families with children. The population mix was becoming younger. The developing economy enabled consumers to spend more than their income on food. Kellog wanted to increase sales in this Latin American region, especially Brazil, but consumers had turned their backs to the American style breakfast. How was Kellog to create a nutritious breakfast habit among the Brazilians?

The company asked J.Walter Thompson (JWT), Kellog's advertising agency, to help instill the breakfast habit in Brazil. According to Horekens, "In general, Brazilians do what people in Novellas do." Novellas are Brazilians' soap operas. J. Walter Thompson tried to advertise Kellog ready-to-eat cereal and instill the breakfast habit by advertising within a soap opera. The first experience of advertising within a soap opera failed; the advertisement portrayed a boy eating the cereal out of a package.

Kellog wanted to teach the Brazilians how to eat a complete, nutritions breakfast, not just Kellog's cereal. The commercial did not work because it made Kellog ready-to-eat cereal seem more like a snack than a major part of a complete breakfast. Kellog wanted to portray ready-to-eat cereal as a part of a complete to be eaten in a bowl with milk alongwith other foods to make a complete breakfast.

The company believed that the growing population in this region would reinforce the importance of grains as a basic food source. The 1980, population in Brazil was 119 million, which made it the sixth most populated country in the world and the population was expected to grow to 165 million in the next few years. Within this population growth was an increase in the number of women of childbearing age, which further supported Kellog's potential for a successful cereal market. The structure of the population in Brazil in 1980 was

Thirty seven percent of population under age 15

Forty eight percent of population under age 20

Twelve percent of population over age 50

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Case 83 The Kellog Company

Six percent of population over age 60

These figures showed that the population of Brazil better fit the market for a ready-to-eat cereal consuming segments.

The "cult of the family" continued to be the most important institution in the formation of the Brazilian society. This culture ideal was reflected in the ways they conceptualised and evaluated the range of personal and social relations. This seemed to be the way Kellog would have to demonstrate the importance of a nutritional breakfast- by playing up the family and its importance.

Through the use of the novellas, Kellog made a second attempt to teach the Brazilians the importance of breakfast. Most Brazilians families watched these soap operas. Composed mostly of family scenes in their commercials, Kellog opted for scenes that showed the family at the breakfast table. One member of the family, usually the father, took the cereal box, poured the cereal, and then added milk. This scene represented a complete "Kellog' breakfast in a way that Brazilians could relate to. The advertisement focused first on nutrition, then on flavour and finally on ease of preparation. As a result of this campaign, sales in Brazil increased Kellog controlled of 99.5 percent of the ready-to-eat cereal market in Brazil. However, percapita cereal consumption was less than one ounce or several spoonfuls per Brazilian annually, even after advertising.

Although Kellog controlled the market, there was not much of a market to control. Brazilians had begum to eat breakfast, but Horekens was not sure whether sales would continue to increase. His problem was-How could Kellog further convince the Brazilians of the importance of eating a nutritional breakfast in order to establish a long-term market?

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After going through this case, you will be able to :

• underline paanwala's sound "customer-relationship" on firm footing.

• recognise his insistence on adopting sales promotion techniques: discuss ideas withconsultant.

• find that he is planning a website on internet and seeks your suggestions.

Banarasidas is a famous Paanwala in Fort Area in Mumbai. He has been keeping close relationship with his customers and has developed the practice of offering Paan to the customers, according to their specific requirements and preferences.

As he is running his paan shop in a city like Mumbai, he has a profound sense of modernity. This is reflected in the display of his paan-shop, his promotion methods, ultra cleanliness, Packing of paan, etc.

Now, he is thinking of creating a website on Internet. His marketing ideas are always creative and innovative as his profile is far different from other Paanwalas. He is fond of reading English books. He had completed his M.A. (English), twenty years ago.

Besides, it is his practice to discuss and confirm his marketing ideas, with a professional consultant, also his client.

He would like to get your suggestions on using website for marketing.

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After going through this case, you will be able to :

• find CCL engaged in manufacture of inflatable products.

• recognise its Water-Bed developed for Indian Markets.

• identify new product-features and advantages.

• underline product weakness.

• explain comprehensive market plan design for the product.

'A GLORIOUS MORNING!' muttered Ms.Shhakti Rohilla to herself as she arranged her agenda for the day. Ms. Rohilla was the newly appointed Marketing Manager of Customer Comforts Limited (CCL) -a Rs. 20 crore company in Mumbai. First on her engagements for the day, she had a meeting with her Director, (Marketing) early in the morning. This meeting was to evaluate the initial thoughts of Ms. Rohilla on how to plan marketing efforts for 'water-beds'-a major product developed, recently, by CCL.

Customer Comforts Limited (CCL) was set up about a quarter of century ago in New Delhi by Harjinder Singh to create and market a variety of inflatable products. The organisation manufactured rafts, boats, lifejackets and collapsible containers for bulk storage purpose. It had acquired, both, quality image and customer satisfaction. Over the years, the only change that Mr. Singh had allowed in Company philosophy was to innovate and add more vigorously to the consumer products in the inflatable category to meet customer desires.

The water-bed was a major offering in the series by CCL in the middle of 1991 to Indian markets. The product had already been accepted, to a large extent, abroad and it was hoped that Indian consumers, too, will accept it.


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Water-beds are made of PVC with mattresses full of water. This water needs to be changed once in six months. In winter, if customers desired, the water could be heated to a required temperature.

Among the major benefits of water-beds over the conventional beds and mattresses, whether, made of jutes, cotton, or foam, was that a water-bed applied equal pressure on every point in the body. This ensured its users a healthy and comfortable night's sleep. Ms .Rohilla believed that the benefit will be its chief attraction and needed to communicate this.

Further, the PVC used in marketing water-beds was of high quality, they are sturdy enough as the in-house research and limited field experiments proved to withstand children romping on them. One could even stub a cigarette without springing a leak. Ms. Rohilla knew that this would be a major hurdle to cross as it would take some communication to convince customers. However, she felt confident that the benefit would reach customers.

Ms. Rohilla was to design a comprehensive market plan for the Water-bed. Before that, however, she consulted her Director (Marketing) with her initial thoughts. The Director seemed to agree but asked her to marshal them in writing and discuss the same again that afternoon.

As she began, as if at once, her study room clock chimed. "Oh nine-thirty! Time to get ready for the office" said Ms. Rohilla and spurted out of her study.

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Case No. 86MR. KUMAR

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After going through this case, you will be able to :

• find a firm with dismal performance in Mint market.

• recognise its lack of focus, absence of promotional support as mint's causes of failure.

• underline MNC's successful entry in the same market with : "Hole-Mint".

• explain firm's dilemma: distribution and financial constraints.

• identify marketing team aiming at promotion mix strategy.

Mr. Kumar at XYZ Ltd., sat with the marketing team concerned about the growth opportunities lying in the Rs. 140 crore mint market. Their own product was doing dismally poor due to lack of company focus and no promotional support in a fragmented confectionery market. Biscuit sales were more important to the sales representatives than the confectionery sales.

A recent launch of "hole mint" roll by an MNC had created waves in the confectionery market. The high media decibels created interest with the adults in the so-called kid segment. The "hole mint" virtually began to represent the mint category in the Indian context.

The team was sure that the old product needed to be relaunched. But how to go about the entire thing? Afterall, a mint was a mint and nothing more. XYZ Ltd., knew their distribution and financial constraints. They could not commit more than 1.5 crores over the entire the year on the promotional support. The north and northwest were their stronghold territories.

They knew that they had to grow the segment if profits were to grow. "Hole mint" users, as well as, new users had to be brought about in to use of the XYZ product.

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After going through this case, you will be able to :

• find Cadbury and Nestle, both, running from neck-to-neck, in volume share.

• recognise, both, scaling new heights: despite distribution and time-frame constraints.

• underline massive thrust of ad and promotional campaigns

• analyse each company' s brand segment: and struggle for expansion strategy,

A child's preference for chocolate could be for plain milk chocolate, chocolate-enrobed goodey bars, or the latest hit: wafer-enrobed chocolate. Leading brands like Cadbury's and Nestle encompass all of them. Kit-Kat from Nestle and Perk from Cadbury's have started running from neck-to-neck, with 8% volume share each.

Within one year of their launch, no chocolate has succeeded in getting the share both have got, despite the fact that Kit-Kat and Perk are available only in 16 and 20 towns and not at national level. The market seems to accept chocolate more easily compared to the past since 1993, the growth has been from 15 % to 25 % and new consumer interest has been created in chocolate because of high profile ad-campaigns and promotional efforts-While COM (Cadbury's Dairy Milk) has attempted to break consumer mindset that chocolates were for children only, the two wafer enrobed brands have established new segment which threatens the traditional plain milk chocolates. Here lies the strategy of Kit-Kat and Perk. While Nestle Kit-Kat wishes to push CDM by concentrating the wafer market, Cadbury's is looking at milk chocolates for consolidation of gains,

Cadbury's aim of launching Perk appears to have been reactionary since it followed Kit-Kat's launch. Obstensibly, the Perk was a logical step into an evolving market which synergized with the Company's revitalised expansion strategy. And trend of snacking


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products has acted as a spur. For Cadbury's launch, said their Vice President (Sales), was an effort to build-up its repertoire of brands and, thereby, get into the evoked set (preferred set) of brands-CDM, Kit-Kat, Perk and Five Star.

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After going through this case, you will be able to :

• find a U.S. bio-fertilizers firm sets-up subsidiary in India,

. recognise the poor test-marketing results.

• analyse causes of resistance to bio-fertilizers by farmers.

Green Belt Inc. is an American firm engaged in the manufacture and marketing of environment-friendly bio-fertilizers. Recently, this firm set up an Indian subsidiary, by the name, Green Belt (I) Ltd. Its test-marketing has thrown up poor results. The company realizes that inspite of the general awareness about the hazards of chemical fertilizers; the farmers still prefer to use them. This is due to three reasons:

a) Subsidy/Loan is available for the purchase of chemical fertilizers.

b) The chemical fertilizers are believed to give a guaranteed increase in the crop yield.

c) Environment friendly bio-fertilizers are believed to be slow in action and not likely toboost the crop yield.

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Case No. 89KLEAM


After going through this case, you will be able to :

t find ABC's quality toothpaste commanding the market.

• recognise grocers' demand for two brands for display

• explain companies complying with this demand, failed.

• analyse complications for ABC : infrastructure for second line product.

• underline high sales promotion expenditure.

The products of ABC Company included toothpaste, toothbrush and toothpowder under the brand name "KLEAM". From modest beginning, the Company expanded several folds in three years time and was regarded by all the grocery stores in its area as the leading producer of high quality toothpaste. In due course, it was discovered that most grocery stores wanted to display two brands of toothpaste on their racks. The company was not quite sure whether this was to spread business, to give customer a choice or for other reasons and it had seen marginal operations of certain companies go out of business to fulfill the grocers' desire for a second brand. These companies failed because they seemed unable to produce toothpaste of the same uniform high quality as ABC Company.

As a result of the demand of the grocers for a second brand, the ABC company was considering the manufacture of a second line of toothpaste, similar in all ways, to the first in quality, price and packaging-except that it would carry a different brand lable

If the company decided to engage in the manufacture of a separate line, it would be necessary to consider the advailability of having a separate fleet of trucks and a separate set of books, in fact, almost a separate and distinct marketing operation. While the Company was keen to expand its total volume of business, it was apprehensive that it might end up


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with two weak brands, instead of one strong one. It also it feared that the promotion of two brands might be unduly expensive.

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After going through this case, you will be able to :

• find Ad and SP war between beverage giants : sparks off controversy

• identify Pepsi-sponsored TV Commercial : a bone of contention

• underline Brazilian Ad Council's verdict: rejecting Cola plea

t analyse Clip's sequence of shots, its humour appeal.

Rio-de-Janeiro, Feb 5: To Pepsi, a new television commercial campaign seemed a little more than a case of playful monkey business.

But to Coca-Cola, the commercial was offensive to Brazilians, especially to Coke drinkers.

After a bitter legal dispute, however, the commercial depicting two chimpanzees sipping the rival soft drinks will continue to air.

Brazil's Advertising Regulations Council voted 8-3 on Friday to reject a request by Coca-Cola to suspend the ad.

The decision signalled "the triumph of a good sense of humour" said Attorney Saulo Ramos, a former Justice Minister who represented Pepsi.

The clip, telecast since the last three weeks, has become a national conversation piece.

The commercial shows two chimpanzees, one drinking Pepsi and other sipping a Coke.

The animals are taken to a laboratory to determine the results of Pepsi and Coke on them.


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The Chimpanzee who drinks Coca-Cola is then shown in diapers hammering differently shaped moulds into holes. The results are not bad for a chimp, but do not compare to his Pepsi-guzzling counterpart.

The Pepsi drinker is shown wearing stylish clothes and a hat driving along the Rio beachfront trying to meet bikini-clad women. The chimp then giggles widely with a car full of human friends.

Coca-cola claimed that the ad showed 'Prejudice against Coke drinkers' by comparing them with monkeys. Pepsi countered that Coke's own ads showed elephants and polar bears guzzling the soft drink.

Coke attorney Harry Thomas Tate said the decision was unfair and rewarded aggressive advertising. He said the company had not decided whether to appeal.

Coca-Cola sales are 50% of the growing and lucrative Brazilian soft drink market, but Pepsi has made gains with slick advertising in the last two years. Pepsi is third in the country with a 8.5 percent share.

Pepsi paid to have two giant nine-meter-high inflatable dolls, a chimpanzee talking on a cellular phone and a Pepsi can placed outside Coke's headquarters on Friday.

Pepsi may not be laughing for long, however. Brazilian soft drink manufacturer Antarctica the country's number two bottle has already prepared a new ad with a chimpanzee wearing the same clothing as the Pepsi drinker.

In this ad, the chimp is introduced to "guarana" a soft-drink made from the Amazon "guarana" Berry and says it's the best taste ever. He throws away his Pepsi.

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After going through this case, you will be able to :

• find NGO Fund Raising Trust: rendering yeoman's services to VSSO.

• recognise its focus on ensuring VSSO concentration on cause of their interest.

• assess Trust's plans to widen network of doners.

• underline its decision to appoint Ad/Publicity Expert to increase donations inflow.

• analyse campaign plans, budget and target audience.

Services Unlimited is an NGO (Non-Governmental Organisation) registered under the Charity Commissioner as a trust. It is a national fund raising trust established in 1971. Its basic purpose is to raise funds and provide them to the Voluntary Social Services Organisations working in India. In 1994, Services unlimited had received Rs.30 lakhs by way of donations and allocated them to 125 organisations. Its general policy was to give funds to each organisation in the range of Rs. 10000 - Rs.20000 per year. There was no restriction regarding the number of years an organisation to receive its help. In fact, till 1994, one organisation had received this type of funding continuously for the 15th year. However, they are subject to rigorous monitoring. There are no restrictions as far as 'acceptance' of funds are concerned. Some donors donated money to 'Services Unlimited' without any conditions, whereas some stipulated that the money should be given to a type of organisation operated by women/ disabled persons, etc.

Services Unlimited's chief purpose is to ensure that voluntary social service organisations should spend their time in serving the cause of their interest rather than fund raising. Its trustees were aware that the upper limit of donations, viz., Rs.20000 per year was not enough to many organisations. But its problem was to decide between helping more

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organisations with smaller funds and helping smaller number of organisations with more funds. Till recently, the trustees had not tried to receive more funds for donations in a professional manner. Nearly, 70% of its donors were individuals contributing above 1/3rd of its collections. The rest of them were companies and other institutions. Most of these donors were known to the trustees, personally.

Recently, the trustees decide to make systematic effort of raising its donations particularly from the corporate sector and other individuals spread all over the country. The trustees felt that because of their good work of the past 22-23 years, they must have developed a good reputation by the word of mouth. They also believed that the voluntary organisations which were receiving funds from Services Unlimited would also help them in generating more funds. Such organisations were numbering over 300, spread all over India.

As a result of this, they recently appointed one Ms. Sharma as Advertising/ Publicity Manager. Ms. Sharma had an experience of working in advertising industry for over 10 years.

Soon after joining, Ms. Sharma realised that the trustees had no idea, whatsoever, about how advertising works. They were of the opinion that a good advertising would result in receiving more donations.

They had not thought of advertising and publicity budgets or had no time-bound plans.

Ms. Sharma, therefore, realised that her immediate task was to formulate a campaign plan and a campaign budget and present it to the trustees for their approval.

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Case No. 92



After going through this case, you will be able to :

• recognise the flagship advertising strategy of brand owners.

• recognise, the change in ad strategy to suit the wide range of products in India

• underline the flagship approach modified for a piggyback support to Leather ShavingCream

• analyse the ad media

• assess how to make the best use of limited funds with the most creative campaigns

"Old Spice" is the oldest men fragrance range in the world. It is also the world's largest selling brand of after-shave-lotion (ASL). In the Indian market, too, it has established itself firmly in the No. 1 position. Shulton follows a global brand strategy and also adopts a flagship approach to advertising. It promotes the mother brand, while the other products of the company ride piggyback on its equity. This umbrella approach is probably more successful in the West, where marketing and distribution is done through department stores.

Colfax Laboratories (I) Ltd., has since the 60's, marketed a men's toiletry range : after shave lotion lather shaving cream, body talc, hair cream and shampoo Colfax kept to the international strategy of using after shave lotion (ASL) to boost the range in India. However, such a heavy reliance on a single alcohol-based product was extremely risky. Alcohol supplies can be very erratic. The company, therefore, decided in 1987 that it was imperative to promote other products and reduce its reliance on ASL.

Keeping in mind the budgetary and profitability constraints that plague the toiletries market, it was decided to promote lather shaving cream (LSC) as the next step towards the men's


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toiletries market. The decision was made easy because LSC is a complimentary product. As for its advertising impact, the key elements of the advertising strategy followed by Old Spice were :

Historically, since budgets had been inadequate to run multiple product campaigns, an umbrella campaign for Old Spice focusing on ASL was run. In terms of creative umbrella, the international 'Surfer' and 'Lovely Day' commercials incorporating the range pack shot were used. This advertising gave a fillip to ASL sales with a marginal impact on other products.

Due to the limited budget, the advertising was concentrated in a approximately 40 select towns which contributed over 70 percent of the then sales. T.V was the primary medium. Press was used to announce the launch of a new variant or for tactical purposes, for example, the 50ml pack and the atomizer.

As the saying goes, the proof of the pudding is in the eating. In the case of Old Spice LSC, the results were impressive. Both the volumes and value recorded excellent growth. Because of the success, retail margins could be brought down after the launch. The commercial also got kudos from "Shulton", owners of the brand name worldwide. In fact, the commercial is being used by Shulton in international markets. The Adworld survey rated the Old Spice shaving cream commercial among the 15 most liked ads (unaided). Old Spice lather shaving cream continues to grow.

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After going through this case, you will be able to :

• examine and demonstrate how consumer industry instraction is always a two wayprocess.

• evaluate the consumer behaviour pattern with regard to compulsive and stereotypedadvertisement techniques.

• reason out change in consumer perception regarding the same.

Philips Electronics was in the midst of a $600 million global effort to transform its image from a light bulb maker into a customer-centric consumer products company last year when customer feedback uncovered a useful nugget of information. The best advertising gambit, the research led them to conclude, would be for the brand to remove a chunk of its advertising from consumers' lives. The result: Philips decided to buy ad space and let the network or magazine fill it themselves with "real" content.

The company started when it bought all the ad pages before the table of contents in issues of Time, People, Fortune and Business 2.0, and had no intention of putting advertisements there. The result was that its visibility moved up from the hinterland to the magazines' third pages, where readers could easily find them, and the magazines added editorial content. Towards the back of the publications, a Philips' ad told readers what the company had done and why : to help simplify their lives by giving them less advertising with which to deal.

By the end of 2006, Philips was buying 4.5 minutes of ad time on NBC's Nightly News and giving three of those minutes back to programming. The idea of giving back was a natural extension of the company's tagline, "Sense and simplicity". While the notion of "less is more" is hardly a new one—the trend most recently resurfaced back in 2000,


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encapsulated in the launch of Real Simple magazine—this time around it's the marketing that's being trimmed down.

Along with Philips, companies as varied as Staples, Fidelity, Apple and AT&T all have marketing strategies that consumer anthropologist Robbie Blinkoff, managing director of Context-Based Research Group in Baltimore, dubs "simplexity". He notes that consumers, overwhelmed by a large and fractured media marketplace, "don't see a road map. They want their products and services to be varied, sophisticated and smart, but they want them presented in a clear, straightforward way that hides all the complexity. They're looking to (marketers) to uncomplicate their offerings".

This new form of simple is now popping up in such high-profile campaigns as Staple's "Easy button" and Apple's "Mac vs. PC." Last November, Fidelity and Boston-based Arnold simplified the company's message in humorous print, TV and online ads that show investing one's money can be as simple as answering a few questions and hanging a picture.

Claire Huang, Fidelity's Vice President of marketing, says financial services seem so complicated to most people that they get stuck in inertia. "So instead of talking about our bells and whistles like other financial brands," she says, "we tell people that if you like easy things, you might like this plan."

As part of AT&T's image campaign discussing its merger with Cingular, which broke late last year, GSD&M promoted the ease of the company's multipronged business model with an ad that shows people hanging out in a coffeehouse with their favourite electronic gadgets. In the spot that broke last month, "Giants" the voiceover talks about communications companies making business plans "while back on planet earth people were simply communicating." The idea, says Jeff Nixon, a cd at GSD&M, was inspired by watching people figure out on their own how to make their communication devices work together.

One of the largest electronics companies in the world, Dutch-owned Philips—the only prominent brand to literally give back ad time—made a shift to simplicity in 2002, when it began to market itself as a mass-market consumer, not technology, brand. The company conducted focus groups with 2,000 people in eight countries and found, according to Eric Plaskonos, Philips' U.S. brand director, that they "were fascinated about new technology and what it could do, but the barrier was that marketers were over-featuring the products and over promising the benefits."

The company received clear marching orders from its global target of affluent 35-55 year-

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olds: Innovative products should be easy to use. As one participant puts it, "I don't want to build a car, I just want to drive it."

Research culminated in 2004 with the launch of "Sense and simplicity," a global branding effort by DDE, New York. The positioning was introduced with TV and magazine ads showing a baby on a white background holding a white box and the headline, "Simplicity should be as simple as the box it comes in ". A subhead invited consumers to "Join us on our journey."

"We were writing a mantra for the marketing, about 30 lines to guide us in the tone and feeling we wanted for the ads," explains Lee Garfinkel, chief creative officer of DDE, New York, who co-wrote the tag with John Russo. "The phrase that kept coining up was that the bland was about the sensibility of making things simple. We realised the tag was staring us right in the face. How is something simple? When it makes perfect sense."

The campaign has featured clean graphics, plain language and a minimal look for TV, print and the Web site. In the U.S., where the company's ad budget hovers at about $150-160 million, most of the marketing has migrated from general branding to product ads connecting the simplicity theme with its better known sub-brands. Last year, the company ran TV, print and online campaigns in the U.S. for state-of-the-art Philips Norelco shavers, Sonicare electric toothbrushes, flat-screen TVs and energy-efficient lightbulbs, and for all its consumer products in a holiday effort with called, "The gift of simplicity."

Ongoing customer research informed the company that everyone wants to be able to comfortably use even the most advanced equipment, and that increasingly time-harried customers value every second in each day, says Plaskonos which is why the 30-second spot "Glacier" for instance, promotes the company's light bulbs and so, energy reduction, in simple terms. It opens with striking footage of melting Arctic glaciers, references to global warming and a baby on an ice floe. The ad ends with the voiceover, "Simplicity is a light bulb that can help change the world".

The company took this to another level in the U.S. last summer via its afore mentioned media buying strategy. According to Catherine East, DDB's regional account director, Philips bought ad space and gave some or all of it back to the content provider with the goal being to "give people their desired experience and get the obstacles out of the way". The company ran a branded announcement of the advertising reduction, explained how it was designed to simplify the audience's experience, and asked consumers to go to its Web site to give feedback.


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The media program included: buying eight minutes of ad space on 60 Minutes and giving back half of that for programming; the 4.5 minutes of ad inventory with three minutes back on the Nightly News and buying and giving back the entire 30-minute ad inventory for a TNT broadcast of the regular season football game between the University of Texas and Oklahoma State University.

The Nightly News effort prompted about 5,000 e-mail messages through the NBC site, plus more than 100 people scoured the Web for the online addresses of Philips executives to send messages of support, says Plaskonos. "The most passionate responses came from University of Texas football fans—particularly former band members—who really appreciated an uninterrupted game" he says. Feedback from the anti-clutter promotions, he adds, has been so positive that the company will continue the program starting in March.

Critics say that Philips' marketing still has a way to go to tap the emotions behind the yearning for simplicity. "The Philips campaign strives to make an emotional connection, but falls flat" says Jeffrey B. Hirsch, President of Right Brain Studio, a consumer research agency in Studio City, Calif. "It's all logic. The strategic thinking is sound, but the ads read like a creative brief, not consumer communications. I want more than an 'efficient shave.' I want to feel free, exhilarated, secure, comforted, empowered, full of potential, or any other number of uplifting emotions".

The work will evolve, says DDB's Garfinkel. "We sometimes had to force ourselves to think simply. Agencies can complicate things". Overall, results from its effort are promising. In the 2006 annual Interbrand global brand study, Philips registered a 14 percent increase in the value of its brand to $6.73 billion, and jumped five places in the rankings, to No. 48. Global sales were up 6 percent in 2006 compared to 2005. In January, Philips CEO Gerard Kleisterlee promised to "deepen and extend commitment to our 'Sense and simplicity' brand promise".

Simplicity for Philips has evolved into a defining philosophy, of which marketing is only one phase. "It defines the way we go to market and the way that we do business" says Plaskonos. In addition to simplifying its communications, the company also simplified its products and its working procedures. For example, user product manuals have gone through a rigorous streamlining for ease of operation, say sources.

The company has also learned that "simplicity is an intricate process and it's not easy to stay on track" says Plaskonos. Take the much ballyhooed International Consumer Electronics Show in Las Vegas in January. "It's a celebration of technical benefits, an exhilarating, overwhelming sensory experience" he says. "But afterward, we have to get

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back to basics, get away from the 'wow' and focus on how we make life easier for consumers".

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Case No. 94



After going through this case, you will be able to :

• identify the steps for the development of a new product in the market

• explain the significance of packaging for a new product

Himalaya Soaps Ltd. - a Government of India undertaking, has its registered office and factory in New Delhi. It specialises in producing herbal products which include herbal oil, herbal soaps and other herbal cosmetics. Though Himalaya is well known for its long standing tradition of maintaining good quality standards, the shampoo that it wants to launch is for mass target audience.

The shampoo will have some basic features like Anti Dandruff and strong roots for long and silky hair.

Apart from this, the new strategy would be that it would act as a conditioner for damaged hair (to avoid dryness of hair) and also will avoid knots in the hair. Therefore, only one shampoo can be used for all these problems.

In the current market, customers are to use 2 to 3 different products for one problem of damaged hair while with this product the customers would have an advantage of getting the solutions to all these problems in one product in the form of Himalaya Shampoo.

Also Himalaya intends to use the Penetration pricing strategy as the target audience are the Mass audience.Price being a major tool as a motivator for buying of any product ,if priced low, Himalaya would definitely get better results in the Introduction stage and can expect good market standing in the long run.


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The shampoos existing in the market can be divided into three segments:

Class Brand Names

Rich/ High Class Target Audience: Gamier, Ultra Doux

Middle Class Target Audience: Head and Shoulders, Clinic Plus, Sunsilk, Himalaya,

Anti Dandruff Shampoos.

Lower / Mass Target Audience: Rejoice, Silk & Shine, Velvet

Reasons for going for low priced shampoo for mass target audience:

Since Himalaya is an established name in the market, serving the Middle Class level target audience, in future it wants to launch shampoo for its rich class target audience. But, before that it wants to try out a different segment i.e. the Mass / Lower class target audience by adopting the penetrating pricing strategy.

The features would be :

Good odour

Different colours

Attractive Packaging

Enriched with moisturiser

Enriched with conditioner

Makes knot free hair

The advertising agency has adopted a campaign which says:

New entrant in the Herbal field. A unique shampoo.

The ad agency airs the ads on radio after prime programs and on hoardings. This time they plan to go for Mass communication on TV and Magazines.After two months of launching of the product a survey revealed that Himalaya was not performing according to the expectations in the market and the sales went down drastically.

The colour combinations were not appreciated and the size of the bottle of the product was too big. It was suggested to modify the colours and packaging.

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After going through this case, you will be able to:

• explain why it is important to go for Brand Extension in the Product to Avoid MarketSaturation.

• justify saying that Maggi had Already used Several Tools of Promotion of the Productbut Still Failed to be a Market Leader for Longer Time.

'The King of Noodles at Home"

An important product of the Nestles was launched in the market. It was launched for the first time in the market in 1980. This then ruled the market and was called the market leader for several years till the competitors started entering the market. After facing market challenges from the competitors, Maggi decided to relaunch itself with product expansion strategy in 1997. It came up with new Maggi with different flavours and this change was not adjustable to the target audience and Maggi's sales went down drastically. Many retailers stopped maintaining the product in their shops.

Even after enjoying and ruling the market for more than 15 years, Maggi had a tough time in the market. Its target audience in the beginning were kids. To expand more it began extensive sales promotion like offering gifts in return of empty wrapper. This strategy helped in improving the sale of Maggi. This was followed by other promotional schemes. Some of these included advertisement of Maggi during and between Kids Show.

The punch line 'Fast to cook, Good to eat' became a part of Indian advertising. This improved the sales of Maggi and observed a growth of 15% during that period. By January 1994, the price of Maggi noodles was brought down from Rs. 7 to Rs. 5. for a 100 gm packet of Maggi.

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In 2001, Magi was able to sustain its leadership position by introducing 50 gm packs with two new flavours, tomato and curry.

Ultimately Nestle, tried to extend the brand in various categories and failed many times. Maggi did rule the market in the earlier phases only because of the reason that it adopted an innovative strategy in the food market. Maggi could have existed in the market in the growth stage for a longer period had it adopted the new expansion strategies in the same product.

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After going through this case, you will be able to:

• select appropriate channels of sales promotion

• explain the procedure for understanding the consumer perception

Mr. Shah is the Product Manager for Unilever Co. Mr. Shah has experience in the similar field of three years. He has to submit his marketing plan to his boss.

His marketing plan comprises:

1) The review of brand's performance of the previous year. SWOT analysis of thebrand.

2) The focus on innovative marketing strategies for the coming year.

3) Formulate primary and secondary objectives of the product.

4) Preparing / Allocation of funds for advertising of the product for the coming year.

Deodorant Bar Segment : sales figures

10000 units (1999)

9899 units (2000)

9000 units (2001)

Beauty Bar Segment: sales figures

13000 units (1999)

1422 units (2000)

1528 units (2001)

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1) The underdevelopment of the deodorant bar segment with an over development ofthe beauty bar segment. This was due to the cultural factors and the people weremore interested in cleansing and skin protection and enhancing the complexion whichaccording to the consumers was possible by using the Beauty Bar Soap and not theDeodorant Bar Soap. Deodorant Bar soap was according to them meant for cleansing,Deodarising etc. Therefore, the ratio of sales of Beauty Bar segment were higher.This implies that the consumer's perception was not clear about the Product- DeodrantBar Soap.

2) Mr. Shah's brand is a deodorant bar. To understand the market standing, Mr. Shahused a consumer attitude research. According to this, the brand awareness of thedeodorant bar segment was less. Customers could not draw a line of discretionbetween both the Bar soaps and the purpose of each in the Market. Also expenditureon advertising was less. Sales promotion was one aspect which was totally overlookedhere.Promotion of the Deodorant bar in small packs could have increased theawareness and also could have helped to boost the sales.This was not done.

Features of deodorant bar segment after the survey

1) Deodorant fragrance - of higher level

2) Highly priced

3) No proper advertising / communication

4) No repeat customers / No brand loyalty

Features of Beauty bar segment after the survey

1) Cleanliness enhancing fairness

2) Moisturising

3) Proper channel of advertising

4) Satisfied customers because of special offers, coupons, etc.

One more important aspect was the mismanagement of funds in the deodorant bar segment. Sales Promotion was done by the local newspapers and was on radio and some hoardings for a few days which could not capture the target audience.Therefore, first priority would go to fund allocation, sales promotion and advertising in the coming year. Also these activities would go region by region.

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After going through this case, you will be able to :

• recognise Chinese domination in of business and banking

• identify causes for concentration of Micronesians in labour and agriculture sectors

• underline social, economic and ethnic imbalances arising out of the employmentscenario

• assess the rise and implications of ''PR Problem'' situation for AWWC

An American World Wide Corporation has decided to expand aggressively in Asia. It plans to source much of its raw material and subcontracting there and manufacture and market throughout Asia, from Japan in the north to New Zealand in the south.

You were appointed to organise and direct this major new effort and one question was where to locate the regional headquareters for the Asian Division (ADR). After considerable study, you selected the island nation of Luau.

Luau's advantages are several. It is about equidistant between New Zeland and Japan. It was a British colony, so the main language is English. It has a relatively efficient telephone and telegraph system and good air service to all the major Asian destinations in which you are interested and to the United States, as well.

Not least important, the Luau government is delighted to have your company locate and invest there. It has made very attractive tax concessions to the company and to its personnel who will move there.

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The company moves in, leases one large building and puts out invitations to bid on the construction of a large building which will be its permanent headquarters. Now as you begin to work much more with the private banking and business people of luau and less with government officials, you begin to be more aware of luau characteristics about which you had not thought much previously. Almost all of the middle and upper management personnel in the business and finance sector are of Chinese extraction. The native population of luau, which is the great majority, is a Micronesion race.

On enquiry why the Chinese are dominant in banking and business; while the Micronesians stay with farming, fishing, government and manual labour, you are told that this is the way it developed historically. The Chinese enjoy and are good at banking and business; while the native Luauans do not like those activities and have stayed with their traditional pastimes. The two groups buy and sell from and to each other, but there are almost no social relations and very little business or professional overlap between the groups. Occasionally, some of the Micronesians study abroad and some work abroad for periods; when they return they frequently go to work in a bank or business or take a government position.

You must staff your headquarters with middle and lower management people and with clerical help. You find that the only applicants for the jobs are Chinese, and you select the best available. They are quite satisfactory, and the operation gets off to a good start.

Then as the months pass, you notice a gradual change of attitude towards you and the company among the government officials and among the people in general. They have become less friendly, more evasive, and less co-operative. You ask your Chinese staff about it, but they have noticed nothing unusual.

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After going through this case, you will be able to

• state a fanatic's views on tobacco consumption by the youth

• recognise his influence in favour of ayurvedic herbal cigarettes

• identify consumer suspicion about the reduction of nicotine content in conventionalcigarettes

You have been appointed as Marketing Advisor to the Marketing Director of a large company, which manufacturing cigarettes. The young son of the company's chairman is a fitness fanatic. He believes that tobacco consumption is bad for the youth. The company has, therefore, launched a non-tobacco ayurvedic herbal cigarette. Somehow, the sales of these cigarettes are not picking up. On the other hand, the traditional loyal customers are now thinking that the company has been slowly reducing the nicotine contents in all it's brands. As a result, the sales of conventional cigarettes have also shown a setback.

The Marketing Director does not want the sales to decline in this way. He is also scared of the Chairman's son, as he is emerging as a strong force in the company. Besides, the chairman has recently said that, 'by launching a non-tobacco cigarette, the company is doing a great service to the society.'

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After going through this case, you will be able to :

• identify Musky's raw materials

• underline the wild life preservation measures against the killing of musk-deers in Nepal

• analyse ethical issues involved in the firm's future strategies

'Nature Beauty Products' has been a medium sized business, manufacturing and selling herbal cosmetics and perfumes. Their top-selling perfume 'Musky' has been a favourite among the nation-wide clientele. Its raw material is an organic extract from musk-deers in Nepal. After a recent regulation enforced in Nepal, the trapping and killing of musk-deers has been restricted. This has pushed up the raw material price by 50 %.

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Case No. 100MR. SATISH


After going through this case, you will be able to :

• negotiate a major deal

• underline corrupt Chairman' s powers: as the final authority

• recognise the various ethical issues at state

Satish is a government contractor. His firm enjoys a good reputation for the quality of his work.

A big contract is at the negotiations stage. This is important for Satish, as it will improve his prestige and will also fetch him good money.

The negotiations will be taking place with the Technical Committee. However, it is the Chairman of the Technical Committee who will have the last word in finalising the contract.

Satish knows that this Chairman has a reputation for giving contracts only on receiving kickbacks. Satish also knows that the contract has almost gone to his competitor.

Satish is ready to appease the Chairman to a certain extent but not to the extent of the kickbacks offered by his competitor.

As one last ditch attempt, Satish has asked for a personal interview with the Chairman at his residence and the Chairman has been kind enough to grant the interview.

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After going through this case, you will be able to :

• find a proposal for the ban on the display of moving sign-boards, advertising productsand services

• underline the controversy revolving round this ad medium

• analyse the plea of the sign companies against the ban

• explain the ethical issues put forth by the Chamber of Commerce members

An urgent board meeting of the Chamber of Commerce was called to discuss the proposed new legislation, controlling the display of flashing, rotating and moving signs. This legislation aimed at governing the proliferation of signs. The President of the Chamber of Commerce, Shri Niranjan Kapadia in his address to the board observed that the signs, particularly flashing and rotating signs, had become too numerous and offensive to the community. There were many consumer complaints and protests as also public hearings. In some other cities, sign control laws had been adopted much earlier overlooking the objections of many local and national companies. The law usually allowed four years to the sign-owners to comply with the provisions and almost every type of sign was covered.

One member of the board who was also the Chief Executive of the National Metal Works Ltd., Shri Nitin Shah, reported that his company had stopped using outdoor signs about three years back and diverted the cost of such advertising to underwriting the costs of a series of musical concerts. He believed that business must be concerned with the quality of life in the community in which it operates. It must practice good ethics and operate in the manner that would benefit the community.

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The local sign companies were criticizing the proposed legislation and wanted it to be more lenient by providing for exemptions through a review board. The main objection by the sign companies was that their business would be adversely affected as a result of such a law. They would be compelled to increase the cost of other forms of advertising service to make up for income. This they would like to avoid as the economy was already inflation-ridden. One argument was that the proposed law would be unconstitutional and would be in violation of free enterprise and trade.

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After going through this case, you will be able to :

• examine this case study and investigate the reasons for the success of this enterprise.

t note various factors, individual actors, institutional framework, leadership strategies, marketing innovation and socio-economic contexts that shaped its fortune.

• analyse the feasibility of its replication in the contemporary period.

The Story of AMUL

Amul is the largest co-operative movement in India with 2.2 million milk producers organised in 10,552 co-operative societies in 2003-2004. The country's largest food company, Amul, is the market leader in butter, whole milk, cheese, ice cream, dairy whitener, condensed milk, saturated fats and long life milk. Amul follows a unique business model, which aims at providing 'value for money' products to its consumers, while protecting the interests of the milk-producing farmers who are its suppliers as well as its owners. Despite being a farmers' co-operative, Amul has given multinationals a run for their money.

The Kaira District Cooperative Milk Producers' Union Limited was established on December 14, 1946 as a response to the exploitation of marginal milk producers in the city of Anand (in the Kaira district of the western state of Gujarat in India) by traders or agents of existing dairies. Producers had to travel long distances to deliver milk to the only dairy, the Poison Dairy in Anand - often milk went sour, especially in the summer season, as producers had to physically carry milk in individual containers. These agents decided the prices and the off-take from the farmers by the season. Milk is a commodity that has to be collected twice a day from each cattle. In winter, the producer was either left with surplus unsold milk or had to sell it at very low prices. Moreover, the government at that

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time had given monopoly rights to Poison Dairy (around that time Poison was the most well known butter brand in the country) to collect milk from Anand and supply to Bombay city in turn (about 400 kilometers away). India ranked nowhere amongst milk producing countries in the world in 1946.

The producers of Kaira district took advice of the nationalist leaders, Sardar Vallabhbhai Patel and Morarji. They urged the farmers to form a cooperative and supply directly to the Bombay Milk Scheme instead of selling it to Poison (who did the same but gave low prices to the producers). Thus the Kaira District Cooperative was established to collect and process milk in the district of Kaira. Milk collection was also decentralised, as most producers were marginal farmers who would deliver 1-2 litres of milk per day. Village level cooperatives were established to organise the marginal milk producers in each of these villages. The first modern dairy of the Kaira Union was established at Anand (which popularly came to be known as AMUL dairy after its brand name). The new plant had the capacity to pasteurise 300,000 pounds of milk per day, manufacture 10,000 pounds of butter per day, 12,500 pounds of milk powder per day and 1,200 pounds of casein per day. Indigenous R&D and technology development at the Cooperative had led to the successful production of skimmed milk powder from buffalo milk - for the first time on a commercial scale anywhere in the world. The foundations of a modem dairy industry in India had just been laid as India had one of the largest buffalo populations in the world.

We move to year 2000. The dairy industry in India and particularly in the State of Gujarat looks very different. India has emerged as the largest milk producing country in the world. Gujarat emerges as the most successful state in terms of milk and milk product production through its cooperative dairy movement. The Kaira District Cooperative Milk Producers' Union Limited, Anand becomes the focal point of dairy development in the entire region and AMUL emerges as one of the most recognised brands in India, ahead of many international brands.

Starting with a single shared plant at Anand and two village cooperative societies for milk procurement, the dairy cooperative movement in the State of Gujarat had evolved into a network of2.12 million milk producers (called farmers) who are organised in 10,411 milk collection independent cooperatives (called Village Societies). These Village Societies, henceforth called (VS) supplymilk to thirteen, independent dairy cooperatives (called Unions). AMUL is one such Union. Milk and milk products from these Unions are marketed by a common marketing organisation (called Federation). GCMMF has 42 regional distribution centers in India, serves over 500,000 retail outlets and exports to more than 15 countries.

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Interestingly, the Gujarat movement spread all over India and a similar structure was replicated (all are at different levels of achievement but their trajectory appears to be quite similar). Two national organisations, the National Dairy Development Board (NDDB) and the National Co-operative Dairy Federation of India (NCDFI) were established to coordinate the dairy activities through cooperatives in all the states of the country. The former provides financing for development while the latter manages a national milk grid and coordinates the deficit and surplus milk and milk powder across the states of India. In the early nineties, AMUL was asked by the Government of Sri Lanka to establish a dairy on similar lines in Sri Lanka. Interestingly, while Poison folded up sometime in 1960s, the cooperatives are faced with new competition in liberalised India - from multi-national corporations (MNCs) that brought in new and improved product portfolio, international network and immense financial support. The Cooperatives face new challenges that test the robustness of their approach and their commitment to the movement and a new style of management thinking. Today AMUL is a symbol of many things. Of a promise to member farmers who are assured a guaranteed purchase of all the milk that they produce at pre-determined prices. Of high-quality products sold at reasonable prices to consumers. Of developing and coordinating a vast co-operative network. Of making a strong business proposition out of serving a large number of small and marginal suppliers. Of the triumph of indigenous technology. Of the marketing savvy of a farmers' organisation.

Cooperatives and the Global Dairy Industry

Traditionally, cooperatives have been established to serve the needs of its members in order to maximise their returns. Governments have usually seen these organisations as effective mechanisms for delivering their own programmes (for example, sectoral development or poverty reduction, etc.). Researchers have looked at cooperatives as channels for re-distributing wealth, improving the opportunities for the weaker sections of the society, alternative institutions for property ownership, efforts in democratic and participative governance of organisations etc. In that, the cooperatives have often sought protection of sorts from uncertainties in the market place. Globally, modern day cooperatives are an agglomeration of many such small groupings that serve some of the above objectives but have now moved from being protected entities to becoming market driven. This makes such cooperatives an interesting organisational alternative to traditional business enterprises (i.e., investor owned firms) in terms of concern for shareholders, distributional effectiveness and the ability to provide product/service variety.

In emerging economies, cooperatives have been used as institutions to organise marginal producers, thereby providing scale effects to a network of such producers. Sometimes, it

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is the government that organises these marginal producers and may also manage the collective (as in various cooperatives in the former Soviet Union and Africa). On other occasions, producers themselves come together to produce and distribute their own products (as in the case of AMUL, the majority of cooperatives in North America etc.). While control and subsidies from the government distort the performance of the former, producer-driven cooperatives have to develop systems and processes that respond to market requirements and be competitive. In that, the determinants of success for this kind of cooperatives are no different from those of other commercial organisations. Moreover, they recognise that in order to optimise the objective function of the marginal producers, they have to serve the market very effectively.

Cooperatives are, however, different from other commercial organisations in one respect - they are bound to serve the suppliers (i.e., the producers of goods and services who happen to be the members of the cooperatives) in good and bad times. In that, they present an interesting model to other commercial organisations on strategic management of resources and their conservation. Globally, cooperatives have played the role of preventing market failures for small producers especially in the dairy industry. Traditionally, a large number of these cooperatives have had small membership and produced predominantly raw products (i.e., fluid milk) or products with some value addition (i.e., dry powder, butter etc.). This situation has been changing dramatically in the last decade and especially in the last three years. There has been a spate of mergers all around the world to create fewer but larger dairy cooperatives. In many cases, these cooperatives look very different from the merged entities. Cooperative dairies that operate with small membership have retained a certain focus (i.e., geographical or product related) in their offerings. There have been several factors driving the restructuring of the dairy business (which has chiefly been organised around cooperative principles).

These include efficiencies in managing fewer large plants versus a number of under-utilised small plants, need for more milk supply (and declining membership), need to offer wide variety, improvements in trucking and milk handling, thereby facilitating long hauls, opening of new international markets (also markets for new products), seeking marketing clout and need to bring investment from outside the cooperatives. In USA, for instance, there were 592 cooperatives (with a membership of 281,065 producers) that marketed milk to plants and handlers in 1973. This number was reduced to 226 (with 87,938 members) in 1997. However, the share of milk delivered by the cooperatives increased by 9 percent during this period though the share of dairy sales of small cooperatives reduced from 43.8 percent in 1975 to about 30 per cent in 1998. The two largest dairy cooperatives in the US, the Dairy Farmers of America and Land O'Lakes had annual sales of US$ 7.9 and 5.1 billion respectively. Dairy Farmers of America was formed by the merger of four large

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cooperatives in the US in 1998. It consists of 25,499 members across 45 states of USA. Consolidation in cooperatives during the last five years was also in anticipation of (and in reaction to) the consolidated Federal Milk Marketing Order of 2000 which removed geographical anomalies in minimum support prices for dairy products and hence reduced the need to locate spatially distributed processing centers to take advantage of varying prices. It helped dairy cooperatives to forge alliances with firms in various regions.

European (and especially Scandinavian) dairy cooperatives have also seen tremendous consolidation. Danish cooperatives, mostly producers' cooperatives, have often faced difficulties in raising capital internally for investment (though government support has been quite strong on this count) and have been re-structuring since the mid-70s. Dairy coops in Denmark have reduced to 45 units in 2002 from 1500 in 1930s with one large dairy processing 90 per cent of the available milk. The Danish Dairy Board, however, invests in R&D, allots quota for milk supply to individual farms, regulates prices and quality, and supports the efforts of the cooperatives in international markets. It believes that its competition is from the dairies outside Denmark. Similar has been the experience of dairy fanners in other parts of Europe with a higher involvement of government in reshaping the structure of the industry. Many Irish cooperatives have, however, converted to non-cooperative forms (Hamm, 2001). Outside Europe and USA, the experience of dairy cooperatives in New Zealand is instructive. The New Zealand Dairy Board (NZDB) zealously guards the structure of the industry, which had an annual worldwide sale of NZ$3.5 billion in 1996.

Dairy cooperatives collect milk from individual farmers and sell processed products in the domestic markets and to the NZDB for exports. Scholars argue that this structure looks more like strategic partnership between producers and the board (the global marketing arm) with the latter providing capital for growth and innovation. Interestingly, the form that a producing organisation should take and the relationship that it should have with its marketing has been the center of debate in managing dairy cooperatives. AMUL in India has learnt from many of these experiences and has been influenced by practices in dairies around the world especially in its formative years. It has, however, formed it own organisational structure (i.e., AMUL is a cooperative of village cooperatives) to bring about a change in the lives of the marginal farmers of India.

The AMUL experience has attracted considerable interest from the development community-predominantly anthropologists, development agriculture economists and political scientists. Key areas of their enquiry have been the role of AMUL in reducing social and economic inequality in the region of the cooperative, the sociology of cooperation, interface of the dairy cooperative and the rural power structure, relation of the State and

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the Cooperative and the role of the government in its growth (interestingly, AMUL has successfully managed to exercise its independence from the government unlike other cooperatives in India), elements and replicability of the cooperative movement at Anand, cost effectiveness of subsidies to AMUL (in its initial years), etc.

We now present, how AMUL developed a robust organisation based on sound values and commercial interests. AMUL's journey towards excellence is marked by some critical understanding of the business environment in large emerging economies like India where markets have to be developed by combining efficiency related initiatives with increasing the base of marginal suppliers and consumers. The essence of AMUL's efforts were as follows:

• It combined market and social development in an emerging economy. It recognisedthe interlinkages between various environments that governed the lives of marginalmilk farmers and the unmet needs of the consumers. It also changed the supply chainparadigm in order to reduce the cost to the consumer while increasing the return tothe supplier.

• It realised that in order to achieve their objectives, it had to benefit a large number ofpeople - both, suppliers and consumers. While large scale production had the dangerof failure due to poor control and required more resources, it also had the advantageof creating a momentum that would be necessary to bring more people into the foldand thereby help more suppliers and consumers.

• It also realised that its goal could only be achieved in the long run and this requireddeveloping values in people and processes that were robust, replicable andtransparent.

• It also realised that the cooperative would not be independent and viable in the faceof competition if it were not financially sound. This implied that AMUL had to developdistinct capabilities that would deliver competitive advantage to its operations. Thiswould include long term cost containment, world-class deployment of technologicalresources and R&D, and better leveraging of scarce resources.


While Kaira Union (or AMUL) had the support of national leaders who were at the forefront of the Indian independence movement, its local leaders were trained in Gandhian simplicity and had their feet rooted firmly amongst people whom they had mobilised - the poor farmers of Anand. The foremost amongst them was Tribhuvandas Patel who had led

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the movement for the formation of cooperatives of small and marginal farmers in order to compete against investor owned enterprises on one hand, and keep bureaucracy away on the other hand. Tribhuvandas was the first Chairman of the cooperative. His skills lay in organising the village producers, in making them believe in the power of cooperation and their rights towards the improvement of human condition. He is remembered as fair and honest person whose highest sense of accountability to the members of the union laid the foundation of trust between network members.

Another important aspect of his remarkable management style was his gentleness and ability to repose trust in people - he gave complete autonomy to managers of the union and earned complete commitment from them. Verghese Kurien was one such manager who would, first, shape the destiny of the Union and then the milk movement throughout the country. Kurien emerged as the father of the dairy movement in India. He managed to keep the government and bureaucrats away from the cooperative and gave shape to the modern structure of the cooperative, worked tirelessly to establish the values of modern economics, technology and concern for farmers within the cooperative. He interfaced with global financing agencies to build new projects at AMUL.

He worked with the Unions to bring the best of technology to the plants. He worked with marginal village farmers to create systems that would increase milk yields. He understood that without meeting the needs of customers he would not be able to satisfy his obligations to the farmers. In short, Kurien shaped the destiny of the milk movement in India through the NDDB (as its Chairman) and particularly at GCMMF and cooperatives in Gujarat. He helped build a modern organisation with professional management systems that would support the aspirations of fanners and customers. Several young people left better paying jobs to help create a dream of making India the milk capital of the world. Kurien had learnt the persuasive charm of Tribhuvandas through plain speaking and had soon created a cadre of highly capable managers to whom he had delegated both, management as well as commitment.

These leaders were created at the village, district and state levels in different organisations of the network. Tribhuvandas knew that his fledgling cooperative needed a technocrat manager who shared his concern for the fanners and also had the tenacity to organise marginal producers. Convincing farmers to join the cooperative required commitment bordering on stubbornness, a can-do attitude and a desire to change the lives of poor people. Verghese Kurien had those skills and had linkages to the government. He was charismatic in his communication and committed in his effort. Over a period of time, he developed a very close link with the poor farmers who, as he always says, "were his employers" at the cooperative. He would travel through the villages along with Tribhuvandas

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and work out the details of how the milk collection cooperative would work, how trucks would pick up milk from village societies, how the cattle would have to be taken care of and how all of this would help the poor milk farmer come out of poverty and the clutches of the middleman. Operational details were meticulously planned and executed. And then he, along with two of his close associates, would work on the design of the dairy plant including conducting experiments to create powder out of buffalo milk - a task that was ridiculed by all who heard of it including the international aid agencies in the dairy industry. Tribhuvandas and Kurien were able to convince the government also of the value of his efforts and secured funding for several projects of the cooperative.

He was slowly laying the foundation of a modern dairy industry in India. Membership of the cooperative started to increase, professional managers started to join AMUL and the production capacity at AMUL started to expand (and this expansion was done through innovative changes to processes at the plant and through equipment designed and fabricated in-house). Kurien had transformed AMUL from a dream into a major industrial entity - a network of plants, cooperative societies, research centers, an institute for training future managers in rural management, secondary services like veterinary/artificial insemination expertise/feed factory etc. Kurien's biggest strength lay in his ability to convince people that the cause of rural farmers was important thus establishing an important shared value. Subsequently, he could convince the government to replicate the AMUL model in almost all states of the country.


AMUL's business strategy is driven by its twin objectives of (i) long-term, sustainable growth to its member farmers, and (ii) value proposition to a large customer base by providing milk and other dairy products a low price. Its strategy, which evolved over time, comprises of elements described below.

1. Simultaneous Development of Suppliers and Customers: From the very early stages of the formation of AMUL, the cooperative realised that sustained growth for the long-term was contingent on matching supply and demand. Further, given the primitive state of the market and the suppliers of milk, their development in a synchronous manner was critical for the continued growth of the industry. The organisation also recognised that in view of the poor infrastructure in India, such development could not be left to the market forces and that proactive interventions were required. Accordingly, AMUL and GCMMF adopted a number of strategies to assure such growth. For example, at the time AMUL was formed, the vast majority of consumers had a limited purchasing power and were value conscious with very low levels of the consumption of milk and other dairy products. Thus, AMUL adopted

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a low price strategy to make their products affordable and guarantee value to the consumer. The success of this strategy is well recognised and remains the main plank of AMUL's strategy even today. The choice of product mix and the sequence in which AMUL introduced its products is consistent with this philosophy. Beginning with liquid milk, the product mix was enhanced slowly by progressive addition of higher value products while maintaining the desired growth in existing products. Even today, while competing in the market for high value dairy products, GCMMF ensures that adequate supplies of low value products are maintained. On the supply side, as mentioned earlier, the member-suppliers were typically small and marginal-farmers had severe liquidity problems, were illiterate and had no prior training in dairy farming. AMUL and other cooperative Unions adopted a number of strategies to develop the supply of milk and to assure steady growth. First, for the short term, the procurement prices were set so as to provide a fair and reasonable return. Second, aware of the liquidity problems, cash payments for milk supply was made with minimum of delay. For the long-term, the Unions followed a multi pronged strategy of education and support. For example, only part of the surplus generated by the Unions is paid to the members in the form of dividends. A substantial part of this surplus is used for activities that promote the growth of the milk supply and improve yields. These include provision of veterinary services, support for cold storage facilities at the village societies, etc. In parallel, the Unions have put in place a number of initiatives to help educate the members. To summarise, the dual strategy of simultaneous development of the market and member farmers has resulted in the parallel growth of demand and supply at a steady pace and in turn has assured the growth of the industry over an extended period of time.

2. Cost Leadership: AMUL's objective of providing a value proposition to a largecustomer base led naturally to a choice of cost leadership position. Given the lowpurchasing power of the Indian consumer and the marginal discretionary spendingpower, the only viable option for AMUL was to price its products as low as possible.This in turn led to a focus on costs and had significant implications for managing itsoperations and supply chain practices.

3. Focus on Core Activities: In view of its small beginnings and limited resources, itbecame clear fairly early that AMUL would not be in a position to be an integratedplayer from milk production to delivery to the consumer. Accordingly, it chose astrategy to focus on core dairy activities and rely on third parties for othercomplementary needs. This philosophy is reflected in almost all phases of AMULnetwork spanning R&D, production, collection, processing, marketing, distribution,retailing etc. For example, AMUL focused on the processing of liquid milk and the


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conversion to a variety of dairy products and associated research and development. On the other hand, logistics of milk collection and the distribution of products to customers was managed through third parties. However, it played a proactive role in making support services available to its members wherever it found that markets for such services were not developed. For example, in the initial stages, its small and marginal member farmers did not have access to finance, veterinary service, knowledge of basic animal husbandry, etc. Thus to assure a continued growth in milk production and supply, AMUL actively sought and worked with partners to provide these required services. In cases where such partnerships could not be established, AMUL developed the necessary capabilities and provided the services. These aspects are elaborated later in this section.

4. Managing Third Party Service Providers: Well before the ideas of core competenceand the role of third parties in managing the supply chain were recognised and becamefashionable, these concepts were practiced by GCMMF and AMUL. From thebeginning, it was recognised that the core activity for the Unions lay in processing ofmilk and production of dairy products. Accordingly, the Unions focused efforts onthese activities and related technology development. Marketing efforts (including branddevelopment) were assumed by GCMMF. All other activities were entrusted to thirdparty service providers. These include logistics of milk collection, distribution of dairyproducts, sale of products through dealers and retail stores, some veterinary servicesetc. It is worth noting that a number of these third parties are not in the organisedsector, and many are not professionally managed. Hence, while third parties performthe activities, the Unions and GCMMF have developed a number of mechanisms toretain control and assure quality and timely deliveries (see the sub-section onCoordination for Competitiveness later in the case for more details). This is particularlycritical for a perishable product such as liquid milk.

5. Financial Strategy: AMUL's finance strategy is driven primarily by its desire to beself-reliant and thus depend on internally generated resources for funding its growthand development. This choice was motivated by the relatively underdeveloped financialmarkets with limited access to funds, and the reluctance to depend on Governmentsupport and thus be obliged to cede control to bureaucracy. AMUL's financial strategymay thus be characterised by two elements: (a) retention of surplus to fund growthand development, and (b) limited/ no credit, i.e., all transactions are essentially cashonly. For example, the payment for milk procured by village societies is in cash andwithin 12 hours of procurement (most, however, pay at the same time as the receiptof milk). Similarly, no dispatches of finished products are made without advancepayment from distributors, etc. This was particularly important, given the limited

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liquidity position of the farmer/suppliers and the absence of banking facilities in rural India. This strategy strongly helped AMUL to implement its own vision of growth and development. It is important to mention that many of the above approaches were at variance with the industry practices of both domestic and MNC competitors of AMUL. Organisational AMUL is organised as a cooperative of cooperatives (i.e., each village society, a cooperative in itself, is a member of the AMUL cooperative) thereby deriving the advantage of scale and uniformity in decision making. The founders of Kaira Union realized that to fulfill their objectives, a large number of marginal farmers had to benefit from the cooperative - a network of stakeholders had to be built. And once built, it had to grow so as to draw more rural poor to undertake dairy farming as a means of livelihood. The network had to have several layers - the organisational network where the voice of the owners governed all decisions, a physical network of support services and product delivery process and a network of small farmers that could deliver the benefit of a large corporation in the market place. More importantly, a process had to be put in place to build these networks. Building an organisational network that would represent the farmers and the customers was the most complicated task. A loose confederation was developed with GCMMF representing the voice of the customers, the Unions representing the milk processors and the village societies representing the farmers. Competition in the markets ensured that the entire network was responding to the requirements of the customers at prices that were very competitive. The task of ensuring that returns to the farmers was commensurate with the objectives with which the cooperatives were setup was achieved through the representation of farmers at different levels of decision making throughout the network - the board of directors of societies, Unions and the Federation comprised of the farmers themselves. In order to ensure that most returns from sales went to the producers, the intermediaries had to operate very effectively and on razor thin margins. This turned out to be a blessing in disguise - the operations remained very "lean" and started to provide cost based advantage to the entire network. AMUL established a group to standardise the process of organising farmers into village societies. In addition to establishing the criteria for selecting members, the group had to train the VS to run the cooperative democratically, profitably and with concern for its members. This included establishing procedures for milk collection, testing, payment for milk purchased from member farmers and its subsequent sale to the union, accounting, ensuring timely collection and the dispatch of milk on milk routes established by the union, etc. The Village Societies Division at AMUL acts as the internal representative of village societies in their dealings with the Union. Cooperative development programmes at the village level for educating and training its members have become an important part of the strategy to build this extensive network. The milk procurement activity at AMUL comprises development and servicing of village societies, increasing

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milk collection, procurement of milk from societies and its transport to the chilling locations, and resolving the problems of farmers and village societies. Their stated objective is to ensure that producers get the maximum benefits. The Village Societies Division coordinates these activities. Milk collection takes place over a large number of pre-defined routes according to a precise timetable. The field staff of this division also help village societies interface with the Union on various issues ranging from improvement of collection, resolving disputes, repair of equipments to obtaining financing for purchase of equipment etc. In addition, they are also responsible for the formation of new societies, which is an important activity at AMUL. In essence, the organisation structure of AMUL allows for the effective utilisation of resources without losing the democratic aspiration of individual members. It is obvious that such a system needs charismatic leadership to achieve consensus across issues - a process that has long-term benefits for any organisation.


GCMMF is the marketing arm of the network and manages the physical delivery and distribution of milk and dairy products from all the Unions to customers. GCMMF is also responsible for all decisions related to market development and customer management. These activities, which range from long-term planning to medium-term and short-term operational decisions are described below.

As mentioned earlier, the introduction of new products and the choice of product mix and markets should be consistent with the growth strategy, and synchronous with the growth in the milk supply. GCMMF's demand growth strategy may be characterised by two key elements: (i) developing markets for its high value products by graduating customer segments from low value products, and (ii) maintaining a healthy level of customer base for its base products (low value segment). This strategy often requires GCMMF to allocate a sufficient quantity of milk supply to low value products, thereby sacrificing additional profits that could be generated by converting the same to high value products. Interestingly, advertisement and promotion was not considered to be enough of value addition and hence the budget was kept relatively small. Instead, the GCMMF preferred a lower price with the emphasis on efficiency in advertising. In this context, the GCMMF provides umbrella branding to all the products of the network. For example, liquid milk as well as various milk products produced by different Unions are sold under the same brand name of AMUL. Interestingly, the advertising has centered on building a common identity (for example, a happy and healthy "cartoon" AMUL girl) and evoking national emotion (for example, the key advertising slogan says "AMUL - The Taste of India"). GCMMF also plays a key role in working with the Unions to coordinate the supply of milk and dairy

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products. In essence, it procures from multiple production plants (the thirteen Unions), which in turn procure from the Village Societies registered with each Union. GCMMF distributes its products through third party distribution depots that are managed by distributors who are exclusive to GCMMF. These distributors are also responsible for servicing retail outlets all over the country. GCMMF sales staff manages this process. Retailing of GCMMF's products takes place through the FMCG retail network in India most of whom are small retailers. Liquid milk is distributed by vendors who deliver milk at homes. Since 1999, GCMMF has started web based ordering facilities for its customers. A well-defined supply chain has been developed to service customers who order in this manner.

Operations and Supply Chain Management

As mentioned earlier, the strategy, design and practices in AMUL's network are strongly driven by the objective of establishing and operating an efficient supply chain from milk production and procurement to product delivery to customers. Management of this network is built around two key elements - (a) coordination of the diverse elements of the network and (b) the use of appropriate technology that includes product, process and information technology and managerial practices and systems. In what follows, we describe various features of these elements that have contributed to the evolution of an efficient supply chain.

Coordination for Competitiveness

Robust coordination is one of the key reasons for the success of operations involving such an extensive network of producers and distributors at GCMMF. Some interesting mechanisms exist for coordinating the supply chain at GCMMF. These range from ensuring a fair share of the allocation of benefits to various stakeholders in the chain to coordinated planning of production and distribution. More importantly, the reason for setting up of this cooperative is not amiss to any one in this large network organisation. Employees, third part service providers, and distributors are constantly reminded that they work for the farmers and the entire network strives to provide the best returns to the farmers, the real owners of the cooperative. It may be remembered that coordination mechanisms have to link the lives and activities of 2.12 million small suppliers and 0,5 million retailers. There appear to be two critical mechanisms of coordination that ensure that the decision making is coherent and that the farmers gain the most from this effort. These mechanisms are:

• Inter-locking Control

• Coordination Agency: Unique Role of Federation

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Inter-locking Control

Each Village Society elects a chairperson and a secretary from amongst its member farmers of good standing to manage the administration of the VS. Nine of these chairpersons (from amongst those VS affiliated to a Union) are elected to form the Board of Directors of the Union. The Chairperson of the Union Board is elected from amongst these members. The managing director of the Union, who is a professional manager, reports to the chairperson and the board. All chairpersons of all the Unions form the Board of Directors of GCMMF. The managing director of GCMMF reports to its Board of Directors. Each individual organisation, the Union or GCMMF, is run by professional managers and a highly trained staff. It must be pointed that all members of all the boards in the chain are fanners who pour milk each day in their respective Village Societies. Akey reason for developing such an inter-locking control mechanism is to ensure that the interest of the farmer is always kept at the top of the agenda through its representatives who constitute the Boards of different entities that comprise the supply chain. This form of direct representation also ensures that professional managers and farmers work together as a team to strengthen the cooperative. This helps in coordinating decisions across different entities as well as speeding the flow of information to the respective constituents and decisions.

Coordination Agency: Unique Role of the Federation

In addition to being the marketing and distribution arm of the Unions, GCMMF plays the role of a coordinator to the entire network within the State - coordinating procurement requirements with other Federations (in other states), determining the best production allocation for its product mix from amongst its Unions, managing inter-dairy movements, etc. It works with two very clear objectives: to ensure that all milk that the farmers produce gets sold in the market either as milk or as value added products and to ensure that milk is made available to an increasingly large sections of the society at affordable prices. In addition, it has to plan its production at different Unions in such a way that the market requirement matches with the unique strengths of each Union and that each of them also gets a fair return on its capacity. In this regard, GCMMF follows an interesting strategy. GCMMF, in consultation with all the Unions, decides on the product mix at each Union location. Some considerations that govern this choice are the strengths of each Union, the demand for various products in its region as well as the country, long term strategy of each Union, procurement volumes at different Unions, distribution costs from various locations, etc. Demand for daily products and the supply of milk vary with the season. Further, demand and supply seasons run counter to each other making the planning problem more complex. In making allocations to Unions, GCMMF is guided by two main objectives-(i) maximising the network surplus, and (ii) maintaining equity among unions for the surplus

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realized. In this regard, very often the GCMMF is willing to sacrifice realisable surplus and allocate products to "less efficient" Unions in order to achieve better balance in surpluses accruing to the Unions.

Technology for Effectiveness

Service to customers required the following: better and newer "products", "processes" that would deliver the low cost advantage to the network and "practices" that would ensure a high productivity and delivery of the right product at the right time. Thus technology or knowledge that was embodied in products, processes, and practices became an important factor in delivering effectiveness to the network of cooperatives. One distinguishing feature of AMUL (in comparison with other similar cooperatives globally) is the large variety in their product mix. Producing them not only requires diverse skills but also the knowledge of different types of processes. AMUL dairy led the way in developing many of these products and establishing the processes for other member Unions. Equally impressive are the achievements on process technology. While several continuous innovations to equipment and processes have been done at AMUL, the most significant one has been the development of processes for using buffalo milk to produce a variety of end products. Gujarat (and most of India) is a buffalo predominant area. As more farmers joined the cooperatives, the need to develop a mechanism for the storage of the increasing quantities of milk became intense. Moreover, the cooperative was established on the promise that it would buy any quantity of milk that a member farmer wanted to sell. The need to store milk in powder form increases as excess milk quantities in winter seasons could then be used in lean summer seasons. Moreover, demand for liquid milk was not growing along with the growth in milk production. No technology, however, existed worldwide to produce powder from buffalo milk. Engineers at AMUL successfully developed a commercially viable process for the same - for first time in the history of the global diary industry. Subsequently, it also developed a process for making baby food out of this milk powder. It has also developed a unique process for making good quality cheese out of buffalo milk, thereby converting a perceived liability into a source of comparative advantage - the task was done through the process technology research. Most of its plants are state of art and automated. Similar efforts in the area of "embryo transfer technology" have helped create a high yield breed of cattle in the country.

AMUL's innovations in the areas of energy conservation and recovery have also contributed to the reduction in the cost of its operations. AMUL also indigenously developed a low cost process for providing a long shelf life to many of its perishable products. The total quality management at the grassroots has been a strong force and motive to develop leadership, operational and strategic capabilities in the entire network - farmers, village

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cooperatives, dairy plants, distributors and wholesalers and retailers. Key elements of this total quality management have been:

• Friday Departmental Meetings: Each Friday, at a prescribed time, every one in thenetwork (from the farmers to the carry and forwarding agents) joins their respectivedepartmental meeting to discuss quality initiatives and share policy related information.

• Training for Transformational Leadership so that individuals are able to control theirthoughts, feelings and behavior and take more responsibility in one's life and in thesurrounding environment.

• Aligning policies for effective management of Unions and village societies on handwith those of channel members on the other hand. ISO certification was obtained forall the Unions and each village society is in the process of obtaining the same.

• Training for farmers and their families emphasising the need for good health care fornot only cattle during its pregnancy and feeding but also for expecting and feeding themothers and the whole family. This effort has brought about a significant social changetowards such issues in villages that have cooperative milk societies.

• Retail Census: GCMMF undertakes a census of all retail outlets (over 500,000) toevaluate customer perceptions and distribution efficacy of their network. Interestingly,this is being done by wholesalers in their respective territories at their own cost. Thisinformation is used for policy deployment exercise. The extent of IT usage includes aB2C ordering portal, an ERP based supply chain planning system for the flow ofmaterial in the network, a net based dairy kiosk at some village societies (fordissemination of dairy related information), automated milk collection stations at villagesocieties and a GIS based data network connecting villages societies to markets.Milk collection information at more than 10,000 villages is available to all dairies (orUnions) to enable them make faster decisions in terms of production and distributionplanning, and disease control in more than 6,700,000 animals. Similarly, this is linkedwith information at all 45-distribution offices and 3900 distributors. This network isbeing extended to cover all related field offices in the network. The GCMMF cyberstore delivers AMUL products at the doorsteps of the consumers in 125 cities acrossthe country. What is remarkable about the above is the implementation of verycontemporary practices in rural areas where both, education and infrastructure aregenerally low. One of the key sources of a competitive advantage has been the abilityof the cooperatives to continuously implement good practices across all elements ofthe network - the federation, unions, village societies and the distribution channel.Whether it is the implementation of small group activities or quality circles at the

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federation and the total quality management at the Unions or housekeeping and good accounting practices at the village societies level, the network has developed very interesting ways of rolling out improvement programmes across different entities. While these programs may not be very unique, the scale is impressive. One of the key strengths of GCMMF and AMUL can surely be characterised as the development of processes that allow them to implement these practices across a large number of members.

Growth and Challenges

From its inception with the formation of its first milk cooperative, the AMUL network has sustained an impressive growth rate for more than 50 years culminating in the emergence of Indian dairy industry as the world's leading milk producer. However, it is unclear whether AMUL's strategy and practices that have worked well for so long, can maintain this growth trajectory in a changing environment with globalisation and increased competition. In this section, we describe some of AMUL's initiatives and briefly discuss opportunities for growth and challenges that need to be overcome. AMUL's growth during the past five decades has been fuelled primarily by the growth in the milk supply with a corresponding pricing strategy to generate demand. This growth has been sustained by a two-pronged strategy - (a) growth in the number of member farmers by widening its coverage with more village societies and increasing the membership in each society, and (b) growth in the per capita milk supply from its members. This growth is achieved by increasing milk yields and by helping members raise their investments in cattle.

It is worth noting that AMUL has funded these support activities from its earnings (instead of repatriating them to the members either as dividends or with a higher procurement price). It is expected that AMUL's growth in the immediate future will continue to rely on this strategy. However, in the new emerging environment, several challenges have become apparent and the AMUL network needs to evolve proactive mechanisms to counter these threats. First, competitors are cutting into the milk supply by offering marginally higher procurement prices, thereby challenging the practice of provision of services for long-term growth in lieu of higher prices in the short-term. Second, for a section of its membership, dairy activity is a stepping-stone for upward mobility in the society.

Typically, such members move on to other occupations after raising their economic position through milk production. As a result, AMUL is unable to realise the full benefits of its long-term strategy, and finds new members (mostly marginal farmers) to replace those who have higher potential and capacity. While this is a welcome development for the society as a whole, it is unclear whether AMUL would be able to sustain it in the light of increased competition. By progressively increasing the share of higher value products, AMUL has

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been able to grow at a faster rate than the growth in milk supply. AMUL has been rather cautious in implementing this strategy and has always ensured the retention of its customer base for liquid milk and low value products. With the slowdown in the growth of milk supply, this strategy is likely to come under pressure and AMUL will be forced to make some hard choices. More important, it is fairly clear that its low price, cost efficient strategy may not be appropriate for the high value segment. Thus, AMUL may have to adopt a dual strategy specific to its target markets, which in turn may lead to a dilution in the focus.

Apart of AMUL's growth has come from diversification into other agro-products such as vegetable oils, instant foods, etc. In some of these initiatives AMUL adapted its successful cooperative organisation structure, but the experience to date has been somewhat mixed. More recently, the network is exploring conventional joint venture arrangements with suitable partners for diversification into areas such as fast food and speciality chocolates. While it is too early to assess the success of these ventures, the challenges involved are becoming quite visible. For example, diversification has resulted in the expansion of the network with disparate elements, each motivated by their own objectives. This in turn has led to a lack of focus within the network and a dilution in the commonality of purpose. These developments are likely to have serious implications for coordination and control in the network. More important, shared vision and a common goal was one of the main planks of AMUL's growth during the past 50 years, and its dilution is likely to adversely impact the network performance.

The largest segment of the market in emerging economies desires value for money from its purchases. Development of such markets requires careful nurturing and a long-term approach. Initial success in these markets is typically based on a low price strategy (providing value for money) supported by cost leadership. This strategy helps to grow the market exponentially by focusing on the largest segment of the population, the middle and the lower middle class. In this context, it is important for global players to note that the value proposition perceived by consumers is influenced to a large extent by the state of markets and the economy and cultural factors. Development of an appropriate value proposition suitable for large mass markets in India requires a thorough understanding of the environment and a focus on costs. This in turn requires designing the organisation structure and practices in a manner that delivers continued market share through cost leadership. AMUL is a good example of this strategy. Firms that are able to develop control processes through the better use of operational practices and supply chain coordination are the ones that are able to serve large volumes and enjoy top line growth in revenues. Development of suppliers likewise requires nurturing with a long-term perspective. It is interesting to note that this was achieved by AMUL through a process of education and social development activities - activities that are not usually considered to be standard business practices.

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This type of 'out of the box' vision is essential for developing an innovative mechanism in new, unfamiliar environments where the building of the relationship with consumers goes much beyond marketing messages and useful product offerings. Environments with underdeveloped markets and suppliers (as in the case of AMUL) add one more dimension of complexity relating to the relative pace of growth of these two areas. Through its pricing strategy, AMUL has been able balance the growth in markets and suppliers and has achieved some degree of synchronisation. Otherwise, gaps between demand and supply would require complementary strategies.

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After going through this case, you will be able to :

• examine the nature of consumer behaviour reflected in the case study.

• evaluate the marketing strategies of the tobacco industries and also assess theiradvertisement campaign approach.

• examine the choice factor that the consumers possess.

• scrutinise the role that the popular media in changing perceptions of consumers andindustry analysts.

This case is quite different from other cases of marketing or consumer behaviour. The product involved is harmful for health which has been proven through medical research and the governments across the globe are pushing for restrictions to curb expansion of this sector for public good. Additionally the industry is facing multiple litigations. Yet, the tobacco industry has not only sustained itself but has been growing by leaps and bounds. How is this possible? What makes the consumer so dependent on the industry?

Companies such as Philip Morris, RJ Reynolds, Brown and Williamson, and Lorillard hold almost the entire market share in the tobacco industry. While each company has different advertising and marketing techniques, they all target the same customer group. Tobacco companies try their best to generate interest in their particular brand or brands. Companies market a number of attributes that usually include, but are not limited to: taste, flavour, strength, size and image in order to distinguish themselves from competitors.

However, all tobacco companies are satisfying the same needs. Many long-time smokers are addicted to the nicotine in cigarettes. They smoke because the nicotine is needed to help them feel normal. Many addicts go through withdraw without nicotine. All tobacco

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companies have nicotine in their cigarettes, which fulfills the need of long-time smokers. Other smokers depend on cigarettes in social settings.

Many smoke to look sophisticated and mature. Tobacco companies make many kinds of cigarettes that target different groups. Social smokers may perceive certain brands as more sophisticated, and therefore, they shy away from other lesser-known brands. For example, a person who smoked generic cigarettes at the bar may be perceived as uncultured. On the other hand, the smoker with the Marlboro Lights may be more socially accepted because they have a brand name product. Many types of cigarettes cater to the many markets of smokers who want to portray a certain image in social settings.

Tobacco companies do not create the need to smoke, but try to generate interest in their particular brand. Overall, the tobacco companies satisfy consumer demand for the millions of adults across the globe who choose to use tobacco by providing differentiated products to different target markets of smokers.

The tobacco industry has developed a rather large array of products. Companies such as Philip Morris, Lorillard, RJ Reynolds, and Brown and Williamson, as well as the other smaller competitors, all provide the same product- cigarettes. The tobacco industry is filled with fierce competitors. But underneath the brand names and images, the product is relatively the same. All tobacco companies produce an inhalant that is made with tobacco, tar, and nicotine. These materials are rolled in a special kind of slow-burning paper for longer smoking time. The cigarettes are approximately three to four inches long and come in packs of twenty to twenty-five or even thirty. With so many similarities, one would think that the market would resemble that of a commodity. However, through brand marketing and promotions, each cigarette is uniquely different in the mind of the customer.


The tobacco industry can be broadly or narrowly defined. Many products use tobacco as the main material. This case defines the market by focusing on the tobacco and the way it is smoked. Companies produce cigarettes, which are lit and the smoke is inhaled to the lungs. Tobacco products such as cigars, snuff, and chew are considered close substitutes to cigarettes. Cigar smoke is just taken into the mouth, but not inhaled like cigarettes. Snuff and chew do not even contain smoke, but are put on the skin for nicotine absorption. Companies such as Imperial Tobacco, which produce a wide array of chew and snuff products, would be considered a company that provides substitutes to cigarettes. They would not fall in the cigarette industry itself. The affect of substitutes on profits is also low. Nicotine can be found in cigarettes, as well as cigars, chew, and snuff. But most people will not switch over to chew and snuff if the price of cigarettes rises. Chew and snuff do

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not substitute for the needs of a cigarette. Cigarettes are smoked for the nicotine and for social acceptance. Chew and snuff are not acceptable substitutes for most smokers; the nicotine is not inhaled but put on the skin for absorption.

Buyers and Retailers

The stores that sell tobacco products have a moderate influence on the market. Retailers have some power over manufacturers who need prime slotting to ensure strong sales. However, manufacturers have leveraged quite a bit of power by offering retailers special incentives for giving their products good placement or for installing certain numbers of brand advertisements around the store. To some stores, such as Super Malls, losing a major cigarette brand would mean large loss of revenues from customers who would rather go to another mall to locate their favorite brand.

Also, companies are trying to develop closer relationships with bars and coffeehouses. Tobacco companies offer ashtrays, napkins, and matches, saving each buyer thousands of dollars in supply costs. Retailers now are marketing the brand on coasters and napkins for the company.

The end-users in the industry also have moderate power. Brand loyalty is very high, and it has been shown that smokers generally chose a brand in their teen year and continue to smoke that brand the rest of their lives . However, in the face of a dramatic price hike, consumers have been quick to notice that brands are interchangeable and then go for the lowest price. But the dearth of substitutes for tobacco products makes it difficult for the industry to lose customers all together. The suppliers in the tobacco industry have a low level of influence, even though there are no close substitutes that the industry can use in place of tobacco. Tobacco is purchased from farmers, who essentially have to take the market-determined price for their crops. Tobacco is a commodity, so it makes no difference from which supplier a firm buys its materials. The large number of individual farms that supply the industry makes it almost impossible for anyone to raise the price. There is not a threat of forward integration from suppliers because they have none of the tools necessary to manufacture or market tobacco products. The farmers have only the land and equipment necessary to grow the leaf. If they were to try to produce cigarettes, they would probably not be able to compete with the many large companies that have economies of scale.

Profit Analysis

Why are tobacco executives still smiling? Simple - They continue to rake in the huge profits. Indeed, the tobacco industry has faced much opposition during recent years but still remains profitable. To be specific, there are two main reasons that the industry has


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continued to be prosperous: addiction and management practices. Government influence and lobbying have also played a smaller role. First, the strong addiction of tobacco has allowed for a very loyal following in the tobacco industry. In fact for most tobacco users cigarettes are inelastic commodities as they are very brand-loyal and therefore less price sensitive than most would think.

Not only does this bring in revenue for the companies themselves but for the wholesalers and retailers as well. A survey points out that the average smoker still smokes 1.2 packs per day, which means strong profits for the industry as a whole. Buyer power is lower because the smokers depend on the cigarettes to fulfill their addictions. Even when the average store sells around 25 packs per day, the industry is bound to make substantial profits. The loyalty of customers in tobacco has allowed for a successful forecast of future profits in the industry. The management practices of the tobacco industry have also contributed to the industry's success. For example, The Retail Masters program has allowed for strong profits. Retail Masters is a multi-level program of promoting brands in the retail environment. This program has the potential to increase a store's cigarette sales by 11 percent. Simply by getting better displays and shelf space, for instance, the tobacco industry could become more profitable.

Buyer influence increases because they have the power to delegate displays and shelf space. Overall, if the industry were to constantly maintain better displays and shelf space, tobacco companies as a whole would have a better chance of achieving greater profits. Also, most tobacco companies are introducing new products in order to keep high profit margins. RJ Reynolds, for example, is in the final phase of conducting market studies on its latest product, Eclipse. The company claims the new product reduces second-hand smoke by nearly 90 percent, ridding itself of ash and odors. Tobacco companies are also trying to get a better public image by producing public service announcements such as the "Be Smart, Don't Start campaign ". Although the industry has been under close scrutiny as of late, their customers are impressed with the message.

Again, the marketing management practices behind the tobacco industry bring a promise of strong future profits. As already stated, the profits of the industry look to be good, but there are a lot of changing conditions that might affect the future of the industry. For example, the new product inventions mentioned above could either help or harm the industry depending on how well they do. For example, the new Eclipse cigarette will more than likely be imitated by other competitors, who will also have to invest a great deal of capital to get the product on the market. And finally, tobacco companies are having to pay more and more money for court settlements.

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Profits can be decreased greatly if money the money is spent defending the company. The government is also a very limiting factor to tobacco. Just over the past decade, the government has passed so many laws that it has forced the tobacco companies to double their prices on cigarette packs. Although the customers still seem to be buying as they have in the past, there is certainly a price ceiling that a customer will not be willing to pay above. It is highly unlikely that the same customers who are currently paying less than three dollars a pack, will pay ten dollars for a single pack of cigarettes. However, if the government keeps increasing excise tax and still allots money to the prosecution during tobacco lawsuits, the industry will be severely handicapped.

Overall, as the restrictions of the government increase and lawsuits are lost, the profits of the industry are bound to decrease.

Industry Environment

The tobacco companies play off each other for market share and innovate marketing strategies to fight back and keep the smoking demand. The tobacco industry has a very low threat of entry. A few powerful firms, control most of the industry. Any new entrants would be sure to receive heavy retaliation from the other companies fighting to keep their share of the lucrative industry. For example, Philip Morris is by far the industry leader with estimated tobacco sales of $46.7 billion in the year 2004. They have a huge base of resources with which to attack other competitor entrants. They could easily start promotions such as buy one, get one free or offer coupons at certain times during the year to discourage entrants to the industry. Many small companies will not be able to compete with the capital requirements in the tobacco industry.

The barriers to entering the tobacco industry are numerous. The high volume of cigarette sales gives existing firms economies of scale, which would be a disadvantage for newcomers to the market.

The products currently on the market are differentiated somewhat in their design, but mostly through the large advertising budgets that are used to promote them. Tobacco companies now pour $4 billion a year into promotions and advertising- nine times what they spent in the decade of 1970s. These firms have finely tuned distribution channels, which include legions of sales representatives that vie for shelf space. One of the biggest obstacles to a new entrant would be finding a decent place of the shelf with such heavy-handed competition already occupying that space. Store managers may be reticent to give away prime slots for fear of losing discounts or other offers from major players. Government policy is another possible deterrent to enter the market. Large settlements against the tobacco companies have been the norm in the past several years. Although gigantic


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companies like Philip Morris are able to handle the charges because of their extensive monetary resources, it is difficult to imagine how a small startup company would be able to burden the expense. Switching costs are very high in the tobacco industry. Many smokers are still smoking the same brand they first started smoking. Even if the price of their brand is raised, they would not consider switching to another brand. Many companies who would want to come into the industry would not easily take away market share, due to high brand loyalty.

The tobacco industry has limited media coverage due to government restrictions placed over the past two decades. The tobacco companies have been prohibited from advertising on television and radio, and even more recently from billboards and outdoor posters because of the harmful side effects their products may cause. Since so many channels of marketing are closed for the tobacco industry, magazines are the most common method of advertising. Even with magazines and other legal forms of advertising, tobacco makers are still running into restrictions.

In each magazine advertisement, a Surgeon General's warning is required to appear with information about tobacco-related health risks that the product may lead toward. Companies have also been required to create advertisements solely about the harmful consequences of using tobacco products. These ads were a result of an advertising war between the tobacco industry and anti-tobacco campaigns. The tobacco companies were mocking the ads and celebrating those who continued to use tobacco. The government intervened and required the tobacco warning advertisements for all tobacco companies.

The government has also intervened with tobacco marketing by altering the slogans and gimmicks the companies use. The government wants the companies to avoid targeting vulnerable markets, such as young children and teenagers under the legal smoking age of 18 years. Since government regulations have become such a threat to the tobacco industry, companies are coming up with creative ways to advertise and appeal to consumers.

Some companies are developing smoker's lifestyle "magalogs'', a combination of a magazine and catalog. The issues come out monthly and contain articles about travel, cooking, and shopping. The magalogs do not contain articles about smoking and do not have pictures of people smoking, but they do advertise tobacco products and accessories. The idea of the magalogs is to portray an image that a smoker's lifestyle is fun and exciting. Tobacco companies are hoping these magalogs will persuade the existing smokers to purchase more.

In the past consumers have been proven to remain loyal to one company throughout their lives, but as tobacco prices have steadily increased several times, more brand switching

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from the premium brands to the lower priced one is occurring. The price increases are decreasing the demand for tobacco products as well. Surveys' have shown that the number of smokers has decreased 10% in 2004.

One of the main reasons for the price increases in the tobacco industry is that companies are trying to keep shareholders happy by paying them high dividends. Another reason is that companies need to cover the higher costs that they have incurred from legal settlements with state governments. The premium brand companies are also spending more money on advertising as the prices increase to keep their customers from switching to the lower-cost brands. The tobacco industry has many strong competitors with varied portions of market share. As of now, the price leader is Philip Morris. When they increase prices, other brands will follow the lead to avoid price wars.

Any attempt to take away market share from the leader will result in more harm than good for the lower companies with less share. If a price war were to be started, Philip Morris, with its extensive capital, could easily outprice all other brands. The smaller tobacco companies could not compete and would soon go out of business. This type of competitive rivalry causes threats to all competitors. The companies with less market share want to follow the trends to avoid losing share no matter how high costs are, and they are trying to gain new consumers as well. The competitors have to watch the price leader carefully to make a competitive strategy. The price leader controls the industry and sets the rules of the game.

But the opportunities of the leader and the other companies can be dampened by government regulations. As more restrictions are being placed in the tobacco industry, all companies will lose consumers if they do not find successful alternatives to marketing their products. Once the tobacco gain market share, it is somewhat easy to keep it. The addictive substances in tobacco products give the industry opportunities to keep consumers brand loyal and trying their new products. The environment of the tobacco industry is constantly changing with all of the threats and opportunities. Tobacco makers rely on the key success factor of image in all that they do. The new magalogs are another attempt to create a wanted tobacco user's lifestyle, and they will continue to find alternatives around regulations to keep their image up as they fight hard in the competitive environment.

Competitive Analysis

Philip Morris is the industry leader and is able to heavily promote and advertise a new product. Marlboro is one of the most well-known brands in the world. We could easily create a line extension and rely on the brand name for customer loyalty. Companies such as Philip Morris, RJ Reynolds, Brown and Williamson, and Lorillard are the top four


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competitors in the tobacco industry that together hold almost all of the market share. Philip Morris -the industry giant is responsible for the development of Marlboro, Virginia Slims, and Basic, three of the best-known brands on the market. Other than producing tobacco products, the company has expanded and purchased Kraft Foods in 1988, the largest food company in the United States. Kraft's affiliation with Philip Morris has led to much scrutiny from anti-tobacco users and a decrease in profits. Philip Morris has a strong advantage with the Marlboro brand.Marlboro is one of the most well-known brands in the world. The brand loyalty to Marlboro will help Philip Morris keep customers. Lorillard is responsible for cigarette brand Newport, which is currently second behind Marlboro.

Lorillard is the fasted growing brand in the cigarette category, but is still quite far behind Philip Morris. Currently, the company is trying to introduce a new kind of cigarette that would directly compete with Marlboro. The new product would be a non-menthol cigarette, which is a first in the industry because most companies usually introduce menthol cigarettes. Lorillard's strength is shown with its creativity. As long as they try new products, they can gain some market share from Philip Morris. Also, Lorillard is undertaking a series of print advertisements to expand on their commitment to responsibility. They are trying to become a more responsible company in the eyes of the public.

RJ Reynolds, currently third in the standing, has undergone some recent changes in their corporation. In March of 1999, RJ Reynolds decided to sell its overseas cigarette unit to Japan Tobacco Incorporated and concentrate on its United States business. RJ Reynolds will use the money from the international sale to pay off large debts and to repostion in the market. RJ Reynolds is responsible for such brands as Monarch, Doral, and the ever-popular Camels. The weaknesses of competitors are the weaknesses of the market.

As mentioned before, Philip Morris is the leader in the tobacco industry, with over twice the market share of its closest competitor, RJ Reynolds. After whom several international companies such as JTI, the Imperial Group and Brown and Williamson compete for the right to own the third spot in the industry. Much like Philip Morris, tobacco companies aim their sites through very general segmentation strategies—men and women. Indeed, they too rely on a multi-segmented market to bring in the majority of their sales revenue. Not only that, but tobacco companies use several line extensions in order to gain market share in an attempt to overthrow the king Philip Morris. Several recent trends in competitive products have shown just that. For example, the scientific communities in both the United States and Europe have been developing new nicotine delivery systems in an attempt to transform the cigarette industry, as we know it. Basically, the idea behind it all is to make a product with a controlled, gradual reduction in nicotine delivery.

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However, these new products are not quite that simple for companies to create. In fact, only one domestic tobacco company has attempted to commercialize a new type of nicotine delivery device. A few years ago, RJ Reynolds publicly announced a new type of cigarette called Premier. It was offered in two test markets in Arizona and Missouri. The markets did not do well and a little over one year later they closed. Premier was hard to light, did not burn down the way people wanted them to, smelled and tasted bad. But it had a number of key attributes: no ashes, very little second-hand smoke, and limited fire safety problems.

Maybe if those who had tried it had taken the time to acquire a taste for it, the product would have established itself as a mainstream smoke. Instead, it eventually failed. Since Premier's introduction, RJ Reynolds has continued to work on the product to try to improve the problems associated with it. This work, along with a large collection of project ideas on the way, is a strong indication that RJ Reynolds is doing its best to steal the number one position away from Philip Morris.Not only that, but RJ Reynolds is not alone in its pursuit of a better smoke.

Other activity has been noted form tobacco industry companies such as JTI, the Imperial Group, Procordia A.B., and Brown and Williamson. This can be easily seen as a strong indicator that several companies have extensive interest in the development of a superior nicotine delivery device. Through all of this, the outsider can easily see that the competition of Philip Morris is trying to gain market share in the tobacco industry and eventually overthrow the strongest company in the industry, Philip Morris.

Value Chain Analysis

Philip Morris creates value in a number of ways, from product design to getting the product into the customer's hand. Many parts of this value chain have been strategically used to build a competitive advantage in the cigarette industry. As discussed earlier, research and design are an important part of Philip Morris' strategy. They are constantly trying to find ways to make their products better, safer, or more convenient for the customer to use. A product like cigarettes may seem impossible to improve on, but time and again they have made minor improvements that have added to their differentiation in the market, such as the flip-top box and the soon-to-be-released slow-burning paper, which should reduce cigarette related fires significantly.

Even though cigarettes cause cancer and a myriad of other fatal illnesses, Philip Morris wants customers to know that they are looking out for their safety. A discussion of Philips Morris' value chain cannot ignore their operational advantages, such as the economies of scale they have achieved by being the biggest supplier of tobacco products in the market.

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They also have made a number of production oriented advancements that have allowed them to produce high quality products at sufficiently low cost to buffer profits. The marketing aspects of the value chain are the points where Philip Morris has related differentiated itself. Promotion, distribution, and overall marketing clout and prowess have made brands such as Marlboro industry leaders and the envy of marketers everywhere.

Distribution is a function which Philip Morris has mastered. Anywhere that sells cigarettes carries most of their brands, and always carries the top brands such as Marlboro. Convenience stores, gas stations, discount stores, bars; the list goes on and on. In distribution, Philip Morris is the industry leader, and the other firms watch and learn. Most of Philip Morris' differentiation has been achieved through aggressive promotional strategies. They spend a great deal of money and effort getting out the message about their products in all (legal) media. The campaigns they use are seen as cutting-edge by customers and the industry. A powerful, inescapable message that Philip Morris brands are the best cigarettes on the market have been a key factor in the success of the company.

An important ingredient to their formula success has been a clever branding strategy that seems to leave no segment without the perfect brand. With eighteen individual brands of smokes, each smoker is almost certain to be able to find one the fits his or her particular image or lifestyle. And although Philip Morris is a megabrand, it is not a powerful one. The company name is stamped on all of its products and customers often know which company produces their brand.

The individual brands have much more power than the megabrand, and they are what have a vivid position in each consumer's mind. Indeed, Philips Morris' skillful branding is a major competitive advantage for the company. Philip Morris has built and deployed an effective sales force to build strong relationships with cigarette retailers, and with great success. In any given store, one is likely to notice Marlboro and the rest of the Philip Morris family in a prominent place at eye level. The company has also developed a rewards program whereby retailers actually get paid for giving them freedom in the store.

Retailers get points for things like point of purchase displays, in-store advertising and prime slotting, and of course for doing the opposite with other companies' products, and the retailers get money back or credit for the points. This strategy has given Philip Morris a big advantage at the point of purchase by making retailers happy. Linkages Through the variety of effective linkages Philips Morris has carefully constructed over their years of deft marketing practices, they have built a competitive advantage that is seemingly rock solid. Philip Morris uses its large market share to help it leverage for shelf space. Although the aggressive sales tactics described above are used to get total retailer cooperation, they do not have to use such persuasive techniques to simply get good shelf space. No cigarette

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seller would think of eliminating Marlboro from their shelves, for instance. Due to the high demand for their products, buyer (retailer) power is limited. Not all tobacco companies have this sort of power.

The strong promotional tactics that they employ give them much of the power that they have over retailers. By giving their products such appeal and differentiation, customers will not be satisfied without them. This strong demand forces the hands of retailers. Strategy At this point, it would be difficult to make very strong recommendations to Philip Morris for strategic change. The strategy that they have formulated has worked extraordinarily well for them. As the strong market leader, the most important thing for them at this point is to not fall asleep at the wheel. They must stay one step ahead of competitors at all times and resist complacency. A flexible strategy that stays in touch with changing consumer wants and needs is paramount to remaining on top of the industry. As long as Philip Morris is able to market their products carefully while avoiding stagnation, they should enjoy market leadership for a long time to come.

Potential Segmentation Dimensions

There are hundreds of different kinds of cigarettes available in today's market. It can be hard to choose which cigarette to buy and pinpointing the differences between brands can be even harder. Besides brand name recognition, tobacco companies look at segmentation dimensions in order to clarify whom the cigarette is for and what features it has to offer to smokers.

When the first studies that indicated lung cancer was directly related to smoking came out, smokers began to look for substitutes that would provide a healthier alternative. Philip Morris was the first company to take a step in the right direction by introducing Marlboro. The filtered cigarettes were believed to be healthier and reduce the chance of developing cancer. Since then, more companies have introduced their own version of a healthier cigarette.

Tobacco companies introduced such innovations as light and ultra light cigarettes. Light cigarettes are made with less tar; ultra lights have almost no tar in them. The concept of light cigarettes opens up the field of opportunity for smokers. They can now be more health conscious when choosing a cigarette, but light cigarettes can still cause cancer. Cost is another concern when it comes to smokers. Research shows that most smokers are brand loyal and do not pay attention to price, but there is a possibility that some do buy the cheapest brand available. By offering a lower priced brand, tobacco companies can help to gain market share and broaden their variety and assortment of products.

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Not all current tobacco companies offer a low price cigarette; they tend to focus their strength on their top brand. Gender is segmented within the tobacco industry. Brands like Misty's, Virginia Slims, and Carlton are aimed at the female population. Men have the Marlboro Man; women have slimmer and slender cigarettes. The tobacco industry has been trying to also segment ethnicity, but has failed in the past. One example is the brand Uptown, distributed by RJ Reynolds, which was aimed at African Americans.

Many critics felt that the tobacco industry, as well as RJR, were exploiting and encouraging minorities to smoke. Virginia Slims is currently running ads that target many cultures by showing their brand as a cigarette to be smoked by all women worldwide. Flavored cigarettes are becoming an industry favorite. Menthol cigarettes used to be the only choice available for a different taste. In today's market, there are many alternatives to menthol and regular cigarettes popping up around the industry. Camel is currently marketing new citrus and vanilla flavored cigarettes. These cigarettes come in regular, light, and ultra light varieties and offer a different perspective on smoking. Camel also is offering different blends of cigarettes that are made with Turkish and domestic tobaccos, all giving off a different taste. Marlboro was the first brand to alter the appearance of the cigarette package by offering a flip-top box. The idea caught on quickly and now most cigarette packages do have the flip-top box. This little innovation made cigarettes less messy and easier to keep track of. Today, there are still soft and hard packages being offered to the smoking community. Each package comes wrapped in a cellophane seal to help protect the box, but can be removed for immediate use. Cigarette box designs have not really changed much since the 1950s, but there is room for improvement. Targeting Strategy Philip Morris has adopted the strategy that they are committed to marketing their tobacco products to adults who choose to smoke. So what is an adult? By company standards, an adult is a person who is at least 21 years old. Philip Morris markets to adults by using a multiple-segment targeting strategy. Product specialization has worked well for the company over the last forty years. They have developed a series of brands that are very popular and well known among the smoking population. Philip Morris has also used market specialization to its advantage. The Marlboro Man is an example of how market specialization has been a success with the public.

Consumer Behaviour and Marketing Strategy

After a failed attempt to target women in the 1920s and 30s, Philip Morris pulled "Mild As May " brand cigarettes off the market. At the time, the country was engulfed in WWII and people were rationing cigarettes. When the war was over, cigarette consumption skyrocketed, but new studies coupled cigarette smoking with lung cancer. Consumers were outraged and felt betrayed by their brands. There had never been much shift in brand

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preference before, even considering price and model differences. But consumers felt mislead and dropped their allegiances with old brands. Philip Morris saw this as an opportunity to reintroduce their "Mild As May " brand, but the product had undergone a drastic makeover. Trying to attract old smokers who feared lung cancer, Philip Morris introduced Marlboro brand to the public in 1955.

Marlboro was a filtered cigarette that would be safer for all consumers. There was only one problem; filtered cigarettes were viewed as sissy and feminine. Philip Morris needed to assure male smokers that Marlboro was the right cigarette for them. Marlboro launched a new advertising campaign entitled the "Tattooed Man" campaign. The "Tattooed Man " gave off the image of a new Marlboro smoker. Men were portrayed as lean, rugged, merited respect, relaxed, and outdoors oriented. Naval officers, ranchers, and airmen represented a "Tattooed Man," all showing that filter cigarettes were not at all sissy or feminine. The men's hands were calloused and rough, depicting they were hardworking and demonstrating that filtered cigarettes were not sissy.

Marlboro developed full-page black and white advertisements that featured information on the filter and a new flip-top box. The campaign was a success and turned Marlboro into a top selling filtered cigarette overnight. As the campaign continued, researchers used different personalities to find the ideal Marlboro representative. The cowboy emerged as the most popular character and has gone on to represent what a Marlboro cigarette is today. When the Marlboro Man was first introduced to the public, Philip Morris had to explain him. Life ran an article on who and what the Marlboro Man was in January 1957, where each frame pictured the cowboy talking about freedom, smoking, and ranching out West. The article's purpose was to draw in men and make them jealous of a lifestyle that they did not possess.

This introduction led to many more educational ads over the years, which in turn has led to silent, beautiful image-filled ads featured in present day magazines. Without words, the Marlboro Man takes you to a place that many consumers have come to know very well: Marlboro Country. Consumers have also become very familiar with the Marlboro flip-top box. The design is very important to Marlboro smokers, as discovered by Forbes magazine in 1987.

At that time, Forbes polled smokers by giving them two different packages of Marlboro cigarettes. One box was the standard red with black, bold lettering on it. The other box contained unaltered Marlboro cigarettes dressed in a generic brown wrapping and at half price. Only 21 % were interested in the generic brown box, which proves that consumers prefer the bright red packaging. The box symbolizes membership into an elite club that recognizes the Marlboro Man as their spokes-person. Currently, tobacco industry


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advertising standards are very harsh. Banned from television and any print media that is targeted at people under 21, Marlboro must make use of its minimal space.

Marlboro Man ads can still be seen in magazines like Time and Life, and even on some billboards, but overall advertising has diminished. As stated earlier, Marlboro ads no longer explain anything because consumers are well educated and understand their meaning. Modern ads depict cattle running through a field, a mountain scene with wranglers herding cattle, or just the stereotypical Marlboro Man quietly holding his cigarette in his hand. Men understand the message and privately long to be a true Marlboro Man, which is what Philip Morris and Marlboro have been working on for over forty years.

Focus group

The focus group consisted of people with basically the same demographic information. Three males and three females participated in the focus group, each around the age of 21. Every person was from the Midwest, and many attended Truman State University. All the participants in the focus group now smoke Camel Lights or Marlboro Lights. Almost all the participants smoke the brand they had started with. Friends in high school were a main factor in deciding which brand to smoke. One girl had even started smoking the brand her mother used. Many started to smoke a particular brand, became accustomed to the taste, and have never changed. Price is not even a consideration.

Although Camel Lights and Marlboro Lights have the highest prices compared to most brands of cigarettes, the people in the group would not switch to another brand even if the price of the competitor's brand was extremely low. Apparently, the switching costs are high in the tobacco industry. Each group member feels a high emotional connection with their particular brand, and would not consider switching brands. The participants basically smoke because they believe they are addicted to the nicotine in the cigarettes. Many feel that smoking is a relaxing activity. Some agreed that social smoking was enjoyable. For example, Female 1 and Male 1 like to smoke while at the bar. The gas station was a popular place to buy cigarettes, mainly for the convenience. Some group participants liked to stop at the gas station on their way to work or school. One participant, Female 3, buys her cigarettes at the bar where she works, which is convenient for her.

Still others, like Female 1 and Male 1, buy their cigarettes at Walmart because the price is cheaper. Male 1 sometimes has trouble getting his cigarettes from the gas station after the weekend because they are usually sold out. Also, the participants preferred hard packs, but most would but a soft pack if hard packs were sold out. Overall, the participants were satisfied with the current product. Some participants were annoyed with the amount of wrapping on the boxes, but others thought that the wrapping protected the cigarettes

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better. The price was considered to be high, but everyone would pay to get their favorite brand. The participants were dissatisfied with the soft packaging; the cigarettes were not well protected. Most group members did not like the smell that the cigarettes left on their clothing, but did not have a solution to the problem. Male 3 had a problem with the smell, because his girl friend did not like it, and a problem with the after taste.

But these complaints would not stop anyone from smoking. The severity of the problems is not great, but a few ideas have been raised. The tobacco companies need to look at the problems of aftertaste, smell of smoke, and packaging. Soft packs were not liked by any participants. More hard packs should be distributed. One point that surprised researchers was the excitement for pre-packed cigarettes. Tobacco companies might have a marketing strategy with prepacked cigarettes. The high price of the cigarettes was noted within the group, but each was willing to pay for their particular brand.

Tobacco companies do not need to lower price because the members of the group were still willing to pay. They all saw the brands of cigarettes as being very differentiated, and therefore the industry has very high switching costs. It was also noted that the participants still smoked the same brand of cigarettes that they started out with. Many have not even bothered to try different brands. This is a key point that the tobacco companies focus on. If they can get people to start smoking their brand first, then they have a good chance of having that person making a repeat purchase. The tobacco industry is seen by consumers to be very differentiated, allowing the companies to charge higher prices and creating high switching costs. Current Marketing Mix Philip Morns' Marlboro is currently in the mature life cycle. The cigarette industry as a whole is in this life cycle. The objectives for the mature stage are to extend the life cycle for Marlboro by maintaining the brand leader position, advertising image, and cannibalizing the product. Marlboro needs to watch competition (RJ Reynolds and Brown and Williamson), maintain high brand loyalty to keep brand leadership, and continue with creating a socially conscious company. The creating of this image as a socially conscious company is a company wide customer orientation.

What has helped them remain on top is their size advantage, experience, and well-defined target. Some specific areas that Philip Morris needs to focus on are sales growth, profits, customers, and competition. Marlboro is currently in a growth maturity stage for sales growth. Although the industry is in the mature life cycle, Marlboro still controls a majority of the share and sales are increasing. With the 1998 Master Settlement Agreement, where Philip Morris had to pay a large settlement to past consumers for with holding information about the harmful effects of smoking, sales still increased from 1998 to 1999. This is mostly due to the high brand loyalty of consumers.

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As mentioned above, due to the high and unusually strong brand loyalty of the market, profits have increased even with stricter laws and regulations. Pending litigation, smoking could become even more expensive than it already is. Taxes could be imposed to increase price per pack, which would hurt profits if consumers start buying cheaper brands. If government raises the price per pack as a standard and consumers remain brand loyal, profits could increase for the company. Marlboro targets adults over twenty-one and will not use anybody in an advertisement who looks younger than twenty-five. They wish to retain current customers and try to discourage youth smoking. Many smokers start smoking in high school and remain loyal to the brand they start smoking. Though reality and their strategy are incongruent, they try to target current consumers. The three big competitors in the tobacco industry are Philip Morris (market leader), RJ Reynolds, and Brown and Williamson. Philip Morris (Marlboro) and RJ Reynolds (Camels) own the two main brands.

Due to the price increases delegated by the government, cheaper non-premium brands are catching price sensitive customers. If such price increases persist, competition could increase as well. That is only if the prices increase so much that brand loyalty sways. The case discusses how these stated strategies of Marlboro effect Porter's Five Forces. Buyers are an overall weak force in that they are so brand loyal, they will pay inflated prices for product.

They do expect more from the parent company that helps explain the Philip Morris Foundation, a community service charity ran by the people of Philip Morris, and the new slogan for Philip Morris, "Working to Make a Difference', The People of Philip Morris''1

The main reason buyers are a weak force is because of their strong, unwavering brand loyalty.

Newcomers are plentiful, and it will take a lot of work for the company to maintain its current market share. Indeed, with cigarette prices on the rise as much as they are, consumers are more likely to become, in the future, more price-sensitive than they currently are. If Marlboro falls into the age-old trap of incumbent inertia, there is a good possibility that the corporation will lose their number one spot in the industry. The biggest problems that Marlboro faces today are health problems and advertising to children. To combat these issues, the company uses a substantial amount of promotion and goodwill to keep its high-quality name. For the first part, the company is constantly giving to charities and running television commercials to promote their image. For example, in 1997, Marlboro began a concert series known as the "Dueling Diva" concerts, taking place in 10 cities over January and February. The winner at each location won a spot to open for Martha Byrne, a soap-opera actress who made her singing debut on a CD which was given away with a free pack of cigarettes.

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Marlboro saw this as an opportunity to not only sell their cigarettes with the promotional CD, but to benefit society as well. The company was "providing opportunities for local bands to showcase their talent." However, Marlboro' promotion is not always offered with a purchase. Indeed, the company has done much to promote their goodwill through generous donations to various charities. For example, Marlboro Company has a long-standing relationship with National Newspaper Publishers Association. This relationship became solidified even further when the corporation gave over $35,000 for the establishment of a Black Press Institute. Also, the University of Memphis was the happy recipient of one of Marlboro' donations. The company awarded $ 100,000 to University of Michigan for the progmme called "Extending the Bridge: Community Colleges and the Road to Teaching". The programme's goal is to facilitate student transfers from community colleges to universities, in order to improve teacher education and diversify the pool of prospective educators.

These two situations are but a few of the several examples that Marlboro is a society-minded company. The corporation uses this publicity, through press releases and regular news, as an additional source of promotion. Marlboro is also a regular advertiser on television, but not for any of its products. Instead, the company markets its brand-name by sponsoring a program known as the "We Card" programme. It simply encourages retailers to verify the age of those purchasing tobacco products. By doing so, Marlboro is trying to make known that it does not support children smoking, that only adults who chose to should be allowed to smoke. Marlboro is expected to remain strong for years to come. It has the best position according to a recent research study, to defend against competitors Governmental regulations have increased recently, which is a big part of the reason why the growth rate is starting to decline. However, the company, through the use of the aforementioned promotions, will more than likely turn the negative growth rate into a positive one. Through this, they have maintained their market share at twice that of their closest rival. However, Marlboro does not fit every aspect of the maturity stage to a tee. By definition, there are very few new customers during the stage. Although some of the new consumers come through the means of brand switching, an estimated 100,000 people per day become regular consumers to match about the same number that quit smoking all together.

As far as advertising itself is concerned, the company is very limited due to the constraints put upon it by the United States Government. For example, the company is not allowed to use any sort of character that might appeal to children, nor is it allowed to advertise, directly, for its products on television. Furthermore, events such as the Winston 500 are no longer allowed to be sponsored by cigarette makers. Indeed, Marlboro faces much opposition in the way of advertising. However, there are many creative individuals who

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work for the company. They have begun to run ads in alternative weeklies in select cities such as San Francisco to promote parties in nightclubs for smokers. Marlboro even goes so far as to buy "space over urinals and on the doors of bathroom stalls. Ads carry targeted copy such as 'Like you, we travel in packs,' and 'The latest in lip sticks." This is not to say that the company does not run regular ads as well, because they do.

In nearly every periodical, a one to two page advertisement can be found relating to Marlboro, Virginia Slims, Benson & Hedges or other Marlboro brands can be found. Again, through the use of both traditional and creative forms of advertising, Marlboro has remained the industry leader. One of the biggest problems with Marlboro' promotional campaign is its lack of effort towards the legislation towards the company. It is well known that there are several law suits pending against Marlboro, and the company remains quiet about the whole ordeal. This silence makes customers weary of the products, and distrusting of the company as a whole. Even with all of the positive publicity toward Marlboro, very little will outweigh the negative issues in consumer's minds. Not only that, but the press seems to focus in on the bad points of the tobacco industry, forming America's consciousness. Yet, this industry is booming!

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After going through this case, you will be able to :

t assess the various strategies used by the company to climb on its way upward.

• note the stress that the company lays on consumer satisfaction and also their use of technology in an innovative fashion to advertise and promote their interests.

In 1903, in a small wagon shop in Dearborn Michigan, a man by the name of Henry Ford started what is today the Ford Motor Company. It started it in 1896 when Henry Ford built his first car. It was only experimental at the time, but less than ten years later in 1908 he introduced a more updated version to the public. This became known as the Ford Model T. Once people realised what a wonderful novelty this was and how it would greatly facilitate their lives, there was a huge demand for them. In order for the company to be able to satisfy this heavy demand, Ford introduced the world's first assembly line for cars. It revolutionised the industry. By 1923 more than half of America's vehicles were made by Ford. Today, the Ford Motor Company is the number two company in its industry as well as the number two industrial corporation in the world. When the average person thinks of the Ford Motor Company, they think of just Ford. This thinking, however, is incorrect. Ford is divided into four major components, automotive, Ford credit, Visteon and Hertz. Ford also produces vehicles under the names of Aston Martin, Ford, Jaguar, Lincoln and the Mercury and Volvo brands.

Recently, Ford profits have increased significantly, for the nine months ending 30/09/06, total revenues increased 9% to 127.48 billion dollars. Net income from continuing operations decreased 10% to $4.32 billion dollars. Results reflect increased vehicle sales offset by higher warranty and costs related to the Firestone recall. Last year's total sales went up 13% to become 163 billion dollars and profits also rose 10% to become $7.2 billion dollars. As far as Ford Motor Company can remember, this is more than any other


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car company ever. Ford's main automotive competitors are General Motors, Daimler Chrysler, Toyota, Honda, Nissan and Volkswagen,

One of the ways that Ford has established its spot as the number two company in the automotive market is its focus on customer satisfaction. Ford Motor Company admits that its greatest asset is the trust and confidence earned from its consumers. When people see a Ford trademark, Ford wants them to associate that with a trust mark of certitude, quality, reliability of performance and value. Ford strives to connect with their customers as well as reach them. They try to use relationship marketing, because it is cheaper to keep an old customer rather than to attract new ones. William Clay Ford, Chairman of the Board for Ford Motor Company says that satisfying customers goes beyond great products and services. People want to do business with companies who care about them and their environment. He realises that the best cars are socially and environmentally responsible. Chief Executive Officer, Jacques A. Nasser states, "we will be a leader in corporate citizenship if we are a well trusted company that people believe contributes positively to a society and uses its resources to create a more sustainable world". Jim Vannier, Manager of Ford's advertising and marketing programs admits "if you listen toyour customer, if you provide the right product at the right time, you'll get the numbers". The above quotes make it quite obvious that the top executives of the company all concur that customer satisfaction is of the utmost importance in succeeding. If they keep the customer happy, the customer will tell others they are satisfied, and more and more people will be willing to consume their products.

Here and Now

The twentieth century was profoundly affected by the innovations of Henry Ford. The invention of the automobile gave opportunities to multitudes of people. These opportunities were not just in transportation, but in occupation as well. Today, no matter where aFord is produced, the consumer knows that they are receiving a high quality product. The reason for this is that the majority of Ford vehicle parts are designed by Ford engineers, manufactured in Ford plants and assembled in Ford product lines. When you purchase a Ford product, you are truly purchasing Ford quality. Ford is the number two manufacturer of automobiles, second only to the General Motors Corporation.

This case highlights certain strategies of this corporation that propelled it to its current number two spot in its market. There are many aspects of marketing strategies that will be discussed in this case, such as, product strategies, promotion strategies, pricing strategies as well as internet marketing and other forms of product distribution. Each one of these strategies plays a key role in the success of the number two motor company in the

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automotive industry. Many people tend not to realise just how important the marketing of a new product can be. It plays a huge role in the success or failure of the new product. For example, many people may remember many years ago when Ford came out with a new vehicle called the Edsel. The Edsel became known as one of Ford Motor Company's biggest flops, if not the biggest. The Edsel looked like some kind of giant fish sucking a lemon. Although the thought of such an odd-looking car does not sound appealing, it is said that the look is not what caused its downfall. Surprising as it may sound, the demise of this vehicle was due to poor marketing strategies. Ford's biggest mistake in marketing the Edsel was their failure to decide on their target market. They tried to market their product to everyone, and with such a large span of people this was next to impossible for becoming a success.

Objective of the Company

The mission of the Ford Motor Company is very basic. Ford sees their customers as one of the most important things; they know customer satisfaction also plays a gigantic role in their success, "[their] mission is to improve continually [their] products and services to meet [their] consumer's needs, allowing [them] to prosper as a business and to provide a reasonable return for [their] stockholders, the owners of the business. Their mission shows their devotion to constantly improve and while improving, accommodate their customer's needs. Ford's five main principals include, 1) Quality: they put the quality of their products first and foremost. Without a quality product, people will have no desire to waste their money or jeopardize their safety. 2) Customer Care: If you don't take care of the Customer, someone else will. 3) Constant Improvement: If the Ford Motor Company allowed themselves to remain stagnant in their environment, their competition would eventually have a huge advantage over them, because they would have newer and better product lines to offer. 4) Employee Involvement: Ford wants each and every employee to be involved in their company. The happier the employee, the better the worker. It is all about feeling that they are part of the Ford Team. They also want their employees to think like consumers and not like employees of a car company. Once they start thinking like a consumer, they can cater more to the needs of their actual consumers because they will know what the consumers want. 5) They consider dealers and suppliers to be their partners: without the dealers and suppliers Ford would not be able to manufacture the things they need alone and therefore would not be able to produce as many vehicles as there would be a demand for or even be able to distribute them all to people.

The Arena

Ford has many competitors. Since Ford is ranked the number two company, its main competitor is quite obviously the number one company, General Motors Corporation.


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General Motors, also and American company holds 29.4 % of the automotive market share while following close behind them the Ford Motor Corporation holds 25.1%. Of the top 5 best selling cars in 1999, Ford Taurus appears as number three and Ford Escort appears as number five in a recent survey. The automotive industry has fierce rivalry among its competitors. In the past years the following mergers have occurred- Daimler Benz acquired Chrysler and Ford bought Volvo. Ford bought Volvo in order to be able to properly compete with General Motors, this way Ford is not allowing General Motors to become too much larger than they already are. If General Motors develops a new feature or automobile, Ford must be right behind them with their most innovative invention, and vice-versa.

Ford has 25.1 % of the market share presently. This is quite impressive considering that the number one automotive company, General Motors, also an American company has 29.4%. This means that the top two companies hold more than 50% of the market share. This is quite extraordinary. The total market value of the Ford Motor Company is approximately $56 Billion dollars and their profits are well over $7 billion. In 2005 Ford sales raised up to $163 billion dollars. This was a thirteen- percent increase from the previous year.

The Catch

A car, if not properly assembled, maintained, and operated can become a deadly weapon. The United States government regulates many aspects of the automotive industry. Among these regulations are seatbelts, airbags and shatter proof windshields. The government has also made inspection and maintenance programs more expanded, in order to include more areas and allow for more stringent tests. In 1990 the government amended the Clean Air Act. The main focus of the act was to cut down on all the urban smog, carbon monoxide and particulate emissions from Diesel engines and to help decrease acid rain and toxins that motor vehicles contribute to. The amended act demands that polluted cities must sell improved gasoline that helps to reduce ozone forming Hydrocarbons and Carbon Monoxide. Once inside an automobile, the operator of the vehicle is responsible for obeying many regulations as well. It has become extremely important, for instance, to wear your seat belt. Primary enforcement seat belt laws allow police to stop and ticket a driver for not wearing a seat belt, just like any other routine traffic violation. Seventeen states and the District of Columbia have enacted these laws. The remaining 32 states have secondary laws that allow law enforcement to ticket a driver for not belting up only after the person has been stopped, or ticketed, for another violation, and one state does not have any seat belt law. Obviously, safety belt laws work, and the public overwhelmingly supports them. Three out of four Americans support safety belt laws, according to a recent public opinion

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survey. Stronger safety belt and child passenger safety laws, and stepped up enforcement of those laws, are the most effective steps we can take to save lives.

Corporate responsibility towards society

Ford Motor Company sponsors many programs to better the community and their safety. For example in the Detroit area, Ford organised a weekend clinic in which the automotive safety office educated fifty-five people and their children on the proper use and installation of child safety seats. They demonstrated this in the consumer's actual vehicles. Ford is also committed to environmental cleanliness. They sponsor programs to educate our children on environmental cleanliness and responsibility. They also sponsor company -wide recycling, cleaner operating vehicles, recyclable components, cleaner manufacturing, and employee involvement in environmental activities. Ford does not do these thing because they have to, they do it because it is the right thing to do. The Ford Motor Company not only is socially active, but culturally as well. Ford provides financial support at many historically black colleges such as the Tuskegee University in Alabama, this is where the famous black inventor George Washington Carver performed many of his experiments. Ford Motor Company, as of 1999 has 23.2 percent of its employees as minorities. This is up 1 % from 1998. Diversity makes the business world go round and no one knows this better than the Ford Motor Company.

Innovation or Death

The Ford Motor Company values heir Product Analysts. [Their analysts Develop product cycle plans that help forecasters determine [their] approach to different markets. The people who start the product cycle are called the Research, Design Packaging and Financial Analysts. The researchers find out what types of things that consumers would like their vehicles to be equipped with. The Design Packagers are the people who decide the most appealing way to package the final product. The financial analysts put the numbers together to figure out exactly how much money all of the above will cost. Next, designers and engineers along with testers actually create the vehicles. They create vehicles according to the specifications of the Research, Design Packaging and Financial Analysts. This way they are producing what the market wants. The Research and Advanced Technology Teams then decide which technologies should be used in the new products. Ford is constantly trying to improve their product development and expand their innovations. Currently, Ford is working on a new line of intelligent vehicles. These vehicles will enable the driver, through voice activation, to connect to the internet. The voice activation will also be implemented into the navigation system, heating and air-conditioning, cell phones, audio systems, and other electronic things inside the automobile. Ford is adapting to each

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change in order to be able to bring their customers the most innovative and convenient products possible. As soon as new technology becomes available, Ford Motor Company is among the first few to try to implement it into their vehicles.

Product Targeting

Ford Motor Company has different types of cars, which are each targeted towards many different markets of people. As the company learned the hard way with the Edsel, the importance of a target market is extremely high. Loss of a targeted marketing focus usually means a loss in sales. Ford has a different car targeted towards different age groups, personalities, genders and economic standing and more. The Ford Mustang, for example, is targeted mainly at the middle aged. This is exhibited by its slogan of it is what it was and more. This implies that the targeted consumer would be old enough to remember what the mustang was when it first came out in the 1960's.

Another example is Ford Trucks. Their slogan is "Built Ford Tough" The toughness implies a target towards rugged men. Because of the fact that the word "tough" is used, it seems that it would be very unlikely that the Ford Motor Company would be using that to attract women. When the word "tough" is thought of, women are generally not the first thing that comes to mind. The third and final example is the Ford Taurus. Its slogan is "Ford makes it smart to buy American." The target market for a Ford Taurus is a family. The Taurus station wagon for instance is a great family car with tons of room, yet it handles like a sports car. The above three examples are only a small sampling of what Ford offers. Ford Motor Company manufactures sedans, SUVs, trucks, luxury cars and more. If you are looking for it, the odds are that Ford will satisfy you.

Product Mix

The Ford Motor Company has such a wide selection of vehicles in order to satisfy every different type of potential consumer. They offer small cars, sports car, midsize cars, luxury cars, vehicles, convertibles, wagons, minivans, vans, trucks, commercial trucks, and even environmentally efficient cars. Each of Ford's different types of vehicles have many different options that come along with them. The 2001 Explorer for example, runs to roughly $25,715 dollars, without any extras. However, should the consumer decide that he or she would like to add perks, there would be many choices. For instance, in the convenience group of options, you can add anything from a cargo cover to speed control. In the XLS sports group anything from chrome steal wheels to wheel moldings. There is even a trailer tow prep package, which includes a wiring harness and an H.D. Flasher for only $355 dollars extra. After that, the consumer has the option to add even more options. They can customize the engine, transmission, drive, rear axle, wheel type, tire type, seat type, seat equipment

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and much more. The company also offers the Explorer in 10 different colors for the exterior. With the plethora of the above options, how could anyone not find what they are looking for? Each one of the 24 cars manufactured under the Ford name has many options as the Explorer, if not more.

Services Offered

When you own a Ford vehicle, you can register for Owner's Services. This includes reminders of when your vehicle need to be serviced, tips for vehicle safety, maintenance information, do it yourself pointers and online manuals. It also includes warranty guides, offers and discounts exclusive to people registered for the service, online shopping, private communication, links to Ford Company Specialists. Ford, Lincoln, and Mercury dealerships specialize in the servicing of their own vehicles. The dealership is a wonderful place to go to have your breaks serviced, shocks replaced and batteries as well. The company also offers Extended Service Plans (ESP). With the extended Warranty Plan and the Factory unlimited Warranty; you are able to choose a plan that suits your needs. The way the plan works is, you pay a small deductible anywhere from $0-$ 100. The Ford ESP cost protects the consumer from increasing prices in labor and increased prices in parts. Other services that are offered by Ford Motor Company are a Customer Assistance Center, Collision Assistance, Roadside Assistance, Technical Service Information and their website. The web site includes links to safety tips and Frequently Asked Questions.

Promotion Strategies

The current promotions that are offered by the Ford Motor Company are Radiator Service, Brake Service, and Batteries. All of the above promotions are wonderful for the upcoming winter months. The radiator service includes, top of all fluids and a free 12 pt all weather check of hoses, clamps, belts and more. This promotion and all of the above promotions appeal to people who are thinking ahead to the cold winter months. This winter in New York has been predicted to be one of the worst we have seen in a while. A radiator is not actually something you would want to break down in the middle of a snowstorm. The battery promotion is offering a Motorcraft tested, tough series battery. They are also offering a Silver Series Battery for only $20 dollars more. Each promotion for a new battery comes with over an 83-month warranty. It is a good idea to replace your battery before a new winter season. When it is freezing outside, trying to find a Good Samaritan who is willing to give you a jump is a rarity. The Brake promotion comes with the Motorcraft brake service. The promotion includes replacement of brake pads or shoes, front or rear turn rotators and drums. The promotion will also check the brake's hydraulic system and repair, if necessary. This once again appeals to the person(s) who is preparing for the


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harsh winter to come. Being that, a bad winter generally means a lot of snow and ice. With weather conditions like that, who needs to worry about brake failure?

Pricing Strategies

One of Ford' pricing strategies is the fact that they try to help the consumer finance a Ford vehicle. Ford offers its consumers many plans to choose from in order to find the financing option that best fits their needs. The following are only a few of Ford's financing options. The first is the Red Carpet Lease: The consumer is offered flexibility for payment; there are advance payment plans and Additional Payment Programs, depending on which one is best for you. The second financing plan is Mobility Financing: Mobility Financing offers flexible and convenient financing terms for their physically challenged consumers who need adaptive equipment in their vehicles. The finance rate is based on your credit and the terms of the transaction. Ford credit has earned a top ranking place in the world of automotive finance by providing loans and leases that are convenient and affordable. They also specialise in services such as commercial lending and municipal financing.

The Municipal Financing is so convenient that it can be calculated on the internet. All that needs to be done in order to do this is, select a vehicle, model, make, and product line. The online calculator will then give the consumer an estimated lease and retail payment. Ford financing company provides a variety of products and services to both, the dealers and the consumers. Ford Credit also has a commercial lending operation, which caters to light truck fleets and heavy trucks. Ford wants to make it as easy as possible for consumers to be able to drive a Ford. There are so many different financing options that are offered, that finding a plan that is right for you has become easier than ever. If buying a new vehicle is not financially possible, then Ford also offers a whole line of pre-owned vehicles, which are backed by Ford Motor Company with a 100 point inspection.

Distribution Internet Marketing

Ford's newest web site for Ford division cars and trucks is The new web site allows perspective customers to compare Ford vehicles to other cars made by other manufacturers. They are the first company to give consumers the option of product comparison. The section of product comparison on the web site comes complete with photographs, feature description, safety options, competitive pricing, financing and warranty information. Ford division internet coordinator, Trisha Habucke states, "With our new design we incorporated new technologies that deliver more visually exciting content". The web site is so user friendly that consumers can just go right from one Ford vehicle to the next with out any trouble. Ford is committed to bringing their customers total brand experience.

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Case 104 The Magic of Ford

For example, Ford knows that people with certain types of personalities are attracted to certain types of cars. Explorer drivers, for example are rugged, the "No Boundaries-Ford Outfitters" slogan appeals to them. When Ford began their Internet market, they did the most extensive research even conducted by a car company. Their advertising agency, J. Walter Thomson found that 210 test participants concurred that the Ford website deserved a high rating for its complete content. Ford attributes a fair amount of the success to the internet. The internet is a way reach millions of people. The company realises that is has been a powerful tool. Erin Hughes, who is a Ford employee since 1999, admits that her greatest tool is the internet. Erin's Regional Manager realised that if they had one person whose sole job was to be dedicated to the internet, the company would prosper.

Erin later became the first Internet Customer Satisfaction Coordinator. In addition, Hughes started the first internet club for Ford dealers. Since the position of Internet Coordinator is now more common at Ford Motor Companies, once per month all of the internet coordinators get together to share their most recent e-commerce news and best practices. Hughes says "my job is to provide our dealers with the resources and technology needed to help them sell more vehicles on Main Street and E-Street". Advertising also plays a large role in the distribution of Ford Motor Company's products. Ford advertises on Television quite often and also on the radio. Previous slogans that Ford had etched in everyone's minds include things like "Have you Driven a Ford Lately ?" with a catchy little tune along with it. Ford also has their slogans and product photographs on major highway billboards a cross the county as well as scoreboards at sporting events such as baseball. Sometimes, on television movies, you will even catch a glimpse of the Ford logo during commercial breaks where the broadcaster will say something along the lines of sponsored by Ford Motor Company.

The Ford Motor Company has come a very long way, since Henry Ford first established it. They went from a little wagon shop to the second leader in automotive sales. They have been around for almost a century. Ford has elaborative marketing strategies as well as distribution strategies. Their web site was extremely easy and fun to use. Ford is also a very well rounded company in that they are very environmentally concerned. It is nice to see that people realise, if we don't save our planet now there will be nothing left for future generations. With Ford's experience and high understanding of, and ambition for the satisfaction of the customer, can they some day be the number one automotive company, beating out the General Motors Corporation?

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After going through this case, you will be able to :

• underline the offer of alternative space by the authorities after demolition

• analyse the proximity and location problems which creating hurdles

• assess shop-keeper's decision to purchase shop-space in the city.

'Get-well Medico' is a reputed medical store, located along a busy street in a densely populated area of the city. In the course of road-widening activity, the municipal authorities have decided to demolish the building, housing the 'Get-well Medico'. The municipal decision is duly cleared by the courts of law. Municipal authorities have offered a free alternative shop-space to Get-well Medico, in a suburb 7 kms away from the city-centre. This suburb is a up-market locality having wealthy residents. As yet, there is not a single hospital or dispensary or a medical shop in this locality. The proprietor of Get-well Medico is also considering the option of purchasing a shop-space in the central part of the city. But this space will be too small and too expensive.

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After going through this case, you will be able to :

• find that fierce competition plunges profit-making fertilizers firm into huge losses

• analyse restructuring and suspension of unviable products

• underline the marketing and distribution tie-up with US firm

• explain the US firm's decision for a second distributor

• recognise the US firm's insistence on distribution and marketing priorities

Paramount Fertilizers is a limited company, situated at Ooty, in the Nilgiri District, engaged in the manufacture and marketing of fertilizers and rose-mixtures in India. There was a good demand for their products and Mr. Sunderesan, a leading industrialist, was the promoter of the organisation and acted as Chairman-cum-Managing Director from the day of its inception. Mr. Kesavaprasad, with a M.Tech, degree, was appointed as General Manager, who was to report to M.D. and look after the technical as well as marketing co-ordination of the company. Mr. Rama Murthy, a middle-aged man, having 15 years of marketing experience, was working as the Marketing Manager and under him were a few Sales Executives and Sales Assistants at the regional level.

The company was one of the pioneers in the industry and had branches at Coimbatore, Madras, Trichy and Thanjaur in the State of Tamilnadu, at Guntur in Andhra Pradesh and a Sales Office in Bombay. Since it had a professional marketing set-up, a balanced turnover of around Rs. 2 crores was maintained yearly. For nearly 10 years, the organisation was among the top ten sellers in the field. During 1963, the company had stiff competition and was forced to reduce the output, lay off the workers and faced severe financial crisis. The GM exhorted the top officers to find out ways and means of reducing expenses, motivating the sales force and, thus, to bring back the company to its original glory. It was found, that


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out of 10 product lines in existence, two products' life cycles were very poor, two products were of purely seasonal nature and the off-take was always far below the breakeven and only the other six products contributed towards the company's profits. Hence, it was decided to suspend the production of those four uneconomic lines and to go ahead with the other six products in full steam. Further, it was decided that the company should either diversify or look out for the marketing rights of insecticide or fungicide manufacturing company, to increase the market share and profits in future.

M/s. Pennsylvania Insecticide was a giant American company. And they were interested in marketing their fungicides in India. They were ready to give the distribution and marketing rights to M/s. Paramount since it had a professional marketing team and a reasonable financial back-up. Hence, both of them joined, to draft an initial 5 years agreement.

the test marketing was encouraging and the new products were soon selling alongwith old products. Three young M.B.As were recruited to head three new branches. The turnover and the profits showed three-fold increase. The mutual agreement was extended for five more years. In the meantime, the M.D. retired and was retained as Technical Advisor to his M.B. A. son, who succeeded him in the M.D's chair. Towards the end of 9 th year of the tie-up, the Pennsylvania outfit felt that it would be better to appoint one more joint distributor, since the products were under great demand. On learning of this intention, M/s Paramount was concerned and seriously discussed the possibility of cancelling the tie-up if a joint distributor was to be appointed.

A giant Indianised British organisation, viz. M/s. lllingworth, was a leading manufacturer of fertilizers. However, the oil crisis and subsequent inflation forced M/s. lllingworth to concentrate more on marketing activity. As such, they approached M/s. Pennsylvania for distributorship in Tamil Nadu, Andhra Pradesh and Kerala. Since, M/s. Pennsylvania had been looking for a second distributor, they thought that M/s. lllingworth would be an ideal choice.

In the meanwhile, a sea change in attitude came over in the Management of M/s. Paramount. They now had made up their mind about M/s. lllingworth being appointed as the second distributor in the region. Though the Marketing Manager of M/s. Paramount was very much against the proposal, he also succumbed to the pressure and accepted the new idea. As a special case, M/s. Pennsylvania agreed to relax the credit facility further by a month. However, M/s. Pennsylvania refused to resolve priorities in supply matters and contended that the delivery can be made only on first come first served basis.

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Case No. 107TRISTAR


After going through this case, you will be able to :

• find a firm with a simple marketing and distribution network.

• recognise its occasional system failures, caused by external forces.

• underline the competitor's "45-days credit period" facility: plunging firm's sales bydealers.

• analyse illogical demand forecasts and spiralling costs of sales, distribution andinsurance.

After obtaining a management qualification, Mr. Kaushik joined Tristar, as a management trainee in the Sales Department. It was a sudden rise for him and, within eight years, he became Sales Manager.

Tristar had two product lines viz. air-conditioners and refrigerators. While the company's air-conditioners were manufactured at its Thane factory outside Bombay, its refrigerators rolled out of a plant at Jalgaon in Maharashtra.

Tristar had set up eight branch offices across the country, each of which controlled two sales depots. The distribution system was simple : based on the demand estimates supplied by the branches, goods were dispatched to these 16 sales depots, where they were then held in stock until invoiced to dealers. A typical branch served 50 dealers. However, Tristar's estimates of the stock requirement of its 800 dealers were invariably faulty, due to various reasons including political uncertainty and acts of God. Often, it became necessary to transport goods between the 16 sales depots to bridge gaps in stock levels, leading to a collapse in the distribution system.

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Tristar's split level air-conditioner started experiencing erosion in the market share base, due to 45 days credit given by the competitor for its brand 'Pleasant' against the 30 days by Tristar. Orders would pile up with dealers who always used to deflect consumer preference to a rival. Dealers stock-out became a common problem on several occasions. Tristar was keeping its customers waiting for upto three weeks before it delivered.

Illogical demand forecasts were adding to sales and distribution costs to the tune of 6.3 % of sales. Transit insurance costs went through the roof to an alarming 35 %.

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After going through this case, you will be able to :

• find an entrepreneur expanding and diversifying his business into a partnership firm

• recognise a firm's well-knit distribution network and marketing team

• underline, however, the weaknesses in the strict follow-up of terms and conditions;while dealing with distributors

• analyse the consequential effects resulting in huge outstandings

Read the following case and answer the questions at the end.

Mr. Ramrao Panase had a small business of manufacturing papads, wafers, jams and many other daily needed things. He was doing his business himself. After a few years, his products became so popular that he started getting orders from other towns also. There were about 10 to 12 towns where Mr. Ramrao was supplying his products and had created a goodwill amongst the small shopkeepers. During these years, he diversified in many other fields such as gas agency, supply of engineering items, etc. However, his main business was increasing so much that it was not possible for him to give personal attention to it. While doing the other businesses, he had come across a person who became his good friend also. This friend, Mr. D'costa, was General Manager of a company manufacturing chocolates, toffees and biscuits. He had a vast experience of selling these consumer products. He told Mr. Ramrao that his original business had a wide scope and that if the marketing of these products is done scientifically, these products will become very popular and create a name of its own in the consumer market. Since Mr. D'costa was to retire within 2 to 3 years, Mr Ramrao requested him to shoulder this responsibility and offered him a partnership, which Mr. D'costa gladly accepted. He took premature retirement and joined hands with Mr. Ramrao. Mr. D'costa knows that if the business is to be expended, it has to have a distribution network and a marketing team.


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Accordingly, the distributors were appointed all over the country. While appointing the distributors, M/s. Sujata Provision Stores and M/s. Anil Dhanya Bhandar who were direct dealers were appointed as full fledged distributors. As per the terms and conditions of the company when the security deposit money was asked, both these dealers reluctantly made the part payment with an assurance to the District Manager incharge of territory that they will complete the security deposit amount within the next 6 months.

After one or two transactions, it was observed that the cheques of these two parties started bouncing. And every time, the District Manager had to run to collect the outstanding payments. Every time these two distributors gave some lame excuses like someone's death in the family or the main proprietor was away from the town and so on. The company wrote mild, moderate and strong letters indicating that the repetition may compel the company to terminate the contract. However, the cheque bouncing continued. The company could not take the decision to terminate the contract since the heavy outstanding payment was due. The District Manager and the Sales Representative did neither recommend termination nor did they stop booking orders with a possible fear that the demand created in the market may get disturbed.

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After going through this case, you will be able to :

• find two engineers developing car radio, tape players.

• discuss their plans for commercial production.

• underline market domination by small players.

• recognise, with product-acceptance, emerging distribution problems.

• analyse large-scale production and distribution problems.

Sudhir Joshi and Kailash Deshpande are two brilliant electronics engineers. After their graduation, they decided to set up their own business. Right from their college days, they had displayed a good aptitude for practical work. During this time, they had developed different electronic gadgets for home use.

However, for the commercial production, they decided to manufacture car radios to begin with hater, they had plans to take up cassette players. Both Joshi and Deshpande come from middle class families. As such, raising finance was always a problem for them.

The market for car radios and tape players is dominated by small scale manufacturers. Majority of them are from Delhi-Punjab area. Surprisingly, better-known names for radio receivers are not making car radios. Those who are big names in stereo systems also mostly ignore the market for car tape players.

Joshi and Deshpande developed a prototype. They offered it to a friend of theirs who owns a large automotive service station. He found the performance very satisfactory. He asked these young engineers to make more sets which he offered to his clients. Joshi and Deshpande found that they were making around 10-15 sets every month. The only outlet


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that was used for marketing was this automotive service station. At this juncture, the two partners decided to go in a big way. They found that their quality was superior and prices almost 25% lower than the competitors. They were confident about the production, but, would they be able to do the distribution on an all India basis?

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After going through this case, you will be able to :

• find sports material firm catering to rural markets.

• recognise meticulous follow-up of distribution schedules, channels.

• underline resistance to discount strategy to avoid compromise with quality.

Ashoka Sports Ltd. is a leading name in sports material. It concentrates on rural markets in Maharashtra. Ashoka is known for its quality image.

The company is very selective about its distribution and follows Just-in-Time (JIT) Inventory and the 80-20 principle.

It ships sports goods to its retailers by road, parcels, courier, and trains. The company seeks assurances of premium service and quality display from its retailers.

Ashoka does not permit any slash of price or discount by the retailers on any grounds as the company feels that it will tamper its quality image.

Retailers re-order throughout the season of six months (From November to April). The company receives orders with total payment in advance, since it follows Just-in-Time (JIT) policy.

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After going through this case, you will be able to :

• find PDS flops, with failure to reach target audience.

• underline a new TPDS proposal for lower income groups.

• recognise separate cards and prices for different segment consumers.

The Indian Government has implemented the scheme of Public Distribution System (PDS) for foodgrains and other essential consumer items. The main objective of this scheme had been to ensure the supplies of the essential consumer items to the 'vulnerable' sections of society. However, it has been found that the scheme has not been very efficient and many of the 'vulnerable' society members could not avail the services of this distribution system.

The government is now proposing to launch a new "Targeted Public Distribution Scheme" (TPDS). This scheme shall be particularly targeted at the lowest income consumers. This scheme shall segment the lower and higher segment consumers through separate ration cards and prices for the items sold.

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After going through this case, you will be able to :

• find WM living upto its motto : quality products and service for low prices.

• underline its history, growth and expansion strategies.

• recognise perfection in the development of worldwide logistical systems and localdistribution centres.

• analyse WM's logistics expertise in depth.

The first Wal-Mart was opened in Rogers, Arkansas, in 1962. The Founder, Sam Walton envisioned a store offering high-quality products and service for low prices.

Today, Wal-Mart employs more than 1.2 million employees and operates 3,118 retail locations in America, and another 1,071 overseas. These outlets range from its Wal-Mart discount stores, Sam's club warehouse stores, Wal-Mart Supercenter combination discount and grocery stores, neighborhood markets mid-sized grocery stores, to the asda stores in the United Kingdom. Wal-Mart is currently the largest retailer in the United States.

A Logistics Leader

Several factors contributed to Wal-Mart's enormous success in the American retail market. Its low prices, vast selection, and superior service all keep the customers coming. One of Wal-Mart's biggest strengths - its logistics - appears only behind the scenes as the biggest retailer in the United States. Wal-Mart's marketing logistics demands are considerable. The company must co-ordinate with its more than 85,000 suppliers, manage inventory in its warehouses, and bring that inventory to its 20-feet-tall retail shelves. To streamline these tasks, Wal-Mart set up a "hub-and-spoke" network of distribution centers. Centers are spaced across the country so that no store location is more than a day's drive away. Its


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ability to effectively manage such a vast network prompted one business writer to declare Wal-Mart "the king of store logistics."

Sam Walton was something of a visionary when it came to logistics. He had the foresight to realise, as early as the 1960s, that the company growth he was striving for required the installation of advanced information systems to manage the volumes of merchandise. In 1966 Walton hired the top graduate of an IBM school and assigned him the task of computerizing Wal-Mart's operations. As a result of this forward-looking move, Wal-Mart grew to be, in the words of another business writer, ''the icon of just-in-time inventory control and sophisticated logistics, the ultimate user of information as a competitive advantage." By 1998, Wal-Mart's computer database was second only to the Pentagon's in terms of capacity.

Global Expansion

As Wal-Mart expands into global markets in South America, Asia, and Europe, it relies heavily on its logistics prowess to help it move quickly and support the rapid growth it seeks. At first, the company's systems for entering foreign markets needed improvement. Wal-Mart encountered difficulties in certain markets due to the lack of historical data, inexperienced management, and the monumental task of buying and stocking 50,000 to 70,000 items for each international supercenter. When Wal-Mart opened its first supercenters in Brazil before the 1995 holiday season, managers did not anticipate sales which were quadruple those of a comparable U.S. store and could not keep up. By 1997, the company had made rapid progress. Wal-Mart was opening locations at 20 percent less cost, developing local distribution centers to manage the huge volumes of goods going to the stores, and tailoring the stores to meet local tastes. For example, the company added fresh pasta shops to the Wai-Marts in Brazil after customer data revealed heavy pasta consumption in that market.

Wal-Mart Moves to the Internet

Wal-Mart capitalised on its logistics expertise when it took to the Internet with in 1996. The website borrowed resources like inventory, distribution, and information systems from its parent company. After Wal-Mart expanded the site in 1999, was widely initially criticised for its sluggishness and poor customer service. In 2000, the company partnered with a Silicon Valley venture capital firm and made a separate company and retooled the website. Among the features added was in-store returns for items purchased on the site and more reliable delivery. In une 2001, debuted its internet service provider, which offer unlimited Web access for less than $ 10 a month.

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Case 112 Wal-Mart: A Logistics Leader

Wal-Mart's dedication to logistics was evidenced by its promotions of H. Lee Scott, the former head of its logistics division, to CEO in 2000. Scott was famous for taking a logistics approach to Wal-Mart stores when he took charge of merchandising for the company in 1995. He developed a system for giving current merchandise enough shelf space, limited price markdowns, and increased direct-to-store shipments from suppliers. Scott took over the company at a time of unparalleled success. Wal-Mart's annual sales in 2000 reached $ 191 billion, a figure that earned the company the number two spot in the Fortune 500 ranking. The company's commitment to logistics played a major role in bringing it to that point, and will doubtless continue to be large part of the Wal-Mart in years to come.

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After going through this case, you will be able to :

• find MRs replaced with PTHWs as couriers.

• state apparent causes for change : low costs, wider reach, etc.

• identify differing perceptions : global exposure x down-to-earth approach.

• underline, despite the CEO's resentments, firm posting profits.

Niranjan Rajadhyaksha, appointed as CEO of Surabhi Drugs Ltd. was confronted with an ugly reality. If it was left to his senior Vice-president (Sales Marketing), Jitendra Panchal. Rajadhyaksha would soon have been left with a frontline team. Panchal was replacing Surabhi's medical representatives with part-time health workers as couriers (PTHW). His logic: it lessens costs, improves reach and frees the Sales Manager to deal with customers.

Mr. Rajadhyaksha, even though a salesman at heart, had a global exposure in marketing, while Mr. Panchal's career was rather colourless in comparison. Panchal had a down- to earth approach; while Rajadhyaksha's was thoroughly professional.

Rajadhyaksha resented Panchal's strategy of appointing health workers on the ground that these part-time status workers would spell hard times for the company. The company has posted a profit of Rs. 18.00 crores on the turnover of Rs. 250.00 erores.

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After going through this case, you will be able to :

• find an executive with vision and judgement in business.

• recognise his actions and policies which resulting in higher sales, profits and plantexpansion.

• evaluate his mindset concerning his own employees and reflecting his own failures.

• underline his denials of opportunities, lack of motivation and loss of faith and confidencein his own employees.

• criticise his final blow to the Training Department's existence.

Prakash Khanna joined the Deepak Pharmaceuticals in 1980. He earned quick promotions and in 1983 was promoted as a General Manager of the company. The company had an annual turnover of Rs. 3 crores. As the products of the company were in high demand, in spite of company having a large manufacturing capacity, the backlog of unexecuted orders increased substantially.

Soon after taking over, Khanna informed all the dealers that only orders accompanied by cheques for the value of the goods ordered will be executed. The dealers enjoying clean credit facilities for years were told that the company could not afford it any more. This irked the dealers but they put up with this.

Khanna also slashed the advertising budget as in his opinion a company which could not fully meet the existing demand should not seek to create additional demand.

In spite of the withdrawal of credit facility and the reduction in advertisement expenditure, the sales continued to rise. Cash reserves showed a distinct improvement and the company was able to buy some of the latest machinery, which it had been postponing for last two years.


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Khanna was against filling higher positions from among the existing employees of the company. He ordered all the departmental heads to fill in existing positions by recruiting fully trained persons from outside. Consequently, the Training Department was wound up and its personnel were absorbed elsewhere.

Khanna suffered a heart stroke in 1992 and sought voluntary retirement. The Board of Directors appointed an outsider to fill the vacancy caused by Khanna's retirement.

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After going through this case, you will be able to :

• find interference in daily working by a boss's son, which disturbs the executive.

• recognise an executive's concern for a wider field (scope) for his skills developmentand satisfaction.

• analyse alternatives in consultation with his friend.

• underline the stark realities of life: no finance, no influence.

Jayant had prospered fairly well in his employment and had a good pay and status. He however, started feeling clamped when the boss's young son joined the business and started interfering with the day-to-day work of senior officers. Jayant also felt that for proper development, his skills demanded a wider field which would not be available under the boss's son.

He toyed with the idea of standing on his own. As a result of discussions with friends, he picked out a friend, Dinesh, who was in more or less a similar situation. They together listed the alternatives before them as follows:

a) To continue the status-quo

b) To seek other employment

c) To join together to form a consultancy firm

d) To join together to form a small jobbing firm

e) To do as in (c) but independently


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f) To do as in (b) but independently

When they analysed the alternatives, they felt they had not got the finance or the "influence" to insure a degree of confidence for success. At the same time, to continue as before was to court frustration and demoralisation.

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After going through this case, you will be able to :

• find a moped company with two brands a market leadership and a good reputation.

• recognise the entry of advanced technology vehicles - a setback to moped sales.

• underline the company's restructured strategies, enthusing new blood, reactivatingFAS scheme.

• analyse an unpleasant motivational award by which the recipient gets discouraged.

• assess the consequential effects on low performance.

Priya Automobiles Ltd., Pune is in the manufacturing field of two wheelers. They manufacture and market mopeds. These are available in the brand names 'Priya' and 'Supriya', while 'Priya' is their traditional model, 'Supriya' is the improved version.

The company was started about 15 years ago. Their product 'Priya' enjoyed a good reputation and they were comfortable in the market. However, with the entry of new generation fuel-efficient mopeds, the company started loosing its market.

The Priya model was still acceptable by a segment of the market, as it was the cheapest vehicle. Supriya was a generation vehicle. It was costlier than Priya, but its performance was much superior. It compared favourably with the competitors' products. However, it was yet to gain a foothold in market.

The company had to restructure the marketing activities in order to get back their market share. They employed a young sales engineer, Mr. Sudhir Jain, BE with a diploma in marketing, to launch a strong sales drive. He was selected and was put on the job.

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Mr. Jain started off well in his new job. He was given a territory to contact the prospective customers and book the orders.

The company had introduced a new Financial Assistance Scheme (FAS). Under this scheme, the buyers were given easy loans. It was particularly advantageous for group bookings by employees working in an organisation.

Mr. Jain was able to contact people in different organisations, arrange for group bookings and facilitate the loans. His performance was good in the first year, as well as in the second year of his service.

The company had its own system of rewarding those whose performance happened to be good. The Marketing Manager calculated and told him that it would cost about Rs. 6000/- Mr. Jain quickly asked him whether he could get that Rs. 6000/- in cash instead of the trip as he had better plans. The Marketing Manager countered this saying that it might not be possible to do so. It was not the tradition of the company. However, he would check with the Personnel Manager.

The Marketing Manager and the Personnel Manager thought he was a bit fussy about money. Some of his colleagues also thought so. During the subsequent year, Mr. Jain's performance was not at all that good which showed his lukewarm attitude towards his job. Many questions arise from this case.

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After going through this case, you will be able to :

• find an organisation with no "rules," "guidelines" or "comprehensive policy" formotivating sportsmen-employees.

• recognise management decisions on "ad hoc" basis or at the "wish a will" ofmanagement officials.

• underline such decisions' consequential effects on the sincerity of employees.

• analyse the situation involving confrontation with union-leaders.

Kokan Trading Company is an engineering concern and has branches in as many as ten States and Union Territories of India.

The establishment has over 7000 employees, including 1150 officers. The organisation, though spread over in different cities, has a common seniority both, for officers and workmen.

The organisation very generously encourages sports and sportsmen and has a number of teams participating in various local and state tournaments. Kokan Trading Company also has individual officers and workmen participating in different tournaments in individual games such as tennis, badminton, table tennis, chess, etc.

One of the middle-level officers of the company achieved an extraordinary standard in tennis and has won in his individual capacity, first the state title, then the National title and then the International title. Kokan Trading Co. was proud of this employee and gave him every facility to develop himself. In one year when the middle level officer won a triple crown in All India Championship and also a championship in two international prestigious tournaments, the local Chief Manager under whom he was working was immensely impressed by the performance.

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The Chief Manager, thus, impressed by his performance in the sports field, promoted him straight fives steps above his own level. Normally, for his colleagues in the same grade, it would take about 14 years to reach the level and that too by appearing for different examinations and interviews (for judging suitability, conducted by the management). It so happened that one of the workmen of the Kokan Trading Co. had also obtained sufficient expertise and skills to represent in the state in the Basketball team with definite potential of representing at the national level in due course. The trade union operating in the establishment, while thanking management for promoting the officer, five ranks above his own for the splendid performance in sports, also requested the management to show a similar gesture for this workman who has reached a level representing a state team. The union leader argued that in spite of the worker's poor circumstances and generally unfavourable conditions of life, his attaining the expertise to reach a standard of representing state level team, is perhaps as good as the officer's feat of attaining international standard. The Trade Union therefore expressed its hope that the management would promote the workman for his sports activities also five ranks, as was done for the officer for his purely sports activity.

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After going through this case, you will be able to :

• find an employee, though with no formal SM training, is promoted as RSM.

• recognise his outstanding selling record, massive experience, as assets.

• underline his concern for sharing his knowledge with the sales personnel.

• identify his presentation which climaxes his colleagues' resentment.

• analyse the causes of resentment among the sales personnel.

Astroid Computer Corporation is a Bangalore-based manufacturing company. It produces personal computers, monitors, interactive terminals, disk-drives and printers. During the last three years, Astroid has experienced an explosive growth in sales. Its turnover shot up from 20 crores to 200 crores, in the last three years. The corporation distributes its products through own retail-outlets as well as franchisees. Six months ago, Amreesh was promoted to the post of Regional Sales Manager. As a long-serving employee, Amreesh was called a super sales person. He had bagged several annual awards for his selling efforts. He had earlier worked in IBM and Compaq. Since his promotion, he has been spending a lot of time with the sales personnel in the field. He wants to pass all his expertise to his juniors. Though a super sales person himself, he is not trained as a sales manager or as a sales-force trainer.

The junior sales staff is resentful about Amreesh. They think he should not so literally breathe down their necks. After all they, too, know their business. On one each occasion, Amreesh personally made the sales presentation. This was very much disliked by his juniors. Some clients are also getting suspicious of Amreesh's intentions. These clients feel that Amreesh does not believe in his juniors or he wants to teach them a hard lesson.

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Case No. 119



After going through this case, you will be able to :

• find a company with Rs. 258 crores annual sales

• underline sales manpower(7) : Ad spend Rs. 1.70 crores

• identify the 2000-01 sales target: Rs. 375 crores

• analyse forecast for inputs, manpower, ad spend and other promotional avenues

Mr. Vikrant Modi is the Vice President [Marketing] of a national company, marketing industrial raw materials used in chemicals and pharmaceutical industries. In 1998-99, their sales were Rs. 258 crores; with an employment strength of seven Sales Engineers in two Branch Offices. Their expenditure on advertising during the year was Rs. 1.70 crores.

The sales target for 2000-01 has been set at Rs. 375 crores. Please help Mr. Mody.

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After going through this case, you will be able to :

• analyse the supervisor's belief an " informal working relationship".

• identify virtues of this open climate management style: mutual trust, team-spirit andthe freedom of expression.

• analyse its weaknesses and the incident involving friction in this relationship.

• underline the need for the framework of guidelines/rules governing this relationship.

Rajesh Joshi is a supervisor of thirteen employees. Out of conviction, Rajesh deliberately encouraged an open climate in his section, as he believed that this management style was the best method to utilize everyone's status and abilities. Rajesh had exhorted his employees to put across their problems and views frankly and honestly.

Over a period of time, Rajesh Joshi's approach to work had paid off not only in the high level of quality and quantity of work, but also in the department's openness, attracting outstanding people. True, on occasions, there were high tempers and Rajesh wished he had more competent people. However, he knew his group of strong-willed high professionals extracted the best out of everyone else. Rajesh firmly believed in what he was trying to do. Moreover, his boss had also often praised the department for high professionalism. Occassionally, he even teased Rajesh. How he could rein so many professionals so well?

But there was one person wild and on the loose and this time Rajesh felt clawed. One of his best employees, Vivek Purohit, had been working under high pressure for some time, putting in a lot of evening hours and an occasional Sunday. Finally, when Vivek's programme came to a temporary halt while waiting for computer time, he walked into Rajesh's office late one Friday evening and announced. "I am taking Saturday off and going out of town, so that I can completely relax. I will see you on Monday."


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Since Vivek had used all his leave and there was no Policy of Compensatory Time Off, Rajesh treated Vivek's absence as 'without pay'.

Pay-day fell on the following Friday and when Vivek's pay cheque was short he blew his top off. He stormed into Rajesh's office in a rage and said. "It is downright rotten to be treated like dirt and not to know of it until pay-day. I put in plenty of extra time and you know it. The extra hours I worked are at least three times the time I took off. How come you are such a Shylock demanding your pound of flesh and not giving me a day off?"

Rajesh tried to explain, but Vivek had already left in a huff. Within half an hour, Rajesh received a letter of resignation from Vivek. That was bad enough, but nearly all of Vivek's colleagues felt the same way - that Vivek had got a raw deal.

While there was not a slow down, there was not much enthusiasm either from the entire group the following week.

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After going through this case, you will be able to :

• find a TVMC with an excellent after-sales service reputation

• recognise, however, the emerging competition from the self-trained local mechanics

• underline their strengths (prompt service) and weaknesses (poor quality workmanship)

• analyse the strategy to overtake them, at the cost of 25% additional service cost

"Suchitra Vision Ltd", is a leading T.V. manufacturing company (TVMC), distinguished for its prompt after-sales service to the customers. The company maintains a service-engineer at every taluka place and, thus, can attend to a customer's service call within 48 hours. However, self-trained local T.V. mechanics are, nowadays, becoming available, even in a remote village. They can, thus, offer service within few hours only. The quality of their service, however, is poor. To compete with them, the company will have to maintain, a minimum two service engineers at every taluka place. This will push up the service cost by 25%.

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After going through this case, you will be able to :

• find a marketing company dealing in consumer non-durables

• recognise selling operations: direct sales to wholesalers and redistribution to retailers

• underline direct sales targets (DST) for three products

• identify additional marketing inputs for DST

• identify branchwise targets to managers and the latter's reluctance to accept the same

Moonlight Ltd., Manipal was a leading marketing organisation dealing in consumer non-durables. The company's selling operations included direct sales to wholesalers as well as re-distribution to the retailers in the market place.

Ravikiran, the Managing Director conducted the Annual Sales Conference in a five star hotel. After the initial address by him, Ruta Advani, the Marketing Director presented the sales performance for 1999 through attractive audio-visuals. The direct sales and redistribution figures in the respect of the Company's three key products were as follows:

Direct Sales (Units) Redistribution Sales (Units)

Product 1997 1998 1999 1997 1998 1999

A 10,000 9,900 9,850 8,000 7,000 6,000

B 27,000 28,000 29,000 20,000 19,500 19,000

C 35,000 42,000 53,000 34,000 41,250 52,500


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The share of various products on the total volume of sales turnover was as under:

Product % Age on Sales Turnover

A 20

B 30

C 40

Other Products 10

Total 100

Ravikiran took Ruta to task for the stagnant growth in direct sales in respect of A&B. However, he was impressed with the growth of C. After further discussions, Ravikiran announced the direct sales targets for millennium 2000 for the three products as below:

Product Direct Sales Target(units)

A 13,000

B 35,000

C 69,000

Ravikiran offered certain additional marketing inputs for achieving the increased direct sales targets. Ruta agreed to the above and gave the branchwise sales targets to the Branch Managers. They reluctantly accepted the same.

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After going through this case, you will be able to :

t find RTs of a PGEM company headed by RSM with specific tasks

• underline MM's appointment and with it Chairman's SM plans

• identify the MM's opposition to combining SM tasks with the RSMs' regularresponsibilities

• support the MM's demand for PMs' appointment for exclusively handling developmentand marketing of the system

t analyse the entire restructuring programme, in depth

Watts and Volts Ltd has been manufacturing power generation equipment (PGEM) in small and medium sizes. The sales were effected either directly to the consumers who would place large orders or through distributors. The company even sold abroad and 50% of its sales were due to exports.

Regional territories (RTs) were the basis of Sales Department. The Regional Sales Manager (RSM) was responsible for generating sales, making calls, to conceive new ideas as well as developing new products. The Chairman of the company saw this as a problem area and appointed a Marketing Manager (MM). He evolved a thorough marketing plan. It took into account the present selling efforts as well as the development of new products. He suggested an entry into the Systems Market (SM). By this, he meant that the equipment connected to a power generator should also be developed by the company e.g. irrigation pumps for use in the farms. These were to be sold as packages. The Marketing Manager felt that to develop these systems, it was necessary to appoint Product Managers, who were to be given total responsibility of the development and marketing of the system. The

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Regional Sales Managers did not have the time to market the specialised systems satisfactorily. Besides, they did not have system- consumer knowledge and the inclination.

The Marketing Manager, was strongly opposed to having two parallel sales organisations under the same roof. He believed that the job of a Product Manager ended with successful development and introduction of a given product. The sales responsibility will be that of Regional Sales Manager only.

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After going through this case, you will be able to :

• find L&T and SIL, both to be leading players in the switchgear market

• recognise, however, SIL's pioneering leadership and reputation

• identify the price-range of both companies' products to be more or less the same

• underline the fact that SIL is gradually losing its market to L & T

Larsen & Toubro Ltd.(L & T) and Siemens India Ltd(SIL) are the leading players in the field of Switchgear products (Switchgear means protective electrical devices used in factories as the advance level of a fuse with which we are all familiar). Siemens were the pioneers in this field and were followed much later by L&T. When L&T entered this field, Siemens had literally a monopoly of this market with most of the key accounts in their bag. They also had the reputation that their products were the only ones suitable for heavy duty applications. Even today, Siemens has an edge over L&T quality wise. The prices of the products of both the companies are more or less the same. However, Siemens is facing a peculiar situation in the sense that they are losing their market heavily to L&T.

You have been appointed the Marketing Manager of Siemens India Ltd. and are requested to:

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After going through this case, you will be able to :

• find SM under criticism for shortcomings in penetrating various market segments

• underline advice to him to assess the workload to salesmen and redesign sales territory

• analyse the data-base concerning dealers, categories, calls etc., in depth

• assess results of workload and alternatives

The Sales Manager (SM) of a company had often wondered if he had the right number of sales people. In a recent review of operations, he came under severe criticism for not being able to deeply penetrate the various market segments. To his concern that he was understaffed, he was told to take a fresh look at whether the sales territory had been designed appropriately, and also whether each sales person had an adequate workload. He looked at his data base and found that the sales force serviced 6000 dealers nationally. Of these, 20% belong to A category, 20% to B category and the balance to C category. On the whole, there were 10,000 dealer outlets servicing the industry, of which 20% belong to A category, 20% B and the balance to C category. The salesmen made 10 calls a day, as per details given below:

a) A category twice a week.

b) B category once a week.

c) C category once a month.

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For the up-country markets, the norms were as follows:

All A and B category were visited once in 15 days and all C category once a month. 40% of the total dealers operated in the branch HQ's town and the balance in the upcountry markets. In 2000-2001, the sales manager had 300 working days. The total number of sales personnel he had were 60.

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After going through this case, you will be able to :

• find the extraneous circumstances force the organisation to be self-reliant

• recognise its crash-programme for the manufacture of components.

• underline the vim, vigour and vitality in working as one family and with team spirit.

• analyse 'Organisational Goal', successfully motivating and identifying every employeewith the "Goal".

• analyse measures to overcome emerging problems.

Due to the crash programme of manufacturing components, because of the shortage of foreign exchange and the low priority given to the industry, all departments had to gear themselves to perform their portion of the work expeditiously to fulfil the target dates set by the Import Substitution Committee.

The Tool Design Section of the company for designs tooling to the fabricated and for the successful implementation of the programme, it was necessary to secure the active participation of the staff, so that the company's goal would also become the staff's goal.

The urgency of the programme was discussed with the Deputy and Assistant Superintendents whose active participation was sought and they it turn impressed upon the Asstt. Engineers, the Jr. Designers and the Draughtsmen to see that the target was achieved, as far as the designing was concerned.

There was a proper feedback of the progress and close security was maintained. Where certain sections were lagging slightly, the staff was adjusted to make up for the lag and the concern was there to establish a good name for the department.


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Even the clerical staff was motivated by the revision of grades and the whole project was taken up in a spirit of challenge to complete the task as per the schedule.

The departments concerned with other work like taking out prints, estimating and issuing job orders were also followed up with vigour, though the printing machines used to breakdown frequently and upset the apple cart. Permission was also obtained for the issue of job orders against job requests to expedite the release of job orders for fabrication.

In the final outcome, it was found that the job orders for the design were released on the target dates for 80 % of the items and the balance job orders within a week afterwards, thus illustrating the acceptance of the goal by the department and their active participation.

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Case No. 127MR. ANAND

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After going through this case, you will be able to :

• find an executive, planning print-order number for diaries for 2004.

• recognise his Company's logic in concentration only on one type, though in fourlanguages.

• underline sales- trend, during the last five years.

• analyse and interpret the forecast.

Mr. Anand, Sales Manager of Abha Diaries was thinking about the number of diaries to be printed for 2004. The company was printing only one type of table diary with dates, printed in English, Hindi, Gujarathi and Marathi. It was marketed in Western India. The following information about number of diaries sold during earlier years was with him-

2003 215002002 19250

2001 189002000 175001999 16200

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After going through this case, you will be able to :

t find a printer, planning print-order of new year diaries 2004.

• analyse the cost- structure : manufacturing and for wholesalers.

• underline risk factors in decision-making of print-order.

• identify background; delivery schedules and promotional expenses based on pastforecasts and consumption.

The managing partner of Jagat Stationery Company, Mumbai, Mr. Patel was taking a review of past performance in June 2001 to schedule the production of diaries for 2004. The production had to be completed by September in order to utilise the printing facilities for calendars. It was the company's practice to schedule production in lots of 1000 dozens.

The variable manufacturing cost per dozen diaries was Rs. 270 and the diaries were sold to wholesalers at a price of Rs. 360 per dozen. Diaries remaining unsold at the end of 2004 would be scrapped at virtually a total loss.

Mr. Patel has to consider the general economic conditions in order to take a decision. The prices of raw materials are going up, there are curbs on advertising and promotion expenditure and consumer purchasing is going down. Based on the past record of sales, he is thinking 25000 dozens of 2004 diaries.

Table I gives the data on past forecasts and actual consumption for earlier years.

The diaries are marketed in the State of Maharashtra through wholesalers and retailers. The normal selling season begins in October. By spending some money on personal selling, phone calls and/ or publicity literature, it is possible to receive some firm orders for 2004 diaries by end of June to plan better.


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Year Forecast (Dozens) Actual Sales (Dozens)

1997 12000 11800

1998 13000 14500

1999 16000 16000

2000 17000 17800

2001 20000 19500

2002 22000 23000

2003 22000 22500

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After going through this case, you will be able to :

find owner's management style : based on "informal human relations"(IHR).

identify his "Ad Hoc" decisions : bypassing Personnel Department.•

• underline human weaknesses in IHR functioning : prejudices, favouritismdiscontentment etc.

• analyse consequential confrontation with Union : and disregarding consultant's advice.

• analyse effects on organisational performance.

Delana Hosiery Works Ltd. is a small-scale industry producing readymade garments. The owner of the company believed in informal human relations and decided to recruit manpower on ad-hoc basis without issuing appointment orders, issuing written communication to his employees in personal capacity and not insisting on formal procedure of personnel management. For the first two to three years, everything went alright and the team functioned like a family unit, subsequent number of employees grew sizeably. The annual increments were made through acquaintances, rewards given involved favour to some employees. One small group of employees, constantly neglected by the owner became hostile and secretly approached the union's office. They became members of the union. Very soon other groups of employees, loyal to the employer also became members of the union.

The owner did not like the employees' attitude. Initial motivation of the owner in appealing to the employees not to become members of the union went in vain and proved futile.

The legal recourse taken by the union ultimately resulted in directing the owner to issue appointment orders in writing to all employees, issue confirmation letters as per rules in



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writing and give annual increments based on performance. In all areas, informal procedure of personnel management was required to be changed. The arrears paid on account of difference in minimum wages worked out in the neighborhood of Rs. two to three lakhs. Besides, the employees started working on "work to rule" basis. The owner contacted the consultant, who advised to set procedure in all areas of personnel management but the owner looked to the entire episode with prejudices and acted vindictively.

The production and productivity declined substantially, reducing the profit ratio below the level of break even point.

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After going through this case, you will be able to :

• find Secretary-cum-Accountant : takes over as Administrative Officer.

• recognise change in nature of work: or job specifications.

• identify Officer's lack of skills in "public dealings": starts taking its toll.

• underline "Skills-Job Specifications" relationship.

• analyse Consultant's accent on exposure to human relations skills in job shiftovers.

Mr. Hari Prasad is the Administrative Manager of the XYZ company. It is a medium sized company. Mr. Hari Prasad has been working in the company, since the last 10 years as a Secretary and Chief Accountant. His record was excellent. Recently, he has been selected as the Administrative Manager. This new post was created, a year ago.

As a result of this change, output of his work in the office dropped considerably and morale became low. There was an alarming increase in staff turnover.

To study the situation, the M.D. engaged a consultant. The report of the consultant while praising the expert knowledge of Mr. Prasad on many technical aspects of office administration, pointed out his incapabilities especially in dealing with people.

Surprisingly, Mr. Prasad enjoyed considerable popularity among the senior executives of the company. He won their esteem for his valuable services as a manager. They were worried over the capabilities of Mr. Prasad in dealing with people. They were helpless.

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After going through this case, you will be able to :

• explain HLL's history, growth and FMCG market-leadership in India.

• analyse its marketing strategies to tap villages for its multifarious products.

• identify HLL's major media and product-propaganda campaigns.

t underline the vast network of distributors, infrastructure and resources of its command.

"Consider the market, out of five lakh villages in India only one lakh have been tapped, so far." Irfan Khan, Corporate Communications Manager, Hindustan Lever Ltd., in 2001.

Teaching People, how to wash utensils?

In June 2002, the employees of Hindustan Lever Ltd. (HLL), a subsidiary of the Fast Moving Consumer Goods (FMCG) major Unilever and India's leading FMCG company literally took to streets. The company was undertaking a promotional exercise in the rural areas of three states- Madhya Pradesh (MP) Bihar and Orissa, for its utensil-cleansing bar, 'Vim' .A part of HLL's on-going television (TV) campaign 'Vim bar Challenge', the promotion drive involved company officials to visit rural towns and demonstrate how vessels are cleaned with Vim.

Commenting on this, Sanjay Bhel, HLL's Marketing Manager, said, "For the purpose, we are educating the rural masses on the on-going 'Vim bar Challenge' TV commercial by conducting live demonstrations about vessel cleaning. Our aim is to tap the growth rate of the Rs. 4 bn. scouring bar market-although it has been growing at a rate of 15% per annum, since last year it has been decelerating." This exercise was just one of the numerous marketing drives undertaken by HLL over the decades to increase its penetration in the

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Indian rural markets. The company had, in fact, earned the distinction of becoming one of the few Indian companies that had tapped the country's vast population so extensively. It was, therefore, not mere coincidence that around 50% of its turnover came from rural markets. With the penetration of their products reaching saturation levels in many urban markets, FMCG companies had to turn towards rural areas in order to sustain revenue growth and profitability. Since the disposable income in the hands of rural people had been increasing in the late 1990s and the early 21st century, it made sense for companies to focus their energies on this segment. Industry observers also felt that HLL was at an advantage compared to most of his competitors, thanks to its consistent, pioneering efforts towards establishing well-entrenched distribution and marketing networks to reach the vast Indian rural masses.

Backround Note

HLL's origins can be traced back to the England based company, 'William Hesketh Lever,' established in 1885 by Lever Brothers. The company entered India in 1888 through the export of its laundry soap 'Sunlight.' In 1930, the company merged with the Netherlands-based Margarine Unie [an established player in India through the export of vanaspati (hydrogenated edible fat)] to form Unilever Ltd. in UK. The same year, the company established the Hindustan Manufacturing Company for production of edible oil. Initially, a majority of Unilever's revenues came from soaps and vanaspati. In 1932. HLL's Vanaspati accounted for almost three-fourth of India's production of nearly 6,000 tonnes.

In October 1933, Lever Brothers (India) Pvt. Ltd. (LBIL) was incorporated as a wholly-owned subsidiary of Unilever. Two years later, United Traders was set up for import and distribution of toilet products. These three subsidiaries were merged in 1956 to from HLL. HLL offered 1.0% of its equity to the public by an initial public offer in the same year. In the late 1950s the company undertook modernization of its facilities. It also expanded its manufacturing capacity for vanaspati by buying factories atTrichy (Tamilnadu), Shamnager and Ghaziabad (near Delhi). By 1960, HLL's annual production of vanaspati had gone up to 33,600 tons.

In 1961, HLL introduced 'Lux' soap in a range of colours. The 1960s-70s witnessed a series of new product launches- 'Anik' (clarified butter, in the early -1960s), 'Sunsilk' (shampoo, in 1964), 'Rin' (washing-bar, in 1969), 'Clinic' (shampoo, in 1971), and 'Liril' (bathing soap, in 1974). In 1975, HLL entered the oral care market with a gel toothpaste called 'Close-up'. In late 1970s, HLL set up 70 medium and small-scale factories in the rural areas for manufacturing soaps and detergent.

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Case 131 Hindustan Lever - Rural Marketing Initiatives

The company also diversified into manufacturing chemicals and set up chemical plants at Haldia (Calcutta, West Bengal), Taloja (Maharashtra) and Jammu (Jammu and Kashmir). In 1980, Unilever offered HLL shares for sale in order to reduce the non-resident holding in the company to 51 % to comply with the Foreign Exchange Regulation Act (FERA) regulations. The company also complied with the government's condition of minimum 10% export and 60% turnover from priority Secotrs.

In 1983, a new plant for synthetic detergents was set up in Chindwara district of MR In 1986, HLL moved into agri-products by setting up a unit in Hyderabad (Andhra Pradesh). In the same year, the company introduced a new variant of 'Lux'. This was followed by the launch of 'Lifebuoy Personal' and 'Breeze' soaps in 1987. In 1988, HLL set up a manufacturing facility at Pondicherry in collaboration with National Starch Corporation, USA. In 1989, a synthetic detergent plant and a toilet soap plant were established in Sumerpur and Orai (both in Uttar Pradesh), respectively.

In 1991, HLL launched Lifebuoy Plus and Le Sancy soaps in the market. In 1992, the company came out with two more dental care products. Pepsodent and Mentadent G. Between 1992-1996, HLL bought many companies like Tomco, Kwality, Kissan, and Lakme. In the 1990s, HLL formed a 50:50 joint venture with the US based Kimberly Clark Corporation called Kimberly Clark Lever Limited (KCLL) that manufactured diapers and sanitary napkins. HLL formed another joint venture. Lever Johnson, with the US Based SC Johnson & Co., to manufacture and market pest repellants and disinfectants.

The early 1990s (1991-1994) was period of global recession and 'value-for-money' became the buzzword for many FMCG companies all around the world. Even in India, there was a paradigm shift towards value-for-money products. Growth in the urban markets had slowed down and even the rural market showed signs of sluggishness in terms of, both value and volumes. This was evident from the fact that the growth in volumes (in rural areas), which had been 52% in 1996, dropped steeply to 29% in 1997. In spite of the sluggish market conditions, HLL had been successful in launching 10 new brand extensions and products in 1996 alone. In early 1997 also, the company had launched six new products and brand extensions.

In 1997, HLL had a total market share of 58-60% in the FMCG sector, which further increased to 62% in 1998. HLL launched 41 new products and re-launched around 41 product innovations. The company also took up many initiatives in the area of distribution to double its reach in the rural markets. It also set up 10 new factories in India-among them two each for packet tea and personal products and one each for soaps and detergents.

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The year 2001 was a tough year for the Indian FMCG sector due to the country's economic growth slowing down to 4% from 6.4% in 2000. However, HLL was able to post significant gains despite a slowdown in both the rural markets and the industrial segment. This was because of its strategy to focus on its 'Power Brands, aimed at sustaining profitable growth in slow markets. As a result, HLL's financial results clearly depicted its leadership position in most of the product categories it operated in. From Rs. 17.57 bn. in 1992, sales increased to Rs. 109.71 bn. in 2001. Profit-after-tax also increased from Rs. 985 mn. to Rs. 15.4bn. in2001.

HLL was undoubtedly the company that had virtually shaped India's FMCG market over the decades. The company had built some of the most successful brands in India and many of its advertising campaigns had become part of the country's advertising folklore. Amongst over 110 Brands that it owned, HLL called the 30 best selling brands as 'Power Brands' a title well-deserved. This was because brands such as Fair & Lovely, Ponds, Pepsodent, Close-up, Sunsilk, Clinic, Lakme, Surf, Rin, Wheel, Lifebuoy, Lux, Breeze, Vim, Kwality, Brook Bond, Lipton, Annapurna, Kissan, and Dalda had become and integral part of almost every Indian household (Refer Exhibit I for HLL's product/brand profile).

Interestingly, many of the above products, and especially those in categories like fabric wash, personal wash and beverages derived more than 50% of their sales from rural areas. HLL's efforts to build a market for its products in these areas had started way back in the days it began operations in the country. By the 1990s, rural markets had become a significant destination for FMCG marketers like never before.

HLL Goes to the Villages

Traditionally, HLL used both wholesalers and retailers to penetrate the rural market. A fleet of motor vans covered small towns and villages. These vans induced retailers to stock HLL products and display advertising material in their shops. In many towns, there were redistribution stockists who carried bulk stocks and serviced retailers. There were some 7,000 redistribution stockists who served over a million retail outlets.

In the late 1990s, HLL realised that despite its pioneering efforts to expand its rural consumer base, a large part of the market remained untapped. Thus, the company set itself a target of contacting 16 million new village households by 1999. This was to be achieved by strongly focusing on the 'Power Brands' in the rural markets. HLL adopted a phased approach in order to meet its target and decided to address the key issue related to availability, awareness and overcoming prevalent attitudes and habits of rural consumers. Penetrative pricing was also an important factor that was addressed.

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Case 131 Hindustan Lever - Rural Marketing Initiatives

One of HLL's initial initiatives was in the form of 'Project streamline which addressed the problems of the rural distribution system, to enhance HLL's control on the rural supply chain as well as to increase the number of rural retail outlets from 50,000 in 1998 to 100,000 in a time span of one year.

Project streamline was targeted at place that had a poor market development base, thus, making any kind of distribution unavailable. This project was to be carried out with the help of a rural distributor who had 15-20 rural sub-stockists, connected to him in villages. The sub-stockists performed the role of driving distribution in the neighbouring villages using unconventional means like bullock-carts and tractors.

As a part of the project, HLL aimed at providing higher quality services to consumers in terms of 'frequency, ''full-line availability' and 'credits'. As a result, the number of HLL brands and the Stock Keeping Units (SKUs) stocked by the village retailers increased. This initiative helped HLL increase its reach in the rural market to 37% in 1998 from 25% in 1995.

In mid-1998, the personal products division of HLL launched another campaign called 'Project Bharat' to be carried out by the end of 1999. 'Project Bharat' was a direct marketing exercise undertaking to address the issues of awareness, attitudes and habits of rural consumers and increase the penetration level of HLL products. It was the first and the largest rural home-to-home operation to have ever been taken up by any company carried out its direct marketing operations in the high potential districts of the country to attract first-time users.

Under 'Project Bharat,' HLL vans visited villages and sold small packs consisting of low-unit-price pack each of its detergent, toothpaste, face cream and talcum powder for Rs. 15. During the sales, company representatives also explained to the people how to use these products with the help of a video show. The villagers were also educated about the superior benefits of using the company's products as compared to their current habits. This was very helpful for HLL, as it created awareness of its product categories and the availability of the affordable packs.

However, the company sensed that the sampling campaign was not enough to attract first time users. Therefore, it rolled out a follow-up program called the 'Integrated Rural Promotion Van' (IRPV), which further enhanced the awareness about HLL's products in villages with a population above 2000.

Another program targeted at villages with a population of less than 2000 was simultaneously launched. Under this program, the company provided self-employment opportunities to

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villagers through Self-Help Groups (SHG). SGHs operated like direct-to home distributors wherein groups of 15-20 villagers who are below the poverty line (those people whose monthly income was less than Rs. 750 per month) were provided with an opportunity to take micro-credit from banks. Using this money, villagers could buy HLL's products and sell them to consumers, thereby, generating income as well as employment for themselves. This activity also helped the company increase the reach of its products.

Apart from this, in May 1999, the company tied up with various Non-Governmental Organisations (NGOs), United Nations Development Program (UNDP) and other voluntary organisations to increase awareness about health and hygiene in villages. The company set a goal of reaching 2,35,000 villages from the existing 85,000 and covering 75% of the population from the existing 43%.

To further increase the effectiveness of the campaign, the company aimed at achieving a 65% reach through the TV media up from the current reach of 33%. Starting with Maharashtra, the company encouraged primary education in villages with the help of V-Sat connections. This helped it to create greater awareness about hygiene and cleanliness thus, influencing people's behavior, which, in turn, would have a direct impact on its sales.

By the end of 1999, HLL had covered 13 million households through 'Project Bharat'. The campaign was successful in increasing penetration levels, usage and the awareness about the company's products in the districts targeted. This also helped HLL grow at a better pace than the industry. In the shampoo market, while the urban growth rate was only 4-5%, the rural growth was at 15-16%. Similarly, in the skincare market, the urban growth was only at 7-8%, whereas, it was 14% in the rural markets.

In August 1999, HLL launched a nationwide Community Dental Health campaign in association with the Indian Medical Association (IMA) to promote its toothpaste Pepsodent. HLL stood at the second position in terms of market share in the dental care segment (37%) that comprised Pepsodent's 16% and Close-up's 21 %, whereas Colgate-Palmolive was the leader with over 50% market share in the Rs. 10 bn. toothpaste market. The vision of the project was 'to make every person in urban and rural India to adopt a good oral care regime.' Company sources placed the total investment in the program between Rs. 100-200 mn.

The company wanted to attain the leadership status with the help of aggressive marketing initiatives. Statistics revealed that penetration level in India was very low with the per capita consumption (of toothpaste) being only 0.75 gm. Moreover, only 47% of the Indian population used toothpastes, while 27% used toothpowder, the rest used traditional methods

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such as coal and neem sticks. The growth in the segment was around 3-4% in the urban market, whereas the rural market growth was projected at 9-10%.

As a part of the project, several infomercials were launched to increase awareness on dental hygiene and also to highlight common dental problems and their causes. These infomercials were aired on Doordarshan (India's national television channel). Around 200 health fairs were organised, predominantly in the rural areas. Various dental health programmes as well as education and check up modules were organised at public health centers. Representatives of IMA and local public health centers conducted educative demonstrations on good brushing habits, correct use of dentrifices and other issues related to dental hygiene. Dental checkups were also conducted in these health centers.

The Dental Health Campaign was carried out for a period of three years and targeted 100 million people across rural India. By 1999, the promotion covered 10 districts in UP and Maharashtra and by the end of 2000, the number touched 50. This campaign aimed to increase the direct reach of toothpaste in rural India to 1.25 lakh villages, up from the existing 40,000 villages by the year 2001. The IMA-Pepsodent project increased the overall dental care penetration in the country to 58-60% form the prevailing 48%.

In April 2000, the company launched another campaign called 'Project millennium' wherein it targeted at increasing its share in the tea market. HLL planned ways to tap the 'chai-ki-dukan' (tea vendors). The company provided affordable tea packets that were suitably blended to appeal to the rural taste of 'Kadak chai' (strong tea). The company test marketed an especially designed product 'chai-ki-goli', (Fully soluble ball) that was dropped in boiling milk-water combination. These were priced very attractively for a rupee.

All these initiatives seemed to have paid off for HLL, since the increase in brand consciousness and disposable incomes had significantly altered the consumption patterns of rural people. In a survey conducted in December 2000 called the 'Emerging Market Trends' by the Center for Industrial and Economic Research, it was found that HLL had overtaken both Colgate-Palmolive and Nirma in creating brand awareness and penetration in rural households. The survey revealed that HLL was leading with 88% rural market penetration, whereas, Nirma and Colgate-Palmolive followed in that order with 56% and 33% respectively. HLL brands had the highest penetration in many product categories.

Inspired by the success of its earlier ventures, HLL went on participate in a rural communication programme called the ''Grameenon ke Beech'' (Amidst villagers) in August 2001. The programme was launched by the Rural Communication and Marketing Pvt. Ltd., (RC&M), an agency that specialised in rural advertising and marketing. Besides

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HLL, the other companies that had participated in this program included Colgate-Palmolive, automobile major Mahindra & Mahindra and foods major Parle. The first phase of the program covered 1,000 villages and 2,000 satellite villages in 22 districts of western UP and 13 districts of central UP over a period of six months. The programme involved setting up of company stalls, product briefings and demonstrations, interactive games, lucky draws, magic shows and the screening of a hit movie interspersed with product commercials.

In late 2001, HLL launched another project called 'Project Shakti' in the state of Andhra Pradesh for a period of six months. Project Shakti sought to create a sustainable partnership between HLL and its low-income rural consumers by providing them access to micro-credit; an opportunity to direct that credit into investment opportunities as company distributors; and reward for growth and enterprise through shared profits. During 2001, the 'rural cell' within HLL worked closely with self-help groups, NGOs and governmental bodies in Andhra Pradesh to put in place a comprehensive experiment in training these self-help groups.

At the end of six months of implementation (March 2002), HLL claimed to have achieved a 20% increase in consumption in the areas where it was carried out. This was a favourable development for the company, coming at a time of an overall economic slowdown. Having been successful in this initiative, HLL decided to expand this project to other states like Gujarat, Maharashtra and MP. The project at Gujarat was to be carried out in early -2002. HLL also planned to work with a group of NGOs to implement the project in the states of Maharashtra and MP in 2002-03.

Staying on in the Villages

Continuing its focus on rural areas, HLL launched a massive rural campaign to reposition one of its leading brands, Lifebuoy, in February 2002. Lifebuoy was the single largest soap brand in rural India with 20 lakh soaps sold every year and had an estimated value of Rs. 5 bn. The relaunch of 107-year-old Lifebuoy was primarily done to increase growth in the sluggish soap market.

Commenting on this category, Head, Mass Market Soaps and Detergents, Sanjay Dube said, "it is the biggest and comprehensive re-launch of any our brands." HLL decided to further highlight the concepts of health and hygiene in rural areas to support the relaunch. The product was given a completely new look (size and shape), formulation, fragrance, lather profile and was repositioned as a family soap rather than a male soap. The company introduced many variations of the product including Lifebuoy Active Red, Lifebuoy

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International Plus and Lifebuoy International Gold. HLL expected the campaign to bring the company's growth to double digit levels in 2002.

It was evident that HLL's rural marketing initiatives were paying off well and, in some cases, more than it had expected. The company had left competitors Colgate-Palmolive and Nirma way behind in terms of the overall market penetration in the rural areas (Refer Table I).

However, there was the question of how long would it be when even the rural markets become saturated. A study conducted by the Asian Market Research Association (AMRA), a Korean based market research agency that conducted an extensive consumer behavior study in India, stated that the growth potential for FMCG brands was more in the downtown suburbs rather than the urban metros and rural areas. However, how long would it be before HLL and other FMCG marketers lost their fancy for the villages, remains to be answered.

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Case No. 132MR. ANNA PAUL


After going through this case, you will be able to :

• find a farmer with 100 hectare land, growing sugarcane, grapes, maize, onions etc.

• recognise his farm equipment, contributing to the crop-yield.

• identify his professional interests and leadership qualities in setting up a sugar factory,coop distillery, Bank and other institutions.

• underline his farm-produce, commanding assured market in his own village.

Mr. Anna Patil is a progressive farmer in Nasik District. He owns a 100 hectare canal irrigated farm. The farm is situated at Pimpalgaon, on the National Highway, 35 kms, from Nasik and eight kms from Sugar Factory. The soil is fertile and ideally suited for sugarcane, grapes and other crops.

Mr. Patil has a tractor with trolley and other farm equipments. He grows sugarcane, grapes, maize, jowar, wheat, potato, vegetables, onions etc.

He is a promoter-member of a Sugar Factory at Pimpalgaon Co-operative Distillery. He is also Director of the DCC Bank and Chairman of Taluka Kharedi Vikri Sangh. The Co-operative Sugar Factory accepts sugarcane produced in 20 hectares of land and the distillery accepts grapes produced in 5 hectares of land.

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After going through this case, you will be able to :

• find a Cooperative Milk Society supplying milk to consumers in Pune, since 1980

• underline its diversification decision to milk products, after 10 years (i.e. in 1990)

• recognise, with completion of a multi-crore project in 1993 : the coop body startedincurring losses.

• analyse causes for losses.

• assess marketing and growth potential under diversification plans.

A Cooperative Milk Union has its area of operation spread over 20 villages of Baramati Taluka of Pune District. The Society collects 20,000 litres of milk per day and sends to its customers in Pune. The city of Pune is 120 Kms away from the Dairy. The Union was set up in 1980 to process milk and produce milk products. But till 1990, it was marketing fluid milk only. In 1990, Union decided to diversify its product line. Accordingly, the Union started construction of multi-crore project in December 1990. It was completed in January 1993. During the intervening period, Union appointed a large number of unskilled and semi-skilled workers from nearby villages. The staff appointed did hard work for convincing people for producing higher quality of milk and enrolling them as members of the society.

The area of operation was also extended to hundred villages lying within a radius of 30 kms from the Factory. The Dairy earned profits up to 1993, but started incurring losses, thereafter. Absenteeism among workers on account of social and other family obligations became a common phenomena. During flush season October-December, there were large number of colourful festivals and melas around the Dairy; as such most of the workers remained absent from job; causing production loss. The Managing Director could not take harsh steps against such workers as many of them had come from poor families.

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On the other hand, the Dairy could not get qualified personnel like Chartered Accountants, Engineers and other Managers, inspite of good salaries offered by the Union, due to Plant being located in rural area where facilities of urban life were not available.

Since the Dairy collects only 60 percent of the milk produced in the area, it desires to diversify its products.

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After going through this case, you will be able to :

• find an American electronics giant specialising in design and manufacture of electronicsequipment for US Govt / defence forces

• recognise structuring pattern of its engineering and manufacturing divisions

• analyse 'make versus buy decisions

• discuss the production location for Tiger electronic cables example, in depth

Huge Electronics Company (HEC) is a designer and manufacturer of electronics equipment that is sold primarily to government/military customers. Located in the Western United States, HEC grew rapidly in the 1970s to become one of the nation's largest government contractors with employees in excess of 50,000. Partly because of HEC's rapid growth, the company organisation chart was constantly in a state of flux. Despite the changes, the engineering divisions remained fairly stable in a classic project management structure. The manufacturing division was structured in a matrix organisation because of the large investments in manufacturing equipment necessary. Duplicating these equipment purchases for every project would not be cost effective.

Naturally, the project managers in the engineering divisions wielded a great deal of power (if not total power) to set policy and make decisions. The manufacturing project managers did not possess the total authority shared by their engineering counterparts; they did, however, have a strong say in controlling the destiny of their projects, if not the operating policy of the division. Due to of the matrix structure, functional and project managers coexisted at the same level in the management hierarchy, both reporting directly to the division manager. While the power in the division was spread evenly between functional and project management, when push came to shove, the project managers' possessed up what through the project structure it led to the influential edge that seemed to exist.

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Make Versus Buy Decisions

As a result of the fast growth experienced by HEC, production capacity could not keep pace with demand in many cases. Some of the company's product designs had to be off-loaded either completely or partially for the production phase of a contract. The question of who should/would make the decision whether to manufacture in-house or off-load a particular product (or portion thereof) was always a point of contention. At least three parties influenced the decision: (l) the manufacturing project manager (MPM) (2) the manufacturing functional managers, and (3) the engineering project manager. Initially a manufacturing project plan is published by the MPM. This plan includes the "make versus buy" plan for components, subassemblies, and final assemblies. Unless the plan is met with resistance from the functional management, the plan goes into action. The manufacturing functional managers generally attempt to influence the project to have the product either assembled in their shops or not, depending on the capacity and the current and future workloads. The engineering project manager can influence make-buy decisions by the way the products are specified on the drawings to be used for manufacturing facility is incapable of producing, the MPM has no alternative but to have the product fabricated by a firm with the necessary capability.

Project Tiger and the Cable Shop

The decision faced by the Tiger MPM regarding the selection of a production location for the Tiger electronic cables is a dramatic example of the make-buy decisions faced by HEC managers. Below is a description of the cast of characters who attempt to influence the Tiger MPM's decision.

Final Assembly Project Engineer: Wally Carr has 25 years experience with the company, worked his way up through the ranks, and has an inherent distrust for the wire and cable shop because of bad past experiences. His advice to the MPM is: "We should set up our own shop over in the new Tiger final assembly building. This can have control over our own destiny. That's what we did on the old Stingray project and it worked great. Those cable guys never meet their schedules."

Cable Project Engineer: Charlene Rain has five years experience in the firm and was previously in sales for a small electronics distributor. It known to anyone at the time, she has purchased an interest in a local wire and cable subcontractor that specializes in doing overflow work from large prime contractors. Her advice to the MPM is: "We should off-load these cables to a local vendor. They are a simple design and we need to concentrate our manufacturing engineering efforts on the more complicated designs."

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Case No. 135e-COMMERCE

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After going through this case, you will be able to :

• study the telemarketing culture and its effects on the customers.

• study the rationale and ethicality behind telemarketing.

• know the new methodologies in the way of e-Marketing.

J & F's is a $ 150 million company. Mr. John Fredman owns it and he is a 67 year old man who believes in traditional methodologies of work. Mr. Fredman is not adaptive to the new latest technologies in the market.

Many executives of various companies keep calling him to market their products and services. Being quiet busy with his schedule he cannot manage these calls on his mobile phone. The problem began when Mr. Fredman was not keeping well and these telemarketers kept calling in. He couldn't help but receive these calls as he was not a mobile savvy person and he could not bar the incoming calls.

Mr. Fredman now thought of calling the cellular company and asks for a solution. The cellular company's call centre executive said she was helpless as the incoming calls cannot be barred. Fredman was suggested to disconnect the unwanted incoming calls. However, he couldn't do it as again his eye sight was bad enough even with his glasses. Before he could recognise the exact button on his cell, the call ring would irritate him and to avoid it he has to receive the call.

Fredman threatened the executive to sue the company as they were not able to solve his problem. Immediately the executive gave him a suggestion of changing his mobile phone.

Fredman was now in his cool and agreed to the executive's advice.

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Fredman received a brand new mobile phone from the company in exchange of his old cell phone. However the problem remained.

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After going through this case, you will be able to :•

• analyse the marketing gimmicks of attracting and marketing a product.

• justify the social and ethical issues of advertising.•

• learn the cause and effect of an advertisement.

It is because of the Indian weather that Indians are wheatish in color. However, every mother-in-law wants her daughter-in-law to be fair; every boy want his girl to be fair; every girl would want herself to be fair.

"Love Fairever" is a fairness cream meant for ladies. The ad campaign of the product was aimed at dark girls and promised fairness within four weeks.

The ads showed a dark girl, Simran, being rejected for marriage proposals as she was dark skinned. Simran comes to know about "Love Fairever" and applies the same.

A visual effect has been shown as in Simran turns fairer week after week. Suddenly, she is fair, beautiful and attractive !!

Soon she is the talk of the town. Simran gets engaged to a rich and handsome boy, Amar. Her relatives rave, "Lucky boy to have Simran!"

Now, this ad has made a very deep impact on Indian teenagers and especially dark skinned girls. Many girls have committed suicide because of this reason. The cream promises to make the skin fair in four weeks; however that is not practically true with this cream. Embarrassed and humiliated with the rejection in marriage proposals as well as within social groups, many girls have ended their lives. Social rejection is very disastrous. One

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cannot take this easily. Many girls (customers / non-customers of "Love Fairever") have gone under depression.

Falling prey to this ad campaign, many have started buying and using this cream although the cream had bad effects on the skin viz., skin rashes, pimples, dark spots, oily skin, etc.

The National Women's Society has slapped a letter to the company's chairman which has branded its advertisements as being socially and ethically wrong and as promoting wrong concepts amongst the Indian women. The letter has threatened legal action if the ads are not withdrawn by the company forthwith.

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After going through this case, you will be able to :

t summarise the basic concepts for understanding how businesses operate through systems.

• state the process of building a system.

• evaluate technical advances of IT-enabled services.

In 1995, Levi Strauss brought customisation to the women's casual clothing industry by introducing its Personal Pair product. To purchase these customised jeans the customer willing to pay an extra $ 10 to $ 15 had to go to a property equipped Levi's retailer where a salesperson took four measurements inseam, waist, hips, and rise. The salesperson entered these numbers into a computer, which identified one of over 400 pairs of nonadjustable "fitting jeans" that were only for try-on use. The customer tried on the trial pair and told the salesperson about any adjustments that would improve the fit. The salesperson used these suggestions to produce the precise measurements for the customised jeans. In effect, these were a manufacturing specification for a factory in Tennessee. A computer network transmitted the specification to the factory, where the customised jeans were assembled and mailed directly to the customer or to the store within three weeks. Sewed into the waistband was a bar code with an individual customer reference number. The customer could order another pair easily because the personal measurement information is saved in a database. The Personal Pair program achieved a repeat-purchase rate of 38%, more than triple the repeat purchase rate on other Levi's products. By 1997, the program accounted for 25% of women's jeans sales at Original Levi's Stores.

The fall of 1998 brought the next iteration, Original Spin, which was sold to women and men. "Costumer choose a base jean model -classic, low cut or relaxed than choose from colour, fly and leg opening options. Legs can be tapered, straight, boot cut, flare or wide,

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files, zip or button then there are four colours to choose. A trained sales associate measures a costumer's waist and seat, inseam length is determined on the base on what shoes are worn with the jeans and whether the customer like cuffs. A computer used these measurements to suggest a pair of fitting jeans, customer try them on and decide whether they want their jeans the same size or tighter, looser, shorter, or longer. Levis jeans produced for the original spin process cost $55, and every pair has a guarantee of a full refund, a new pair, or credit."

Moving further in the direction of customisation, by early 2000 retails could send measurement and order information to original spin web server. There measurement were converted to pattern used Levi's proprietary, computerised pattern-making algorithms that create unique patterns based on each buyer's size and desired features. In contrast, earlier attempts at mass customisation used a massive pattern database and matched each customer's measurements as closely as possible to a stored pattern. To help assure quick order turnaround, the company reconfigured a Texas plant to handle the special orders with work cells of seven or eight people producing one pair of pants at a time using the customer's pattern and an automated cutting table.

In another aspect of its business, Levi Strauss started to sell jeans to consumers through Levi's and Dockers Web sites in late 1998 with the proviso that its retail partners would not be able to sell its merchandise over the Web. This created channel conflict, competition between a manufacturer and its retailers. Disgruntled retailers decide to put more retail effort into other brands. Online sales were disappointing and October 1, 1999 Levi Strauss reversed its strategy. It kept several different Web sites but used them for consumer information and advertising rather than direct sales.

The late 1990s did not treat Levi Strauss well. It suffered sagging sales, heavy layoffs, and plant closings. After peaking at $7.1 billion in 1996, company-wide sales dropped to $6.9 billion in 1997, and further to $6 billion in 1998. What's more, exhorbitant advertising campaigns have done little to lure teens from the store racks of rival designers.

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After going through this case, you will be able to :

• evaluate the technical advances of IT-enabled services.

• explain the challenges of embracing technology without succumbing to hype andoverselling.

• anticipate how technology will be adapted in practice.

The Halloween and holiday season of 1999 was a major disappointment for Hershey Foods, the largest U.S. candy maker. In July 1999, it had gone live with a new $ 12 million information system that combines SAP's R/3 enterprise software with software from Manugistics Group and Siebel Systems. IBM was the system integrator. Glitches in the system left many distributors and retailers with empty candy shelves in the season leading up to Halloween. Despite the complexity of the system, Hershey decided to go live with a huge piece of it all at once, an approach that is both rare and dangerous. With a number of vendors involved it was difficult to assign responsibility for the problems.

Hershey had embarked on this project in 1996 partly to satisfy retailers who wanted to keep their own costs down by receiving deliveries when they are really needed. The new information system is used by Hershey's 1200-person sales force and other departments 'Tor handling every step in the process, from original placement of an order to final delivery, it also runs the company's fundamental accounting and touches nearly every operation; tracking raw ingredients; scheduling production; measuring the effectiveness of promotional campaigns; setting prices; and even deciding how products ought to be stacked inside truck." The project was supposed to go live during the slow period in April, but development and testing were not yet complete. The July startup occurred as Halloween orders were arriving. In July, Hershey informed customers that computer problems might cause delays

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and some customers soon started receiving incomplete shipments. In September, it announced that its turnaround time for orders would double to 12 days.

In September, Hershey announced it would miss third-quarter earnings forecasts due to the problems rolling out new systems designed to take customer orders and make store deliveries. This particularly hurt Hershey during the Halloween season when it sacrificed some market share to competitors such as Mars and Nestle. Hershey blamed lower-than-expected sales in December on a slowdown in customer order demand partly due to earlier customer-service and order-fulfillment issues. Hershey predicted its sales would be off by as much as $ 150 million for the year.

The problems with the information system were reported in Hershey's 1999 annual report: "We have experienced the well-publicised problems associated with the implementation of the final phase of our enterprise-wide information system. While this has been a painful process for us and for our customers, we should remember that the system is designed to make Hershey more competitive through lower costs, better customer service, and increased sales. It has not been the easiest journey, but we still expect to arrive at our intended destination."

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After going through this case, you will be able to :

• justify the principles that apply to any system in a business.

• study the relationship between information systems and work systems.

Aramark is a $7 billion world leader in providing managed services - food services and facilities management, uniform and career apparel, and child care and early education programs. Headquartered in Philadelphia, Aramark has more than 160,000 employees serving 15 million people at 500,000 locations in 15 countries every day. In corporate communications to customers and employees, Aramark makes a big point of working together to provide the best services possible in the most convenient way.

Aramark Uniform Services rents, leases, or sells uniforms for service employees working in industries including food processing, airlines, manufacturing, hotels, department stores, and many more. It claims to have the broadest range of uniform and career apparel products and services in the industry. The rental service includes clean uniforms delivered every week, automatic repairs and replacements, and free upgrades. The lease option allows the customers to clean the garments without having to purchase them still, repairs and replaces worn-out garments at no cost and allows size changes. The purchase option does not offer cleaning but allows a wider range of products and fabrics, and extensive embroidering and screen-printing for personalisation. Its trademarked ApparelOne Process is designed to determine which option is best for a customer. The process starts with a needs assessment. The second phase is customisation to meet the needs of each employee group and to define the right services. The third phase is to provide proactive improvement suggestions, immediate problem resolution, and one-stop, hassle-free service.

Consistent with this service orientation, Aramark announced an improved customer invoiceas follows : "Spend more time managing your business......And less time learning about

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our invoice.... We listened when you told us our invoice could improve by making the format more readable and less confusing. Accordingly, we have taken the first step in the process of continuous improvement." The changes included redesigning and simplifying invoice layout, removing reduce clutter, and reduce customer time spent in reviewing invoices.

Invisible to Aramark's customers is an enormous amount of data processing required to keep track of uniforms, services, and customer accounts. Until Aramark changed its internal data processing systems, it took three days to retrieve an invoice to resolve a customer complaint. The old paperwork system involved storage rooms full of file cabinets and approximately 100 employees who did nothing but file and retrieve invoices at branch offices. Anew outsourcing arrangement with Xerox changed that.

"Aramark bills are now sent to a single Xerox-run processing center in Toledo, Ohio, Xerox scans and archives 2 million invoices a month into an electronic repository and mails out the monthly statements. The database is accessible to any one of Aramark's local offices through a secured internet hookup." According to the director of marketing services," If a customer calls with a dispute, we can instantly pull that image up on the screen and we can fax it directly to the customer. Ironically, the Forbes article that described this outsourcing arrangement presented it as a counterpoint to major internal problems at Xerox due to two bungled reorganisations. In one of them 53 administration centers in Europe and 36 in the United States were consolidated into 1 and 3 locations, respectively. "The result was chaos. The invoices and shipping orders piled up; instead of cutting expenses, the transition ended up costing Xerox money and customer goodwill."

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After going through this case, you will be able to :

• implement a principle based analysis method that can be used as a starting point for identifying and organizing issues.

t study the improvement goals related to a system.

A Galaxy 4 satellite operated by PanAmSat, a subsidiary of Hughes Electronics, tilted away from the earth at 6:13 P.M. on May 19, 1998 and began to spin because of a computer failure and the subsequent failure of a backup computer. This unexpected problem disabled 80% to 90% of the pager services in the U.S. along with a number of credit card authorisation networks, television transmissions, and other networked services. PanAmSat's effects to realign the satellite failed, but it was able to restore service within a day by rerouting the traffic the satellite normally handled. Of the 17 satellites PanAmSat had in orbit at the time, one was a spare. The recovery plan included rerouting signals for paging, retail-store services, and other services though its Galaxy 3R satellite and rerouting television signals through its Galaxy 4 had occupied since its launch in 1993. Computer failure had transformed the Galaxy 4 from a $200 million link in the U.S. business infrastructure into a 3700-pound place of space junk with a 100-foot span of solar panels. The satellite was insured for $ 116 million, and the company did not expect to suffer a major financial loss as a result.

The immediate consequences of the satellite failure demonstrated the widespread dependence on communications infrastructure. Emergency communication to police departments and physicians was disrupted for hours. Customers at 5,400 Chevron stations could no longer pay by credit card at the pump because automated credit-card authorisation requests were transmitted from antennas atop gas stations through the Galaxy 4 satellite. Customers in Wal-Mart stores had similar problems. At home, the nonresponse of family

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members and friends when paged repeatedly led to confusion and annoyance. The cost of satellite time suddenly jumped. It had ranged from $100 to $500 for a 15-minute block depending on the satellite's location; after the failure the prices jumped to $250 to $600. Annual prices of $900,000 to $ 2.500,000 seemed to be increasing by up to 50% Ten months later, a failure on GE Americom's satellite GE-3 disrupted a number of key networks including PBS broadcasting, CNN, and Turner Classic Movies.

Although satellites typically have been extremely reliable, with a failure rate of less than 1%, the widespread impact of this event was a reminder of vulnerability to infrastructure-related weak links that affect business and society. It is possible to imagine ways to reduce risks through investment in redundant capacity, but the costs are prohibitive in many situations. For example, CBS television shifted to a backup satellite when the Galaxy 4 could not carry its planned broadcasts. CBS could afford the backup, but many paging businesses do not have the resources to keep a satellite idling in reserve.

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After going through this case, you will be able to :

• examine the working of a business process.

• study the process modeling and graphical methods for summarising a process.

• state the process characteristics.

• determine how well processes perform.

• explain communication and decision making activities that play key roles in processes.

With over $21 billion in sales and over 38,000 employees, Cisco Systems is one of the most highly valued companies in the world. It had the good fortune of providing routers and other components of the Internet's infrastructure just as the Internet was taking off. Other firms were in the same line of business, but Cisco found distinctive methods for servicing its customers, performing its internal operations, coordinating with its suppliers, and successfully acquiring and assimilating other firms whose products complemented those that Cisco already had. Cisco places so much emphasis on customers that customer satisfaction is an explicit part of the personal goals for a majority of its employees. Cisco actually outsources much of its production, and in many cases passes orders on to suppliers who send the product directly to customers without additional handling by Cisco.

One part of Cisco's success is related to the way it uses information systems, both its internal Oracle enterprise software and the Internet-based systems that provided data and communication and links for customers and employees. One advantage Cisco had in this regard was that it was founded in 1984 and therefore was not encumbered by the remnants of incompatible and poorly programmed data processing systems from the 1970s.

"Despite its central role as a maker of Internet equipment, Cisco discovered the power of

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the Internet almost by accident. In the early 1990s, Cisco created a simple text 'bulletin board' for customer questions and comments. In late 1993, Cisco engineers looking for a better way to interact with customers turned to Mosaic, the first Web browser. Cisco began using Mosaic, but there still was no commercial Web—customers had to dial into Cisco's computers directly." Cisco began using the Internet for selling in 1995. By 2000, customers, suppliers, distributors, and other business partners had access to portions of Cisco's internal website. In February 2000, 97% of it orders arrived via the Internet.

Cisco's employees have come to expect that everyday data processing tasks that annoy and frustrate employees of most companies will be done quickly and efficiently through web-based applications. For example, engineers, salespeople, and others who need to travel to the customer site can enter their expense reports using the Internet instead of turning in handwritten reports that certainly involve delays and will have a higher chance of misinterpretation and errors.

Cisco uses a system of top-down transparency in which managers at every level in the company have extensive, up-to-date information on sales and other important business transaction. Cisco's sales database is updated three times a day, allowing the Cisco management to keep tabs on whether sales goals are being met. At any time, Cisco's chief financial officer can obtain the company's revenues, margins, orders, the discounts given on those orders, and the top ten customers for the previous day. Financial data that once took weeks to gather and verify is now collect automatically as part of doing business. This helps the company react more quickly to the market.

Shifts and competitive threats : It also allows Cisco executives to maintain tight control without suffocating the employees' entrepreneurial spirit. Cisco has even shortened the time it needs to close its books at the end of each quarter from the ten days four years ago to one day today while cutting spending on finance from 2% of sales to 1 %.

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After going through this case, you will be able to :

• compare different types of databases.

• summarise the capabilities of database management system.

• learn how to store and control databases.

• state basic concepts related to computerised data files and data modeling.

The rapid growth of health maintenance organisations (HMOs) and managed care was a hot button issue because it involved contradictory goals. On one side, people wanted to be able to choose their own doctors and to receive convenient, high-quality medical care. On the other side, reducing medical costs was a key issue for anyone paying medical insurance premiums, primarily businesses and government organisations, but also self-employed individuals who pay for themselves. Doctors, hospitals, and HMOs were caught in the middle because greater patient choice and higher quality care are more expensive to deliver. The resulting tug of war left many stakeholders unhappy. Patients complained that the insurance companies or HMOs chosen by their employers forced them to switch doctors, use inconvenient hospitals, or accept inadequate treatment. They also complained they could not get outcome data to help in choosing a physician. The doctors complained that they wasted inordinate amounts of time trying to convince insurers that particular treatments were necessary. The insurers and HMOs complained they couldn't make a profit.

H.R. 3605, the Patients' Bill of Rights Act of 1998, was introduced in the House of Representatives on March 31, 1998 to address some aspects of these issues. It contained provisions related to access to medical care, quality assurance, patient information, and grievance and appeals procedures. Section 112 (one of 19 sections of the bill) concerned the collection of standardised data about medical care. It started by saying, "A group

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health plan and a health insurance issuer that offers health insurance coverage shall collect uniform quality data that include a minimum uniform data set— The Secretary [of Health and Human Services] shall specify (and may from time to time update) the data required to be included in the minimum uniform data set... and the standard format for such data. Such data shall include at least: (1) aggregate utilisation data; (2) data on the demographic characteristics of participants, beneficiaries, and enrollees; (3) data on disease-specific and age-specific mortality rates and (to the extent feasible) morbidity rates of such individ uals; (4) data on satisfaction of such individuals, including data on voluntary disenrollment and grievances; and (5) data on quality indicators and health outcomes, including, to the extent feasible and appropriate, data on pediatric cases and on a gender-specific basis,

The data collection provisions of H.R. 3605 were intended to support the patient's choice of physicians, but some observers believed they might actually have the opposite impact. The plans with the least choice for patients are HMOs and other organisations that permit only member physicians to provide services except under extreme circumstances. The plans with maximum flexibility for the patient are preferred provider plans, which allow patients to obtain medical services from any physician, but charge the patients more for physicians who are not a member of the plan. The costs of the data collection called for in Section 112 of H.R. 3605 would be substantially lower for HMOs than for preferred provider plans. This is because the HMOs have greater central control over patient medical records and over the process of routing patients to specialists. In contrast, large preferred provider plans may have thousands of doctors with no central repository of medical records and little consistency in record keeping. The process of sifting through different doctors' records to track the type and quality of treatment each patient received would be much more complicated for the preferred provider plans. If the law passed, they would therefore be required to spend more on their internal record keeping and therefore would have to raise their rates. This would tilt the economic advantage further in the direction of the HMOs that provide less choice.

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Case No. 143U.S. AIR FORCES


After going through this case, you will be able to :

• study the technique for understanding information requirements.

• explain the performance concepts for evaluating information.

• justify the importance of formal models.

Bombs dropped by a U. S. Air Force fighter jet during the 1999 NATO offensive against Serbia struck the Chinese embassy in Belgrade, killing three people and injuring twenty others. China had opposed the NATO intervention in Serbia and the bombing caused further strains in the relationship between the U.S. and China. Some observers believed the bombing was not an accident and a backlash of anti-American sentiment occurred in China. The bombs had actually hit the targeted building, but that building was the Chinese embassy instead of Serbia's Federal Directorate of Supply and Procurement, which was actually over 1,000 feet away and did not resemble the embassy physically. The embassy had moved to this site four years earlier. An 11 -month inquiry into the incident led to the firing of one middle manager at the CIA and punishment of six others for their roles in providing incorrect information about the target. Chinese officials were not satisfied with this result. One spokesman said, "To pretend that the United States did not know the position of the Chinese Embassy in Yugoslavia is not credible... It was impossible for the U.S. side to mix up these two buildings. ... The Chinese Embassy in Belgrade had 'unmistakable markings' that should have prevented its bombing."

In events leading to the bombing, NATO had given the Serbian leadership an ultimatum about ending the abusive treatment of ethnic Albanians in the Serbian province of Kosovo. Serbia did not conform and NATO decided to begin air strikes under the assumption that several days of bombing would force the Serbian President Milosevic to agree to NATO's

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demands. Milosevic did not capitulate until the bombing had gone on for 78 days. When the bombing began, NATO had 219 military targets for the bombing, but over half of those were hit within the first several days. Realising that a much more extensive bombing campaign might be required, NATO's commander asked for a list of 2,000 potential targets including electric grids and commercial facilities. Around 650 targets were bombed during the campaign.

Bombing targets were initially suggested by NATO's Joint Analysis Center in Britain and at the Air Force's European headquarters in Germany. Determining these targets is a complicated process that uses intelligence reports and satellite photographs. As the known targets were being hit, the call for more targets brought other agencies into the process. The CIA's Counter-Proliferation Division proposed the Directorate of Supply and Procurement as a target because of long-held suspicions that it was involved with smuggling missile parts to other countries. These concerns were actually unrelated to the NATO action. The person who tried to locate the Directorate used three maps: two Yugoslav commercial maps from 1989 and 1996, and a U.S. government map produced in 1997. None showed the location of the Chinese embassy, which was built in 1996. The method for locating the building was based on triangulating between other addresses on the assumption that street addresses are numbered uniformly. Only after the disaster did the CIA turn up in its files two maps that accurately placed the embassy: one was a map handed out by a Belgrade bank that showed a branch office near the embassy; the other listed the embassy and its grid coordinates in its index but did not mark the building on the map itself.

"According to administration, defense and intelligence officials, the bombing was caused by a fundamentally flawed process for trying to locate the directorate's headquarters in the New Belgrade section of the Yugoslav capital. Armed with only an address, 2 Bulevar Umetnosti, the officer who was dismissed used an unclassified military map to try to pinpoint the building's location, based on a limited knowledge of addresses on a parallel street.... On the map, which the National Imagery and Mapping Agency produced in 1997, the building that turned out to be the embassy was not identified. Instead, the map showed the embassy in its former location in central Belgrade." The potential target was given an official number, 0251WA0017. Looking at satellite images after the bombing, an intelligence official said that the building looked more like a hotel than an office building.

While announcing the punishments for those involved in the fiasco, the CIA director also singled out another officer who heard about the proposed target informally and despite having no direct authority in the matter called NATO to raise doubts and contacted several others at the National Imagery and Mapping Agency and the NATO task force responsible

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Case 143 U.S. Air Forces

for the bombing runs. For a variety of reasons his concerns were not conveyed to senior officers who could have called off the attack.

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After going through this case, you will be able to :

• state the use of important information system categories such as CAD, EDI, SCM,CRM.

• tudy how the IS categories are linked to specific functional areas of business.

• idealise types of information systems such as TPS, MIS and DSS.

Owens Corning manufactures building supplies such as fiberglass insulation and roofing materials, and sells them to building contractors and to building supply distributors such as Home Depot. In 1991 the company faced challenges on all fronts. It was deeply in debt due to a financial restructuring five years earlier, and its revenues were shrinking slowly. Internally it had 200 incompatible systems dedicated to specific tasks such as invoicing for specific product lines. Externally, the company was out of step with the direction the market was moving. The company was organised around different product lines, meaning that retailers dealt with four service centers and four sets of bills. Builders and remodelers also saw few benefits in this product line orientation because they were less concerned with selecting the right brand of a particular material such as insulation and far more con-cerned with timely, convenient acquisition and the delivery of all the materials for a project. Furthermore, although the company wanted to provide a complete "envelope" for a house, including shingles, waterproofing, siding, and other materials, there were significant gaps in the product line.

Owens Corning embarked on a long-term effort to reorient the entire company. It acquired 14 smaller manufacturers to fill in the products it lacked. It reorganised sales so that salespeople sold the entire company's whole line instead of just one product line. One of its most daunting tasks was a complete overhaul of its hodge-podge of outdated and

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incompatible information systems. Anew head of IS was hired in 1994. After reviewing the state of the existing information systems in the light of the company's strategy, he and his staff decided that an integrated information system was needed so that salespeople could enter orders, reserve inventory, and produce consistent bills.

In what was virtually a "bet the company" strategy, Owens Corning embarked on a two-year rush project to replace its old order fulfillment, manufacturing, inventory, distribution, and financial accounting software with SAP's R/3 program, an integrated, but notoriously complex, enterprise software package. The head of IS insisted that half the staffing for this project would have to come from the business units, not the IS group, and that its success would be defined in business terms, such as a 50% reduction in inventory."

By mid-1995 the project team of 250 people was housed at Toledo headquarters to maximise internal coordination and minimise delays in answering questions. It was divided into five groups, each focused on a different set of processes. Each group included representatives from local business units and IS and business professionals from across the company. Councils with members from all five groups made sure that each process meshed with other processes. In some areas, such as production planning, SAP's capabilities were not as good as those in homegrown systems. However, because the company's strategy required greater integration, the project team and local business operations sometimes had to be satisfied with "good-enough reengineering" rather than insisting on the best way to perform each process. Project cost through 1997 was $ 110 million for a combination of analysing how to use SAP, setting it up on the computers, and training people to use it. Estimated benefits were $ 15 million in 1997, $50 million in 1998, and $80 million in 2000.

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After going through this case, you will be able to :

• explain the use of important information system categories such as MIP, CIM, CRM,EFT.

• idealise types of information systems such as TPS, MIS and DSS.

Enron is a leading energy and communications company based in Houston. It has over 32,000 miles of pipeline and has built or acquired production or distribution facilities as it has moved into other industries. Its traditional business was buying and selling gas and electricity by purchasing from public utilities with surplus supplies and selling to utilities that need more. Starting from its base as the dominant player in the U.S. gas and electric power trading it branched out, became the leading gas and power trader in Europe, and also built other trading operations in paper, coal, and plastics. In January 2000 it announced it would begin trading "telecommunications bandwidth," excess capacity on fiber optics networks. It now controls over 10,000 miles of fiber.

In late 1999 it opened Enron Online, an e-commerce site for Enron's trading operations in energy and other areas. Within one year, it had the highest amount of dollar transactions of any e-commerce site in the world. As of October 11, 2000, Enron had used the site for executing over 350,000 online transactions involving commodities with a gross value of $183 billion. Within a year of its launch, over 60% of the world's wholesale gas trades were on EnronOnline. At an average of over one-half million dollars per trade, it was a far cry from buying several books at a B2C site.

Unlike a typical B2B exchange that provides services for buyers and sellers but does not own anything that is being traded, Enron is actually a principal in all of the transactions on its site. It guarantees delivery or payment on all sales executed through EnronOnline. If a public utility uses the site to sell a fixed amount of gas to be delivered over 30 days in June,

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Enron will actually use its pipeline facilities to receive and resell that gas at whatever price it can get at that time. Conversely, if Enron contracts to deliver a guaranteed supply of gas to a utility if its local temperatures go over 95 degrees, it will actually make sure the delivery occurs unless it sells the contract to someone else.

The fact that Enron participates in a large number of trades and controls a large number of buy and sell contracts at any time gives it a great deal of flexibility to recombine those contracts in new ways to meet the needs of utility buyers. In some ways this is like doing a jigsaw puzzle whose pieces are existing and potential contracts for future delivery. Enron Online lets buyers and sellers act on prices that can change by the minute. Buyers and sellers see real-time price spreads of both, the sell price and the buy price. By the time monthly prices had been quoted on the telephone, those prices might have changed. Reuters and Dow Jones have offered subscription-based real-time commodity pricing for some time, but Enron's service provides real-time pricing for 800 products at no charge. The switch to Enron Online removed the company's 500 traders from the order process, allowing them to handle 10 times the previous order volume by focusing solely on bidding based on Enron's own needs and costs. Transactions that once took three minutes over the phone now take a few seconds, including credit checks.

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After going through this case, you will be able to :

• explain the concepts including three dimensions for visualizing the products and servicesof the work system.

• evaluate the understanding of the phases in the customer experience related to aproduct.

• study the coverage of e-commerce in handling the challenges such as establishingand integrating systems, attracting customers.

In May 1998, Ernst & Young announced that its online consulting service called Ernie had been nominated for a Computerworld Smithsonian Award. Each year, this award program honors visionary uses of information technology that produce positive social, economic, and educational change. Ernie was started in 1996 as an Internet-based consulting service for mediumsized companies that can benefit from the knowledge of consultants but cannot afford the high prices experienced consultants charge for extended engagements. Companies that used this service paid $6,000 per year for access to information on the Ernie website plus the ability to direct questions to E&Y consultants via e-mail.

Ernie provided client benefits by using information technology instead of much more expensive face-to-face meetings. After logging on using a company's password, the person needing help accessed an extensive collection of Frequently Asked Questions (FAQs) in many areas. If the FAQs didn't provide the answer, the user could direct the question to human experts by filling in a computerised form. In addition to the user's question itself, the form requested the general topic area (such as organisational change), general background information about the user's firm, and the selection of one of eight categories the website offered (accounting, corporate finance, human resources, information technology, personal finance, process improvement, tax, and other). The forms were routed

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to appropriate Ernst & Young consultants using its corporate intranet and a one- to two-page response came back via e-mail within two days. Users could ask as many follow-up questions as they wanted.

The information, directly accessible through, could be used without the direct involvement of consultants. In addition to FAQs, in mid-1998 it included five "Ernie SuperTools." Ernie Diagnostix for supply chain provided a way to compare a firm's supply chain with those of top-performing companies in an E&Y database. Ernie Software Selection Advisor provided an eight-step approach for selecting the right enterprise-wide software package. A technology selection tool provided a way of determining technology needs and taking advantage of E&Y's buying power. Ernie Business Analysis provided a way to commission an in-depth report to analyse competitors, markets, and industry trends. Alink to the Gartner Group's self-paced courses provided a way for end users, managers, and programmers to learn recent software applications. A 1998 extension called Ernie MediaWatch also linked Ernie to seven prominent trade magazines, including HRfocus, Management Review, Real Estate Forum, and Management Accounting. Linking to these magazines provides additional expertise and perspective that otherwise might not be as readily accessible.

Responding to predictions that Ernie would cannibalise E&Y's traditional consulting business, in 1998 the firm's director of Internet service delivery said that the firm had not viewed this as an important issue. "Bringing a team of consultants onsite remains the best way to implement large computer systems or to bring large-scale change to an organisation. The pace of change is so fast today, that there is a need for immediate support to help navigate the waters of change. That need hasn' t always been there. Organisations used to have time to adapt to change. Now they don't. They need help today, and traditional consulting can't offer that kind of help. So Ernie is serving an entirely new market—the market for decision support."

Several years later, in early 2000, the international consulting company Cap Gemini acquired Ernst & Young's consulting unit and was no longer visible on the Web. Ernst & Young brought out a new online service called Ernst & Young Online Tax Advisor. The Tax Advisor provided specific, actionable advice related to specific client questions and charged by the question. A dedicated group of subject matter experts answered the questions. The maximum fee per inquiry was $2,500, with the average around $1,200. The client could get a feeling for the fee for an inquiry by looking at a list of previous inquiries and the fees charged. By 2000, Tax Advisor had handled over 15,000 questions.

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After going through this case, you will be able to :

• state the relationship between Customer and product.

• study the criteria a customer uses to evaluate the product of a work system.

• assess the importance of the system as providing an effective self service environment.

Webvan is an Internet retailer founded by Louis Borders, who had previously founded the book chain Borders Books. It delivers food, nonprescription drug products, and general merchandise such as houseware, pet supplies, and books. The $450 billion grocery market is 15 times as large as the $30 billion book market, but the economics are daunting. The grocery industry turns on margins of 1 % to 2% of sales. The average price per item is $1.98 versus $7 for drugstores. Several unsuccessful waves of online grocers had preceded Webvan, whose third-wave model is based or highly automated distribution centers containing miles of conveyor belts.57 Borders founded Webvan after concluding that a carefully engineered distribution center could provide timely, cost effective grocery service, and that the lower cost of operating a distribution center could more than offset the cost of vans and drivers.

Webvan's first operations in the San Francisco Bay region, Sacramento, Atlanta, and Chicago allow customers to order the same popular grocery products that they can order from a Safeway or other large grocery stores. (During 2000, Webvan merged with and added sites ii other cities.) Webvan charges approximately the same prices as typical grocery stores and pro vides approximately the same quality. Webvan customers submit orders using its "Webstore". When the order is received, Webvan's order fulfillment process occurs in a large, highly automate distribution center designed to package the items in a specially designed tote, move the order to a refrigerated Webvan delivery truck, and complete delivery within a time window committed to the customer at

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the time of the order. This approach automatically tracks every item purchased art therefore creates much more accurate customer profile data than is available through customer loyalty cards and other methods used by typical groceries.

The Webstore is divided into 11 intuitively organised categories and allows the customer to find items quickly and efficiently by drilling down from general to more specific categories, such as moving from produce to fruits to bananas. To add to shopping convenience Webvan encourages! Customers to keep an online list of nonperishable items they purchase regularly. Customers can add items to a shopping cart or save them in a shopping list. The shopping cart is always visible and instantly updates and calculates the order total while the customer shops. Customers schedule their delivery by selecting a time from a grid of 30-minute alternatives on the same day or within the next several days. Deliveries from the Oakland facility occur from 7:00 a.m. to 10:00 p.m. every day of the week. Customers must be at home to accept delivery of perishable or frozen items or regulated products such as alcohol and tobacco.

Through Q3 of of 2000, Webvan had not yet become profitable even in its initial San Francisco facility. Following its merger with, its revenues for Q3 were $87 million but its loss was $120 million. The company delivered an average of 2,350 orders each day, with an average order size of $105. To achieve break-even, it would need 3,300 to 3,500 orders per day. To achieve that goal, the company's best customers would have to shop on average 3.8 times each quarter, up from the current average of three times a quarter. Webvan planned to improve its Web site and offer preferred deliveries, coupons, and online promotions to its best customers in an effort to achieve that goal.

Webvan had an innovative business model, but on November 20, 2000, the Monday before Thanksgiving, it had some of the same inventory problems that other grocers have. It ran out of pumpkin-pie filling, some gravy products, and turkey stuffing. When customers tried to order those goods, a message popped up saying they were out of stock. The torrent of shoppers also caused some longer-than-normal delays in turning pages on the site. According to the Internet research firm PC Data, Webvan's total traffic on the previous Saturday more than doubled from the week before. The number of shoppers jumped from 144,000 unique users to 294.000. After Webvan went public in late 1999 share prices went as high as $34, but by mid-February 2001 the price had fallen below $0.34 per share, a 99% drop from the peak.

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After going through this case, you will be able to :

• assess the negative and positive impacts of work systems

• study the impact of information systems on people at work.

• point out that the success of any system in business depends on its participants

• explain the impact of ethical issue such as privacy and access on the users.

The U.S. Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 as part of an effort to change many aspects of the welfare system. One of its many provisions called for the creation of a National Directory of New Hires containing the name, address, social security number, and wages for each of the 60 million people hired into a full- or part-time job in the United States by all but the smallest employers. Several states already had state directories that had been quite useful. In Missouri, for example, child support collections had increased 17% in 1996 after the state required reporting of new hires even though its state directory did not cover people who had moved to different states. Welfare officials predicted that matching the federal and state directories would produce billions of dollars in child support payments. Under the new law, the directory would be available to state welfare and child support agencies. The Internal Revenue Service (IRS), Social Security Administration (SSA), and Justice Departments would also have access for the some purposes.

Some privacy advocates voiced alarm about the new database, noting that most new hires have no child support obligations whatsoever. Including information about them in this database would be a threat to their privacy because so many agencies would have access to this information and because data in this type of database has not been totally secure in the past. This type of risk had been publicised in 1992, when an 18-month federal

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investigation found a ring of "information brokers" who allegedly bribed SSA workers to steal personal information. The going rate to obtain a ten-year earnings history within three to five days was apparently $175, of which $25 went for the bribe to the SSA worker. Buyers of the information apparently included private investigators, prospective employers, lawyers, and insurance companies. In 1994, more than 420 IRS employees received some form of discipline for illegally browsing through the tax returns of friends, relatives, and neighbors. Since that time, the IRS has increased its training on privacy issues and has installed automatic systems to monitor data access by its employees. In 1997 the IRS Commissioner asked Congress for legislation that would add criminal penalties to the law that prohibits IRS employees from snooping into taxpayer records. This request followed shortly after a Federal appeals court reversed the 1995 conviction of an IRS employee who was also a Ku Klux Klan member. That employee had been convicted of using his computer terminal to look through the tax records of other white supremacists he suspected of being informers for the FBI. The conviction was overturned because the prosecution failed to prove that the former employee had done anything with the information he collected.

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After going through this case, you will be able to :

• assess the strategic and practical issues involved when deciding how to incorporateIT into a firm's business strategy.

• explain the strategic issues.

The Economist Group grew out of The Economist, a weekly newspaper of international news and business founded in Great Britain in 1843. It currently comprises The Economist, Economist enterprises, the Economist Intelligence Unit, CFO Magazine, the Journal of Commerce, and specialist magazines. Converted to dollars, its revenue for the fiscal year ending in 2000 was around $330 million and its loss before taxes was around $74 million, compared to profits of $46 million, $35 mil-lion, and $38 million in the previous three years.

The Economist Intelligence Unit was founded in 1946 and directed toward companies establishing and managing operations across national borders anywhere in the world. It provides objective and timely analysis and forecasts of the political, economic, and business environment in 195 countries. EIU is a worldwide operation with offices in London, Vienna, New York, Hong Kong, Singapore, and Cambridge (USA). The intelligence is based on regular contributions from a global network of more than 500 information specialists. ElU's electronic publishing division provides the ElU's full database of country, regional, and industry information through a range of electronic media including CD-ROM, Lotus Notes, online databases, news services, and customised network feeds to corporate intranets. Business executives can access the ElU's full-text reports directly over the Internet at which was launched in February 1996 as a way to make the existing content more conveniently accessible.

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In May 1998, the EIU launched ViewsWire,, which describes itself as a pioneering web-based intelligence service from the Economist Intelligence Unit. It delivers timely analysis on key economic, political and business developments around the world. Each day, the ViewsWire supplies 100-150 analytical articles on any of 195 countries. Unlike a traditional news service, it provides views not news from the Economist Intelligence Unit and the rest of The Economist Group. The aim is to give the content the analytical depth needed to make informed decisions about doing business around the world. It also includes carefully selected analysis from other respected sources to ensure a full perspective on international business conditions as a complete decision-support tool for global executives, it supports navigation by country, by subject and by a powerful search facility, which includes the option to set up a range of personal pro-files. Pricing is based on the number of authorised users. The sliding scale for the Global EIU ViewsWire network goes from $8,650 for one user to $102,050 for over 100,000 users. The pricing for the regional network goes from $3,900 to $46,000.

To successfully produce, ViewsWire required the EIU to reengineer how it organized information internally and how it coordinated that process across more than 500 editors and analysts in more than 100 countries, working in a variety of different formats and timelines. The previously existing culture had been organised around producing news articles on strict deadlines. The mandate of publishing a total of 100-150 new articles every day previously required a quota of submissions from reporters and editors. Now they had to change their emphasis and had to be on alert to provide analysis and forecasts in response to fast-changing events. Editors had to learn to break out of publishing time frames to adopt more of a daily focus in their work. They would also have to learn to use more internal resources within the Group instead of only turning to their typical sources for reports. Users had to learn things as well, especially how to drill down into the EIU database to find information they needed.

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After going through this case, you will be able to :

• study the methods for selecting among proposed information system investments.

• understand issues related to project management.

Founded in 1906, Cemex is one of Mexico's few truly multinational companies, with market-leading operations in Mexico, Spain, Venezuela, Costa Rica, Philippines, Panama, Dominican Republic, Egypt, Colombia, and a significant presence in the Caribbean, Indonesia, and the southwest United States. It is the largest cement company in America and one of the three largest cement companies in the world, with revenues of $4.8 billion and close to 65 million metric tons of production. Cemex and its subsidiaries engage in the production, distribution, marketing, and sale of cement, ready-mix concrete, and related materials. Its strategy includes focusing on cement and concrete products, diversifying globally to cushion against volatility in local markets, developing efficient production and distribution processes, using IT to help increase flexibility, improve customer satisfaction, and reduce bureaucracy and excess staffing, and providing training and education for employees. Its state-of-the-art Tepeaca facility supplies one fifth of the Mexican market and may be the lowest cost cement producer in the world, with operating costs of $25 per ton, roughly $10 lower than the industry average, and emissions far lower than legal requirements. In 1992 Cemex purchased Spain's two largest cement companies, reviewed, their operations thoroughly, invested in facilities, and reduced the workforce dramatically, such as by consolidating 19 offices into one.

Although it was a laggard IT user through the 980s, Cemex is now widely recognised as a company that uses IT extensively and views IT as an integral part of its long-term strategy. Lorenzo Zambrano, a Stanford MBA whose family owned a third of the stock, became its CEO at age 41 in 1985. In 1987, he hired an information system director and gave him the mandate of developing Cemex's then primitive IT capabilities. Within a year, dispersed

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operations were being linked via satellite. In one case, a cement plant in a town with only 20 telephones used a satellite dish to transmit voice and data, thus bypassing Mexico's chaotic phone system. By 1998, managers could use the satellite-based communications network to monitor operations and market conditions all over the world and to communicate using voice, video, Lotus Notes, and other technologies.

Application areas that demonstrate the importance of IT include management information and control of operations. Cemex managers can immediately link to any of the 18 plants in Mexico and immediately access the status of each cement kiln, recent production data, and even the deployment of trucks dispatched by different cement and concrete distribution centers. Financial statements are available two days after the end of the fiscal month, an endeavour that used to take a whole month. Eliminating these lengthy delays in evaluating production, costs, and sales volume helps in running a lean, low-cost operation by making it possible for management to take action quickly instead of waiting almost two months to just receive the data in some cases.

Use of IT in controlling operations occurs at many points. Cemex's ready-mix delivery trucks are equipped with dashboard computers that allow tracking using global positioning satellite technology. A central dispatcher in a region constantly reroutes the trucks as customers cancel, delay, or speed up orders. In 1995, because of traffic gridlock, capricious weather, and labor disruptions at the construction site, Cemex could promise delivery no more precisely than within three hours of the scheduled delivery time. Such conditions often forced customers to cancel, reschedule, or change half of their orders. Today, at its largest operations in Mexico and Venezuela, Cemex is committed to delivering ready-mix shipments within 20 minutes of the scheduled time. The reason for this dramatic improvement in customer service is its dynamic synchronization of operations, which has increased the productivity of the company's trucks by 35%. The result is significant savings in fuel, maintenance, and payroll costs, and a considerable increase in customer goodwill.

A Cemex news release in September 2000 announced the launch of CxNetworks, a new subsidiary that will build a network of e-businesses, as an integral element of its overall e-enabling strategy. CxNetworks will leverage Cemex's assets onto the Internet and extend the reach of the company into marketplaces that complement its core business. CxNetworks will initially focus on three business areas: the development of online construction marketplaces, the creation of an Internet-based marketplace for the purchase of indirect goods and services, and the expansion of Cemtec Cemex's information technology and Internet consulting services company into new markets. CxNetworks is in the process of developing and will soon launch a series of online construction market places with a variety of local partners in South America, Europe, the United States, and

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Mexico. These businesses will offer an array of construction products, including cement, as well as online services and information to small and large contractors, builders, and other construction industry participants.

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Case No. 151NIBCO: A "BIG BANG"



After going through this case, you will be able to :

• identify the phases of any information system project

• understand how these phases are performed.

• study different approaches for building information system.

Founded in Elkhart, Indiana, in 1904 as the Northern Indiana Brass Company, NIBCO Inc. is a lead-ing provider of flow-control products such as fittings, pipe, valves, and actuators to residential and commercial construction, industrial, and irrigation markets. It is a privately held company with around 3,000 employees and revenues around $500 million.

In 1995 its management became concerned that its internal systems would not support the company's growth path because they relied on a hodge-podge of incompatible computer applica-tions that could not communicate with each other. A strategic IT planning study with a consulting' firm recommended that NIBCO replace its legacy systems with an ERP system on a client/server platform over a three- to five-year time frame. Further analysis by an internal committee led to a July 1996 recommendation that the company should go with SAP's R/3 system and should pur-chase modules for finance and controlling, material management and production planning, sales and distribution, and human resources. Contrary to consultant advice and prevailing wisdom, the committee recommended a "big bang" implementation in which all the modules (except human resources) would go live at the same time so that NIBCO could pursue its business goals without further delays. IBM was chosen as an implementation partner even though NIBCO believed it had not done a successful big-bang implementation up to that point. Three coleaders of the project were selected, with each focusing on one area but no one individual in charge. Business coordina-

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tion and change management went to long-time NIBCO managers; technology went to an experienced CIO who had joined the company in 1995.

Project kickoff occurred on September 30, 1996. The system was to go live at ten plants and four distribution centers on November 29, 1997, with a 30-day grace period. A great deal of the work would involve figuring out how to standardize what previously had been ten different ways of doing things in ten plants with ten different databases. The project team included three business process teams of seven or eight people, a change management team, and a technical team. The project team worked in a 50,000-square-foot open office. To avoid distractions, phones were in a hallway leading out of that area. Conversion from the existing legacy systems was an enormous task. Data from 85 files and a number of databases had to be cleaned up and loaded in order to test the data system with real data. No replacements were hired for important individuals who had moved from their primary responsibilities. This meant that others in their areas needed to take over the work they were previously doing. To compensate for the stress of doing so much extra work, the company created a bonus plan in which every salaried employee would receive a bonus depending on six criteria related to meeting the schedule and budget for the project. The November 29, 1997 date proved impossible because of delays in the consolidation of a number of distribution centers. In addition, it had been necessary to load the master data for manufacturing six times and more testing was needed.

The new system did go live, on schedule, on December 30, 1997. The project leaders had worked hard on setting expectations around the difficulty of the project and the likelihood of disruptions. Transferring important managers to full-time project responsibility without replacing them did lead to lower productivity. Monthly shipments fell well below plan. According to one of the three project leaders, "It absolutely affected our financial performance. The business jogged; it didn't run." Ten weeks after the roll-out NIBCO was still in start-up mode in its financial, manufacturing, and sales management systems, and some users still wanted to go back to the way things were.

Looking back on the project in late 1999, the CEO said, "We knew we wanted to go to an ERP system." People hadn't heard the horror stories about SAP yet, but we've had no troubles. SAP has been well-suited to our needs. We rolled it out on Jan. 1, 1998, but getting there nearly killed us. We had at least 150 people assigned full-time to the project, and we brought it in on time and on budget. Our cost was $ 18 million, including training time, consultant time and our time. Our service to customers diminished during that time, but the pain was worth it.

In July 2000, two and a half years after the big bang, NIBCO issued a statement in which its CEO said, "NIBCO has undergone a complete transformation in just a few years. We

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have inte-grated an SAP computer software infrastructure enterprise-wide, developed interactive Web sites with online ordering and other transactional capabilities for our customers, implemented demand-pull manufacturing, focused on perfect order completion, and made other strategic moves to position NIBCO for leadership in the 21 st century." The company called its new way of doing business eNIBCO. The CEO said this was a platform to provide better and stronger service. The platform includes

•, an informational Web site providing complete product information,current price sheets, product brochures, catalogs, and specification guides.

•, a secure Web site providing real-time access to customer-sensitive information and fast online order processing anytime, day or night.

• EDI, which allows customers to enter orders via the exchange of standardizedelectronic busi-ness forms.

• Vendor-managed inventory, which reduces customer overhead by transferring toNIBCO responsibility for customer inventory management, order entry, andforecasting.

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After going through this case, you will be able to :

• understand how these phases are performed.

• study different approaches for building information system.

The information system air traffic controllers use to control airplanes in the air and on the ground is a mission-critical system whose failure literally endangers hundreds of lives. Its ideal design goals include minimizing delays, maximizing airport efficiency, and ensuring the safety of passengers and crews. Unfortunately, it uses obsolete computers and workstations and displays only part of the potentially available information that air traffic controllers might be able to use in normal situations and emergencies. Computer failures have occurred occasionally at control centers, leaving the air traffic controllers with little to work on but guesses and projections from last known locations. Although not usually associated with the computer failures, in 1997 there were 225 near misses by aircraft flying too close together, up 22% from 1996.

In 1981 the Federal Aviation Administration (FAA) proposed a project to overhaul the entire air traffic control system by building the Advanced Automation System (AAS) with an initial installation in Seattle in 1992. In 1984 IBM Federal Systems and Hughes were chosen as finalists for the con-tract. After three years and $500 million of FAA expenditures on prototypes, the FAA selected IBM's $3.6 billion fixed-cost-contract in 1988. The Government Accounting Office (GAO) warned that this was unrealistically low/The FAA pushed for an unprecedented 99.99999% reliability, no more than three seconds of downtime per year. Contrary to the wishes of the air traffic controllers, who wanted to retain paper strips they used to chart the progress of planes, the FAA wanted to accom-plish the same type of function with a few keystrokes in a totally paperless environment. This was not achieved with the available technology. A report in 1992 found significant technical flaws in the work to date, including the inability to reach the required peak load

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of 210 coordinated consoles in a single facility. Six months later, IBM announced a 14-month delay. The FAA and IBM both pro-posed a number of changes and finally agreed to freeze technical requirements by April 1993. Later that year, Loral purchased IBM Federal Systems.

In 1994 a new FAA administrator revamped the A AS team and later threw out major portions of the AAS design, deciding to emphasize Display System Replacement (DSR) in a new contract with Loral. A mock-up of the new display caused major controversy at the 1995 air traffic controllers' convention because it did not adequately handle the paper strips used to chart the progress of the planes. In 1994 the FAA administrator also launched a project to use global positioning satellites to make sure that aircraft would not fly on collision courses. An initial system design by one contrac-tor was deemed unreliable in 1995 and a $475 million contract went to Hughes Electronics in 1996 to continue the work. The FAA administrator left the government in 1996. During 1996 and 1997 the scope of the technical requirements expanded to include as many as six new satellites and addi-tional navigation aids on each airplane, including 180,000 small, general aviation planes. By 1998 the future of this project was in doubt.

Meanwhile, work continued on the new terminal's for air traffic controllers. On March 5, 1998, the next FAA administrator testified that the FAA was closer to solving what air traffic controllers described as a hazardous flaw in the new hardware and software the agency planned to install nationwide starting in late 1998 or 1999. The controllers had complained that the design of the Standard Terminal Automation Replacement System (STARS) might hinder air traffic control because the system's windowing software frequently blocks icons that represent aircraft on the screen. In February 1998, a human factors team had solved 87 of 98 remaining issues. The admin-istrator said, "I am optimistic that all the human factors issues will be resolved." In May 2000, the FAA announced it would spend $270 million to address long-standing complaints from air traffic controllers about the design of STARS. The decision to modify STARS came after two years of discussions by the FAA, STARS contractor Raytheon Co., the air traffic controllers, and air traffic sys-tems specialists about "human factors" in the design of air traffic displays and workstations.

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After going through this case, you will be able to :

• identify different types of risks related to accidents and computer crimes.

• understand some of the business conditions that increase vulnerability.

On May 4, 1999, people around the world began receiving e-mail messages with the title line ILOVEYOU and a message saying "Kindly check the attached LOVELETTER from me." The attachment was called LOVE-LETTER-FOR-YOU.TXT.vbs, meaning that it was a program written in Visual Basic. Anyone who opened the attached letter was in for a rude surprise, because the attachment contained a computer virus (technically, a VBScript worm) that destroyed artwork files ending with the letters jpg or jpeg, and modified MP3 files to make them inaccessible. It used Internet Explorer to visit a Web site in the Philippines, where another piece of malicious software, called WIN-BUGS-FIX.EXE was downloaded. That program searched the victim's hard drive for specific password files and sent them to an Internet account in the Philippines. The worm then used Microsoft Outlook to mail itself to everyone in the user's address book. By various estimates the virus affected as many as 45,000,000 computers at a total cost of the wasted time and effort probably exceeding $ 10 billion.

The way the worm was addressed played a major role in its rapid spread. Even some computer users who were aware of virus threats were caught off guard because the message seemed to come from someone they knew and had the title ILOVEYOU. Later, when organizations started blocking messages with ILOVEYOU in their title, they may have inadvertently blocked messages that could have been helpful in analyzing the situation. Soon a number of mutations of the virus appeared, such as one called "Mother's Day Order Confirmation." With unintended bad timing, Williams Sonoma, Inc. sent legitimate e-mail to many of its customers marked "Great Gifts for Mom."

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Events at Ford Motor Company exemplify what happened as companies around the world learned about the problem. The manager of a Ford computer center in England determined that a worm was spreading across Ford's global e-mail network. He suggested that the entire network should be shut down. In Europe alone, Ford had 1,000 infected computers and 30,000 salaried employees receiving 140,000 contaminated e-mail messages in the three hours before the network was shut down. Its factories kept running, but many employees could not access their electronic calendars. Members of Ford's network administration staff in Michigan stayed up most of the night writing corrective software that would be downloaded the next day to each desktop as it was reconnected to the network. Other companies that did not use Microsoft Outlook had no problem with the Love Bug because it could not attach itself to the software they used.

The worm actually left a number of traces that made it easy to determine its source. The computer code contained the words "Manila, Philippines," and performed downloads from Web sites operated by Sky Internet in the Philippines. Computer logs at Sky Internet showed the password-stealing program was loaded on April 29 and that the programmer used Internet accounts from another Manila ISR Incriminating chat-room logs traced to e-mail accounts also revealed several individuals chatting about hacking and the creation of virus programs. The clues were so numerous that some experts worried they might be false tips left to thwart investigators.

The prime suspect was Onel de Guzman, 24, a computer-college student who had written his college thesis on a password-stealing program similar to the one used in the virus. He acknowledged during a May 1999 news conference that he might have released the virus by accident, but said he meant no harm. Although a Philippine law against computer hacking was passed after the Love Bug incident occurred, no such law existed in the Philippines at the time the Love Bug was launched, and all charges were dropped. In an October 1999 interview (with his lawyer present), de Guzman admitted that he created viruses but didn't know if the Love Bug was one of his. He said he saw nothing wrong with stealing software from other computers, just as he has no moral qualms about the damage caused by viruses. He said software makers, notably Microsoft, were to blame for the Love Bug debacle because they licensed products vulnerable to sabotage.

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After going through this case, you will be able to :

• study a value chain for system security with special attention to security issues.

• state the techniques related to web based commerce.

• explain the techniques related to web based transactions.

The London Ambulance Service (LAS) covers a population of 6.8 million people, carries over 5,000 patients every day, and receives up to 2,500 calls a day. Its goal is to respond to calls in an average of 14 minutes. A previous system for dispatching ambulances in response to medical emergencies had divided London into three separate zones and had communicated with ambulances through a combination of two-way radios, telephones, and computer displays in vehicles. Operators in the dispatching center received calls about emergencies and worked with local ambulance stations to identify the nearest available ambulance and then dispatch it to the site. A new system was developed to treat all of London as a single zone. It effectively did away with radio and telephone calls to stations and permitted the computer to dispatch ambulance crews automatically based on the location of the patient and of available ambulances. Unfortunately the new system had not been completely tested or debugged when it was put into operation on October 26, 1992. As the night progressed, calls were missed, several ambulances were dispatched to the same emergency, and operators in the dispatching center were swamped with computerized' exception messages. Some emergency callers could not get through for up to 30 minutes. Between 10 and 20 people probably died because ambulances arrived up to three hours late. A spokesman for LAS called the situation "a complete nightmare."

A formal inquiry into this disaster concluded that neither the computerized parts of the system nor the human participants had been ready for full implementation. The software was neither complete nor fully tested. The computer system's performance under a full

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load had not been tested. The dispatching staff and ambulance crews had no confidence in the new information system and had not been fully trained. Physical changes in the dispatching room meant that the staff were working in unfamiliar positions without paper backup and were less able to collaborate on problems they had previously solved jointly. The automated dispatching approach required virtually perfect information, but the information it received was imperfect due to incomplete status reporting from the ambulance crews, poor coverage (black spots) in the radio system, a radio communica-tions bottleneck, and technical inconsistencies between the mobile data terminals and the central computer. Imperfect data in the dispatching system caused inappropriate and duplicated alloca-tions of ambulances to emergencies. A swarm of computerized exception messages plus an increased number of callbacks when ambulances did not arrive slowed the work even more. As the ambulance crews became more frustrated, they became less likely to press their status buttons in the right sequence, making the information even less accurate. Problemswith the system had been predicted by the owner of a company whose bid to built the

system had been unsuccessful. In several memos to LAS management he had warned that the planned system would be "an expen-sive disaster" and that its rule-based, analytical approach could not be as effective as an experi-enced operator in the small minority of difficult cases.

The next day the dispatching staff reverted to a semi-manual approach in which the computer stored data but the decisions were made while contacting an ambulance station near the incident. This approach worked well until November 4, when the computer system slowed down and then locked up and could not be rebooted. The dispatchers reverted entirely to manual dispatching. The computer problem turned out to be a software bug that prevented the computer from releasing a small amount of memory each time a vehicle mobilization was generated. This bug had little impact initially, but it gradually tied up more memory until the computer could no longer operate.

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After going through this case, you will be able to :

• measure the performance of technology.

• assess the different types of computer systems.

• explain some of the technical choices for capturing data, storing and retrieving dataand displaying data.

Transmeta Corporation was founded in 1995 to build a new type of computer chip directed at mobile applications that rely on battery power to run laptop computers and other portable devices. The company said nothing about its product until an unveiling on January 19, 2000. By October 2000, NEC, Sony, and Fujitsu had all launched notebook computers based on its Crusoe chip. Sony said it will use the processor in its new Vaio PictureBook Cl VN notebook, and Transmeta claimed that Crusoe should nearly double the battery life of the new model. Its November 2000 IPO was greeted favorably on Wall Street even though just a few days earlier IBM had announced a decision not to use Transmeta's Crusoe chip in the new IBM ThinkPad 2400.

Transmeta's Crusoe product is actually a family of processors. The TM3200 is designed to provide a full day of Web browsing on a single battery charge for mobile Internet devices weighing one to two pounds. The TM5400 and TM5600 are designed to solve the problems of poor battery life and sub-par performance in the ultra-light (weighing less than four pounds) mobile PCs. Performing at 700 MHz, TM5400/5600-based laptops can last up to eight hours on battery power when running everyday office applications, and three to four hours running heavy-duty multimedia applications like DVD movies.

Major challenges in designing Transmeta's Crusoe chip centered on reducing the chip's power consumption while still supporting applications that ran on Intel's 86xx line of

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processors (which include the Pentiums). Transmeta applied a unique design that shifted the balance of work between hardware and software. According to Transmeta, "The hardware component is a very simple, high-performance, low-power VLIW (Very Long Instruction Word) engine with an instruction set that bears no resemblance to that of x86 processors. Instead, it is the surrounding software layer that gives programs the impression that they are running on x86 hardware. This innovative software layer is called the Code Morphing software because it dynamically 'morphs' (that is, translates) x86 instructions into the hardware engine's native instruction set. This unique approach to executing x86 code eliminates millions of transistors, replacing them with software. The current implementation of the Crusoe processor uses roughly\one quarter of the logic transistors required for an all-hardware design of similar performance." Because the hardware is fully decoupled from the x86 instruction set architecture, it is possible to improve the hardware over time without affecting legacy software. The Crusoe chips require a bootable ROM chip on the computer's motherboard. This ROM chip holds the Code Morphing software and loads the Code Morphing software into memory; Crusoe runs it before doing anything else. With the right Code Morphing software, the Crusoe will not only translate x86 instructions, but any other instruction set. With this scheme it could also run Linux, Windows, BeOS, or another operating system.

As first, Transmeta chips were being incorporated into portable products there was some controversy about the importance of the power saving afforded by the Crusoe chip. Transmeta claimed that "the chip consumes around one watt of power when running, compared with an Intel Pentium's 15 to 20 watts. This means it uses significantly less battery power, and enables light-weight notebooks to work for up to eight hours. In standby mode, the chip consumes around 20 milliwatts of power." A Toshiba product manager was not greatly impressed, saying that the chip does give an increase in battery life but that the back light on a sub notebook computer also consumes a lot of power. He thought the battery life advantage in this market would be no more than 30% to 40%. After IBM decided not to go ahead with the Crusoe for its new product, a spokes-woman said, "The IBM 480 notebook has a battery life of 4.5 hours and it was hoped that Crusoe would extend this to eight hours. However, Crusoe only managed 5.5 hours in IBM's benchmarking tests." A Gartner Group consultant said, "The main issue is performance. The chip uses emulation or 'code morphing' and therefore does not give the same performance as you get with Intel the reason IBM moved away from the chip is that either there was not enough power or there was not enough performance." There was no guarantee that the Crusoe chip or Transmeta would succeed, especially since Intel and other companies were developing chips for the same market.

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After going through this case, you will be able to :

• present some of the technical choices for storing data.

• study how to retrieve data.

• study how to display data.

Although it is possible to access enormous amounts of information using computers, the human factors of using paper media such as traditional books, magazines, and newspapers are attractive in many ways. For example, given a choice of reading articles in a paper magazine or reading exactly the same articles on a computer screen, most people would view this as no contest and would choose the paper magazine. A student lugging six heavy textbooks in a backpack might have second thoughts, however, and anyone looking at the amount of paper that is produced and discarded might wonder whether there is a way to enjoy the beneficial features of paper publications without the bulk, inflexibility, and waste.

Gemstar's solution is an e-book reader, a portable electronic screen display about the size of a book, but able to store 4,000 pages of text. It can be used to download electronic books through a personal Gemstar eBook account, an online retailer, or a bookstore. Gemstar purchased two com-panies that had developed previous e-book readers (NuvoMedia and Softbook) and then upgraded their products and brought out two new products for the, holiday season of 2000. The black-and-white REB1100 cost around $300 and the larger, full-colour REB 1200 cost around $700. Many observers were surprised that these readers were so expensive, especially with the limited amount of available content, but Gemstar's CEO said that an e-book would probably cost around $100 by 2001 and by 2003 might be given away as a free premium for making book purchases.

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E-book readers are useless if there is no content, but content was starting to become available. Gemstar signed up major publishers including Penguin Publishing, Simon & Schuster, Time Warner Trade Publishing, Random House, Harper Collins, and others. Along with the launch of Gemstar's new e-book readers, six titles by popular authors such as Patricia Cornwell, Ken Follett, and Robert Ludlum were released in e-book format prior to print release and were exclusive to Gemstar for 90 days. Earlier in the year the horror author Stephen King had published the most successful e-book thus far, a 66-page novella called Riding the Bullet that was priced at $2.95. It had sold more than 500,000 copies but there was the question of how many people actually read the book since it was protected by encryption technology that prevented people from mailing, copying, or printing it. Another development that indicated e-books might be at a take-off phase was an announcement by Random House that it would pay authors a 50% royalty for books sold and delivered electronically. This is much higher than a typical royalty, but Random House felt it was justified since there would be no inventory and transportation costs.

Other companies were looking further into the future and wanted to combine the efficiency of electronic distribution with the human factors of paper books. Xerox invented electronic paper in the form of a thin piece of transparent plastic that contains millions of small beads that act some what like toner particles in an office copier. Each half white and half-black bead is enclosed in an oil-filled cavity and is free to rotate within its cavity. Electronic paper is electrically writeable and erasable and can be reused thousands of times. When voltage is applied to the surface of the sheet, the beads rotate to display either their black sides or white sides. Images of pictures and text are created when a pattern of voltages is sent to the paper. The image will remain until the voltage pattern changes. The initial version has only two colors, but Xerox is working on adding additional color capacity.

E-Ink, a spin-off from MIT's Media Lab, developed a type of electronic ink that can be printed onto nearly any surface. Within the ink are "millions of microcapsules, each one containing white particles suspended in a dark dye. When an electric field is applied, the white particles move to one end of the microcapsule where they become visible. This makes the surface appear white at that spot. An opposite electric field pulls the particles to the other end of the microcapsules where they are hidden by the dye. This makes the surface appear dark at that spot. To form an electronic display, the ink is printed onto a sheet of plastic film that is laminated to a layer of circuitry. The circuitry forms a pattern of pixels that can then be controlled by a standard display driver." E-Ink's initial products are industrial displays, but one of its long-term goals is to produce high-resolution displays so thin and flexible that they can be bound into an electronic book.

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After going through this case, you will be able to :

• study the impact of information systems on people at work.

• justify the impact of ethical issue such as privacy on the users.

• explain the negative and positive impacts of work systems.

On April 15, 1998 Polaroid Corporation signed an agreement with Visionics Corporation to integrate Visionics' Facelt facial recognition software into Polaroid's secure identification products for the Departments of Motor Vehicles (DMVs). Integrating facial recognition software into the processing of driver's license applications should help combat identity fraud by making it extremely difficult for anyone to obtain multiple driver's licenses under assumed names.

Polaroid's press release stated that "computerised facial recognition works from a standard OMV photograph and does not require the collection of any additional information, making it convenient and noninvasive for the applicant. Facelt extracts a 'face print' from the photograph, similar to a fingerprint, which is unique to the individual. This print is resistant to changes in lighting, skin tone, eyeglasses, facial expression and hairstyle. When a new license application is submitted, the face print extracted from the digital photograph will be used to search the DMV database of millions of faces for potential duplication. The speed of the Facelt search engine makes it possible to process thousands of images in less time than it would take a DMV agent to scroll through and verify an individual's address or the spelling of their name in a computerised driver license record."

According to the Facelt website, the product utilises a mathematical technique called local feature analysis that "represents faces in terms of statistically derived features from specific regions of the face. These features are used as building blocks that make it possible to

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quickly map an individual's identity to a complex mathematical formula." Using this type of transformation for a new photo and for every picture in a photo database makes it possible quickly to display the closest matches in order of similarity. The mathematical "faceprint" can be compressed to 84 bytes. It is resistant to changes in lighting, skin tone, eyeglasses, facial expression, and hair and is robust with respect to pose variations, up to 35 degrees in all directions.

A number of other current or potential applications of facial recognition are mentioned on the Facelt website. One of these is access control for PCs. A computer equipped with a video camera can lock a PC after a period of inactivity and start it again only after the user looks at the camera and is recognised by the software. The mathematical representation of the user's face can even be used as part of the key for encrypting information stored by the computer. Face recognition could be used in a similar way to control access to ATMs, thereby reducing the chances that stolen cards can be used or even eliminating the need for the cards. In time and attendance applications, facial recognition can make it unnecessary for employees to punch in and punch out. In a video surveillance application, a version of face recognition can search a live video of a crowd to find faces of individuals on a watch list. This might be used in an airport to identify known terrorists or in a department store to identify previously convicted shoplifters within minutes of their arrival. It might also be used to identify missing children.

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Case No. 158



After going through this case, you will be able to :

• assess the negative and positive impacts of work systems

• study the impact of information systems on people at work.

• point out that the success of any system in business depends on its participants

• justify the impact of ethical issue such as privacy and access on the users.

The U.S. Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 as part of an effort to change many aspects of the welfare system. One of its many provisions called for the creation of a National Directory of New Hires containing the name, address, social security number, and wages for each of the 60 million people hired into a full- or part-time job in the United States by all but the smallest employers. Several states already had state directories that had been quite useful. In Missouri, for example, child support collections had increased 17% in 1996 after the state required reporting of new hires even though its state directory did not cover people who had moved to different states. Welfare officials predicted that matching the federal and state directories would produce billions of dollars in child support payments. Under the new law, the directory would be available to state welfare and child support agencies. The Internal Revenue Service (IRS), Social Security Administration (SSA), and Justice Departments would also have access for the some purposes.

Some privacy advocates voiced alarm about the new database, noting that most new hires have no child support obligations whatsoever. Including information about them in this database would be a threat to their privacy because so many agencies would have access to this information and because data in this type of database has not been totally secure in the past. This type of risk had been publicised in 1992, when an 18-month federal

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investigation found a ring of "information brokers" who allegedly bribed SSA workers to steal personal information. The going rate to obtain a ten-year earnings history within three to five days was apparently $175, of which $25 went for the bribe to the SSA worker. Buyers of the information apparently included private investigators, prospective employers, lawyers, and insurance companies. In 1994, more than 420 IRS employees received some form of discipline for illegally browsing through the tax returns of friends, relatives, and neighbors. Since that time, the IRS has increased its training on privacy issues and has installed automatic systems to monitor data access by its employees. In 1997 the IRS Commissioner asked Congress for legislation that would add criminal penalties to the law that prohibits IRS employees from snooping into taxpayer records. This request followed shortly after a Federal appeals court reversed the 1995 conviction of an IRS employee who was also a Ku Klux Klan member. That employee had been convicted of using his computer terminal to look through the tax records of other white supremacists he suspected of being informers for the FBI. The conviction was overturned because the prosecution failed to prove that the former employee had done anything with the information he collected.

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After going through this case, you will be able to :

• explain different types of network that link communication devices and computers.

• survey major networking technologies.

"DoCoMo (meaning 'anywhere' in Japanese) is a NTT subsidiary and Japan's biggest mobile service provider, with over 31 million subscribers as of June 2000. In February 1999, NTT DoCoMo launched its i-mode service. Within one year, it had over four million subscribers, and within another six months it went up to eight million and had overtaken other Japanese Internet service providers (ISPs) that provide service to the desktop. DoCoMo's i-mode is the only network in the world that now allows subscribers continuous access to the Internet via mobile telephone. The service lets users send and receive e-mail, exchange photographs, do online shopping and banking, obtain financial information, download personalised ringing melodies for their phones, and navigate among more than 7,000 specially formatted Web sites." Additional content such as news and games is offered on a subscription basis in the range of $ 1 to $3 per month.

Since i-mode service is used through cell phones with tiny screens, the types of interaction and graphical displays expected by World Wide Web users are not possible. I-mode was built using IP and a subset of HTML. The initial version operated at only 9.6 Kbps, slower than the 56 Kbps modems that often seem very slow for downloading Internet graphics. The 9.6 Kbps data rate was initially adequate, however, because most of the data was text. NTT DoCoMo announced that it would come out with a 384 Kbps service in Spring 2001. The fact that the connection is also online makes it unnecessary to log on and much easier to use instant messaging, a feature that teenagers love, but that is gradually creeping into business environments as well.

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I-mode's pricing model is totally different from the fixed-rate U.S. model or a time-metered European model. I-mode charges are based on the number of packets of data sent per month (as of April 2000, around $0.003 per packet). The more requests for Web pages or e-mails that a user sends, the higher the total charge. I-mode users pay a $3 flat monthly fee for unlimited access to mobile data services. Additional charges are applied on a per-packet basis. Another source of revenue for DoCoMo is billing services. For example, when Bandai charges for its cartoon character downloads, the charges appear on the user's mobile phone bill and the provider pays DoCoMo a 9% gross commission. Although pay-per-use content accounts for only 20% of all i-mode content, 70% of i-mode users subscribe to these services, generating an additional $ 1 per customer per month in billing and collection commissions for DoCoMo.

1-Mode is so popular in Japan that the primary method of Internet access in Japan could soon be through mobile phones and other portable devices. DoCoMo announced that Internet access would be an option on every phone it sells. In March 2000, the number of mobile phone users in Japan exceeded the amount of fixed phone line subscriptions (56.9 million mobile phone users vs. 55.5 fixed phone users). Factors that encourage i-mode use include the limited amounts of space to put computers in a Japanese home, the high price of dial-up Internet access, and the fact that PC use in general is not as widespread in Japan as in the United States.

NTT DoCoMo has looked at ways to penetrate the U.S. market. Some observers are skeptical about whether i-mode would succeed elsewhere. They note that Japan may be a unique market, with unique characteristics that may not exist elsewhere, such as a huge audience interested in using the Internet, culturally specific content, and a huge commuting population. According to one analyst, successful mobile applications are highly specific to cultures and national demographics. What flies in Japan won't necessarily fly in the States or Europe. People [in the U.S.] think text is boring especially coming from the graphics-rich PC world. Until we get colour graphics, mobile access won't become something that people, on an emotional level, think 'I've got to have.

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After going through this case, you will be able to :

• identity the importance of standards

• explain the policy issues that affects the future of telecommunications.

Founded in 1994, Exodus Communications helped create the complex Web hosting business and has attained a market value of over $10 billion. The company offers sophisticated system and network management, along with professional services to support performance for customers Websites. Exodus manages its network infrastructure via a worldwide network of Internet Data Centers (IDCs) located in North America, Europe, and Asia Pacific. Exodus has 22 data centers around the world and is building another 14. Its customers include eBay, Yahoo!, Merrill Lynch, British Airways, and Johnson & Johnson.

When Ellen Hancock, its CEO, joined the company before its IPO in 1998, 80% of its customer base was Internet start-ups and 20% were in the enterprise category. By 2000, 49% of the customer base was in the enterprise category. In the same time frame, it had grown from no consultants to 660 as managed services increased from 8% to 34% of its business. During this transition, Exodus bought two computer security companies and had moved into a number of new services.

An example of the types of service demands that Exodus encounters occurred when the Webmasters of, the Web site of Rolling Stone magazine, had difficulty trying to solve a slow response time problem just a day before the publication of a multimedia cover story on Britney Spears. This would obviously cause a spike in demand that would exacerbate the response time problem. Since Exodus was hosting and maintaining the site, its engineers helped in solving the problem, which involved incorrect configuration data that caused the server to use 10 to 15 seconds to refresh domain name data every few minutes instead of daily.

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Approximately 400 of its customers (12% of its customer base of 3,300 companies) are application service providers (ASPs) that run application software for other firms using remote servers linked to a WAN so that those firms no longer have to install and maintain the software. Exodus charges for service based on usage, and this fits well with an ASP charging scheme. Its ASP customers range from start-ups to established software firms such as PeopleSoft and Oracle's BusinessOnline. According to Ellen Hancock, it's very hard to say what you're not doing, but we've spent a lot of time trying to do that. We say we're not going to know applications. We're not in that business. We just support the ASP. We have no notion of competing with Oracle on e-commerce. We do not intend to ever understand HR [human resources] applications.

Both Exodus and its rival Digex seem to be evolving into "managed service providers," but using different paths. In late 2000, Digex unveiled a customer self-service portal called that gives them the ability to manage and provision their own services, such as performance statistics, site/server layouts, asset management, billing, and help desk issues. In addition, it gives access to service-level agreements and Digex support staff. In contrast, the new but not yet named services Exodus announced included remote monitoring, storage management, and performance monitoring. According to one industry analyst, "These guys are happy to host, and they're willing to manage your servers, but they're unwilling to raise the level of responsibility to something that is application specific or customer-specific."

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After going through this case, you will be able to :

• identify different types of software

• study the processes of programming.

• trace the evolution of programming languages.

• state the difficulty in trying to program intelligence into machines.

Developing techniques for capturing commonsense knowledge and building it into computerised systems is one of the greatest challenges of computer science. Capturing and codifying common sense is difficult because the rules of thumb used in everyday life to understand language and to interpret the world are almost never published explicitly in books or dictionaries. Here are some examples :

• You have to be awake to eat.

• You can usually see people's noses, but not their hearts.

• You cannot remember events that have not happened yet.

• Once people die they stay dead.

• If you cut a lump of peanut butter in half, each half is also a lump of peanut butter; butif you cut a table in half, neither half is a table.

• A glass filled with milk will be right-side-up, not upside-down.

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The CYC project began in 1984 at the Microelectronics and Computer Technology Corporation (MCC) in Austin, Texas, with the goal of codifying this type of knowledge.

Cycorp, Inc., a 1995 spin-off of MCC, was founded to continue the development of CYC technology. In 2000, Cycorp, Inc. had approximately 70 employees and a number of corporate sponsors who hoped to apply CYC technology in a variety of ways. The Cycorp webpage describes the CYC product family as "an immense, multi-contextual knowledge base, an efficient inference engine, a set of interface tools, and a number of special-purpose application modules running on Unix, Windows NT, and other platforms. The knowledge base is built upon a core of over 1,000,000 hand-entered assertions (or 'rules') designed to capture a large portion of what we normally consider consensus knowledge about the world. If successful, CYC will help break the software brittleness bottleneck once and for all by constructing a foundation of basic common sense knowledge. This will provide a 'deep' layer of understanding that can be used by other programs to make them more flexible." Applications of CYC that are available or in development are in areas such as natural language processing, extracting information from databases, searching for examples in captioned databases (such as news photos or film clips), creating application-specific thesauruses, and retrieving information from the Web.

CYC technology includes a knowledge base, a representation language, an inference engine, interface tools, and modules designed for specific applications. The knowledge base is a formalised representation of common sense knowledge including facts, rules of thumb, and methods for reasoning about the objects and events of everyday life. It consists of a vocabulary of terms and a "sea of assertions" about those terms. The assertions are related to causality, time, space, events, substances, intention, contradiction, belief, emotions, planning, and other aspects of human existence. New assertions are added continually. The knowledge base currently contains hundreds of thousands of assertions and is divided into hundreds of "microtheories," each of which is a set of assertions sharing a common set of assumptions. Various microtheories are focused on a particular domain of knowledge, a particular level of detail, a particular interval in time, and so on. Use of microtheories makes it possible to reconcile and resolve assertions from separate contexts that are both applicable to a situation, but may yield contradictory inferences. For example, in the context of total darkness you cannot see anything, and this seems to contradict the assertion that you can usually see people's noses. The CYC inference engine performs logical deductions using a variety of logical techniques. The vast size of the knowledge base requires that special inference techniques be developed, such as using microtheories to optimize the inference process by restricting the search domains. Special-purpose inference modules were developed for a few specific classes of inference. One such module handles reasoning

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Case 161 Cycorp: Building a Knowledge Base to Support Commonsense Reasoning

concerning set membership or disjointness. Others handle equality reasoning, temporal reasoning, and mathematical reasoning.

In 1999 an interviewer asked Doug Lenat, CYC's original developer, whether CYC would be able to learn things on its own. He responded: "We're already able to see isolated cases where CYC is learning things on its own. Some of the things it learns reflects the incompleteness of its knowledge and are just funny. For example, CYC at one point concluded that everyone born before 1900 was famous, because all the people that it knew about and who lived in earlier times were famous people. There are similar sorts of errors. But what we're seeing is not so much something that sits quietly on its own and makes discoveries but rather something that uses the knowledge it has to accelerate its own education."

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Case No. 162



After going through this case, you will be able to :

• find a new brand of mineral water, well-established in institutional markets.

• recognise plans to tap household's market.

• analyse sudden media outcry about unauthorised, illicit refilling and resealing of usedbottles.

• underline Marketing Manager's problems.

'Aqua-Nova', a new brand of mineral water is selling very well in the institutional markets, e.g. hotel-chains, industrial and commercial establishments. The 'Aqua-Nova' is now being promoted in common households. Initial response in this segment seems to be encouraging. However, the marketing manager is disturbed about news that has flashed in leading local and national newspapers. The news is about the unauthorised, illicit refilling, resealing and reselling of the used mineral water bottles. It describes how the water from practically any source is used for this purpose and then sold as genuine pure mineral water.

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After going through this case, you will be able to :

• find a drug formulation firm planning expansion in Gujarat

• recognise negative market-survey response.

• analyse causes of resistance to Punjab based firm in Gujarat markets.

• underline the way-out with firm's registration in Gujarat.

Mahesh Pharmaceuticals is a small scale sole proprietorship concern based in Chandigarh. It is engaged in the production and marketing of drug formulations. At the time of its inception, the firm introduced liquid formulations. But later on as the market for its products started growing, it also launched some tablet formulations. At present, it offers a good range of more than ten different medicines, though the products are all of a general nature e.g. cough syrup, paediatric suspension etc. and can also be treated as OTC drugs.

At present, the firm's products enjoy a good reputation in Chandigarh, Haryana and Punjab. They are selling both on doctor's prescription and otherwise. As a part of strategy to expand the market, the Chief Executive of the firm Mr. Anil Kumar sent one of his representatives to explore the possibility of selling his products in Gujarat. The representative visited a few stockists and wholesalers of drugs in Ahmedabad and Baroda with an intention to appoint a propaganda stockist who will not only keep the stocks and distribute them but will also try to get the drugs prescribed by the doctors in the region. For this, he offered.

a) Commission of 40-45% (negotiable) on the written price.

b) A credit facility of 30 days.


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Inspite of all his efforts, the representative failed to find any stockist who could be interested in selling his products. He described the situation like this "There are many small manufacturers of medicines in and around Ahmedabad. Many of these restrict their markets to nearby areas and hence particularly in Gujarat, the competition is very tough. All the stockists I talked to have described the commission offered by Mahesh Pharmaceuticals very low. Some of them even described the prices set by Mahesh Pharmaceuticals as higher as compared to local manufacturers. All these things are still manageable. The crux of the problem is something else. The moment I talk of a firm from Chandigarh, the stockists refuse to work without any further thought. They say that nobody, here would buy a medicine made by a small concern in Punjab. People of Gujarat are so scared of the name, Punjab that they do not have faith in the medicines made there and they can afford to do so because, after all, none of the products of Mahesh is a specialty item.

After a careful investigation of the situation, Mr. Anil Kumar and his colleagues come to the conclusion that under the existing circumstances, they cannot penetrate the market in far off states. Also it is well known that Ahmedabad has an established reputation for fine chemicals and drug manufacture. Therefore, they devised one scheme. As per this, Mahesh Pharmaceuticals would open one small office in Ahmedabad and get registered there. This address of the firm's registered office will be printed on the labels of the medicines. Thus, in the market the firm will be recognized as one from Ahmedabad, while for all practicals it will operate from Chandigarh only.

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After going through this case, you will be able to :

• find a hawker-turned-businessman: with excellent customer relationship marketingskills.

• analyse his strengths leading to business expansion.

• recognise new perceptions of business : with son stepping into his shoes.

• underline value-based relationship marketing skills being replaced by business-likeformal approach, irritating customers.

Mr. Harish Panjwani was a refugee when he started his small grocery business about 40 years back. Initially, he hawked his good door-to-door and soon developed a sizeable number of steady customers. This was largely due to his sober temperament, reliable dealings and his amiable nature. His extrovert nature helped him develop many friends and well wishers.

Over a period of time, Mr. Panjwani became a socially prominent person with good acquaintances in many walks of life. He expanded the range of his business activities and he, now, owns several shops dealing in consumer durables, dairy products and also has general stores besides a large medical shop. Being of a conservative frame of mind, he feels emotionally attached to his original grocery business and continues to operate it with enthusiasm. His business place has even come to be associated with a meeting venue for people of his generation.

His children are, now, grown up, and the eldest one, Rajesh, has just returned from abroad after completing his management education there. Ambitious by nature, Rajesh would like to expand his business fast. He feels that he needs to be 'professional' in his approach. In

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his opinion, his father's ways of dealing with people are outdated. Many a time he feels irritated when his father's old friends drop in at the shops and spend some time talking. Rajesh feels that this type of casual come together is a waste of time. He would prefer to be more "business-like". He would like to deal with them as customers only, serving them with precision and in a methodical manner. He expects that his customers should appreciate this "modern" way of doing business. He has, however broached his inner feeling only in an indirect way to his father, and he found that his father believes in maintaining close personal links with his customers. Some of the customers have, anyhow, started to notice the change in Rajesh dealing with them, they feel that the old "warmth" of their relationship with one senior Panjwani is somehow, missing and that they are now less welcome at the shops.

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After going through this case, you will be able to :

• find two executives with differing perceptions about banking business.

• identify one branding bank as a "retail outlet" : another banking on" relationshipmarketing" concept

• underline significance of customer-relationship in banking business.

• analyse both views, in depth.

The Indo-Foreign Bank has two senior marketing personnel, with widely different views as to the future. Mr. Narendra Rana believes that a bank is basically a 'retail outlet'. He says, 'You go to a cloth shop to buy cloth. You go to bank to buy financial services.' On the other hand, his colleague Ms. Tarannum Topee, believes that this approach is futile and pointless. The essence of successful marketing, she says; 'is the relationship we build up with the customers.

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After going through this case, you will be able to :

• identify your prospective customer and approach him accordingly.

• select Appropriate tools to have a completely satisfied customer.

Mr. Dilip was a person with a very lousy life schedule. He was almost tied up with work 6 days a week and had to work on Sundays too. He could find time only on some Sundays for his family. Since long he had been planning to a new DVD player for his family but was confused as to choose which brand from the variety of brands available in the market. He tried collecting ample information regarding different DVD players and finally decided to buy a SONY DVD player and walked into the showroom of SONY on a Sunday with his family. After visiting the showroom he expected the showroom executive to attend to him, and give some information about the product that he wanted to buy. But that did not happen. Mr. Dilip moved around in the showroom for about half an hour without any executive attending him. Then Mr. Dilip wanted to step out of the showroom and at that point one executive noticed Mr. Dilip and approached him for help. Mr. Dilip after spending so much time in the showroom unattended was annoyed when the executive said "MAY I HELP YOU". Mr. Dilip responded saying that the company had to realise the significance of the "CUSTOMER". A customer unattended is a customer lost and Mr. Dilip walked out to buy a DVD player from the next showroom.

Though SONY has established itself in the market, it failed in establishing a proper relationship with the customers and thereby kept on loosing the market share over the period.

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After going through this case, you will be able to :

• explain how and why it is important to treat customer like God.

• identify ways to handle all types of customers.

Meena, a very young working professional with a very hectic schedule found it really difficult to manage career and home simultaneously. So on weekends she would plan for some outing with friends. On one Saturday Meena had been out with her friends for shopping and planned to have dinner at a very famous restaurant which specialised in Pasta foods. After shopping, Meena with her friends entered a restaurant.

They had several delicacies to choose from. Different people had ordered for different food items while Meena and one of her friends ordered for pasta. Meena had ordered for half plate of pasta while her friend Mrs Gauri had ordered for a full plate. After placing the order they once aging confirmed it with the waiter and were told that their order would be places in the next 15 minutes and was placed accordingly. Meena noticed that the quantity of Pasta in both the plates seemed the same. They again confirmed it with the waiter. But to their surprise, they realised that they had been charged for the larger/full plate serves for both. Meena approached the manager/cashier for clarification. The Manager at first was not interested in attending her and thought that she was lying. When Meena insisted that she had not ordered for a full plate and she would not pay for what she had not ordered the Manager in an aggressive manner asked if Meena could afford paying the bill and insulted her in front of the other customers. On this Meena felt very embarrassed and decided never to visit the restaurant in future. But her word of mouth would definitely spread and would result in loss of good customers from coming to the restaurant in the long run.

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After going through this case, you will be able to :

• formulate the service rules required for an efficient transaction of sevices.

• explain the importance of developing the skills within an individual dealing in theservice sector so as to serve the customer better.

Mr. Jacob a top-level Manager, had recently taken voluntary retirement from his service as he wanted to concentrate on his own Consultancy. He was in the process of renovating the office which he set up for his Consultancy. He therefore thought he would be in a position to devote his full time only if he takes up Vs. He started with the painting of the office and wanted to give a different look to it. Mr. Jacob decided to order the colours and paints from the same. He believed that the exact combination of the colours that he wanted though available in the local market, he would get a better product when the colours and paints were imported.

Mr. Jacob also realised that there was a slight difference in the prices of local market and that of the International market. Mr Jacob finally placed an order in the International market for the colours and paints. He placed the order on a Monday and was told that he would get the delivery by Thursday. He started with other arrangements till then and was eagerly waiting for Thursday.

On Thurday Mr Jacob found that the delivery was not done. On enquiry, Mr Jacob was told that his order was not processed since the Marketing Manager was out of town. This was not informed to Mr Jacob, neither was there any sort of apology from the company's end. Mr Jacob was informed that the delivery would reach him by the following Thursday.

On coming Thursday also the delivery was not made. This was because there was no

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other order along with Mr Jacob's order and the company could not afford the shipping charges for a single order.Hence, the delay in delivery. This time also Mr Jacob was not informed about this and there was no apology end from the company's end. Mr Jacob was told that the Marketing Manager would personally look into this matter and was promised that delivery would now reach him in a weeks time for sure. Mr Jacob had paid an advance of 50% while placing the order and had to wait for a period of 15 days,while he could have got the similar colours and paints from the domestic market immediately after placing the order. To add on there was no kind of apology from the Marketing Manager nor the company.

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In 1980, Peter A, Horekens, marketing director for Kellog company, was faced with the problem of developing a market for ready-to-eat cereals in the Latin American region. Although Kellog had no competition in the ready-to-eat cereal market in this region, they also had no market. Latin Americans did not eat breakfast as the Americans did. The problem was especially prominent in Brazil. To create a market and increase sales in this region, Horekens had to create a nutritious breakfast habit.

Kellog Company, which headquartered in Battlecreek, Michigan, was founded in 1906 by W.K. Kellog. The company continued to operate successfully with sales in 1980 amounting to 2,150.9 million U.S. Dollars. The Kellog Company manufactured and marketed a wide variety of convenience foods with ready-to-eat cereals topping the list. The company's products were manufactured in 18 countries and distributed in 130 countries. The ready-to-eat cereals sales made up the majority of international sales.

In 1980, Kellog International operations accounted for 38 percent of Kellog Company's sales of more than $ 2.0 billion. The United Kingdom was by far Kellog's largest market. Internationally, sales in the ready-to-eat cereal market continued to increase, although in the past few years the competition also had increased. But in Latin America, consumption of ready-to-eat cereals was negligible.

The Latin American Market

The Latin American Market, mainly Mexico and Brazil, showed great potential as a Kellog's ready-to-eat cereal market. The demographics fit the ready-to-eat market, the only problem was that Latin Americans did not eat the traditional American-style breakfast.

The Latin American market included a growing number of families with children. The population mix was becoming younger. The developing economy enabled consumers to


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spend more of their income on food. Kellog wanted to increase sales in this Latin American region, especially Brazil, but consumers had turned their backs on the American style breakfast. How was Kellog to create a nutritious breakfast habit among the Brazilians?

The company asked J. Walter Thompson, Kellog's advertising agency, to help instill the breakfast habit in Brazil. According to Horekens, "In general, Brazilians do what people in novellas do". Novellas are Brazilian soap operas. J. Walters Thompsons tried to advertise Kellog ready-to-eat cereal and instill the breakfast habit by advertising within a soap opera. The first experience of advertising within a soap opera failed; the advertisement portrayed a boy eating the cereal out of a package.

Kellog wanted to teach the Brazilians how to eat a complete, nutritious breakfast, not just Kelloy's cereal. The commercial did not work, because it made Kellog ready-to-eat cereal seem more like a snack than a major part of a complete breakfast. Kellog wanted to portray ready-to-eat cereal as a part of a complete, well-balanced nutritious breakfast. Thus, they needed the cereal to be eaten in a bowl with milk alongwith other foods to make a complete breakfast.

The company believed that the growing population in this region would reinforce the importance of grains as a basic food source. The 1980 population in Brazil was 119 million, which made it the sixth most populated country in the world and the population was expected to grow to 165 million in the next few years. Within this population growth was an increase in the number of women of childbearing age, which further supported Kellog's potential for a successful cereal market. The structure of the population in Brazil in 1980 was:

• Thirty seven percent of population under age 15.

• Forty-eight percent of population under age 20.

• Twelve percent population over age 50.

• Six percent of population over age 60.

These figures showed that the population of Brazil better fit the market for a ready-to-eat cereal, with the increasing number of children and elderly people as the two largest cereal consuming segments.

The "cult of the family" continued to be the most important institution in the formation of the Brazilian society. This culture ideal was reflected in the ways they conceptualised and evaluated the range of personal and social relations. This seemed to be the way Kellog

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would have to demonstrate the importance of a nutritional breakfast - by playing up the family and its importance.

Through the use of the novellas, Kellog made a second attempt to teach the Brazilians the importance of breakfast. Most Brazilian families watched these soap operas, composed mostly of family scenes. In their commercials, Kellog opted for scenes that showed the family at the breakfast table. One member of the family, usually the father, took the cereal box, poured the cereal, and then added milk. This scene represented a complete "Kellog" breakfast in a way that Brazilians could relate to. The advertisement focused first on nutrition, then on flavor, and finally on ease of preparation. As a result of this campaign, sales in Brazil increased. Kellog controlled 99.5 percent of the ready-to-eat cereal market in Brazil; however, per capita cereal consumption was less than one ounce or several spoonfuls per Brazilian annually, even after advertising.

Although Kellog controlled the market, there was not much of a market to control. Brazilians had begun to eat breakfast, but Horekens was not sure whether sales would continue to increase. His problem was - how could Kellog further convince the Brazilians of the importance of eating a nutritional breakfast in order to establish a long-term market?


1. Analyse the case to enable you to prepare a report about the given situation.

2. What would be your advice - to continue or quit - to the board of Directors ofKellog? Explain with reasons the factors which you would consider essential inframing your report?


of the case

• Peter A Horekens , Marketing Director of Kellog Company, was faced with theproblem of developing a market for ready-to-eat cereals in Latin American region,especially Mexico and Brazil.

• The only problem was that Latin American did not eat the traditional American -stylebreakfast.

• His immediate problem - case subject - was Brazil which showed a great potential.

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• In Brazil, with the population mix was becoming younger, the structure of populationwas:

• 37 percent of population under age 15.

• 48 percent of population under age 20.

• 12 percent population over age 50.

• 06 percent population over age 60.

• These figures showed that the population of Brazil better fit the market for a ready-to-eat cereal, with the increasing number of children and elderly people as the twolargest cereal consuming segments.

• According to Horekens, "In general, Brazilians do what people in novellas do."

• The first experience by Kellog of advertising within a soap opera failed; theadvertisement portrayed a boy eating the cereal out of a package.

• Kellog wanted to teach the Brazilians how to eat a complete, nutritious breakfast, notjust Kellog's cereal.

• The "cult of the family" continued to be the most important institution in the formationof the Brazilian society.

• Horekens thought that Kellog would have to demonstrate the importance of a nutritionalbreakfast - by playing up the family and its importance.

• Through the use of novellas, Kellog made a second attempt to teach the Braziliansthe importance of breakfast.

• The advertisement showed the family at the breakfast table. The advertised focusedfirst on nutrition, then on flavor, and finally on the ease of preparation.

• As a result of this campaign, sales in Brazil increased, however, per capita cerealconsumption was less than one ounce or several spoonfuls per Brazilian annually,even after advertising.

• Horekens was not sure whether sales would continue to increase.

• His problem was - how could Kellog further convince the Brazilians of the importanceof eating a nutritional breakfast in order to establish a long-term market?

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Solved Cases


1. Horekens approach to market the cereals by changing the breakfast habits ofBrazilians is a formidable task and seems to be impractical as well.

2. His focus should be to sell the cereal and not to stress upon the changes in Brazilian'sbreakfast habit. This will be a very slow process and could take years together.

3. A distinct feature of Kellog cereals is their nutrition value which, as identified in thecase is very suitable for old and growing children. Kellog in order to promote thiscereal, should involve doctors in the campaign. Through the advertisement, theyshould highlight the nutritional aspect of the cereal. Kellog can then build theirpromotional plan on this characteristic.

4. Kellog should try to sell the cereal to hospitals, who once roped in, shall be a veryvast market for the cereals.

5. Another potential for promotion shall be to arrange once-a-week free distribution ofcereals in schools where children should be served free.

6. Another channel for promoting the cereal shall be a direct talk with the house ladies.Kellog should arrange meetings with the house ladies and explain to thesehousewives - in fact mothers - the nutritional value of the cereal and distribute freesamples. This should be done through a further dialogue either through the meetingsor by conducting opinion surveys.

7. Kellog could also introduce children shows and an award titled ''Kellog Child'' shouldbe instituted, say every month.

8. Kellog could also start a slogan campaign for example, "Why I like Kellog cereals?"with suitable awards.

9. Activities suggested at serial nos. 5, 6, 7 and 8, though have a gimmickry element areessential to maintain the continuity of the image building process of the company aswell as the product.

10. Kellog should also establish distribution channels where local people would get directlyinvolved in the marketing of the product. It will be in the interest of channel managersto promote this product. Kellog should install the appropriate incentive schemes tomotivate the channel managers.

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11. All this will be followed by the advertisement campaign through various media wherebesides the characteristics of the product, Kellog should keep the public informed oftheir promotional efforts listed above.

12. All these activities must be planned in a manner, so that Kellog brand name iscontinuously hammering on the minds of the people without a gap.

13. Once the product starts gaining acceptability, it will then one day reach at the breakfasttable in Brazilian homes.

In conclusion, I feel that the Harkenes approach, first to change the habit of the people and then promote the product, is a conceptual fallacy. Instead, let the product creep into the minds of the people and when the direct user starts seeing its utility, its growth would be a logical conclusion. Promotion through medical profession would also gain its acceptability by the old people.


An American world wide corporation, has decided to expand aggressively in Asia. It Plans to source much of its raw material and subcontracting there and manufacture and market throughout Asia, from Japan in the north through New Zealand in the south.

You were appointed to organise and direct this major new effort, and one question was where to locate the regional headquarters for the Asian Division. After considerable study, you selected the island nation of luau.

Luau's advantages are several. It is about equidistant between New Zealand and Japan. It was a British Colony, so the main language is English. It has a relatively efficient telephone and telegraph system and good air service to all the major Asian destinations in which you are interested and to the United States.

And not the least important, the luau government is delighted to have your company locate and invest there. It has made very attractive tax concessions to the company and to its personnel who will move there.

The company moves in, leases one large building, and puts out an invitation to bid on the construction of a larger building, which will be its permanent headquarters. Now, as you begin to work much more with the private banking and business people of luau and less with government officials, you begin to be more aware of a luau characteristic about which you had not thought much previously. Almost all of the middle and upper management personnel in the business and finance sector are of Chinese extraction. The native population of luau, which is the great majority, is a Micronesian race.

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On enquiry why the Chinese are dominant in banking and business while the Micronesians stay with farming, fishing, government, and manual labour, you are told that this is the way it developed historically. The Chinese enjoy and are good at banking and business, While the native Luauans do not like those activities and have stayed with their traditional pastimes. The two groups buy and sell from and to each other, but there are almost no social relations and very little business or professional overlap between the groups. Occasionally, some of the Micronesians study abroad, and some work abroad for periods; when they return, they frequently go to work in a bank or business or take a government position.

You must staff your headquarters with middle and lower-management people and with clerical help. You find that the only applicants for the jobs are Chinese, and you select the best available. They are quite satisfactory, and the operation gets off to a good start.

Then, as the months pass, you notice a gradual change of attitude towards you and the company among the government officials and among the people in general. They have become less friendly, more evasive, and less cooperative. You ask your Chinese staff about it, but they have noticed nothing unusual.


1. Analyse the case.

2. Is there anything gone wrong? Who could be responsible for it?

3. What might you do to improve government and public relations?

SOLUTION ____________________________________________________________

Summary of the Case:

• An American world wide corporation, has decided to expand aggressively in Asiaand after considerable study, selected the island of luau.

• Luau's main language is English and has good infrastructure facilities.

• Luau's Govt. is delighted with the decision of the company and, in turn, has madeattractive tax concessions to the company and its expatriate employees.

• The company moves in into a leased building and also decides to make its ownbuilding which will be its permanent headquarter.

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• Luau's population is a mixture, consisting of local population which is a Micronesianrace and Chinese.

• Almost all of the middle and upper management personnel in the business and financesector are of Chinese extraction. The native population of luau, is engaged in farming,fishing, government, and manual labour. This pattern, as the company executivesunderstood, was developed historically.

• The two groups buy and sell from and to each other, but there are almost no socialrelations and very little business or professional overlap between the groups.

• While recruiting the staff, the company found that the only applicants for the jobs areChinese, and you select out of them.

• As the months pass, company notices a gradual change of attitude of governmentofficials and among the people in general.

• When company executives asked the Chinese staff about it, they said that they didn' tnotice anything unusual.


Whatever has gone wrong, it is due to the mistake of the company. This can be summarised as under :

1. Selection of Luau island was based on a very narrow perspective. The company init's zeal to start the business, didn't study the cultural aspect of the society.

2. The company was carried away by the luau's government's generosity.

3. As the island of luau was well connected by airlines and had a good communicationsystem, it provided enough facility to study the social set up of the island.

4. Case itself states that there were almost no social relations and very little business orprofessional overlap between the groups. From this it appears the that lack ofinteraction between the two groups was very apparent. It was not an undercurrent.

QUESTION NO. 3 : _________________________________________________

My suggestions are as under :

1. The company is constructing an office building with the expectation of the business growth which, in turn, shall require additional workforce. This additional workforce

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should be recruited from the Micronesian race. But the implementation of this corrective action shall take time and in the meanwhile would aggravate the feelings of the native population. I therefore suggest that the company should recruit native people now itself and train them. This would appear an additional expenditure but this, in fact, shall be an investment which will pay off in the form of goodwill from the natives as well as government machinery.

2. The company as a part of social obligation, should streamline the native population'seducational system and also involve themselves in updating the technology of thetrades being followed by the natives. Though it might not be possible for the companyto spend a huge amount immediately but in order to build up the confidence and calmdown the hurt feelings of the natives which is Micronesian race, a modest beginning isa must.

3. The company can also mend the fences by developing relations with the influentialpeople in the Micronesian race and explain to them their faux-pas which was notdeliberate. Educated and matured persons in all likelihood would understand andeven suggest some measures and help the company in repairing the damage.

P.S. Both the cases have been analysed for reference purposes. In actuality, every student shall have his own analysis, identification of problems and the suggested solutions. Any solution substantiated logically with the assistance of the facts given in the case shall fulfill the objective for evaluation purpose.



Promotion Strategy has been divided into two parts. They are:

a) Sales Promotion

b) Trade Promotion

Sales Promotion Strategy :

It will be performed with the view of attracting final consumers towards the product.

Increment in Sales Promotion Expenditure : A heavy rate of discount has been given to retailers. This can be curtailed to some extent and the same expenses could be diverted into various other field of sales promotion.

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Issuing Free Samples : Along with magazines and newspapers, a small pouch or sachet could be attached as Taj Mahal Tea did a couple of months ago. People were puzzled to find the product in the newspaper.

This helps to attract the customers, specially those from non-user groups who then onwards may turn into permanent customers.

Printing Discount Coupons : Discount coupons will be printed on newspapers and magazines leading to a reasonable discount in prices along with the submission of coupons.

Cross Promotions : It means using one brand to advertise another non-competing brand. For example, free sachets of jam of a nominal value on a purchase of a pack of bread of a particular brand and weight.


shows and conventions :

Booths can be set up in order to display and demonstrate the product. An umbrella counter outside the grocery shops can be kept, displaying Benson and Johnsons product.

Organising sales contests :

Including sales force or dealers to increase their sales result over a stated period with prizes going to those who succeed.

Speciality Advertising :

Supplying dealers and selected segments of people with T-shirts, pen, caps, etc. highlighting the brand.


Many companies think that their job is over, once the product leaves the factory. They should take a whole channel view of the problem of distributing products to final users.

Knowing our customers and our distribution budget or expenditure, we will go for a few more retailers including the previous existing retailers. We will be targeting departmental as well as supermarket stores.

We should go for more sales force in order to cover the entire district as well as to monitor the wholesalers and the retailers properly.

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In this is way, we will be going at our distribution network and making the appropriate changes whenever necessary.

After adopting the above steps i.e. market survey and 4 P's of marketing mix, we will be able to win the retailer's faith and also liquidate our stocks after taking back from the retailers.


• The Benson and Jonson Company, manufacturing jams and sauces, observed thatthe maximum consumption of these products is during September to December.

• They offer a very attractive bonus scheme to the wholesalers to maximise the sales.

• They advertise their scheme in newspapers, magazines, the radio and the TV.

• It was not possible for the company to cover the entire district because of a limitedsales force.

• The company made it very clear that goods once sold would not be taken back.

• Blue Shield Company as a competitor of Benson and Jonson, came to know abouttheir scheme. So they also declared a bonus scheme to retailers and consumers.

• As Benson and Jonson's scheme was not attractive to the customers, their goodswere laying in the retailers' warehouses. So the retailers asked the representative ofBenson and Jonson to take back the stocks and refund the amount back, which thecompany denied. Thus this reduces the consumption of other equally good movingproducts.

• The company promises to come up with alternative solutions to liquidate the stockbut the retailers persisted that they take back the stocks.

This Blue Shield Co. knew very well that the need to increase its market share and that this can be done only by creating a share of mind and a share of the heart. By share of mind it means the company is familiar to consumer minds and by share of heart it means that people will buy the company product whenever they are purchasing. So it means that if you have created a steady share of mind and share of heart, there is no doubt that your market share is increased.

After studying all this, the Blue Shield Co. accordingly planned its competitive scheme in order to counter attack B & J Co.

There is a saying that "Poor Firms Ignore their Competitors, Average Firms Copy their

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Competitors, Whereas Winning Firms Lead their Competitors". So Blue Shield Co.managed to fit in the third category by leading its competitor B & J Co. This is how the scheme of Blue Shield Company was more successful.


Why did the scheme of the Blue Shield Co. became more successful?

I think the best way of answering this question is to have a comparison between these two companies.



1) Orientation 1) Retailer oriented 1) Consumer and retailer oriented.

2) Sales force 2) Limited 2) Aggressive and large sales force.

3) Discount 3) No discount to consumers 3 ) Discount on every bottle purchased for consumers.

4) Investments 4) From retailer point of view i.e. because of huge Investment, the profits is comparatively lesser.

4) Less investment and more profits comparatively.

5) Sales Growth 5) Nil 5) Increasing rapidly.

6) Feedback 6) Zero Consumer feedback 6) Proper consumer feedback.

1. The Benson and Jonson Company was basically retailer oriented, it didn't pay anyattention towards its consumers, whereas the Blue Shield Company paid emphasisto both the retailer as well as consumer and that's how it was able to satisfy both thesections of society.

2. As far as the sales force is concerned, B & J Co. didn't have enough sales force tocover entire district. So it has to heavily rely upon retailers and wholesalers to pushit's products whereas in the Blue Shield Company, it has an aggressive sales force isare capable of promoting its products effectively.

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3. The B & J Co. did ignore consumers, there wasn't any scheme for consumers althoughthey had huge cash discount for their retailers i.e. in some cases as huge as 70%whereas the Blue Shield Co. had a discount of Rs. 1.50 on every purchase of bottlefor their customers as well as free bottles scheme for retailers.

4. Investment: This is from the retailer view point. So according to them, although theyhave profits in both the company's products but due to the fact they had to investheavily on B & J Co., the profits on this company's product were marginally lowerthan that of the Blue Shield Co. product. So retailers were more interested in sellingthe product of the Blue Shield Co. rather than that of the B & J Co.

5. Sales were almost nil, i.e., dales came to full stop for B & J Co. the main reason forthe downfall of company sale was because of the fact that B & J Co. offered differentcash discounts to its retailers. To some retailers, it provided cash discount to theextent of 70% and to some retailers it provided 5% cash discount, on the basis of thegross bottles purchased by them. The more you purchase the more will be the discountprovided to you was the policy of the company. Till the goods reached the retailer,there was no problem but after it came to the retailer there was a problem in the pricefixation of the product for the consumers. This created a conflict amongst retailersbecause of the price fixed by the other retailers who were getting less discount. Sothere wasn't any uniform price for the company product and it ultimately led to thedownfall in the sales of the company.

Whereas Blue Shield Co. sales was rapidly increasing as they provided free bottles instead of discount to their retailers, and so the price fixed by the retailer for their customers were uniform. And the fact that because B & J Co. was not doing well, this company's sales were drastically increased.

6. There wasn't any concern for the customers in the B & J Co. So there was literallyzero feedback of the customers. Whereas the Blue Shield Company had a properfeedback of the consumers by doing various consumer value surveys.

In addition to this the Blue Shield Co. came into the market or rather it planned its marketing strategy after knowing well its capable and closest competitors. The company knew that B&J Co. was its closest competitor. The closest competitor means fighting for the same consumers and their needs. So Blue Shield Co. went to study the strategy, objectives, strengths, weaknesses, reacting patterns of its competitors. It also had market based surveys and industrial surveys for B & J Co.

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The company also paid attention towards the consumers by having various consumer value surveys, by asking them what do they think of Company's position in respect of its competitor, or what do they expect from the companies for their satisfaction as well as by asking them what do they perceive of the offers made to them by the competitor.

Reasons for taking the product back

• To maintain good relations with the retailers.

• To avoid reduction in sales of other products of the company.

• To prevent further increase in demand of the competitor' s product.

• To maintain a stable bargaining power of the company.

• To prevent the company from public embarrassment.

• To ensure that the goodwill of the company does not suffer.

• To ensure that long-term viability of the company remains unaffected.

Product Mix

Most of the new ventures fail not because of their quality but because they fail to live up to the customer's expectation. Hence product decisions can't be seen in isolation from other elements of marketing mix like price distribution, advertisement and promotion distribution.

Objectives of Product Relaunch :

1. Reinforcing the institutional image.

2. To bring forth visible changes in what was perceived to be unwanted.

3. To enhance the national image.

4. To enter the new market as a part of relaunch.

5. Increase usage in keeping with the strategy to provide complete satisfaction.

6. To invite new users through increasing trials.

7. To increase growth in the number of potential loyal customers.


• Packaging is done through product and brand planning.

• It is done with a view to protect and draw the attention of the customers.

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• • The message to be delivered needs proper planning as wrong messages communicated will be very fatal for the company.

It should always be made clear beforehand whether packaging is really necessary or not.

The Cost of packaging should also be taken into consideration.

Appearance of packaging at point of sale should be as per the


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Define The Problem& Research Objectives

Develop The Research Plan

Collect The Information

Analysis The


Present The Findings

Market Research




• Jay Engineering Works Ltd. was started by Lala Shriram in the forties to manufactureceiling fans and sewing machines.

• The factory was in Calcutta.

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• Under the able leadership of Lala Shriram, the products became very popular andvery soon acquired the status of a market leader.

• On his death, his sons took over the company.

• They went for an expansion and diversification spree.

• Expansion: As part of the expansion, they opened two new factories in Agra andHyderabad.

• Diversification: As part of diversification they went into new fields like textiles,automobiles, gensets, etc.

• Ideally, these steps should have increased the sales of the company and made theirmarket standing better. However, sales started falling and their reputation took anose dive.

Problem Faced

As mentioned above, the diversification and expansion measures taken by the company should have helped to increase its sales and profits, but instead the sales started falling and the company's market standing took a downturn.

What is Diversification?

Diversification is the process of moving into various fields, due to opportunities arising in those fields. It is moving away from one's core competence. Companies usually diversify to hedge their risks or balance their risks.In case one of their businesses doesn't do well, they always have other businesses to offset the losses in.

What is Core Competence?

Core competence is one's strengths, areas in which one has a competitive edge. It is what one can excel in. For example, when one talks about Nokia, the first thing that comes to mind is Cellphones. This is what we would consider as their core competence.

Similarly, talking about Ashok Leyland, their core competence would be in heavy commercial vehicles. This is because they excel in this product and as a result have a competitive edge in the market place.

When one talks about core competence, it does not refer to the first product the company started with, but the product on which it is the market leader.

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Coming back to diversification, a few examples are listed below :

1. WIPRO: Wipro started off with Shikakai, a hair washing soap and then went intosoftware, which apparently is their core competence.

2. B ATA: Bata is known for its footware, that being it's core competence. It diversifiedinto shirts with the brand called 'Ambassador'.

3. RELIANCE: Reliance would probably be the best example for diversification. TheManaging Director of Reliance, Mr. Anil Ambani, himself said that the core competenceof Reliance is diversification! The various fields into which Reliance has it'scompetencies are:

• Reliance Petrochemicals

• Reliance Oil & Gas

• Reliance Petroleum (1st refinery to be set up in the private sector)

• Reliance Power

• Reliance Financial Services

• Reliance Infocom (Telecom)

• Reliance Health Care

In this case of Jay Engineering Works Ltd. as part of diversification the company branched into textiles, automobiles and gensets.


Facts of the Case

Background information

1. The collaboration of U.P. Mini Computers with Zenith Mini Computers is approvedby the Government of India.

2. The Association is for five years.

3. UPMCL is to set up its own Research and Development Cell.

4. Zenith has a wide range of Computers.

a) 30 models available.

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b) Price range Rs. 30,000 to Rs. 3,00,000.

5. UPMCL to undertake market survey for deciding the product-mix suitable to Indianindustries and businesses.

6. Zenith will take care of know-how fees and the type of training.

Issues Concerned

1. Two alternatives for market survey

a) Give the job to a consultancy firm

b) Choose an in-house operation.

2. The Chief Executive of UPMCL does not agree to rely on a consultancy firm.

3. The existing marketing department of UPMCL is not very competent.

Analysis of the Case

Since we are into launch a new brand in the market the case analysis is done while keeping in mind.

• Preliminary Requirements

1. When (Timing)

2. Where (Geographical Strategy)

3. Whom (Target Market Prospect)

• Objectives

1. Product

2. Place

3. Price

4. Promotion

And then select an appropriate marketing strategy.

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Options for Market Survey

• External consultancy firms

• Internal marketing department.

Comparison of Options

• Consultancy Firms

1. Wide spread

2. Professional service

3. Temporary service

4. Cuts on costs

5. Time-saving

• In-house Department

1. Personal involvement

2. Clear objective

3. More awareness

4. Limited coverage

5. More infrastructure

Selection Made

Considering both the options, we decide on hiring the services of a consultancy firm for doing the market survey.

Recruitment and Selection

The Specifications

• The consultancy firm will provide the manpower according to requirements.

• UPMCL will arrange for the orientation and training of the persons chosen.

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Educational qualifications of the persons hired

• Computer proficiency (preferably of a technical background)

• Experience of customer relations and industrial marketing (2-3 years).

Orientation Program

Defining the job

Good selection

Proper training

Job analysis

Job description : What the job entails.

Job specification : List of job's "Human Requirements"

Orientation and Training

• Orientation vs Training

• Training needs analysis

1. Task analysis (new employees)

2. Performance analysis (current employees)

3. Setting training objectives

Some Training Techniques

• Job instruction training (JTT)

• Lectures audio visual techniques

• Programmed learning

SOLVED CASE NO. 4) TASTY BISCUITS - PUNE ______________________

Facts of the Case

• Tasty Biscuits - a well-established biscuit company in Pune for the past few years.

• Innovative ideas.

• Good quality of biscuits.

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• Good distribution network and promotion policy.

• A study made by the 'Indian Biscuit Manufacturers' Associationshows-21% of thetarget market are children.

• Introduction of animal shaped biscuits by Tasty Biscuits.

• Market research was carried out in Pune with a sample size of 200.

• Introduced in Mumbai, Delhi, Chennai, Calcutta and Pune.

• Encouraging response for the first 6 months.

• Decline in sales from seventh month onwards.

• Price 10% higher right from the beginning.

Cause of Slump in Sales

• Market size underestimated. The animal shaped biscuits were introduced in Puneand the four metropolitan cities only. By doing a proper survey, even other potentialmarkets could have been detected. Smaller cities have also started welcoming suchnew ideas.

• Product incorrectly positioned in the market.

• Competitors fight back harder than expected. Since the company did not pay attentionto the competitors they faced heavy competition from them. When a product is nomore novel it fails to attract customers.

• Same product, flavour and design. Tasty Biscuits stuck to the same product, flavourand design for a long time. Seeing the competition, they should have added somenew flavours and designs to beat the competition.

Failure in Revision of Prices

• Tasty Biscuits failed to realise that in the beginning.

• Buyer are less price sensitive when the product is more distinctive.

• Buyers are less price sensitive when the are less aware of substitutes.

• Buyers are less price sensitive when the product is assumed to have more qualityprestige and exclusiveness.

• They continued with the same pricing policy even after six months.

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• They had initially adopted the rapid skimming strategy in the introduction stage.

• The price of the product was high and so was the cost of promotion.

Wrong Market Research

• Restricted only to Pune. The market research was only done in Pune and the productwas launched in Mumbai, Delhi, Chennai and Calcutta.

• Small sample size. The sample of 200 was very small.

• Sampling was not done according to the income group. Sampling should have beencarried out according to the income groups and hence accordingly the product priceand product launch could be decided.

• Not focussed. The response of the parents were taken instead of the children. Rather,the children could have been directly targeted. There was no focus.

• Failed to make a study about competitors. They failed to make a study of thecompetitors. Whenever a new product is launched the competitors fight back.

Remedial Measures

• Target marketing. The children should have been majorly targeted but also other agegroups could have been included.

• Free samples in school. Free samples should be distributed in schools. Also somegifts could be given like stickers to attract the kids.

• New flavours and designs. Varied flavours and designs can be introduced to bring anovelty and keep the children attracted to the biscuits.

• Nutritional biscuits. Young parents are very particular about the nutritional value of aproduct for their children. If something of that sort could be added it would be anadded advantage.

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Margaret, who had recently retired from a thirty-year career in public school administration, was considering a new career by the purchasing of a business in the community where she and her spouse of three years had moved. While they had an income from her retirement program, it was not sufficient to appropriately support the two of them, consequently the need for additional income prompted her consideration of buying a business.

During the process of constructing their new home, Margaret had become acquainted with their plumbing contractor who also owned and operated another business for the propose of selling plumbing fixtures for the kitchen and bathroom. This sole proprietorship consisted of a display showroom featuring various upscale plumbing fixtures and a showroom sales staff of four persons including the manager and a shipping receiving clerk. The plumbing contractor indicated to Margaret that he was considering selling this business in order that he could concentrate more on his plumbing contracting operation.

The thought of purchasing this business was appealing to Margaret. The community in which she was building her home had a population of 100,000, a projected population growth rate of 2% per year, and was the financial and economic center of a country with 300,000 inhabitants. The projected county growth rate was even higher than that of the city. Three other important factors in Margaret's considerations were that the per capita income of the community and county was above the average for the state; there were several new upscale housing developments being planned for the near future in the community; and there were no other plumbing display showrooms in the city or the county of any significance. Because of these factors, Margaret decided to pursue the possibility of purchasing the business.

Margaret and the owner agreed to meet to discuss the possibility of purchasing/selling the business. At this meeting the owner presented the following information about his operation:

1. A P & L Statement for the eight months of operation of the business since its establishment

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2. A copy of the Lease Agreement ( 28 months remaining on the current lease with athree-year option to renew)

3. A listing of the major suppliers of goods sold and the account terms from each supplier.

If Margaret was to buy the business, she was planning to eliminate one of the staff members and assume that responsibility herself, thus increasing the estimated annual net profit available to him to approximately Rs. 31,500.

In the next meeting, the accountant reviewed the monthly income statements, the Balance Sheet for the end of the 8-month operating period, and other relevant legal documents pertaining to the business. He also presented equipment and furniture depreciation schedules and existing tax documents and records. The owner suggested that the selling price be adjusted based on a physical inventory of the stock; although he doubted that the adjustment would be much since such an inventory took place within the past 45 days. He also suggested that he assumes the responsibility for existing account receivables as well as account payables.

To assist in the transition, the owner suggested that if Margaret agreed, he could rent a small office area in the rear of the building on a month-to-month basis and operate the plumbing service business out of it. By doing this, he could be readily available for assistance when needed. He also stated his willingness to work on the showroom floor and in the sales office on Saturdays for two months to assist in the transition, provided it was appropriate with Margaret.

At the conclusion of the meeting, Margaret asked for time "think the matter over" and if she chose to do so, call the major vendors to ensure that she would be able to open new accounts under her name with the same that existed for the current accounts.

In the two weeks that followed, Margaret contacted the vendors and they assured her that new accounts with the same terms and discounts as the existing ones would not be a problem. After checking with the county offices on a variety of items, such as the number building permits issued and anticipated to be issued and available plans for housing developments, Margaret believed that the current level of sales could not only be maintained, but could grow given that the existing business had only operated for eight months.

Margaret decided to purchase the business in accordance with the terms discussed.

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Q1. What observations do you have of the relationship of the buyer and seller in this negotiation process and the potential future effect (s) or implication (s).

Q2. As a financial advisor, what would your advice have been to Margaret, if any, regarding

a) Her analysis of the financial aspects of the business, and

b) The Financial terms of her offer to purchase the business?

Q3. What suggestions do you have, if any, regarding Margaret's investigation of the other aspects of the business other than the financial review?

Q4. What are your thoughts regarding whether or not this is 'the right' business investment for Margaret? If you have concerns please indicate the reason(s) for those concerns.

In the discussion that followed, the owner indicated that his asking price for the business was Rs. 220,000 if he were to carry a note for any substantial balance, which he would be willing to do. The basis for this asking price was the following :

1. Wholesale cost of stock in inventory Rs. 130,0002. Wholesale cost of Stock on display in showroom Rs. 30,0003. Book value of office furniture and equipment (tel. system) Rs. 20,0004. Leasehold improvements; i.e. showroom

(orig. cost of Rs. 60,000) Rs. 40,000TOTAL AMOUNT Rs. 220,000

SUMMARY OF PROFIT & LOSS STATEMENT.(For 8 - month period)SALES Rs. 400,000/-COST OF GOODS SOLD (65%) Rs. 260,000/-GROSS PROFIT Rs. 140,000/-OPERATING EXPENSESWages and Benefits Rs. 60,000/-Rent Rs. 26,800/-Telephone Rs. 3,600/-Utilities Rs. 1,600/-

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Advertising & Marketing Rs. 8,000/-Accounting Services Rs. 2,400/-Mic. Office Supplies & Exps Rs. 1,600/-TOTAL OPERATING EXPENSE. Rs. 104,000/-PROFIT BEFORE TAXES RS. 36,000/-TAXES (Maximum anticipated federal income tax) Rs. 10,000/-ESTIMATED NET PROFIT (For 8-month period) Rs. 26,000/-

After reviewing this information, Margaret was still interested in pursuing the matter further. She arranged a second meeting with the owner and her accountant.

Margaret planned to make a downpayment of Rs. 40,000 on the business if she was to buy it. If the owner were to carry a 10-year note at 10% interest for the balance of Rs. 180,000, the payments would be Rs. 2,378.74 per month unless the arrangement were to include a balloon payment. In 8 months, this monthly payment would total approximately Rs. 1,900. Subtracting this amount from Rs. 26,000 estimated net profit at the end of the 8-month operating period would leave abalance net profit of Rs.7,000 for that period or a projected annual net profit of approximately Rs. 10,500.

When you include the wages for the one employee in the financial considerations, the business is yielding an annual operating profit of approximately Rs.40,000 from annual sales of Rs. 600,000 or a 61/2% return. This raises the question about the advisability of purchasing this business with that rate of return unless you could be relatively sure of your ability to substantially increase sales without significantly increasing operating.

In addition, when you include the payments on the promissory note in the financial considerations, thus reducing the annual net profits to Rs. 10,500, Margaret will be receiving approximately 5% on his Rs.220,000 investment. Again, the advisability of purchasing this business should be seriously questioned unless you can be relatively positive about being able to increase profits.

Margaret failed to consider other financial factors important to a successful business acquisition. Among these are:

a) What was the average turnover period for accounts receivable and did Margaret have a sufficient reservoir of working capital to address this consideration? Given the guideline of having a working capital reservoir equal to one and one-half of one month's gross revenues, Margaret would need to have a working capital reservoir of Rs. 75,000 in addition to her down payment of Rs.40,000.

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b) What methods were available to increase the discount received on purchases of goods to be sold? Obviously, the cost of goods sold of 60% is substantial increasing this margin should be an important financial consideration

As for the financial terms of the offer to purchase the business, a more creative promissory note might be beneficial; one with a balloon payment or one with an escalating rate of payment over the term of the note. Either of these would have made more funds available each month during the first few years of operation. These additional funds could be used in a variety of ways, such as purchasing a greater volume of goods to be sold, and thus increasing the discount or creating and operating reserve.

3. It does not appear that Margaret spent time observing and analysing the day-to-dayoperation of the business before deciding to purchase it. Without her havingexperiences in this field, it would seem that such observations would be important.

It also does not appear that Margaret spent time determining who the customers were and what their needs were. For example, although the current and prospective home-owners were the ultimate customers for Margaret's products, general contractors and plumbing contractors were quite often the actual purchasers of these products. Understanding this aspect of the customer base is very important.

4. It is very difficult to know whether or not this is "the right" business investment forMargaret, since it does not appear that she spent sufficient time investigating manyaspects.

CASE WATER WORKS _____________________________________________


This case presentation a review of the process and consideration involved in the decision by Margaret to purchase a retail sales business which sells upscale bathroom and kitchen plumbing fixtures in a small, but growing urban community. The buyer did not analyse all aspects of the business as thoroughly as she should have and consequently may have placed herself and the business in jeopardy as far as future success is concerned.

It is the intent of the questions and the answers to each to explore the following:

1. The weaknesses in the buyer/ seller relationship in the negotiation process thatculminates in the buying and selling of this business;

2. The specific weakness or omissions in the financial analysis of the business;

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3. The omissions in analysing other aspects of the business other than financial;

4. The general consideration anyone, including Margaret should review when investigatingthe possible purchase of an existing business.

5. If a sale requires the seller to receive a substantial portion of the purchase price overan extended period such as by a promissory note, the relationship between the buyerand seller will likely last five or ten years. In this case, the seller depends on the buyerto succeed in the business and make regular payments on the note. In turn, the buyerdepends on the seller to have been truthful about all aspects of the business. Thiscodependency requires the buyer and the seller to perform careful research beforethe sale and establish a common psychological and emotional understanding as salenegotiations proceed. How to establish this mutual understanding when circumstancesmake it necessary is the secret to buying and selling a business.

In this case, it does not appear that the discussions and review of the business were as comprehensive as they should have been. If this is true, then it did not allow the seller and Margaret to establish the trusting relationship that is needed when a long -term relationship is imminent. It also did not allow the buyer to learn as much about the business as she probably needed to know given the fact that her previous experience had not been in a private business nor in the plumbing industry. Both of these omissions could lead to potential problems.

6. The most apparent "error" in assessing the financial aspect of this business investmentby Margaret was her removal of the one of the employee's wages from the totalamount of expenses in his calculation of the potential return to her. Even though shedoes plan to eliminate one staff position and fill that position herself, she should notexclude that amount of wages from the financial consideration of determining theoperating profits of the business. You do not want to "buy a job", you want to buy abusiness.

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Like lectures, discussions, and texts, a business case is a device for learning. The special feature of a case is that it stimulates the circumstances faced by a business executive - a real problem, time pressure, and limited information - in which a decision must be made. Case analysis involves reading about a business situation and preparing an oral or written report on the key facts, symptoms that reflect the presence of problems, specific problems to be solved, and recommended solutions.

Cases illustrating a decision situation have been developed for all areas of a business. Some are comprehensive, incorporating problems in production, finance, marketing, and personnel. Others are more straightforward, such as those you will find in this text.

Your task is to "solve" the cases much as detectives solve crimes. The major difference is that in crime there is a particular guilty party and, therefore, only one correct solution. In business there are usually several solutions that, if properly implemented, can solve a problem. For instance, a retailer might achieve the same end result by increasing advertising, decreasing expenses, or selecting a new source of supply. The same is true in most business cases.

How then can a case solution be evaluated? The instructor will look for the quality of the analysis undertaken, the proper use of concepts from the business disciplines, the reasonableness of any assumptions made, and the compatibility of the recommended course of action with other described conditions.

WHY DO CASE ANALYSIS? _____________________________________________

The central purpose of preparing cases is to improve your ability to identify and isolate major problems and to offer practical solutions for an organisation in a particular situation. Put another way, the purpose is to improve the analyst's skill in offering penetrating insights into marketing problems.


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Case analysis permits a hands-on experience in the classroom within a short period of time. Students have the opportunity to compare the problems and solutions that they identify in a case with the problems and solution identified by others in the class.

A second purpose of case analysis is to develop the skill to present and defend recommendations. A good analyst not only identifies a workable solution, but also presents it in a convincing fashion.

COMPONENTS OF A CASE ANALYSIS _________________________________

There are many approaches to analysing a case and, with training and experience, most individuals develop their own method (which often carries over to the workplace following graduation). One that many students find useful in a five-part analysis-facts, symptoms, problems, alternative solutions, and recommendations.

A medical analogy will help illustrate this approach. Imagine going to see the doctor, having experienced fever, nausea, dizziness, and a headache for several days. When you first arrive, the physician or an assistant will collect a variety of facts, some of which may not seem terribly relevant to your immediate problem. For example, you will be asked your age, height, weight, allergies, and current mediation. In addition, some new data will be collected, like your temperature, blood pressure and pulse. These bits of information, or primary and secondary data, will familiarise the physician with your case and may provide some clues to be used in the analysis. Note that the physician is fairly selective in the facts gathered. Experience and training tell the medical persons that the colour of your hair, for example, is not likely to be important. However, despite the physician's skills, invariably more facts are collected than are needed.

The next step is to ask you the reason for your visit, or the symptoms you are experiencing. At this point you describe in some detail the duration and severity of the fever, nausea, dizziness, and headache. It is critical to realize that these symptoms are not the problem (unless they are life threatening). They are discomforts that indicate the presence of problems. Not until the problems, or causes of the symptom are rectified will you return to good health and a feeling of normalcy.

The task of the physician is to study the symptoms alongwith the facts and possibly some additional details (e.g. blood test, X-ray, your recent eating behaviour, the possibility of a blow to the head) and arrive at an educated conclusion about the causes, or the problems. In this example, the cause could be as varied as a concussion or a virus. It is only through a careful analysis of the information that the physician can consider and eliminate many possibilities and eventually arrive at the correct diagnosis.

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Lastly, just before suggesting a course of action, the physician will double-check the facts to ensure that the preferred solution is compatible with the existing conditions. Are you allergic to any medication? What dosage is appropriate for your body weight? Given your job or life-style, is it necessary for you to engage in certain behaviour changes? Finally, the physician makes a final recommendation as to how to address your problem. If the problem has been correctly diagnosed and the appropriate solution administered, the problem will be solved and the symptoms will disappear.

Notice the expertise which the physician provides. As a result of training and experience, the doctor arranges, assembles, sifts, and analyses the facts and symptoms to arrive at a diagnosis - a conclusion about what is causing the discomfort. Once diagnosed, the physician is prepared by training and experience to prescribe a remedy or solution.

This same approach can be sued with a business case. In fact, the written presentation can be subdivided into the following sections:

Facts Important issues necessary to become familiar with the situation.

Symptoms Undesirable condition (a decline in sales, rising expenses, customercomplaints, dissatisfied employees) that suggest the presence of a problem.

Problem Basic weaknesses that create symptoms and undermine efficientperformance. In this section identify concepts (segmentation, dual, distribution, price lining, product life cycles, push promotion strategy, etc.).

Alternative Solution Various courses of actions that will eliminate problems and alleviate symptoms. Concepts may appear here also.

Recommendation The specific course of action proposed (often presented first so the reader knows where the analysis is headed).


It is best to read a case from beginning to end to get a feel for the situation. During the first reading, don't worry too much about details. Try to get a sense for the time period, the personalities, and the situation facing the organisation.

Next, read the case again in more detail. Make a list of the facts and look for the major symptoms. At this point you may want to gather some additional outside information. Go

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to the library and look up the company or industry in the Business Periodicals Index. Read a few articles to flesh out your comprehension of the situation. Also, check your text for the marketing concepts, strategies, and techniques that are relevant to this case.

This leads to the crucial step of defining the problem. Just as the skill of the physician is in diagnosing an illness, the skill of the business case analyst is in correctly identifying the problems. Ask yourself, why do these symptoms exist? Keep in mind that the physician does not rely entirely on intuition in making the diagnosis. Similarly, you should make use of the marketing fundamentals you are learning. Are products life cycle, push versus pull promotion, and/or vertical marketing system relevant? The problem may be poor strategy or bad implementation. Spend some time wording your problem statement so that it is clear and succinct, yet comprehensive.

The next step is to do some brainstorming about solutions. Ask yourself some "What if questions. What would happen if the firm shifted its promotional budget away from consumers and more toward the trade? How would competitors react to a reduction in price? Would television be a better advertising medium for the product than print? Could the product line be extended? Be careful here not to rely too heavily on your intuition of common sense. Make use of the marketing principles you are learning. Having considered several options, select the solution or recommendation that is most compatible with the conditions found in the case.

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The Case Study Focus THE


As the cases in the marketing program is uniquely designed to develop marketing management skills that are required in a competitive business environment, the case method is integrated as a dominant tool in its education methodology. A case study reinforces the students' understanding of the concepts and their ability to apply them in the real and practical situations. To be an effective marketing professional, the student has to think and act like one. Thus, the program has a very strong case study orientation.


According to the Harvard Business School, "A case is a partial historical clinical study of a situation which has confronted a practicing administrator or managerial group. Presented in a narrative form to encourage student involvement, it provides data - substantive and essential to the analysis of a specific situation for the framing of alternative action programs and for their implementation, recognising the complexity and ambiguity of the practical world".

"Case studies focus attention on what a firm has done or should do in an actual business environment. By reading, understanding and analysing cases, students can develop and refine their analytical skills".


Case studies are widely acknowledged as very effective learning aids. A case is usually a depiction of a managerial situation or dilemma that calls for the best possible plan of action given the available information, by allowing each student an opportunity to get into the shoes of the protagonist. The case method brings out the complete realities of problem solving and help us in developing the decision making capabilities of students. The cases included in this study course material cover various areas of marketing so that the student develops the skills on each of those areas. The educational methodology followed gives a

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thrust to the skill development of the students by providing them exposure to various real life situations.

Marketing Management deals with an organisation's efforts to identify customer needs and wants and designs the appropriate products or services to meet these demands. According to Philip Kotler, Marketing Management is "the analysis, planning, implementation and control of programs designed to create build and maintain, beneficial exchanges'. With target buyers for the purpose of achieving organisational efforts to identify customer needs and wants and design appropriate products or services to meet these demands. Thus, marketing management involves managing demand, which in turn involves managing customer relationships".

Therefore understanding the concepts of marketing management is all about understanding the application of marketing concepts and practices by domestic and global companies, by small and large businesses and in intense and moderately competitive markets. The importance of case studies in understanding, marketing management emerges from this application of theory.

A case is a tool for applying theoretical concepts to real life business situations. Case studies attempt to stimulate learning by doing. A case brings to life the various dimensions of a managers job, it requires the reader to analyse the situations on hand, making decisions wherever required and depend those decisions with logical arguments.

This study course material contains case studies covering a multitude of marketing management concepts.

The cases are designed to facilitate the understanding of these concepts and enable the reader to link them with the practical aspects as experienced by the companies involved. All the cases are involved at fullfilling the following purposes:

• Arousing interest in the topic under discussion by involving the reader in the company'sproblems - each begins with the build-up of a situation problem, which is later examinedin detail.

• Giving a detailed perspective to work out the alternative solutions to the situation/problem at hand. The background note provides comprehensive information aboutthe situation/problem.

1. Promoting analytical thinking and a practical approach to problem solving. The mainbody of the case is a comprehensive write up on the situation / problem and it ispresented chronologically. This describes the genesis of the problem, its evolutionaland the attempts to deal with it.

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•65535 The Case Study Approach

The findings of surveys, comments from industry experts are provided wherever possible.

Bridging the Gap Between Theory and Practice - Each case is followed by a set of questions, which are essentially aimed at enabling the reader to link marketing theory to practical situations as mentioned in the case and help those readers who wish to go beyond the information presented in the cases.

In a nutshell, the cases included in this study material focuses on the different facets of marketing management.

It is hoped that this study material on case studies in marketing management will be found interesting and useful by the students and teachers of marketing.