volume iii september 2011 - sibm. mahima mishra & prof. kunal khairnar 68. ... is to show that...

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Volume III September 2011

SIBM

Volume III

ISSN 2249–1880

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Editor-in-Chief Dr. Vivek Sane

DirectorSIBM, Pune

EditorDr. Anupam Ghosh

SIBM, Pune

Editorial BoardProf. Anil Kshatriya

SIBM, Pune

Dr. Shibashish ChakrabortySIBM, Pune

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Volume III

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SAMVAD“SAMVAD” is a peer-reviewed

research journal of SIBM, Pune. “SAMVAD” means dialogue

and SIBM, Pune invites all the management professionals, faculty and students to participate in this

dialogue which will contribute towards shaping management

thinking in the country.

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6. Editorial

(I) Research Papers7. Growing with The Masses A New Approach to Bottom of The Pyramid

Dr. Vivek Sane & Prof. Anil Kshatriya

13. An Exploratory Study of Important Aspects of Egg market in Kolkata Dr. Shibashish Chakraborty & Mr. Sayan Shom

35. Sustainable Business : A Tangible Reality Dr. Anupam Ghosh

(II) Viewpoint42. Building Strategies in Turbulent Times Prof. Vijay Kumar Dharmadhikari

47. A primer on Credit Default Swap (CDS) & RBI guidelines on CDS Prof. Utkarsh Jain & Prof. Kaustubh Medhekar

53. Nurturing Winning Brands Dr. Kaushik Mukherjee

56. The Employee Value Proposition- A Key to Attract Performers Prof. Deepika Pandita

62. Inflation Vs Growth: The Tightrope Walk Prof. Mahima Mishra & Prof. Kunal Khairnar

68. NetworKING KHAN-Profile of an avid Networker Prof. Vinod Shastri

71. Strategizing for Life Prof. Sapan Shrimal

75. Why don’t MBAs mind their own business? Dr. Sanjay Bhale & Prof. Vinod Shastri

(III) Management Case79. ITC’s e-Choupal: A case study on Rural Marketing Initiative Prof. Rajesh Panda

Contents

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Editorial

It is a moment of much pride for us to publish the SAMVAD (Volume III) journal as a part of SIBM’s endeavor to nurture research and innovation to the fullest. This edition is of special importance to us as it incorporates the quality contributions of our fulltime faculty members with the ISSN number.

The content is segregated into three segments in sequence such as Research Papers, View Points and Management Case (altogether 12 papers). So the effort is to show that management cases and research papers are not discrete but homogenous in nature depending on the varied viewpoints an author can have on a certain issue. We hope and wish that this journal would enhance the academic and management vigor of the readers and add value to their respective fields.

RegardsEditorial TeamSAMVADSIBM, Pune

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Dr. Vivek Sane Director, SIBM, Pune.E-mail : [email protected]

Prof. Anil Kshatriya Assistant Professor, SIBM, Pune.E-mail : [email protected]

ABSTRACT

In 2006, C. K Prahalad propelled a radical thought through his book The Fortune at the Bottom of the Pyramid. The book propounded a theory that conceptualized a model for eradicating poverty through profits. It proposed and exemplified ideas which proved that value can be co-created by large companies by keeping in mind the constraints and needs of poor population which occupies the largest portion of any market. In this conceptual paper authors are proposing to add four new dimensions to the seminal model of Bottom of the Pyramid (BOP) with an attempt to expand application of original concept in the emerging markets like India. These perspective dimensions have been supported with several examples of products and services that are offered in Indian markets by large companies who have successfully converted the challenges of low income groups into opportunity. Through such opportunities these companies have not only improved their bottom line but have also provided the BOP masses with immense potential to live a better life. They have made a difference to the lives of millions of poor who are looked upon as source of growth and not as burden.

Key words : Bottom of the Pyramid (BOP) Markets, Emerging Markets, Services, Innovation and Growth. Introduction

It was in 2002 issue of Strategy + Business, an award winning management quarterly that two prominent thinkers C. K. Prahalad and Stuart Hart1 raised this very simple but most epoch making question. Can we eradicate poverty through the motive of profit? And the answer to this question was provided through an equally simple proposition. "If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunities will open up"2.

To elaborate upon this point let us take a day to day example. Think of a wealthy person who owns an expensive car. He is passionate about the brand of his car and drives this car to office every day. One fine day he finds that a beggar in standing near the door of his status machine. All he expects him to do is to give a paltry sum of few rupees to support his living. But instead

Growing with The MassesA New Approach to Bottom of The Pyramid

Research Papers


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if this gentleman frowns at him, gives him a dirty look and ignores this beggar swiftly moving towards his office. The same incident happens next morning where again the same beggar looks at him with expectation. But all that wealthy man has are those hateful looks. And this goes on for four days. But on fourth day the owner of this expensive car is horrified as he steps down from his office. He finds to his utter surprise that all four tyres of his car are flat and someone has mischievously put him to pain. He does not want to name the person but in his mind he knows who the culprit is. Next morning when he drives down to his office in the same expensive car and finds the beggar at same place he decides to go and talk to him. Not about the incident or about dole but about offering him a job to serve him as car washer. The beggar not only gets work and earning but in the process also become the biggest protector of his car. This is what co-creation is all about. The gentleman benefitted by providing an opportunity to the beggar. This is the win-win proposition that BOP markets are able to achieve3.

The authors provided a framework to achieve this objective. This framework comprised of four channels of interconnectedness namely Private Enterprises, Development and aid Agencies, Civil society Organizations and the Consumers & Entrepreneurs who were at the Bottom of the economic Pyramid. The idea was to include the poor and economically deprived by bringing them into mainstream of economic thought process. Collectively they can create an eco-system to encourage innovative practices that become solution to poverty. The authors have exemplified through several cases of innovation in India, Peru, Brazil, Mexico etc. how this has been made possible by several large companies. Companies like ITC (India), Avon (Brazil), Cemex (Mexico) have leveraged the opportunity of serving the BOP markets by keeping their constraints and needs in forefront. These companies have strengthened the potential of poor to put their abilities to optimum use. They have given them living but more importantly they have enabled dignity and choice through markets.

Discussion on new dimensions

Eight years have elapsed since the concept of BOP markets was first discussed. Many MNCs and Indian companies have taken the idea forward by bringing innovations into their business practices. It has penetrated deeply and has also brought a cultural shift in many companies that were dominated with the western philosophy of business. We propose few interpretations through which we attempt to broaden the scope of the concept of BOP. These four new interpretations of the BOP strategy are given below:

1. For developed countries the market at home is saturated and they are moving towards India as an emerging market, which is the bottom of the pyramid for them. This reflects on the fact that for these companies countries like India are themselves a portion of the pyramid and not just a small fragment of its population. Cost effectiveness of operation in Indian markets has forced large MNCs to divert a large portion of their resources to India. There are specialized teams who now work on the India Strategy.

2. With a business model of ex-Deccan Airways and Nano from Tata Motors a new meaning can be that the top end of one market can be linked with the partially visible bottom (prospective customer) of another market. For example ex Deccan Airways, with a slogan of "now everybody can fly" targeted those rail commuters who used to travel through 2nd and 3rd class A.C. compartments (Top end of rail market is linked with the bottom of


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aviation market). Youngsters preferring to buy a top end motor cycle costing Rs.75,000/- onwards may be tempted to book a Nano with a starting price of approximately Rs.1,00,000/. Thus challenge at one end becomes an advantage at the other end of the market. BOP markets work on this principle. They offer choices to people so that they can move up the value chain. But these choices are offered by keeping in mind the cost consciousness of India consumers at heart. We therefore find that the innovative skills required to engineer a Nano are very different from those required to build a high end motor bike priced at Rs. 75, 000.

3. Every product is positioned in a particular price band. For e.g., Rs.1/- to Rs.10/-. It is observed that the maximum volume can be generated from products being sold at lower end of the price band. Many a times a BOP consumer wants to enjoy the pleasure of using services of technology but he or she has very small budget which also is variable from time to time. Hence BOP markets are approached by companies in such a manner that they offer flexibility to such consumers by providing them with price bands from which they can pick and choose their products and services from time to time. A low income family may buy a Rs. 5 detergent soap in one month but may be in a position to buy only one sachet of Re 1 in the next month. Offering this flexibility through single serve is a key to serve and prosper in the BOP markets.

4. There are approximately 6, 40,000 villages in India. There is a segment of customers at the lower end of the marketing pyramid who need to be tapped. There is a tremendous revenue generating opportunity. Rural poor have to be approached in a radically different manner. There are two major constraints while serving the rural poor. First, the assumptions that the necessary infrastructures like roads, water and sanitation will be available along with basic resources like electricity is flawed. Second the level of literacy in rural India is low and therefore people may barely understand what companies try to communicate to them. This demands revisiting of the modes through which people will approach the products and services. This is possible only when there is a zero base thinking applied while delivering your products and services in markets where the above two facts are tactfully handled to your advantage. Looking at the Indian scenario it can be observed that the some illustrations come closer to the above analysis. These have been discussed below.

Corporate Examples of Growing with the Masses in India

1. Reliance India Mobile (mobile for Rs.501/- Monsoon Hungama scheme.

2. Tata Docomo (One paisa per minute plan). Earlier Hutch, now Vodafone introduced the concept of "Chota Recharge".

3. Tiger tikki from Britannia for Rs.2/-.

4. Chotu Amul from Amul butter.

5. Chinese computer giant Lenevo is planning to launch a personal computer for Rs.8, 000/-

6. Kolkata based company "Global Automobiles Ltd" launched India’s cheapest motor-cycle at Rs.19990/- called "Rock Hundred" powered by a hundred c.c. engine. It also claims to


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offer a mileage of 125 km per liter.

7. Ravindra Kumar of SAS Motors aims to revolutionalise the agricultural sector by introducing 22 hp tractor at a price of 1,20,000/-(small and affordable tractor) called Angad.

8. Bungee, a U.S. based company is introducing DALDA in Rs.5/- and Rs.10/- pouches.

9. Godrej Boyce’s small refrigerator "Chota Cool" is to be priced at Rs. 3,000/- and is to be made available in red and blue colours.

10. Deepak Khaitan promoted Eveready Industries came out with a battery operated lantern which became very popular in rural areas. This lantern throws a white light instead of the yellow light of a kerosene lamp (re-featuring of the product as per needs.).

11. GlaxoSmithKline’s Horlicks Asha, priced at Rs.85/- for a 500 gm pack is half the price of regular Horlicks.

12. Hindustan Unilever’s new venture Brooke Bond Sahedmand is a low priced tea for rural areas.

13. Tata’s new low priced water purifier "Tata Swatch".

14. New banking product called Microfinance.

15. C.K. Rangannathan promoted a sachet based shampoo called CHIK through its company Cavin Kare. This prompted leading companies like to replicate the sachet revolution at a price of Rs.1/- and Rs.5/.HUL (Sunsilk), Nescafe, Parachute, Colgate-all these products are now also presented in small packs.

16. Deccan Airways started by Capt. Gopinath (which is now called Kingfisher Red) created low cost, no frill budget airline business model which is then replicated by Indigo, Spice, and Go-Air. Today in aviation sector the market share of budget airlines is formidable.

17. Tata group launched Nano car for Rs. 1 lakh. Perceiving success and huge market, all the leading car manufacturers launched their small cars for Indian market. For e.g., General Motors-Spark, Ford-Figo, Honda-Jazz, Fiat- Punto, Volkswagon- Polo and Skoda-Fabia.

18. Tata Groups Ginger Hotel at Bangalore where tariff begins at Rs.2,000/-.Now they also have hotels at Haridwar, Pune many other places. It is called a chain of "Budget hotels".

19. L.G has come out with T.V sets called "Sampurna" available with starting price of Rs. 7,000/-

20. Inspire Multiplex, which runs chain of multiplexes under the brand ‘My Cinemas’, the growing exhibition industry multiplex operator and is targeting to open 300 screens across the globe in the next three years. Opened its first multiplex in Kandivali in western suburbs of Mumbai, to invest close to Rs. 450 Crores for expanding its footprints globally. 60% of the tickets are sold in the bracket of Rs. 49- 200/-.

21. HUL to Ride With Telcos, Banks to Reach Bharat (FMCG giant plans joint distribution model to penetrate deeper into rural India) - In a bid to viably cover each of India’s 6.38 lakh villages in which some 775 million people reside, Hindustan Unilever (HUL) has initiated


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discussions with top telecom and banks and financial services companies to create a joint distribution model. HUL, which hopes to have a million outlets by end of 2011 up from 5.50 lakh last year – has unveiled a blueprint titled Gateway to Rural: Beyond FMCG. (HUL, banks and mobile service are incurring high costs in the quest to go rural, makes a lot of sense to partner and work out win-win deals.

These are stories of large companies who have used their entrepreneurial ideas to reach out to millions who earlier were never looked upon as profitable market. They could do this because they changed their perspective towards the BOP population. This change in perspective enabled them to gear-up to serve these markets by changing the whole pattern of their business operations. Those companies who have managed to bring this change in a timely manner have definitely gained an upper hand over their rivals. Attracting BOP customers has become an integral part of their business strategy. They are aligned to the dynamics of business environment and are reaping splendid results through this alignment. From these examples the following features emerge for the business model of Growing with the Masses -

1. Lower price (affordability)

2. Convenience and availability

3. Brand power-biggest driver

4. Adaptability as per the needs of the targeted customer.

5. Use of technology to improve the systems.

6. Driving away inefficiencies and making an all out effort to reduce the cost, and passing on the benefit to the customer.

7. Volume driven market (Revenue per unit is less but the number of products being sold are more-Total sales increases).Greater turnover.

8. It requires different types of marketing strategies to reach out to the target audience at the bottom.

9. The most important feature of this business model is to understand the aspirations of the masses and then positioning the product accordingly. For e.g., the desire of the common man to fly by plane or a low income class woman trying to use a shampoo sachet at least once a week.

10. It also requires different distribution channels and cannot depend upon the conventional channel of wholesalers and retailers. In many of the examples mentioned above NGO’s (Non Government Organizations) or self-help groups have helped in distribution of products or creating awareness.

Conclusion

BOP market strategy and interpretations thereof is no more left academicians to discuss and debate about it. It has become a reality. All the above examples prove this point. Earlier the question was who will serve the poor; they hardly have potential to purchase our products and services. Today the question is who will think of not serving the poor; they are the largest


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players for the markets of the future. This shift is a result of acceptance that the idea of BOP gained over the number of years. This powerful change is making MNCs and companies back home as to how they should become beneficiaries in the process by capturing the large base of the economic pyramid and staying there for long. They have chosen to grow with the masses and at the same time enriched lives of millions who are indeed the real beneficiaries of this movement.

End Notes

1. Prahalad, C K and Hart, Stuart L (2002). "The Fortune at the Bottom of the Pyramid." Strategy + Business, 26, 1-14.

2. Prahalad, C K and Hammond, Allen (2002). "Serving the World’s Poor, Profitably." Harvard Business Review, September, 4-11.

3. Prahalad, C K (2005). "The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits." Wharton School Pblishing.


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An Exploratory Study of Important Aspects of Egg market in Kolkata

Shibashish ChakrabortyAssociate Professor, SIBM, PuneE-mail : [email protected]

Sayan Shom Consultant, Mott MacDonald Pvt Ltd, New DelhiE-mail : [email protected]

ABSTRACT

It is important for marketers of branded eggs to understand their customer needs and the existing value chain. This paper endeavors to make a study on the existing value chain and to map different kinds of eggs consumed and SEC of consumers. This study will try to explore relationship between kind of eggs consumed and pertinent independent variables.

Introduction

Eggs form an integral part of a non vegetarian diet. They add proteins to one’s diet as well as other nutrients. They supply all essential amino acids for humans, and provide several vitamins and minerals, including vitamin A, riboflavin, folic acid, vitamin B6, vitamin B12, choline, iron, calcium, phosphorus and potassium. They are also an inexpensive single-food source of protein.

Egg production in India

Producing 4800 crores eggs in 2008-09 India is the 4th largest producer of eggs in the world. The total egg industry size was Rs. 11048 crores in 2008. The industry is highly fragmented with no national level player.

Zones States

North Haryana (Ambala, Barwala, Sonepat, Karnal) Punjab (Chandigarh)

West Gujarat , Maharashtra

South Andhra Pradesh (Vijayawada, Godavari, Tunku, Hyderabad, Chittoor, Vizag) Tamil Nadu (Namakkal), Karnataka , Kerala

East Orissa West Bengal (Kolkata, Bankura) North Eastern States

Central Madhya Pradesh

Table 1 : Major Production Belts and Centres

Shibashish Chakraborty & Sayan Shom

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Egg Production In Bn

Though India is the 4th largest egg producer in the world the annual per capita consumption of eggs stood at a paltry 47 eggs in comparison to 345 eggs n Mexico and 230 in USA.

As per NECC traders and industry experts, the market is slated to grow at 8%-10% per annum for the next 4-5 years. This growth would be driven by the expected increase in number of layers to 26 Crores by 2010. Rise of middle class, increase in urbanization and shift towards non-vegetarianism are the other factors. Urban areas, which accommodate 27% of the total population, account for 75% of the total egg consumption.

Players Brand Variants Pack size Price/pack(INR)

Suguna Suguna Pro, Active, Health (Omega 3), Shakti 6 40, 43, 46

Kegg Farms Keggs Near organic 6 45

S.K. Bajaj Poultry Bajaj SK Bajaj SK Gold, Bajaj SK Rs 3.5 10 36, 50

Agrocorpex India Agrocorpex Standard table eggs 6 25

Prabhat Poultry Prabhat Jumbo (sold by weight) 6 -

SKM EggProducts SKM Best Enriched eggs 4, 6 14, 21

Baramati Agro N’rich - 6 22, 28

Takve Poultry Takve - 6 20

Jaya Healthcare SMART Eggs Cholesterol free, Diabetic (Omega 3) 6 -

Palam Eggs Mr. Farmer Standard table, Near organic 6 24, 34

Egg Industries FEGGS Two (one for elders, other for youngsters) 6 -

Table 2 : Major Branded Egg Players

Branded eggs

The branded eggs segment with a total market size of Rs. 60 Crores accounts for 0.54% of the total eggs market. Though at a nascent stage, the branded eggs segment shows tremendous promise and potential with a growth rate of 20-25% per annum. Suguna Poultry was the first firm to venture into branded eggs category in the year 2003. Over the years it has developed four brands viz. Pro, Active, Health and Shakti. The table lists the prominent players in the branded eggs segment and their product offerings.


Figure 1 : Egg Production in India1

1Source: Compound Feed Manufacturers Association

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The major factors behind the growth of the branded eggs market are:

• Growing health consciousness

• Increasing levels of income

• Proliferation of modern retail formats

• Acceptance of packaged and processed foods by the Indian consumer

Although costlier than ordinary eggs, branded eggs are projected to become the next big market in the food and beverage segment. Marketers claim that these eggs are richer in proteins, contain less fat and are picked from bio-layer farms. With attractive packaging and promise of a healthier proposition these eggs command a premium over ordinary eggs. These protein-rich and low-fat branded eggs are slowly becoming the staple choice of many families as income levels and health consciousness rise. The market for branded eggs in India, compared to that of the normal eggs, could be said in an embryonic stage, but it is definitely growing. The poultry farms in India generate a production of around 110 million eggs daily, making India as one of the top egg-producing nations in the world. However, the per capita consumption is less than 40 eggs per year. The National Egg Co-ordination Committee aims to achieve a per capita consumption of 180 eggs by the year 2015.

Starting with Suguna Poultry in 2002, over the years a number of firms have started selling branded eggs in the country.

The major players in the branded eggs category are

• Suguna • Kegg Farms • S.K. Bajaj Poultry • Agrocorpex India • Prabhat Poultry • SKM Egg Products • Baramati Agro • Takve Poultry • Jaya Healthcare • Palam Eggs • Egg Industries • Maity Poultries

Any company which intends to supply branded eggs in Kolkata. It has two variants as a part of their product mix:

1. Normal Eggs : Priced at Rs. 3.50, these eggs are pitted against the ordinary eggs found in the Kolkata market, the value differential being scientific and healthier processes for egg production, cleaning, sorting and grading of the eggs and robust, impact resistant packaging.

2. Specialty Eggs : Priced at Rs. 5.50, these eggs are significantly larger than the normal eggs and are enriched with Omega 3 fatty acids, ensuring that the consumer enjoys a healthier product.

Objectives of the Research

a. To study the existing value chain.


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b. To map different kinds of eggs consumed and SEC of consumers.

c. To study relationship between ‘Kind of eggs consumed’ as the dependant variable and size, price, freshness, appearance, assurance against ailments, nutritious, and versatile as the independent variables.

MethodologyPrimary research:

a. Interviewing retailers, wholesalers, traders to determine existing supply chain and devise supply chain strategy.

b. Interviewing consumers to identify need gap of ordinary eggs vis-à-vis branded eggs.

c. Visiting various residential complexes, hotels, gymnasiums, health clubs and primary schools to ascertain costs and benefits of branded eggs distribution and associated communication.

Sample Size and Sampling Method

a. Commission agents supplying eggs in urban Kolkata. Sample size: 10.

Sampling Method: Convenience sampling

b. Egg wholesalers at prominent markets of Kolkata. Sample size: 8. Sampling Method: Convenience Sampling

c. Retailers of eggs at local grocery shops. Sample size: 40. Sampling Method: Convenience Sampling.

d. Consumers of eggs in Kolkata. Sample size: 160 Sampling Method: Convenience sampling.

Secondary research

a. Kolkata Municipal Corporation (KMC) Kolkata Metropolitan Development Authority (KMDA) data on housing complexes in Kolkata.

b. National Council of Applied Economic Research (NCAER) data on consumer demographics.

c. Secondary data from other sources like National Egg Coordination Committee, Compound Feed Manufacturers Association etc.

Limitations

a. Survey for key buying factors limited to urban Kolkata.

b. Few firms offering branded eggs in Kolkata and concept of branded eggs not well entrenched in the consumer’s mind.

c. Due to paucity of time sample size collected was relatively small.


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Findings

Primary research conducted involved four phases.1. Phase I: Interviewing commission agents.2. Phase II: Interviewing wholesalers.3. Phase III: Interviewing retailers of eggs (i.e. local grocery shops) and visits to modern retail

formats.4. Phase IV: Interviewing consumers.

Phase I : Interviewing commission agents using a discussion guide and not a structured questionnaire. Sample Size: 10Location: Sealdah Wholesale Market. New Market (Hogg Market), Esplanade Major Findings :

• About 90% of the eggs consumed in Kolkata are hen eggs, produced in poultry farms in Andhra Pradesh.

• The other 10% consists of duck eggs and hen eggs produced by local farmers (Deshi Murgi)

• The hatchery owner popularly known as the Mahajan transports the eggs from Andhra Pradesh.

• The eggs are purchased by the commission agents in Kolkata.

• There are about 25-30 commission agents that cover urban Kolkata.

• Costs to the commission agents (CA):

o Inventory carrying cost.

o Transportation cost (minimal about 20p for a standard carton of 210 eggs).

o Losses due to damaged eggs (On an average in a carton of eggs 10-15 eggs are damaged. If damaged eggs exceed 25% then a refund is made by the Mahajan)

• Margins for the CA is 2 paisa per egg.

• There is no variation in terms of margins.

• No other incentives are provided to the commission agents by the Mahajans.

• Egg consumption increases by about 20% in winter months relative to summer months.

Phase II : Interviewing wholesalers at prominent markets of Kolkata using a discussion guide.Sample Size: 8Location: Lake Market Bansdroni Bazaar Gariahaat Market Market near Ruby Hospital, Kasba Gold Park, Jagu Babur Bazaar, Bhawanipore


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Findings:• The price offered by the egg wholesaler is Rs. 3.00.

• At all locations eggs were procured from hatcheries in Andhra Pradesh (A.P.).

• Eggs were first packed into cardboard boxes with cardboard packaging and loaded on to trucks by hatchery owners in A.P.

• These were received by commission agents/wholesalers in Kolkata and then sent out to retailers via vans/matadors.

• Commission agents in Kolkata mainly located at New Market, Sealdah (near Sabji Patti).

• Margins for the wholesaler varied between 12 paisa to 25 paisa.

• End customers making bulk purchases (restaurants etc.) purchased from the egg retailers at a discount(mentioned earlier).

• In case of bulk purchases eggs(in excess of 200 eggs) were sold at Rs. 2.70 to Rs. 2.80.

• The egg that is sold in Kolkata is laid 10 to 12 days earlier.

• Stays fresh for another 10 days in summer months and upto a month in winter, without refrigeration.

• Sale of eggs through modern retail formats have not had much of an effect on sales through traditional formats.

• The perception among the egg sellers was that customers preferred to buy from them rather than modern retail formats due to lower prices and freshness of eggs.

Phase III : Interviewing retailers and wholesalers and subjecting them to a structured questionnaire.Location: Local grocery stores, wholesalers across urban Kolkata Sample size: 40Findings:

• The modal price point is Rs. 3.00 per egg, with only three egg sellers selling at higher prices

• 9 respondents purchased directly from commission agents (CA)

• 31 respondents had eggs delivered at their store by carrying and forwarding agents (CFA)

• The average daily egg sales for those who purchased from CAs (2170 eggs) directly were significantly higher than those who purchased from CFAs(275 eggs)

• Average margins for those who purchased from CFAs was 27.4 paisa with a sample standard deviation of 9.08 paisa

• Average margins for those who purchased directly from CAs was 41.6 paisa with a sample standard deviation of 7.19 paisa

• 21 respondents purchased on cash while 19 on credit


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• For those purchasing on credit the mean credit period was 7.23 days and mean daily sales was 1186 eggs significantly larger than those who purchased on cash, 263 eggs

• The mean rotation period for all respondents was 1.67 days

The eggs consumed in urban Kolkata are mainly produced at hatcheries located in Andhra Pradesh. The hatchery owner popularly known as the Mahajan enjoys a margin of 9% approximately. The eggs are packed into cardboard cartons with paper pulp packaging, loaded onto trucks and transported to Kolkata. There are 7 to 8 such Mahajans that serve the urban Kolkata market. A standard crate has 30 eggs and there are 7 such crates in a carton. Thus a standard carton of eggs has 210 eggs.

Once these eggs arrive in Kolkata, they are purchased by commission agents in Kolkata. Commission agents are located at the wholesale market in Sealdah and New Market, Esplanade. When the primary research was conducted (March 2010), the commission agents enjoyed a margin of 2 paisa per egg, which works out to 0.67% of the retail price. There was absolute homogeneity in terms of margins enjoyed amongst the various commission agents.

Carrying and forwarding agents (CFA) and retailers/wholesalers purchased eggs from the commission agents. Smaller trucks (tempos or Matadors) or cycles were used by the CFAs to

Carrying &Forwarding Agents

HatcheryOwners‘Mahajon’

CommissionAgentsKolkata

Retailers / Wholesalers(Local grocery store)End consumer

Player HatcheryOwners

CommissionAgents

Carrying &Forwarding

Agents

Retailers / Wholesalers

Volume Dependent on 150,000 -300,000 5,000 - 10,000 100 - 2000 farm size eggs / day eggs / day eggs / day Margin 9% 0.67% 5.7% 8.13%

Total Margin : 26% (appx.)


Eggs: The Value Chain

Figure 3 : The Value Chain Continued

Figure 2 : The Value Chain

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ferry the eggs to the wholesaler and retailers. It must be noted that some of the wholesalers and retailers purchased eggs directly from the commission agents while others purchased from the CFAs. It is also interesting to note that those wholesalers/ retailers who purchased directly from the commission agents traded in significantly larger volumes than those purchasing from CFAs. The CFAs enjoyed a 5-7% margin. The wholesalers/retailers had a margin of 8-13% while purchasing from the CFAs and a margin of 15-20% while purchasing from the commission agents directly.

The end consumer, both institutional and individual, purchased eggs from the wholesaler or the retailer. At the time the research was conducted the retail price of eggs was Rs. 3.00, with minor variations. Discounts of 20-25 paise were offered for bulk purchases (excess of 200 eggs).

Phase IV: Interviewing of egg consumers was divided into two sub-phases.Sub Phase A: Initially consumers were interviewed to determine the prominent factors likely to influence decision making process for buying eggs.Sample size: 12Findings:The prominent factors that emerged were:a. Priceb. Freshnessc. Appearanced. Sizee. Assurance against ailment resulting from viruses present in eggs like Salmonella, Avian

Flu etc.

Sub Phase B2: Interviewing consumers of eggs in Kolkata using a structured questionnaire.Locations: Intercepts at grocery stores selling eggs, modern retail formats like Spencers, Reliance Fresh and bazaars across Kolkata.Sample Size: 160

Key Buying Factors for an Egg

Traditionally eggs in India have been perceived as commodity products, with little or no differentiation in terms of quality. Eggs have been purchased from the bazaar or the neighborhood grocery store, with no packaging that ensures that the egg reaches the destination of the end consumer undamaged. However with an increase in household incomes and changing lifestyles, branded eggs have arrived in India and by all indications are here to stay. Despite its higher price tag, many firms that produce branded eggs have seen a rise in demand and feel there is still a huge untapped market for the product.

Sample collected for research consisted of egg consumers from socio-economic classes A1, A2, B1 and B2 with an annual household income greater than Rs. 3.00 lacs per annum. Respondents consumed three types of chicken eggs viz. poultry eggs, country eggs (Deshi Murgi) and branded eggs.


2Refer Appendix I for questionnaire.

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VariablesDemographicsa. Age b. Genderc. Occupation d. Educatione. Annual Household Incomef. Household size

Purchase and consumption habitsg. Kind of eggs consumedh. Weekly Consumptioni. Place of purchase

Key buying factorsj. Pricek. Freshnessl. Appearancem. Sizen. Assurance of protection from viruses like Salmonella, Avian Flu etc.

Perception of eggso. Healthy and nutritious foodp. Versatile, suits all occasions- breakfast, major meal or quick snack

Key buying factors and perception of eggs were recorded on five point Likert Scale.Sample SummarySample Size: 160Composition:

Socio Economic Frequency PercentageClass(SEC)3* A1 60 37.50A2 37 23.12B1 34 21.25B2 29 18.13

6029

3437

37.50

18.13

21.25

23.12

A1

B2

B1

A2


Table 3: Socio-economic Class

3Socio Economic Classes were derived from education level and occupation. Socio-economic grid provided in Appendix II

Figure 4: Socio-economic Class

Annual Household Income : Mean: Rs. 5.69 lacs per annum

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Annual Household Income (INR lacs/annum) Frequency

3.0 to 4.4 50

4.5 to 5.9 46

6.0 to 7.4 38

7.5 to 8.9 6

9.0 to 10.4 10

10.4 to 12 10

Kind of Eggs Frequency

Poultry Eggs 99

Country Eggs 34

Branded Eggs 27

Kind of eggs purchased

Poultry Eggs

61.9%

Branded Eggs

16.3%

Country Eggs

21.9%

Figure 5 : Egg Choice

Considering the nature of the variables we conduct:

a. Correspondence Analysis in order to map Kind of eggs consumed and SEC classification

b. Discriminant Analysis with ‘Kind of eggs consumed’ as the dependant variable and size, price, freshness, appearance, assurance against ailments, nutritious, and versatile as the independent variables.

Correspondence Analysis

It is expected that the analysis will provide a spatial map that allows us to study the relative proximities between the socio-economic classes and choice of eggs, thereby enabling us to arrive at a conclusion whether SEC and choice of eggs are related to each other.


Table 4: Annual Household Income

Table 5 : Egg Choice

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Socio-Economic Class

Egg Choice A1 A2 B1 B2 Total Poultry Eggs 31 23 23 22 99Country Eggs 13 6 9 6 34Branded Eggs 16 8 2 1 27Total 0 37 34 29 160

Table 7 : Summary of Correspondence Analysis

Proportion of Inertia Confidence Singular Value

Correlation

Dimension Singular Value Inertia Chi Square Sig. Accounted for Cumulative Standard Deviation 2

1 .186 .035 .885 .885 .069 -.018

2 .067 .004 .115 1.000 .074

Total .039 6.286 .392a 1.000 1.000

a. 6 degrees of freedom

From the spatial map shown in Figure 6 it is evident that:

a. For branded eggs proximity is highest for respondents from A1 socio-economic class, followed by A2, B1 and B2.

b. For poultry eggs proximity is highest for respondents from B1 socio-economic class, same for A2 and B2, and least for A1 socio-economic class.

c. For country eggs proximity is highest for respondents from B1 socio-economic class, followed by A1, B2 and A2.


Figure 6 : Spatial Map

Country Eggs

Branded EggsPoultry Eggs

A1

A2

B2

B1

1.0 -

0.5 -

0.0 -

- 0.5 -

- 1.0 -

- 1.5 -- 1.5 -1.0 -0.5 0.0 -0.5 1.0

Dimension 1

Dim

ensi

on 2

Eggs Choice

Socio- Economic Class

Table 6: Contingency Table

The inertia measure from Table 7 is used to assess the degree of explained variance. The ‘Dimension 1’ explains 88.5% of the variance and the remnant 11.5% of variance is explained by `Dimension 2’.

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Conversely focusing on SEC, we find that:

a. The A1 socio-economic class prefers poultry, country and branded eggs equally.

b. The A2 socio-economic class prefers poultry eggs, followed by country eggs and branded eggs are the last choice.

c. The B1 socio-economic class gives almost equal preference to poultry and country eggs and branded eggs are least preferred.

d. The B2 socio-economic class gives maximum preference to poultry eggs followed by country eggs and branded eggs are a distant third.

The major outcome of the correspondence analysis is that as a person moves up the socio-economic ladder propensity to consume branded eggs increases.

Discriminant Analysis

The discriminant analysis model involves linear combination in the following form:

D = b0 + b1X1 + b2X2 + b3X3 + ……. + bkXk

Where

D = Discriminant Score

bn = Discriminant coefficient or weight

Xn = Independent variable

The kinds of eggs that are purchased have been classified into three categories viz. ‘Poultry Eggs’, ‘Country Eggs’ and ‘Branded Eggs’. The question of interest is whether the eggs choice can be differentiated in terms of, Price, Size, Appearance, Freshness, Healthy and Versatility.

Hypotheses Formulation:

H0: The centroids of all groups are equal.

H1: The centroids of all groups are not equal.

Table 8 : Group Statistics, Means and Standard Deviations

Poultry Eggs Country Eggs Branded EggsEgg Choice Mean Std. Deviation Mean Std. Deviation Mean Std. DeviationPrice 4.0208 .91742 3.0000 1.01504 2.2308 .81524Size 2.5833 1.21106 4.0000 1.10096 4.4231 .64331Appearance 1.9688 .96740 3.7353 .96323 4.2692 .87442Freshness 2.5417 1.07524 2.2353 .85489 3.8846 .95192Ailment 2.4479 1.07478 2.1765 .83378 3.5000 1.02956Healthy 3.3854 1.10853 3.1765 .99911 2.5769 .90213Versatility 3.5625 1.11273 3.5294 1.26096 3.2308 .95111

An examination of the group means from Table 8 indicates that price and appearance appear to separate the groups more widely than any other variable.


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Correlation Price Size Appearance Freshness Ailment Healthy VersatilityPrice 1.000 Size - .055 1.000 Appearance .026 - .131 1.000 Freshness - .024 - .047 .072 1.000 Ailment - .027 .002 .063 - .109 1.000 Healthy .032 - .078 - .028 - .035 - .037 1.000 Versatility - .155 - .037 - .081 - .039 - .036 .285 1.000

Table 9 : Pooled Within-Groups Correlation Matrix

For the discriminant analysis we have used the step-wise method, in which the independent variables are introduced one by one.

Test of Wilks' Lambda Chi-square df Sig. Eigenvalue % of Cumulative Canonical Function(s) Variance % Correlation1 through 2 .208 236.917 10 .000 2.474a 86.6 86.6 .8442 .724 48.865 4 .000 .382a 13.4 100.0 .526

a. First 2 canonical discriminant functions were used in the analysis.

Table 10 : Wilks’ Lambda and Eigenvalues

Determination of significance of the discriminant function: In order to test the null hypothesis of equal centroids, both the functions must be considered simultaneously. In Table 10 the value of Wilks’ λ is 0.208 which transforms to a Chi-square of 236.917, with 10 degrees which is significant beyond the 0.05 level. Also, when the first function is removed, the Wilks’ λ associated with the second function is 48.865, which is again significant at the 0.05 level. Therefore both the functions contribute significantly to group differences.

Interpretation of results: From Table 11, the standardized coefficients indicate relatively large coefficients for appearance and size on function 1, whereas function 2 has relatively larger coefficients for freshness and ailment.

An examination of the structure matrix also corroborates the same. Variables with large coefficients for a particular function are grouped together and are marked with asterisks. The variables healthy and versatility have low coefficients and therefore have not been used in the analysis. Thus, amongst the variables considered for the analysis, appearance, price and size have asterisks for function 1 and are primarily associated with function 1. On the other hand, freshness and ailment are predominantly associated with function 2 as indicated by the asterisks.

Function 1 2Price -.467 -.028Size .528 -.156Appearance .719 -.329Freshness .189 .779Ailment .123 .661


Table 11 : Standardized Canonical Discriminant Function Coefficients

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Function 1 2Appearance .660* -.211Price -.486* -.064Size .451* -.147Healthya -.087* -.032Freshness .213 .691*Ailment .162 .556*Versatilitya -.017 -.018*

Pooled within-groups correlations between discriminating variables and standardized canonical discriminant functions. Variables ordered by absolute size of correlation within function. * Largest absolute correlation between each variable and any discriminant function. a. This variable not used in the analysis.

Table 12 : Structure Matrix

Table 13 : Functions at Group Centroids

Unstandardized canonical discriminant functions evaluated at group means

Function Egg Choice 1 2Poultry Eggs -1.179 .140Country Eggs 1.254 -1.050Branded Eggs 2.715 .858

Figure 7 is a scatter plot of all groups on function 1 and function 2. It can be seen that the group ‘Poultry Eggs’ has the lowest value on poultry eggs while ‘Branded Eggs’ have the highest value. Because function 1 is primarily associated with size, appearance and price, one would expect three groups to be ordered on these three variables. ‘Branded Eggs’ appear


Figure 7 : All-Groups Scattergram Plot

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much cleaner than ‘Poultry Eggs’ and are usually larger than them. However branded eggs available in the market have higher prices than poultry eggs, which explains the negative coefficient as observed in the structure matrix (Table 12).

Illustration 5.4 further indicates that function 2 tends to separate ‘Branded Eggs’, highest value and ‘Country Eggs’, lowest value. ‘Country Eggs’ are produced in an unorganized set-up with inadequate monitoring of the birds and their feed. Standardized scientific processes for sterilization of eggs are absent. Hence ‘Country Eggs’ score low on function 2, which is primarily associated with the variables ailment and freshness. On the contrary, ‘Branded Eggs’ are considered to be a healthy proposition.

Function 1 that is primarily determined by the variables appearance and size may be named as ‘External Quality’

Function 2 that is primarily determined by the variables freshness and ailments may be renamed as ‘Health Appeal’

Predicted Group Membership

Egg Choice Poultry Eggs Country Eggs Branded Eggs TotalOriginal Count Poultry Eggs 88 7 1 96 Country Eggs 4 25 5 34 Branded Eggs 0 1 25 26 % Poultry Eggs 91.7 7.3 1.0 100.0 Country Eggs 11.8 73.5 14.7 100.0 Branded Eggs .0 3.8 96.2 100.0Cross-validateda Count Poultry Eggs 86 8 2 96 Country Eggs 4 24 6 34 Branded Eggs 0 2 24 26 % Poultry Eggs 89.6 8.3 2.1 100.0 Country Eggs 11.8 70.6 17.6 100.0 Branded Eggs .0 7.7 92.3 100.0

Classification Resultsb,c

a. Cross validation is done only for those cases in the analysis. In cross validation, each case is classified by the functions derived from all cases other than that case.

b. 88.5% of original grouped cases correctly classified.c. 85.9% of cross-validated grouped cases correctly classified.

Assessing validity: The classification results based on the analysis sample indicate that the hit ratio or the percentage of cases correctly classified is (88 + 25 + 25) / 156 = 88.5%. Leave-one-out cross-validation correctly classifies (86 + 24 + 24) / 156 = 85.9 % of cases correctly.

Evaluation on maximum chance criterion: The maximum chance criterion is the percentage correctly classified if all observations were place in the group with the maximum probability of occurrence, which in our case is ‘Poultry Eggs’. Therefore the maximum chance criterion is 96 / 158 = 60.76%. The suggested threshold value is 25% above the maximum chance criterion


Table 14 : Classification Results

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i.e. 60.76 × 1.25 = 75.9%

The levels of classification accuracy in both instances are significantly above the threshold value indicating an acceptable level of classification accuracy.

Evaluation on Press’s Q: Press’s Q is a statistically based measure comparing the classification accuracy to a random process.

Press’s Q = [ N – ( n × k) ]2 / N ( k – 1)

Where, N = Total sample size

n = Number of cases correctly classified

k = Number of groups

Therefore,

Press’s Q for original cases = (156 – 138 × 3)2 / 156 (3-1) = 213.34

Press’s Q for cross-validated cases = (156 – 134 × 3)2 / 156 (3-1) = 193.96

The critical value of the Press’s Q statistic for degrees of freedom = 2 is, 9.210.

In both cases the calculated values exceed the critical value, and hence it can be safely concluded that the classification accuracy for the analysis exceeds at a statistically significant level, the classification accuracy expected by chance.

Managerial Implications and Recommendations

By performing correspondence analysis it was found that branded eggs were preferred most by A1 socio-economic class, followed by A2, B1 and B2 in that order. Hence it becomes imperative that companies selling branded eggs focuses on the A1 and A2 SECs initially and formulate a segment-by-segment invasion plan to target B1, B2 and C SECs gradually.

It may be noted that the average market price of branded eggs available in Kolkata at the time of performing this research, was Rs. 7.00, which is substantially higher than ordinary poultry eggs that sell at Rs. 3.00. However if any company enters the market at the price points Rs. 3.50 and Rs. 5.50, consumers from B1, B2 and C classes may react favorably and the product may gain greater acceptance. Information on pricing need to be communicated to the aforesaid SECs (B1,B2 and C) in order to alter popular perceptions

The two dimensions that emerged from discriminant analysis were:’

a. External Quality

b. Heath AppealHence such communication should be sent out to the target audience. Nutritional benefits, certification from food control agencies need to be displayed on packaging as well as actively advertized.

Companies may adopt the following Marketing Communications Initiatives:


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The Health Platform

• Highlight the health benefits on packaging & advertising

• Product endorsement by leading health specialists

• Break the myth that eggs contribute to cholesterol which is the popular perception

• Certification of Omega 3 enrichment, production processes from food quality control organizations

• Same should be displayed on packaging and product information collaterals

• Displays at clinics highlighting the product benefits

• Product info fliers and other merchandise like egg shaped paper weights, pen stand or other suitable merchandise at clinics, hospitals

• Recommendation from doctors

For Homemakers/ Mothers

• Decision-makers for purchase of eggs

• Sponsored cooking shows on television with eggs, being the key ingredient for recipes

• Product benefits highlighted during cook shows in a subtle manner

For the Kids

Kids are important, they influence their parents’ buying decisions and they are the adult consumers of the future.

Parents today are willing to buy more for their kids because trends such as smaller family size, dual incomes and postponing children until later in life mean that families have more disposable income. As well, guilt can play a role in spending decisions as time-stressed parents substitute material goods for time spent with their kids.

Today’s kids have more autonomy and decision-making power within the family than in previous generations, so it follows that kids are vocal about what they want their parents to buy. ‘Pester power’, ‘Kid-fluence’ or ‘Nag-Factor’ refers to children’s ability to nag their parents into purchasing items they may not otherwise buy. Objection of parents towards buying eggs at the child’s behest is likely to be less compared to say a chocolate or a cartoon DVD if the parent is convinced that the egg presents a healthy proposition.

• Utilize Kid-fluence, the ‘Nag Factor’ or the ‘Pester Power’

• Merchandise like egg-shaped balloons distributed at school, crèches etc for junior school children

• Product info fliers given to mothers/guardians accompanying kids


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• Develop brand mascots that have an emotional connect with kids

• Characters, may be an embodiment of the brand attributes that serve to reinforce the brand personality, as well as, act as eye catchers for kids

• Free stickers of characters along with egg packs

• Redeem 10/20 ‘Dozen packs’ for attractive merchandise like soft toys, masks etc.

• Sponsor school events

• Tunes or jingles as ringtones

Others

• Communication collaterals located at gymnasiums, swimming clubs, sports clubs

• Social media marketing: Use of social networking websites like Facebook, Youtube, Orkut, Twitter, MySpace

• Marketing through blogs on health

• Advertising on heath related websites

• Promotions at the ‘Alpha Family Health Mall’ a speciality mall dedicated to healthcare

• Setting up canopies at malls on weekends for promotion and distribution of promotional packs of eggs

Apart from the existing distribution channel the following options may be considered:a. Institutional Sales: For daily orders companies may consider supplying eggs to institutions. Revised discounted rates need to be offered for such bulk orders. Due to larger buyers, a steady and substantial demand for eggs can be ensured. In addition to the basic purpose that is to sell, these institutions can act as effective communication platforms, where a large size of relevant target audience may be accessed while the cost associated with such communication is low or negligible. Other costs such as transportation, inventory, servicing can be significantly reduced.

Institutional sales can be explored at:

i. Premium Hotels and Restaurants

ii. Football Clubs

iii. Premium Hospitals and Nursing Homes

iv. Residential Schools

b. Exclusive Retail outlets or Franchisee Establishments: In order to effectively cover the Kolkata urban metropolis and to bring the product and the brand closer to the target audience.


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Conclusion

An egg is a quintessential food product that is available at an affordable price, and has myriad health benefits. There is a popular perception that eggs contribute heavily towards cholesterol. Hence it becomes imperative for marketers to bust the myth that eggs contribute to cholesterol and highlight the health benefits. Branded eggs are a novel concept for the Indian populace, and with changing consumer outlook branded eggs are gaining greater acceptance amongst the affluent sections of the society. However the branded eggs industry has been plagued by supply shortages, and the average price of a branded egg is nearly double than that of an ordinary egg which inhibits purchase by the common man. Any company selling branded eggs, with its price points Rs. 3.50 and Rs. 5.50, might be able to grab an appreciable market share in the branded eggs segment provided that benefits and costs associated are effectively communicated to relevant target groups. This study will help marketers to determine bases for positioning their product (branded eggs) and tailor communication, to carve niches for themselves and gradually expand their market share to become prominent players in the egg market.

References

• Kotler P. et al, 2009. Marketing Management, A South Asian Perspective , 13th Edition, Pearson Education

• Malhotra N. K, 2008. Marketing Research, An Applied Orientation, 6th Edition, Prentice Hall India.

• Sengupta S., 2005. Brand Positioning, Strategies for Competitive Advantage, 2nd Edition, Tata McGraw Hill.

• Hair J. F. et al, 2008, Multivariate Data Analysis, 7th Edition, Prentice Hall India.

• Rencher A. C. Methods of Multivariate Analysis, 2nd Edition, Wiley-Interscience,A John Wiley & Sons , INC. Publication

• www.e2necc.com/necc-agrocorpex.html


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Appendix IQuestionnaire for Key Buying Factors

Are eggs consumed in your household? (Y/N) : ___

Age: ______yrs. Gender: □ Male □ Female

Occupation:□ Entrepreneur (No Employees) □ Entrepreneur (Employees less than 10)□ Entrepreneur (Employees greater than 10) □ Self employed Professional□ Salaried: Clerical □ Salaried: Office Executive – Junior □ Salaried: Office Executive – Middle/Senior

Education (Tick appropriate box):□ SSC/HSC □ Diploma/ Institute but not graduate□ Graduate/ Post Graduate General □ Graduate/ Post Graduate Professional

Annual Household income : Rs. ___________________ lacs per annum

How many members are there in your household? _____________________________

What kind of eggs do you mostly consume? □ Poultry Eggs □ Country Eggs (Deshi Murgi) □ Branded/ Packaged Eggs

While purchasing eggs I am concerned about the price. □ Strongly Disagree □ Disagree □ Neither Agree nor Disagree □ Agree □ Strongly Agree

While purchasing eggs I am concerned about the freshness. □ Strongly Disagree □ Disagree □ Neither Agree nor Disagree □ Agree □ Strongly Agree

While purchasing eggs I am concerned about the appearance (color / presence of bird droppings). □ Strongly Disagree □ Disagree □ Neither Agree nor Disagree □ Agree □ Strongly Agree

While purchasing eggs I am concerned about the size.□ Strongly Disagree □ Disagree □ Neither Agree nor Disagree □ Agree □ Strongly Agree


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While purchasing eggs I am concerned about salmonella, Avian flu and other viruses that may cause serious ailments□ Strongly Disagree □ Disagree □ Neither Agree nor Disagree □ Agree □ Strongly Agree

Eggs are good for health and nutritious.□ Strongly Disagree □ Disagree □ Neither Agree nor Disagree □ Agree □ Strongly Agree

Eggs are the ideal food for any occasion (major meal/ snack/ breakfast/quick meal)□ Strongly Disagree □ Disagree □ Neither Agree nor Disagree □ Agree □ Strongly Agree

My weekly household consumption of eggs is I usually purchase eggs from:□ Neighborhood grocery shop (Kirana Store/ Mudir Dokan)□ Bazaar □ Modern Retail Format/ Departmetal Store

Please complete the following sentence in less than 35 words.An ‘Ideal Egg’ is

Appendix IIData for Key Buying Factors

Variables list Age: Age of respondent Sex: Gender of Respondent

Occ: Occupation□ Entrepreneurs: Employees None □ Entrepreneurs: Employees < 10□ Entrepreneurs: Employees >10 □ Self Employed Professionals□ Clerical/Salesmen □ Office/ Executives: Junior Level□ Office/ Executives: Middle/ Senior Level

Edu: Education Levels□ SSC/HSC □ Some College but not Graduate□ Graduate/ Post Graduate: General □ Graduate/ Post Graduate: ProfessionalSEC: Socio Economic Class derived from Education levels and Occupation based on SEC Grid given below.


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AHI: Annual Household Income in Rs. Lacs / annum

Hsz: Household size

Egch: Choice of Eggs□ Poultry Eggs □ Country Eggs □ Branded Eggs

Price: Perception of price of eggs□ Fresh: Perception of freshness of eggs□ Aprnc: Perception of appearance of eggs□ Size: Perception of size of eggs

Dis: Perception of assurance against disease causing viruses like Salmonella, Avian Flu etc.Hlth: Perception of eggs as a healthy nutritious food option

Vrstl : Perception of eggs as a versatile food, suitable for all occasions like breakfast, major meal or a quick snack

Purloc : Place of purchase of eggs

Wcons : Average weekly household consumption of eggs

Footnotes

1. Source: Compound Feed Manufacturers Association

2. Refer Appendix I for questionnaire.

3. Socio Economic Classes were derived from education level and occupation. Socio-economic grid provided in Appendix II


Edueation / Occupation SSC/HSC Some college Graduate / post Graduate/Post but not graduate Graduate general Graduate Profassional

Entrepreneurs: Employees None B1 A2 A2 A1Entrepreneurs: Employees < 10 B1 A2 A1 A1Entrepreneurs: Employees >10 A2 A1 A1 A1Self Employed Professionals B2 B1 A2 A1Clerical/Salesmen C B2 B1 B1Office/ Executives: Junior Level B2 B1 A2 A2Office/ Executives: Middle/ Senior Level B1 A2 A1 A1

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Sustainable Business : A Tangible Reality

Dr. Anupam GhoshAssistant Professor, SIBM, PuneEmail: [email protected]

Defining Sustainable business The word `sustainability‘ comes from the word `sustain‘ which means to support1 or to maintain something necessarily for the long term. This means to maintain something and take care of its attributes so that the benefits could be carried forward with no loss with profit on an average. This concept is more about harnessing the qualities of guardianship rather than mere caring in the long run. However, to `sustain‘ something means constant enhancement, so that the organization or process or product synchronize its properties in the changing environment.

The term `sustainability‘ when connected with human development is called `sustainable development‘. Sustainable development regards human progress as a process which incorporates interests of the future generations too with preservation and conservation of natural environmental as a vital element. The term ‘sustainability’ has been understood in many literatures such as:

(1) From Developmental side: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs2.

(2) From Socio-Economic side : as a concept of three pillars3 (economic, social & environment).

(3) From Socio-Environmental side : as concentric circles with environmental sustainability enveloping both social and economic elements4 and

(4) From Environmental side : as improvement of living standard within the carrying capacity of the ecosystem5.

In the light of the above varied dimensions of sustainability, let us visualize how business operations amalgamate with this concept. It is quite noticeable that business has many sides (economic, social developmental & environmental), so business sustainability could no longer be hypothetical.

In the first definition the future generations had been considered to be a potential stakeholder of business. Here, business operations are suggested to be driven in such a way that also

Dr. Anupam Ghosh

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envelops the aspirations of future generations. According to the `Brundtland‘ definition, a sustainable business should be aware of the resource usage in such a way that neither the present nor the future generations face scarcity. Hence, it could be said that somewhere sustainability of business (according to the Brundtland definition) is dependent on the needs of the present and future stakeholders. Following this definition businesses initiative for development involving business would be merely voluntary and only need based.

The second aspect (social, economic and environmental business dimensions) of pillars calls for bringing equilibrium among three basic premise of sustainable business (profitability, society & environment). This definition seems to have given same weightage to all stakeholders of business (making environment as a vital stakeholder). Nowadays, this concept has been incorporated as a Triple bottom line6 reporting initiative in many sustainability reports. This definition is more of an explicit admission (from the previous one) that natural environment concerns forms an important backbone of any business which even thinks of being sustainable. The third definition (of concentric circles) shows that natural environment forms the bedrock of sustainable development. The definition also expresses that natural environment is an inclusive concept which in the process incorporates many parties towards developmental work. These definitions show that there cannot be a trade-off between pure anthropocentrism and hardcore bio-centrism when question of sustainability arises. Quite obviously a best-fit model is required to judiciously choose among human-centric and bio-centric ingredients to make a business sustainable. So, from the definitions we may derive that sustainability of business would never be possible if companies behave irresponsibly and indifferent towards natural environmental concerns.

In the same vein the concept of Sustainability in business has been understood in many ways depending on the corporate objectives of companies. A sustainable business is one which balances profitability and social equity with environmental pro-activeness. Recent survey7 has shown that there are many drivers which help sustainable business, such as government legislation, consumer concerns and employee interest. Also other studies8 have shown that governance, social and environmental issues have a deep influence among all stakeholders for all durations of business. So sustainability in business in a holistic sense would mean putting business as one of the guardians of human wellbeing as well as the natural environment. From the point of procurement of raw materials, to processing and finally to output of product or service; if a company tries to balance and prioritize the governance, social and environmental issues; then it may attain sustainability and called as sustainable. However, the meaning of sustainability has various connotations depending on the societal structure, the profitability motives and also the natural environmental setups of business. Environmental concerns are the only (according to the previous definitional discussion) research finding in all studies which holds the key for businesses to become sustainable in the long run. However, when the question of natural environment arises, it is the responsibility of a company (for its own existence) to optimally use the natural resources and not pollute it. If business is not particular about natural environment then people and planet co-ordination would worsen. Hardcore profitability initiative would pollute the eco-system and eventually make the life of human stakeholders at a stake.

International Pressures towards sustainability

In such a pursuit the international community (especially the UN) many a times organized summits such as the Montreal protocol9, 1987 (for awareness of the ozone layer depletion

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and reduction of the CFCs). The Kyoto protocol10 (2007) tries to minimize the man-made interference towards natural environment. The plan was to reduce and arrest the growing trend of greenhouse gas emissions which has been a problem since 150 years of industrialization. As a continuance of the UNFCC convention the Protocol was framed in 1997 in the COP 3 in Kyoto, Japan. The impetus of the protocol was to limit the CO2 emissions of developed countries by at least 5%. The countries emission reduction target was set with 2008 to 2012 with 1990 taken as the base emission year. The Protocol created an “emissions trading” regime allowing industrialized countries to buy and sell emissions credits within themselves. The developed nations would be able to get “emission reduction units” by financing projects in other developed countries through a mechanism called ―Joint Implementation”. The Protocol also has a provision for “Clean Development Mechanism” for promoting sustainable development, this enables industrialized countries to finance emissions-reduction projects in developing countries and also receive credit. However, within all the fanfare of the protocol the Bush administration refused to ratify it in 2001 because according to them the question of emission cuts would hurt the economy as clean technology transfers need huge investments.

However those who study climate change express almost universal criticism of the protocol, which they fault as economically inefficient, inequitable and ineffective. And they point out that the protocol fails to include the largest future sources of carbon dioxide emissions. A very significant reduction in the standard of living is required by the developed nations and that our planet cannot support a human population where every person enjoys a standard of living equal to that of developed nations. The agreement outlined in Kyoto committed individual countries to reduce their carbon dioxide emissions to below 1990 levels. However, the choice of 1990 immediately introduced inequities into the ensuing political process to determine who should cut how much. With a completion date of 2008—the Kyoto Protocol mandated economically inefficient measures to achieve its goals. There are other problems with the agreement that it gives credit for planting forests to sequester carbon, however, that provides economic incentives to destroy wetlands. The Protocol does not set a long-term goal for atmospheric concentrations of carbon dioxide. Hence, no objective reason for the overall reductions by individual nations that it proposes. The COP1511 in December 2009 will give way to a new international treaty as Kyoto protocol would expire in 2012. The conference is being organized from 7-18th of December 2009 in Copenhagen and hosted by the Danish government. Officials from 192 countries are attending with a sizable number of non-governmental organizations and a large media presence. All the controversies and uneasiness reflected on the part of developed and developing countries regarding the protocol are supposed to be resolved there. The key issues somewhat to be resolved in COP15 are the extent of reduction of emissions by the industrialized countries, the amount by which developing countries such India, China going to limit emissions, the question of financing of clean-technology to developing nations and the way that money would be managed.

Indian initiatives towards sustainable business

After a long phase of denial, there are some signs that national policy is beginning to acknowledge global concerns on this all-important issue. Climate change is now widely regarded as the most serious challenges the world faces, with dire consequences. It is a key economic issue and needs to be dealt with accordingly. It is in this context, the Prime Minister of India on 30/06/2008 released the National Action Plan on Climate Change. This plan seeks

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to promote and encourage sustainable development through use of clean technologies. The action plan, while it does not commit to GHG emissions reduction targets it does pledge that India’s per capita greenhouse gas emissions will “at no point exceed that of developed countries in spite of it development imperatives.

India‘s response to the challenge of climate change can perhaps best be described by referring to the National Action Plan on Climate Change12 (NAPCC), which actually consists of eight separate missions involving both mitigation and adaptation measures.

In terms of cooperative relationships that India is trying to establish, the most promising would be in the field of joint technology development. It is envisaged that with the substantially lower cost of scientific and technical manpower in India, even American business will find such an approach beneficial.

Aggressive measures are necessary to reduce emissions and raise efficiency in areas such as power generation, transmission, and lighting, building practices, transport, forestry, water and waste management.

The Copenhagen conference may end with only a ̀ political‘ agreement on reduction of carbon emissions beyond the Kyoto Protocol period. Yet it offers India an opportunity to formulate a green development policy that takes care of the carbon regime of the industrial revolution. Wind, water and solar energy (derived using available technologies) have the least impact on global warming. They can help taper off fossil fuel use and meet the bulk of energy demand in the future. This is the green growth that India should aspire for. With political commitment, it is possible to develop a research and production base for cutting-edge technologies and fast-paced innovation. It will also lay the foundation for a new wave of green jobs.

Apart from the isomorphic pressures for Indian business, the country where developmental problems of population, scarce resources and pollution are ever increasing, business‘s role should be considerably widened as one of the stakeholders (apart from Government, NGOs or social pressure groups) for development. Indian business houses such as Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI) have played the role of facilitator in formulizing practicable sustainability roadmap for companies. CII, for instance, has developed collaboration with local Government and companies to develop CII-Sohrabji Godrej Green Business Centre13 and the CII-ITC Centre of Excellence for Sustainable Development14. The CII-Sohrabji Godrej Green Business Centre initiates activities such as climate change awareness, use of recycled products, more use of renewable energy. This -Centre of Excellence has the vision of-make India a leader in green businesses by 2015. In pursuit of the vision, appropriate stakeholders for green business are identified and accordingly skills are developed. On the other hand the CII-ITC Centre of Excellence for Sustainable Development strives to make a secure environment for businesses to pursue sustainability activities and also to integrate all such activities into business processes, strategies and policies.

On studying the environmental, sustainability reports, strategies and policies of companies from diverse sectors many things could be comprehended (such as the ways to attain total sustainability of business). Companies such as ABT Bioproducts15 specialize in Organic farming, bio-fertilizer, plant growth promoters and soil fertility enhancers. Aditya

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Birla Group16 pursues sustainability based “sustainable Livelihood. After a participatory assessment of the communities around the plant social projects are launched. These are phased out as soon as the people take over the reign of development. The company‘s partnership is with administrative bodies, like-minded organizations and Govt. 5 year plans. In the same vein FAB India17 (which is an urban handicraft retail chain) is maintained by local craftsmen & artisans. Cleanstar energy18 is involved into cultivation of non-edible plants and trees to produce alternative fuels. DABUR INDIA19 Ltd initiated some significant programs for ecological regeneration and protection of endangered plant species. The company is committed to ecological conservation and regeneration. Uses state-of–the-art technology to preserve, produce and also encourage the local people to cultivate rare herbs. Hindustan Unilever20 Ltd. attempts to operationalise environment policy at the plant level (in products, design and production). Strive to increase the understanding of environmental issues and disseminate good practice, also, providing women empowerment, relief for poor and other benefits. Infosys21 provides solutions for social and environmental concerns also tries to eliminate accidents, occupational illnesses and injuries at work.

Takes the following initiatives:

• Strives for conservation of resources.

• Prevention of pollution is stressed.

• Confirms to all legislations.

ITC22 Ltd. Promotes `e-choupal‘: (one of the biggest social convergence initiatives) which connecting farmers directly to markets through internet (giving the best technological knowledge and skills, and good prices), thereby avoiding middlemen who cheat farmers. Jindal Steel23 helps in providing areas of education, health and infrastructural facilities, free housing, subsidized meals, free transport, medical benefits. From the operations view point the company is vigilant in cost reduction, resource efficiency in steel production. Larsen & Toubro24 has taken sustainable initiatives in the following: heath, education, environment conservation, and infrastructure and community development. The company has gained expertise in construction technology, electrical products which are resource effective. Maruti India25 has shown much sustainable improvements at the process (or plant level), such as, improved component designs with an objective to reduce raw material usage, fuel-efficiency, environmental innovations at product level & at production area. Oil companies such as ONGC26 India is involved more of technical integration of natural environment into business. Stresses on use of cleaner technologies and follows the Kyoto Protocol. Reliance Industries27 Ltd. helps in promoting training for employees and enhancing their responsibilities towards environment. They follow relevant laws, reduce emissions and encourage recycled products. Another initiative is that they promote awareness among their supply chain and employees and customers about nature.

Conclusion

The above discussion show that Indian companies from various sectors have tried to be environmentally safe, socially committed and striving for new `greener‘ profitability. However, as Corporate Social Responsibility (CSR) the `business sustainability‘ concept is subject to many interpretations. The joint goal of these two concepts is doing well to all

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present and future stakeholders within the constraints of business operations. The CSR concept is more of static in nature. It talks more of social improvement and developmental capabilities of a company. CSR is more of an anthropocentric concept. Whereas, Business sustainability or sustainable business makes CSR a dynamic entity, just merely by respecting the natural environment and showing concerns to present and future generations. So, need of the hour is to develop such an understanding which makes both the concepts converge into something fundamental.

There should be something unique (an activity, a strategy or a business operation) to benchmark and differentiate a CSR doing business with a sustainable business. From the different definitions of sustainable development (as discussed in the beginning) we get two traits; one: need based anthropocentric approach and second: pure biocentrism. In the first strand of traits we come across the need for resource mobilization and this allocation would be obviously human driven. Thus, satisfying the needs of the future generations require judicious use of limited resources at the present time. This demands the use of such resources which are recyclable, economically viable and renewable, and supplements the conventional ones. So, sustainable business should have such uniqueness that the company must be judicious in the use and conservation of material resources. The second strand of traits is on the policy and strategy level which would drive the first trait (i.e. need based anthropocentric approach). According to the second trait, a sustainable business should frame or must be following `green‘ policies or strategies for the best resource allocation and optimal use of scarce ones. These policies should not only focus on preservation and conservation but extend to green innovations. So, biocentrism in the policy level and anthropocentrism at a particular process level (procurement stage) could show the seed of sustainability in business.

End Notes

1. Charles Onions, ed., The Shorter Oxford English Dictionary (Oxford: Clarendon Press, 1964), 2095.

2. United Nations General Assembly (1987) Report of the World Commission on Environment and Development: Our Common Future. Transmitted to the General Assembly as an Annex to document A/42/427 - Development and International Co-operation: Environment. .

3. Adams, W.M. (2006). “The Future of Sustainability: Re-thinking Environment and Development in the Twenty-first Century.” (Report of the IUCN Renowned Thinkers Meeting, 29–31 January, 2006).

4. Ott, K. (2003). “The Case for Strong Sustainability.” In: Ott, K. & P. Thapa (eds.) (2003).Greifswald‘s Environmental Ethics. Greifswald: Steinbecker Verlag Ulrich Rose. ISBN 3931483320.

5. “Caring for the Earth: A Strategy for Sustainable Living.” Gland, Switzerland, December 20,2009, IUCN/UNEP/WWF (1991).

6 J. Elkington “Towards the sustainable corporation: Win-win-win business strategies for sustainable development.” California Management Review 36, no. 2, (1994): 90-100.

7. The Business of Sustainability. December 20, 2009, http://www.bcg.com/documents/file29480.pdf

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8. Show me the money: Linking environmental, social and governance issues to company value. December 20, 2009, http://www.unepfi.org/fileadmin/documents/show_me_the_money.pdf

9. Montreal Protocol, December 20, 2009, http://ozone.unep.org/Ratification_status/montreal_protocol.shtml

10. Kyoto Protocol, December 20, 2009, http://unfccc.int/kyoto_protocol/items/2830.php

11. COP 15. December 20, 2009, http://webcast.cop15.dk/kongresse/cop15/templ/ovw.php?id_kongressmain=1&theme=cop15

12. National Action Plan on Climate Change (NAPCC), December 20, 2009, http://www.energymanagertraining.com/NAPCC/main.htm

13. CII-Sohrabji Godrej Green Business Centre, December 20, 2009, http://www.greenbusinesscentre.com/site/ciigbc/aboutus.jsp

14. CII-ITC Centre of Excellence for Sustainable Development, December 20, 2009, http://www.sustainabledevelopment.in

15. ABT Bioproducts, December 20, 2009, http://www.new-ventures.org/index.cfm?IDenterprise=131&fuseaction=enterpriseDetails

16. Adityabirla, December 20, 2009, http://www.adityabirla.com

17. FAB India, December 20, 2009, http://www.fabindia.com

18. Cleanstar energy, December 20, 2009, www.cleanstar.in

19. Dabur India Ltd., December 20, 2009, http://www.dabur.com/default.aspx

20. Hindustan Unilever Ltd., Sustainability, December 26, 2009, http://www.hul.co.in/sustainability

21. Infosys, December 26, 2009, http://www.infosys.com/sustainability/pages/index.aspx

22. ITC Ltd., Sustainability Report, December 26, 2009, http://www.itcportal.com/sustainability-report-2009/index.htm

23. Jindal Steel, Social Commitment, December 26, 2009, http://www.jindalsteel.com/social-commitment.html

24. L&T Ltd., December 26, 2009, http://www.larsentoubro.com/lntcorporate/common/ui_templates/HtmlContainer.aspx?res=P_CORP_AABT_DCOR

25. Maruti India, Sustainability, December 26, 2009, http://www.marutisuzuki.com/sustainability.aspx

26. ONGC India, December 26, 2009, http://www.ongcindia.com

27. Reliance Industries Ltd. , December 26, 2009, http://www.ril.com/html/aboutus/social_resp_comm_dev.html

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Building Strategies in Turbulent Times

Prof. Vijay Kumar DharmadhikariAssistant Professor, SIBM, PuneE-mail : [email protected]

Introduction

Aligning technology, operations and business strategies is a challenging task and has prime importance in a firm’s business strategy formulation. Today technology and disruptive manufacturing methodologies can make the difference between a winning or losing competitive strategic alternative. This article aims at formulation of winning business strategies with focus of analysis on technology and operations strategies.

Today there is hardly any industry that can be classified as low tech. Technology is advancing by the minute and in order for industries to remain competitive they need to be with the bandwagon, quick, agile and flexible in adapting to the trends. Technology today plays a key role in restructuring a firm’s strategy. At the same time, operations also play a significant role in a company’s strategy formulation. Ever since Wickham Skinner1 wrote his classic paper on the focused factory, manufacturing managers have paid attention to this important and simple concept: A plant cannot do a large variety of very different tasks exceptionally well, a factory with a clear competitive objective that focuses on narrow product mix for a well defined market will outperform a conventional plant with an inconsistent set of manufacturing objectives.

Literature Survey

For Technology Strategy the focus of analysis is the Strategic Technology Unit (STU) which includes the skills or disciplines that are applied to a particular product, service, or process addressing a specific marketing need. Identifying all the relevant STUs of the firm is the critical task in the development of technology strategies. It produces the full portfolio of key technologies the firm needs to embody to achieve key competitive advantage. For this we first identify which key technologies we possess, and which ones we should acquire in order to protect and enhance our competitive capabilities. Defining the core technologies is the core to STU segmentation. Next we analyze the strengths of resulting technology portfolio.

For Operations/Manufacturing strategy the focus of analysis is the Strategic Manufacturing Unit (SMU) which is a group of products sharing the same manufacturing strategic objectives expressed in terms of cost, quality, dependability, flexibility and innovativeness. The key to understanding the degree of focus of a plant is the SMU.2

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Viewpoint

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For business strategy the focus is primarily, a set of well co-ordinated multifunctional programs aimed at creating or reinforcing the competitive standing of the business. Therefore during the process of business strategy formulation, we need to identify all necessary functional support, thus producing most critical set of functional requirements.

Present Business Scenario

Today most companies are reassessing their business plans and reworking on strategies as they struggle to understand the demand picture in the unpredictable months ahead, a few are looking for new opportunities to optimize efficiency and profit from innovative thinking and changes. We can see fear, uncertainty, and cautious approach everywhere. But it is important for industries to renew their commitment to achieve the status of global economic power as we might see a shift in the epicenter of the global economy from the western world to India and China.

The future profitability of all the businesses today depends very much on how well the challenges of the current market situation will be addressed. One has to think beyond cutting costs and execute a real change appropriate to his business model. Managing key clients with appropriate technology solutions and right manufacturing plans is also an important challenge today. The crux of building the apt winning strategy in the current era of turbulence not only encompasses understanding market conditions and technology but also new ways to manage through the slowdown and networking opportunities that can serve as the foundation for developing your business strategies.

The fact that, inspite of so much of turgid theory being available on strategy formulation since over 100 years covering almost all known aspects of strategy formulation3, we still have companies facing failures in strategy formation. This is due to more and more uncertainties involved in the considerations of situation and more so in these turmoil times. While setting up their firm’s strategy many visionaries earlier did so on gut feel rather than on hard facts and the result is seen in the shaky fundamentals of many of the firms thus indicating that lot more research needs to be done in this area of Strategy formulation. Moreso with the linking of technology and operations strategies with the business strategy of a firm.

Globally, companies are facing many competitive problems. Technology roadmapping, a form of technology planning, can help deal with this increasingly competitive environment. While it has been used by some companies and industries, the focus has always been on the technology roadmap as a product, not on the process.

Products are becoming more complicated and customized. Product time to market is shrinking. Product life is shortening. A short-term focus is reducing investment funding. There is increased competition. Cut-backs are occurring because of increased competition. These problems require companies to be more focused and better understand both their industry and markets. Better technology planning can help deal with this increasingly competitive environment.

Real time Application

We take a specific automation company under consideration for a real time scenario, where the current business strategy gave no due consideration to technology strengths


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of the company and also there had been no specific effort in formulating the basics of manufacturing strengths. The growth of this automation company was stagnated due to low technology focus and also due to general manufacturing strategies with low concentration on total solutions.

To address the problems this company faced, first of all we identified the strengths in-house and focused our business growth areas to the domain expertise we had acquired over the past years. We also identified global and local partners with those domain expertise with whom we could tie up in order to bring in those expertise required to put this company on a high growth path. These tie ups were achieved over a period of six months.

Today’s emerging technologies4 which are in their infancy or adolescence are highly likely to replace legacy technologies partially or completely in the near future were identified. These emerging technologies have been broadly classified to belong to one of the 6 categories listed below

1. Energy Technologies

2. Transportation

3. Information Technologies

4. Bio Technologies

5. Robotics

6. Materials Science

We ensured that the technology roadmap focused on those industrial sectors where the company’s domain expertise was already present or acquired by virtue of strategic business tie-ups. Hence we chose to focus our efforts on the following Business Growth Areas

a) Robotics

b) Machine Tools

c) Advanced Control Systems

d) Flow forming

e) Manufacturing Execution Systems

Technology Roadmapping5 methodologies used were successfully done by SWOT analysis. SWOT Analysis involved the collection of information about internal and external factors which have or may have an impact on the development of strategy of our organization. This technique helped us to analyze our own strengths, minimize weaknesses and take possible advantages of opportunities available.

Technology Portfolio Matrix6

STU Representation


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1. ROBOTICS

2. MACHINE TOOLS

3. ADVANCED CONTROL SYSTEMS

4. FLOW FORMING

5. MANUFACTURING EXECUTION SOLUTIONS

The figure above shows the technology portfolio matrix for the automation firm. The circle identifies the existing position of each STU and dots the future position. Ideally we would have all the STUs in the high attractiveness, high strength cell similar to STU 1. What is critical is to reflect on the competitive moves that have to be made in order to gain competitive strength in highly attractive STUs such as 2, 3 and 5. The amount of effort and resources to be allocated to each STU depends both on our ability to gain competitive advantage and the projection of future attractiveness of a given STU.

The next step is the formulation of strategic action programs and budgets. To be consistent with the frameworks proposed in the earlier section the action programs were made such that it:-

• Responded to the technological requirements emanating from corporate and business strategies

• Seized the opportunities and neutralized the threats identified in the environmental scanning process

• Reinforced the strengths and eliminated the weaknesses detected in the internal scrutiny process

• Addressed all the issues linked to the strengthening of the portfolio of technologies of the firm.


LOWHIGH MEDIUM

LOW

MED

IUM

TECHNOLOGY

STRENGTH

1

3

2

4

5

TECHNOLOGY ATTRACTIVENESS

HIG

H

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Conclusion

By shifting focus to multiple business growth areas the company did not put all it’s eggs in the same basket. Each business growth area would be a separate ‘S’ curve and we have high probability of success in atleast a few of them. The automation company successfully experienced exponential growth in spite of slow down.

References

1. Harvard Business Review; hbr.org/1974/05/the-focused-factory/ar/1

2. The Strategy Concept and Process-A pragmatic approach -Arnoldo C Hax and Nicolas S Majluf, 2005

3. www.tonymanning.com, Making Sense of Business Strategy, 2008

4. en.wikipedia.org/wiki/List_of_emerging_technologies

5. www.mastheadconsulting.com Masthead CRM Consulting report,2006

6. www.1000ventures.com


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A primer on Credit Default Swap (CDS)&RBI guidelines on CDS

Prof. Utkarsh JainAssistant Professor, SIBM, PuneE-mail : [email protected]

Prof. Kaustubh MedhekarAssociate Professor, SIBM, PuneE-mail : [email protected]

Reserve Bank of India through a notification (RBI/2010-11542 IDMD.PCD.No.5053/14.03.04/2010-11) issued guidelines on Credit Default Swaps (CDS) for corporate bonds in India. The market has a given a mixed response, primarily due to apprehension and misconceptions about the said product. There has been much confusion in public debate about the role CDSs played during the crisis in United States. In this light the study tries to analyze the mechanics of the CDS, the relation of CDS and late 2000s financial crisis, the importance of CDS to Emerging markets,the present scenario in India and a commentary on recent RBI Guidelines on CDS.

What are CDS?

A (single name) credit default swap (CDS) allows the contracting partners to trade or hedge the risk that an underlying entity defaults – either a corporate or a sovereign borrower. There are two sides entering into the contract: The protection buyer pays a yearly premium until a pre-defined credit event occurs or until the contract matures. In return, the protection seller assumes the financial loss in case the underlying security defaults or the reference borrower

Protection seller(Writer/seller of CDS)

Protection Buyer(Buyer of CDS)

Pays premium

Yes

No

Gives protection

Occurrence of Credit Event during the

tenure of CDS

Credit event triggers a compensation payment

from seller to buyer

CDS expires on maturity

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becomes insolvent. In effect, a CDS contract resembles an insurance policy, where one side assumes the risk and the other pays an (insurance) premium. When entering the contract, protection buyer and seller agree upon a premium, which compensates the protection seller for bearing the risk of a default. 1,2

Since credit default swaps are presently not traded on any of the organized exchanges, they are a part of the over-the-counter (OTC) derivatives market in various European and American markets. Though still a relatively small part of the huge market for OTC derivatives, credit derivatives are growing faster than any other OTC derivative.3

In addition to the CDS "spot market" there is also a market for options and forwards written on CDSs. Options on CDSs, so called Credit Swaptions, give the buyer the right but not the obligation to receive or sell protection for a predetermined premium, whereas CDS forwards oblige the parties to buy or sell CDS protection in future at a certain price.

CDS & The late 2000s financial Crisis

Many causes for the financial crisis have been suggested, with varying weight assigned by experts, the United States Senate issuing the Levin–Coburn Report found "that the crisis was not a natural disaster, but the result of high risk, complex Financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street."4

The 2008 crisis revealed several shortcomings in CDS market practices and structure in United States. Lack of information on the whereabouts of open positions as well as on the extent of economic risk borne by the financial sector is partly to blame for the heavy reactions observed during the crisis. In addition, management of counterparty risk has proved insufficient, as has in some instances the settlement of contracts following a credit event.5

The Credit Default Swap market was largely unregulated in United States. Huge amount of exposure was taken by various institutional players, without having corresponding exposure to reference asset. At the risk of stating the obvious, the primary motive of taking such huge positions in CDS compared to the exposure to the reference asset was speculation and not hedging. Since, the regulatory framework and reporting mechanisms were not stringent; there were almost no disclosures of the positions taken in the market by the players.

According to Deutche bank report published in December 2009, at the peak of use of CDS instruments (pre 2008 crisis), gross notional amounts outstanding had reached an impressive USD 58 trillion (June 2007, BIS data), which compares to a notional value of debt securities outstanding worldwide of USD 80 trillion at the time.The issue of interconnect-edness and, hence, the potential for contagion played a role in the decision to grant public assistance to AIG. Prior to the crisis AIG had accumulated considerable CDS positions in both gross and net terms that threatened to drag down other institutions.6

The report further adds that, the collapse of Lehman finally confronted market participants and supervisors with the failure of a relevant CDS counterparty that was also an important reference entity. Market reactions were heavy, owing to the fuzziness of information on actual


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credit exposures in a market where trading takes place over-the-counter (OTC). Skimming through it the fallout became soon clear that CDS net exposure referenced to Lehman was a mere fraction of the total amount outstanding, and that potential losses linked to Lehman as a reference entity had largely been overstated. In fact, trade replacement costs for Lehman counterparts turned out to be more substantial than credit losses induced by CDSs written on Lehman Brothers.7

Importance of CDS to Emerging markets

Notwithstanding the fact that CDS as a product had its repercussion’s in increasing the financial complexity of the market, the authors of this work are of the humble opinion that Credit Default Swap can be of prominent help to emerging economies primarily on account of following points:

1. Credit Default Swap (CDS) can help market participants a tool to transfer and manage credit risk in an effective manner through redistribution of risk.

2. Specially funding of SMEs (Small and Medium Enterprise) may be supported by credit derivatives, a systematic structure can be formed in the following manner: Banks can transfer the credit risk to a third party, which in turn can transfer that risk to a pool of investors, since the credit risk would not remain primary concern of the banks, banks might be willing to infuse more funds in the SME sector. The investors will also be benefitted as new asset class would be available to them,which can be incorporated as a part of their portfolio.

3. Credit Default Swap will have benefits like enhancing investment and borrowing opportunities and reducing transaction costs while allowing risk-transfers

4. Such products would also increase investors’ interest in corporate bonds and would be beneficial to the development of the corporate bond market in a country like India.

5. Another important advantage is that, it would act as an alternate way of taking short position on a reference entity/ obligation. For Example, an investor wishes to take short position on bonds of company XYZ, but is not being able to take that position due to lack of liquidity in the market. In such scenario, he can take a long position on CDS on XYZ’s bond. Thus CDS would provide an effective way to trade on credit risk to market participants.

Present Scenario in India and RBI guidelines

In the Second Quarter Review of Monetary Policy for year 2009-10, an Internal Group was constituted by the Reserve Bank of India to finalize the operational framework for the introduction of plain vanilla OTC single-name CDS for corporate bonds in India.

Draft guidelines on CDS based on the recommendations of the Group were placed on the RBI website on February 23, 2011 and were open for comments from all concerned. Comments were received from a wide spectrum of banks, PDs and other market participants. The guidelines were suitably revised in the light of the feedback received and would become effective from October 24, 2011.


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The objective of RBI for introducing Credit Default Swaps (CDS) on corporate bonds is to provide Market participants a tool to transfer and manage credit risk in an effective manner through redistribution of risk. CDS as a risk management product offers the participants the opportunity to hive off credit risk and also to assume credit risk which otherwise may not be possible. Since CDS have benefits like enhancing investment and borrowing opportunities and reducing transaction costs while allowing risk-transfers, such products would increase investors’ interest in corporate bonds and would be beneficial to the development of the corporate bond market in India.8

The key features of the RBI guidelines on CDS are as follows:

• Participants in the CDS market are classified as either Users or market makers.User Entities are permitted to buy credit protection (buy CDS contracts) only to hedge their underlying credit risk on corporate bonds. Such entities are not permitted to hold credit protection without having eligible underlying as a hedged item (clause 2.1).The users cannot buy CDS for amounts higher than the face value of corporate bonds.9 This is the most important point of difference, as there was no such limitation in United States of America prior to 2008, and hence many Institutional players had taken huge long positions (in CDS) without having any exposure to reference asset.

• Since the users are envisaged to use the CDS only for hedging their credit risks, assumed due to their investment in corporate bonds, they shall not, at any point of time, maintain naked CDS protection i.e. CDS purchase position without having an eligible underlying bonds held by them and for periods longer than the tenor of corporate bonds held by them.(clause 2.5.2)10

• The eligible entities under user’s category would be Commercial Banks, PDs, NBFCs, Mutual Funds, Insurance Companies, Housing Finance Companies, Provident Funds, Listed Corporates, Foreign Institutional Investors (FIIs) and any other institution specifically permitted by the Reserve Bank of India.(clause 2.1.1)11

• CDS will be allowed only on listed corporate bonds as reference obligations. However, CDS can also be written on unlisted but rated bonds of infrastructure companies. [clause 2.4 (I) & (II)]12.This is another major area of difference between the US markets and RBI guidelines. In United States of America, the CDS were written on various pass through securities like Mortgage Backed Security(MBS), Collateralized Debt Obligation (CDO) etc, whereas as per the RBI guidelines, the CDS are specifically restricted for listed corporate bonds, the obvious reason being that there is no big market of pass through securities in India as it is in US.

• The credit events specified in the CDS contract may cover: Bankruptcy, Failure to pay, Repudiation/moratorium, Obligation acceleration, Obligation default, Restructuring approved under Board for Industrial and Financial Reconstruction (BIFR) and Corporate Debt Restructuring (CDR) mechanism and corporate bond restructuring.(clause 2.11.1)13.

• Since, CDS are traded mainly over-the-counter (OTC), the contracting parties therefore have to agree upon the terms and conditions of the CDS individually – such as definitions


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of the credit events or settlement procedures. In order to facilitate documentation, and to avoid disputes as to whether a credit event had actually occurred and how a contract should best be settled, CDS contracting parties (in the international and US market) generally refer to the International Swaps and Derivatives Association (ISDA) Master Agreement14. In India, the RBI guidelines specifically states that Fixed Income Money Market and Derivatives Association of India (FIMMDA) shall devise a Master Agreement for Indian CDS15 (clause 2.9)

• Regarding the Settlement procedures, the RBI Guideline states that the parties to the CDS transaction shall determine upfront, the procedure and method of settlement (cash/physical/auction) to be followed in the event of occurrence of a credit event and document the same in the CDS documentation. (Clause 2.12.1). However it further adds that for transactions involving users, physical settlement is mandatory(Clause 2.12.2). For all other transactions, market-makers have been permitted to opt for any of the three settlement methods (physical, cash and auction), provided the CDS documentation envisages such settlement (Clause 2.12.2).16

• Further, The guidelines specifically provide norms for Prevention of mis-selling and market abuse, wherein it requires protection sellers to ensure that CDS transactions shall be undertaken only on obtaining from the counterparty, a copy of a resolution passed by their Board of Directors, authorizing the counterparty to transact in CDS. (clause 3.10)17

• RBI has also incorporated certain reporting requirements in the guidelines which would require market makers to report their CDS trades with both users and other market-makers on the reporting platform of CDS trade repository within 30 minutes from the deal time(clause 4.1.1). The users would be required to affirm or reject their trade already reported by the market- maker by the end of the day(clause 4.1.2). In addition to these reporting requirements the participants are also required to report to respective regulators (e.g. IRDA for Insurance companies) information as required by them such as risk positions of the participants vis-à-vis their networth and adherence to risk limits, etc. 18

Conclusion

The central bank in 2008 had planned to introduce the CDS for corporate bonds, but postponed the move in view of the global financial crisis, which was caused by large scale trading in such debt& derivative instruments. The experience gathered during the crisis significantly contributed to a better understanding of the market of credit default swaps. The shortcoming of US and EU regulatory framework has been carefully avoided in the RBI guidelines.Though the move of Central bank to introduce CDS in India has been much awaited and welcomed, it would be interesting to see how market participants react to specific clauses like restricting CDS contract currency to only Indian Rupee, market maker’s duty to verify underlying exposure etc. There are still many areas where further clarification would be required from the RBI. Nevertheless, it is a fact that the CDS will be introduced first time in India and in the humble opinion of the authors, the robust regulatory and reporting framework should reasonably lead to the successful launch of the credit derivative market in India.


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References

1. Deutche Bank report: Credit Default Swap: Heading towards a more stable system (December21, 2009)

2. The Lehman Brothers guide to Exotic Credit derivatives

3. http://www.creditderiv.com/introduction%20to%20credit%20derivatives%20article%20by%20Vinod%20Kothari.pdf

4. ‘‘Senate Financial Crisis Report, 2011 "http://en.wikipedia.org/wiki/Late-2000s_financial_crisis)

5. Ibid

6. Ibid

7. Ibid

8. Ibid

9. www.rbi.org.in

10. Ibid

11. Ibid

12. Ibid

13. Ibid

14. http://www.isda.org/

15. http://rbidocs.rbi.org.in/rdocs/content/PDFs/FGCD240511A.pdf

16. Ibid

17. Ibid

18. Ibid


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Nurturing Winning Brands

Dr. Kaushik MukerjeeProfessor, SIBM, PuneE-mail : [email protected]

Some brands are loved. Some are hated. Some brands are highly valued while others are also-rans. Consumers go all out to acquire certain brands while they are indifferent to others. What does it take to nurture winning brands?

Brands are in a way like living organisms. They have a genetic origin and are nurtured in an environment that supports their evolution. At crucial junctures, interventions are needed to bolster the brand’s continued growth and avert any possibility of a decline in the brand’s strength.

At the core of winning brands is a simple question : What does this brand mean for consumers? If the meaning is clear to consumers the next issue to focus on should be: Is the meaning substantial enough for consumers? For example, brands like Harley Davidson and Starbucks are about consumers discovering their own selves through the brand experience. These brands are iconic because they have made a positive difference in the lives of consumers. Likewise, Lux is not a soap for having a bath but a promise of beauty and attractiveness for women. The issues that need to be managed to nurture brands and create winning brands include:

• Track customer aspirations : The targeted customers must be the unwavering focus for brand managers. The strategic tasks for brand managers include: building a relationship with customers through trust and credibility, communicating a key benefit to customers and enabling a price premium1. The brands that become winning brands are those that keep track of the customers’ changing aspirations. For example, in the 1980s, Surf used Lalitaji (a housewife who bought products that offered good value and not ‘cheap’ products). This worked well since most Indian women aspired to be good housewives at that time. But in today’s changed scenario, the woman of the house is welcomed back from work by the husband and children (as seen in the advertisements of Vicks or Whirlpool). Unless a brand keeps a track of changing customer aspirations it will fall by the wayside.

• Offer a credible value proposition : Having ensured that the brand really understands the customer well enough, a credible value proposition should be used to ensure connect with the customers. For example, Tanishq realized that wedding was the big occasion when jewellery was bought by Indian households. But to target the modern Indian girls, the communication had to reflect their psyche. So the advertisement shows a nuclear family where the marriegable girl is not very keen on tying the knot but Tanishq makes

Dr. Kaushik Mukerjee

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her amenable to marriage. The ad surely resonates in the hearts of millions of young girls in modern India who are putting careers ahead of marriage but Tanishq rekindles their latent desire for getting married. In the late 90s, the Indica promised ‘more car per car’ and made middle class families sit up and take notice. Likewise, Samsung targets the youth by using the provocative line ‘Next is what?’ because the youth are restless and yearning for ‘something more’. The value proposition should succinctly answer the question ‘why should I buy this brand?’ for the customer. Actually, the secret to a credible value proposition is to move the brand to an ‘enacted’ space wherein the focus is more on what it means rather than what it does2.

• Build an endearing image : The credible value proposition needs to be carried forward to build an endearing image for the brand. The brand needs to occupy a prized position in the customer’s mind and heart. The image must be compelling enough for the customer to induce purchase of a brand that holds a premium price. This is the kind of image that has helped to create brands like Rolex, Harley Davidson, Apple, Christian Dior etc. The price becomes incidental for customers as they are willing to invest their life’s savings to acquire a Harley and join the HOG (Harley Owners Group). This image is their identity and their reason to be alive and feel good about themselves. Similarly, customers of Apple’s i-Pad or i-Phone have queued up through the night outside stores to lay their hands on these prized possessions in the morning when the store opens. This image is created through suitable associations and consistency in delivery of the brand’s promise.

• Get employees to live the brand’s promise : The people representing the brand play an important role in building the brand3. Brands like Starbucks, Disneyland or Virgin are the result of the role played by the people who have represented the brand. First and foremost, the brand’s values need to be imbibed by the people and thereafter the same needs to be followed through their actions. The greatest test of the brand’s promise is the manner in which the employees to the justice (or injustice) to the brand through their actions. For example, the promise of ‘fun and excitement’ by Virgin is followed up by the way the people behind the brand are attired and through their behaviour. The infectious laughter and informal chatter of a Starbucks associate early in the morning makes the day for the customers who come there for more than just drinking a cup of hot coffee. The engagement of the employees with the brand’s promise should be evident from every communication (verbal and non-verbal) and ensure that the customer’s experience is consistent with the image of the brand.

• Show genuine concern for customers : The brand becomes loved and adored when it is able to win over the trust of customers. This is a hard fought battle since customers are not easy to win over and it takes a lot of sincere efforts on the part of the brand. First and foremost, the brand needs to show genuine concern for customers. Typically, the customer is always asking – why should I trust you? So, the brand needs to be empathetic towards the problems being faced by customers and go the extra mile to address their concerns. Several hospitality providers (such as the Taj Hotels) have taken the trouble of helping customers solve problems that are strictly speaking not really their business. This is when the brand ambassadors need to get into action. As a result of going the extra mile, they win customers for life. And the brand’s image gets indelibly etched on the hearts of the customers who thereafter become advocates for the brand. So, one good deed by a brand ambassador spawns several bouts of loyalty and referrals that go a long


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way in making the brand stronger and more adorable.

• Make customers achieve more : Customers are keen to patronize brands that seem to fulfill their aspirations and dreams. This is why brands like ebay have been able to create a large following since they have virtually transformed the lives of their customers (or partners). Therefore, brands that can create opportunities for customers to become partners and participate in the proliferation of the brand stand a better chance of becoming a winning brand. By focusing on higher order motivations, a brand can create a more adorable image4. The Fair & Lovely Foundation offers scholarships to young women to help them pursue their dreams and by empowering the women they are ensuring that the brand helps them to achieve more. This will help in endearing more women to the brand.

• Go global : In today’s global market, brands that are not global risk going out of the customer’s mindspace. The reason for dominance of global brands is the fact that customers are going global and recognizing global brands as the ones that she would like to associate. Research has shown that successful global brands are perceived to have high quality, carry the global symbol and are more socially responsible5. This is what explains the power of brands like Coca-Cola, McDonalds, Nike, Microsoft, and IBM. Across cultures and geographies they are symbols that customers recognize and admire. The success of global brands is a testimony to the power of global branding. Therefore, brands need to take the appropriate steps in forging a global brand strategy and ensuring that it becomes a reality.

It needs to be understood that nurturing brands requires a cohesive strategy, inclusiveness of all concerned stakeholders and a well-orchestrated rollout. Brands need to assert their presence across media (especially social media) and acquire omnipresence in their customers’ lives. Then and then only can they aspire to become winning brands.

References:End Notes

1 Dawar, Niraj (2004) What Are Brands Good For? MIT Sloan Management Review, Fall2004, Vol. 46 Issue 1, p31-37

2 Berthon, Pierre; Holbrook, Morris B.; Hulbert, James M.(2003) Understanding and Managing the Brand Space. MIT Sloan Management Review, Winter2003, Vol. 44 Issue 2, p49-54

3 Harris, Patrick (2007). We the people: The importance of employees in the process of building customer experience. Journal of Brand Management, Nov2007, Vol. 15 Issue 2, p102-114

4 Hamish Pringle and Peter Field (2009), Brand Immortality, Published by Kogan Page, 2009

5 Holt, Douglas B.; Quelch, John A.; Taylor, Earl L. (2004). How Global Brands Compete. Harvard Business Review, Sep2004, Vol. 82 Issue 9, p68-75


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Prof. Deepika PanditaAssistant Professor (HR), SIBM, PuneE-mail : [email protected]

Imagine a situation where you have to sell jobs for your organization to individuals who have many lucrative job options in hand, what would you sell the job for or would you actually be able to attract the right talent towards a certain job! Every organization wants the best talent onboard, but how many of them actually succeed in the same? The question stares most of the organizations on their face today!

Businesses can no more afford to think only of existence, they need excellence for survival. When we look at what makes organizations great, is it the fixed assets, the plant and machinery, the technology? No, while all of these are important and contribute in their own way to an organizations success, there is more to it that makes great organizations great, it is the people!

Why Employee Value Proposition?

Many workers1 have recommended organizations to build unique brands of themselves in the eyes of its prospective employees. This essentially means developing a statement of ’why the total work experience at their organization is superior to that at other organizations. The value proposition should outline the unique employee policies, programs, rewards and benefits programs that prove an organizations commitment to people and management development. In nutshell it should define an employee’s ‘why should I join this organization?’

The employee value proposition needs to be communicated in all hiring efforts of the organization. It may be reflected on the company’s website, job advertisements and letters extending employment opportunities.

"The War for Talent" 2 emphasized that great managerial talent has always been important and critical for many companies thus formulating a Employee Value Proposition leads to engagement of the employees and satisfy people` s expectation in their work place.

What is Employee Value Proposition?

An EVP describes the mix of characteristics, benefits, and ways of working in an organisation. It is the deal struck between an organisation and employee in return for their contribution and performance. This "deal" characterises an employer and differentiates it from its competition.

The Employee Value Proposition- A Key to Attract Performers

Prof. Deepika Pandita

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Most organizations encounter two main problems when it comes to their EVP:

• They struggle to differentiate themselves from their competition. Differentiation is crucial if an organisation is to stand out from the "sea of sameness" that characterises some sectors.

• Their branding is appealing but it does not accurately reflect the reality.

An effective EVP enables an organisation to stand out as different but also it ensures that the ‘packaging’ reflects the ‘contents. All too often people join organizations tempted by the ‘branding’ and are disappointed when they experience the reality.You know when you’ve got it right – you become a magnet for talent, and have engaged and motivated employees.

What can an EVP do for an organization?Here are the specific benefits of an EVP :

1. Helps to attract and retain talent

A clear and differentiated EVP ensures that you attract and retain people that you would inevitably lose to other organisations with more attractive EVPs.

2. Helps to appeal to different markets and tough to hire talent groups.

For organisations operating in a number of countries the EVP will need to move beyond a one size fits all. A good EVP contains elements that appeal to different groups of employees from different cultures, age groups and functions. The most successful EVPs are derived from combining needs of key segments of the workforce to form a universal brand which is then communicated through the best channel for each segment.

3. Helps to re-engage a disenchanted workforce

The process of creating an EVP involves surveying and talking to existing employees. This is a very powerful engagement tool in itself and people usually enjoy and appreciate it. In our experience the process can also help to re-build/enhance trust and increase motivation.

4. Helps to prioritize your HR agenda

The process of eliciting your EVP will help you to understand what your HR priorities should be. To create an EVP you need to understand what is important to your employees and potential hires. Having this insight will mean that you understand what specifically you need to do to attract, engage and retain people that you want, where improvements need to be made and what will most likely make people leave if they are not addressed.

5. Creates a strong ‘people’ brand

Organizations’ with strong and credible EVPs become as famous for the way they treat people and the quality of their people as they are for their products and services. A great example of this is Apple. Apple do not have to enter into a war for talent. They have great people queuing up to join them.


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6. Reduce new hire premiums

When candidates view an organisation’s EVP as attractive, they demand a smaller compensation premium when accepting an offer. According to the Corporate Leadership Council EVPs that are viewed as unattractive require a 21% premium to hire employees, while attractive EVPs require only an 11% premium.

What makes a good EVP?

Source: -Talent Smoothie Consulting 2010

To ensure an EVP generates maximum returns it must be built around attributes that genuinely attract, engage and retain the talent you want. It must also be consistent with strategic objectives and clearly demonstrate its uniqueness.3 The EVP must also be real i.e. a large proportion of it must be true now. It should however also contain elements that are not true now but that the organisation aspires to. This is important to drive change and progress and also to give employees a sense that the organisation is responding to the changes they want to see.

As well as the ‘content’ of the EVP, it must also be articulated in a style that appeals to the audience. So many companies write about themselves in dull corporate speak and the net result is a lot of organisations that claim to be unique but sound the same.

Finally, the EVP is at the core of all other organisational processes. The characteristics of the EVP need to be reflected in the corporate and employer brands. The EVP, if operationalised well is the driver of engagement, it informs recruitment messages, communications and development and it helps inform strategic HR priorities. It helps support and drive business strategy forward.

EmployerBrand

CorporateBrand

IntemalComms

HR Strategy

EVP

Recruiment

Engagemenl


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How do you create an EVP?

There are a number of ways to understand what your employees feel constitutes a great place to work. A good starting point is to tap into information you already have including employee opinion survey data. This will tell you what employees think are working and what isn’t. Typically though such surveys don’t tell you what is important to your people? It is obviously crucial to understand this in order to create an attractive EVP. The process of developing an EVP elicits what is important to the different types of people that you want to attract and engage.

To be successful the EVP must be credible which is why it EVP must always be tested. The purpose of testing is to ensure that all categories of employees and potential employee find it appealing. The testing also tells you which elements of the EVP need to be ‘turned up’ or ‘turned down’ to appeal to different groups. Testing should take place with internal employees and external potential employees.

The testing will reveal changes that need to be made to the EVP to appeal to the different audiences that it was tested with. Assuming that valid and rigorous data is used to create the EVP you should expect it to work for 90% of the target population. It should always be tested though as the 10% it needs to be adjusted for could be a crucial part of your workforce.4Recent survey reveals that 88% of the employees leave organizations for reasons other than money.5 Thus a company needs an EVP for their employees to differentiate their work place practices with their competitors’ apart form their compensation practices.

Key Challenges in developing an EVP

• Effective EVP development demands Marketing excellence6: Expertise is required in segmentation, insight, brand positioning and brand activation – yet EVPs are often driven and owned by the HR team who may not have all the above capabilities needed.

• Stakeholder engagement is critical: Lack of stakeholder engagement will seriously undermine the ability of the EVP to gain commitment and traction within the business and hence its ultimate effectiveness.

• Bespoke research is needed: Companies tend to fall back on existing research, but rarely has it been designed to uncover springboards for genuine EVP insights and propositions.

• Avoid internal focus: EVPs can be overly introspective and tactical, undermining their differentiation and ultimate impact.

• Employees are a discerning audience: EVPs offer a promise that needs to be delivered: employees are no less discerning than customers of a company’s brands.

• There is a key difference between the EVP and the communication itself: An EVP is not an end in itself, it needs to be brought to life internally and externally through many touch points


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The challenges are real but the benefits immense. Employee Value Propositions offer a key marketing tool to enable employers to attract and retain the right talent and to build the competitive edge needed to drive growth.

Some Companies following the EVP in India are-

1. 7Dupont Hyderabad based Company created an EVP Model by creating a world of possibilities for meaningful life for the employees.

DuPont brings together people with different talents, aspirations and views to create a highly motivated team that shares the DuPont vision of creating sustainable solutions essential for a better, safer, healthier life for people everywhere. It fosters a rewarding journey by providing its employees with exceptional opportunity, mobility and flexibility in their day to day activities.At DuPont, we create an environment of openness, freedom and trust that helps employees to become leaders in their own right. It provides employees with the opportunity to expand their horizons, enhance their strengths and talents, and maximize their potential.

2. 9Kotak Mahindra Bank emphasized on work culture and created an EVP Model called as "FLAME".AtKotak pride is their work culture. In the journey towards becoming a global Indian Bank and a preferred employer, Kotak offers the employees a unique value proposition. They call it the FLAME and truly believe that they have ignited the spirit within the employees.

Source: - www.kotak.com

3. 8McDonalds in India emphasized that EVP helped them get a better brand image than its competitors.McDonald’s Employee Value Proposition (EVP) defines what their employees around the world value the most about their jobs at McDonald’s. the EVP represents what they offer to crew and managers in exchange for their performance and commitment to the organization. They have communicated the three elements of their EVP (Family & Friends, Flexibility and Future) across the System along with tools and best practices to help the individual markets bring them to life. Activating the EVP is a key element of the

Focus on Results Strongly focused on achieving our short and long term organizational and financial goals.

Leadership An opportunity to work with industry leaders and be one of them.

Active Involvement/ Being participative and inclusive Inclusiveness in our decision-making, with the responsibility to be involved in this consultative process.

Maximum Challenge An environment where employees are constantly stretched and challenged to give their best.

Entrepreneurial An ability to create business Creativity opportunities and run them as entrepreneurs, within broadly defined parameters.


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2011 business plans for each of their nine major markets.

As markets work to deliver the EVP, they ask their employees to consider their actions in three categories:

• Foundational. These policies and programs are impactful and needed, but can be found at other companies; for example, certification of restaurant managers and training provided at our Hamburger Universities around the world

• Differentiated. These actions set McDonald’s apart from competitors but could possibly be duplicated; for example, sabbaticals for restaurant managers

• Unique. These programs can only be found at McDonald’s; for example, theirVoice of McDonald’sand.

ReferenceEndnotes

1. TandeHill in 2006

2. Mckinsey& Co in 1997 coined this word

3. Talent Smoothie in 2010 in the UK.

4. Talent Smoothie in2010 in the UK.

5. TandeHill Human Capital Consulting 2006

6. Brand Learning 2010

7. www.dupont.com/india

8. www.aboutmcdonalds.com

9. www.kotak.com


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Inflation Vs Growth :The Tightrope Walk

Prof. Mahima MishraAssistant Professor, SIBM, PuneE-mail : [email protected]

Prof. Kunal KhairnarAssistant Professor, SIBM, PuneE-mail : [email protected]

Every country in the world has distinguished economic policy, which may vary even though the fundamental concepts remain the same. In the aftermath of balance of payment crisis in 1991 in India, several drastic changes were formulated in Monetary Policy viz. changes in the CRR, SLR, PLR Rates, interest rate deregulation across various segments were initiated. Trade liberalization, financial liberalization, tax reforms and opening up to foreign investments were some of the important steps, which helped Indian economy to gain momentum. With positive indicators such as a stable annual growth rate, rising foreign exchange reserves, a booming capital market and rapidly expanding foreign direct investment (FDI) inflows, India emerged as the second fastest growing major economy in the world.

But along with these success stories, major concern before policy makers has been continuously raising inflation especially since March 2008, which has to be kept under control. Inflation refers a general increase in the prices measured against a general level of purchasing power. Inflation is undesirable because it adversely affects some sections of the population especially the poor, distorts relative prices, leads to an appreciation of real exchange rates, erodes the value of the financial assets and creates instability. Inflation is one of the most regressive and punitive taxes as it reduces the purchasing power particularly of those who are least able to resist it or bear its effects. Through several past incidents, economists have learned that an economy can never be totally free of inflation. In the following paragraphs, we would try and understand a few theoretical as well as practical facets of Monetary policy and its impact on inflation and growth

MONETARY POLICY: AN OVERVIEW

The two major macroeconomic instruments are fiscal policy and monetary policy. These policies affect the performance of economy as a whole. While fiscal policy is concerned with government expenditure and taxes, the monetary policy determines the rate of growth of the nation’s money supply which is regulated by central bank of that country.

By monetary policy we mean the regulation of the money supply and the control of the cost and availability of credit by the central bank of the country through the use of deliberate and discretionary actions for achieving the objectives of general economic policy.1

Monetary Policy deals with changes in money supply, the level & structure of interest rates &

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other conditions affecting the level of credit. The fundamental objective of monetary policy is to drive the economy to achieve full-employment with a non-inflationary level of total output.

There are two sides to the monetary policy: With the expansionary monetary policy, central bank decreases rate of interest to increase the supply of money mostly during recessionary situation or during phases of Liquidity crunch in economy. With the contractionary monetary policy decrease in money supply and increase in interest rates are used to correct inflationary situation in order to keep a check on consumption expenditure as well as investment expenditure.2

KEYNESIAN MONETARY POLICY TRANSMISSION MECHANISM:

The monetary transmission mechanism explains how monetary policy changes through changes in nominal interest rates effects various real variables like output and employment.

When interest rate increases, both investment and consumption demand declines, (including both business investment in fixed capital and household investment in consumers durables) which leads to multiple changes in income through multiplier effect. Thus via interest rates hike RBI can check the demand pull inflation in the country by contracting the money supply in the economy.3

The International Monetary Fund has urged the RBI to maintain a tight monetary policy and keep raising interest rate to tame inflation. The inflation situation in the economy continues to be a cause for concern. Despite large scale tightening of the monetary policy by the RBI and other steps taken by the government, inflation continues to remain close to the double digit mark. In June 2011, WPI based headline inflation stood at 9.4 percent. Near term outlook for inflation is not too encouraging and there are chances that we may see inflation jump to the double digit territory on a few occasions. High international oil prices, likely decontrol of diesel prices, surging global food prices and hike in Minimum Support Prices for the upcoming agriculture season are some of the factors that constitute the upside risks to inflation.4

In this context, the most fervently discussed topic today has been the most recent interest rate hike (the 11 consecutive one since the last 18 months) made by the RBI. The markets had duly factored in another rise of 25 basis points, but Mr. Subbarao had to surprise them with a rise of 50 basis points. What’s more, the Government and economic experts have reinforced the opinion that inflation is the greater evil and needs an immediate firefighting than the well placed fears of an impending economic slowdown.

Industry (i.e. the most affected sectors), as expected is not in a mood to swallow the bitter pill, yet again. Given the IIP growth and the international debt crisis, another painful passage through recession is in the offing. Yet, why is it that the RBI is relentless in its quest for making the money dearer?

To pull back the inflation is a rare coincidence for a national issue to be at the forefront of both the economic as well as the political agenda. For, inflation has the potential to disrupt stability, both economic and political. Growth with stability seems to one objective accepted universally by all

Changes in the Changes in Change Multiple change Money supply interest rates in investment in income


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central banks. The exact policy measures at any given point of time are governed by the exigencies of the situation with an eye on their medium/long run impact. Many of the Central Banks from the developed world follow a policy of what is known as “Inflation Targeting”, which implies that the Central Bank determines an inflation rate which it reckons as desirable and then uses one of more of the weapons in its armory namely interest rate, CRR, SLR norms, Quantitative controls etc to achieve it. Life is thus much easier for the developed world as they can focus on inflation alone assuming that there is no such thing as the growth-inflation trade off in the long run. Indian economy, of course is at stage of evolution, where the RBI faces the two fold task of tracking (and directing) growth and inflation. To make matters more challenging (and interesting) is that each policy measure has to weigh its short run and long run ramifications at the same. (Politicians, one can say are lucky in this respect, as they are not aware of the long run)

Presented below is more of an oversimplification of reality5. The three charts presented below:

I. Growth rate of GDP

II. Interest Rate (Reverse Repo Rate)

III. Inflation


INDIA INTEREST RATEBenchmark Interest Rate

8 -

7 -

6 -

5 -

4 -

3 -

- 8

- 7

- 6

- 5

- 4

- 3

Jan/07 Jan/08 Jan/09 Jan/10 Jan/11

INDIA GDP ANNUAL GROWTH RATE10 -

9 -

8 -

7 -

6 -

5 -

- 10

- 9

- 8

- 7

- 6

-5

Jan/07 Jan/08 Jan/09 Jan/10 Jan/11

INDIA INFLATION RATEAnnual Change on Consumer Price Index

18 -

16 -

14 -

12 -

10 -

8 -

8 -

4 -

- 18

- 16

- 14

- 12

- 10

- 8

- 6

- 4

Jan/08 Jan/09 Jan/10 Jan/11

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Phase I Recession to Recovery :

January 2008 to Jan 2009

The period starting Jan 2008 marks the reversal of growth trend following the worldwide recession. The GDP growth declined continuously for the next one and a half years. The GDP rate during this period nosedived (as can be seen from the chart I below) from 9.5% in January 2008 to 5.8% in March 2009. Inflation (measured as CPI), which was comfortable in the beginning at less than 6%, started rising sharply during this period reaching a level as high as 10%.The interest rate (reverse repo rate – rate at which the RBI borrows from banks) was kept constant for some time (as can be seen from chart III) at 6%. The simultaneous fall in growth and sharp increase in inflation would have put the RBI in a stiff position as to what course of action would steady the ship. A contractionary monetary policy (or even keeping the rate of interest constant) would have further dampened the slowing growth rate, whereas an expansionary monetary policy (decrease in the interest rate) could aggravate inflationary pressures.

Phase II : January 2009 to January 2010

The RBI decided to pursue the latter option (following its global peers) and started decreasing the interest rates just before January 2009. As can be seen from chart II, successive rounds of reductions, brought the interest rate level down to 3.25%. This rate was maintained for over a year, during which the economic growth showed signs of recovery. The GDP rate started increasing gradually (emphasizing the inherent ‘domestic’ strength of the economy relatively less affected from the mayhem in the US and Europe) from around 6% in January 2009 upto 9% by the end of March 2010. However, as might have been anticipated, inflation accelerated continuously, reaching as high as 16% by the end of January 2010. This naturally prompted the RBI to reverse the course of its monetary policy, moving into the contactionary mode. By February 2010, the RBI started stepping up the interest rates to fight inflation.

Phase III: From Recovery to Recession?

With successive interest hikes which have taken place since the last 18 months, the reverse repo rate has reached a 9- year high of 7%. (More importantly, higher than the level we had initially started). To make the situation more complicated (and interesting), the GDP growth rate is gradually tapering off during this phase of rate hikes. So much so , that the GDP target has been revised downwards to 8.2% from the earlier 9%. To make matters worse, the ominous cues from all over the globe portend another double dip recession. We are now in the midst of yet another fluid and uncertain situation, where the RBI is confronted with the ever intriguing dilemma - whether to curb inflation at the cost of growth (or even worse – at the risk of recession) or sustain (or at least attempt to) the growth at higher prices. Faced with a similar situation two and half years back (refer Phase I given above)- slowing growth accompanied with high prices, the RBI had chosen to lower interest rates. As the current scenario is not exactly the same as the earlier one, the RBI has chosen to go the other way. The RBI has recently raised interest rate by 50 basis points, taking the reverse repo rate to 7% and the repo rate to 8%. The verdict is pretty clear – Priority to Inflation control over Growth.

One interesting inference could be that the ongoing inflation is partly fuelled by the expansionary monetary policy pursued some time earlier. So it is all the more imperative that RBI douses the fire


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lest it might go out of control.

The Way forward

There is always a time lag between a monetary policy move and its impact on the real economy. The successive hikes help in creating a momentum in the desired direction over a period of time, which may eventually rein in inflation. Further, the prevailing negative interest rates (inflation rate being greater than nominal interest rates) negatively impact savings and boost consumption, which keeps prices high. Hence, we are likely to see more interest rate hikes over the next few months. In other words, the policy is likely to be pursued till inflation is well and truly under control (or at least till we see real interest rates turning positive). Anything less than that would largely nullify the efforts made by the RBI so far.

More importantly, the case for continual rate hike is that inflation itself would impede growth and investment in the medium term. Fears of dampening investment climate/growth due to rising interest rates might invoke a fierce response from certain sections of the industry. However, it is to be remembered that inflation could play a bigger spoilsport (even for the industry) in the times to come. This explains the reason why the recent rate hike, despite raising a few eyebrows has been largely welcomed by most of the experts.

Assuming the RBI continues on its rate hike spree, the next question to be asked is “What happens to growth”.

There could be various outcomes of the RBI policy. Some broad scenarios have been outlined in the above diagram in a simplistic manner in the form of a Growth – Inflation matrix

(Upto 6%) (6% above)

INFLATION

(8% and above)

GROWTH

(Below 8%)

Scenario IModerate Growth

+ Low inflation

Scenario IIModerate Growth + High inflation

Scenario IIILow Growth

+ Low inflation

Scenario IVLow Growth

+ High inflation

The successful transmission of the current monetary policy would make Scenarios II and IV (i.e inflation continuing to menace the economy) less probable.

Even if the inflation is controlled (as in Scenarios I &III), the level of growth may or may not be sustained based on a number of factors. Scenario I given above is the most desirable one with both targets (inflation less than 6% with growth of 8%) being achieved. This is to drive home the point that Monetary policy alone may not be the solution to the situation.

Though it may hit by the higher rates of interest, Growth is not a function of the monetary policy alone. So is the case with inflation. The foregoing discussion doesn’t delve into the impact of


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the Fiscal policy, Structural reforms and debottlenecking of the supply side factors, all of which together will also have bearing on growth rate and inflation. By taking on the responsibility to douse inflation, the RBI has implicitly prodded the Government to take prudent and complementary policy measures in order to sustain the growth rate.

Fiscal consolidation, implying a lower fiscal deficit has been on the policy agenda for quite some time. The Fiscal Responsibility & Budgetary Management Act stipulates a target for fiscal deficit of 3 % of GDP. Although the Fiscal deficit has decreased from 6.3% in 2009-10 to 4.7% of GDP in 2010-11, we have been lagging behind. The target for the current year is 4.7% and looks to be a stiff one to achieve if oil prices do not come down. A high fiscal deficit may lead to higher inflation and could make the anti-inflationary monetary policy pursued by the RBI less effective and vice versa. So also, government spending affects both the Investment and the Consumption demand, thus having a direct impact on the growth rate of GDP. The bottom line is that both the Monetary policy and Fiscal policy should act in tandem with each other to be effective.

On the other hand, there are a number of Supply side reforms, which required immediate attention and promise immediate and long lasting benefits. Some of the important supply side factors for agriculture would include (among others) improving farm productivity, fixing of broken agricultural produce distribution system, allowing farmers to strike deals in the open market, circumventing the middlemen, reforming APMC Act etc. Revamping the Public Distribution System would have long term and far reaching benefits for the masses. For the economy as a whole, addressing the infrastructure bottlenecks and human capital imbalances which fuel non-food inflation is important. All these would require a strong political will, co-operation and co-ordination between the Central and State Governments and efficient administrative machinery for their execution.

The Free market economy exposes us to a plethora of challenges and opportunities. Without (and despite) policy interventions the trade cycle may turn into an economic roller coaster! The Government, the Central Bank and the Real economy, together have to drive and at the same time be driven by each other to keep the ball rolling.

Reference (Endnotes)

1 Mishra & Puri, Economic Environment of Business, pp no 182

2 Friedman, M. (1968), “The role of monetary policy”, American Economic Review, Vol. 58 No. 1, pp. 1-17.

3 Dornbusch, R. and Fischer, S. (1994), Macroeconomics, 8th International ed., McGraw-Hill, New York, NY.

4 http://www.rbi.org.in/home

5 http://www.tradingeconomics.com/inflation-rates


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NetworKING KHAN-Profile of an avid Networker

Prof. Vinod ShastriAssistant Professor, SIBM, PuneE-mail : [email protected]

"Know the right people who know the right people"- Sahil Khan

All of eighteen years of age and splashed on the front page of a leading daily on your birthday -for whatever reasons- must be a huge high! Sounds more like a politician’s son being soft-launched through a paid advertisement wishing him a happy birthday. But we are not talking of someone born with a media spoon in his mouth.

We are talking of 1Sahil Khan, coming from a higher middle class family with no connections in the media or, for that matter, any high places. Then how did it happen? Did he achieve something really big or did he commit a big crime? Unfortunately, the answer is not as intriguing as the question- Sahil simply networked. And through his network, he could get the media coverage for the launch of his first venture.

"I was lucky to be introduced to the power of networking so early in my life", admits Sahil. But luck did just that- introduction. "Rest of it has been all sweat,’ continues Sahil with a hint of well-deserved pride in his voice. After all, at the ripe age of twenty-two, Sahil is the 353rd most networked person in India on Facebook with friends in twenty-two countries while yours truly at fifty is a lowly 23,622nd with friends in a measly nine countries!

We are obviously curious to know where it all started for this truly young entrepreneur with three start-ups under his belt even before he turned twenty- founder of the immensely popular online lifestyle magazine fondly called TTS (www.thetossedsalad.com), founder of a design firm by the name ‘Three November Designs’ and a core team member of Pune’s first egg specialty eatery ‘Yolkshire’, from which he recently moved on to launch another venture in the food sector; Phew!

His college -Symbiosis Centre for Computer Studies & Research- was part of National Entrepreneurship Network (NEN), the largest aspiring entrepreneur community in India. Sahil was actively involved in the Network’s events and that’s where it all started. He started getting familiar and comfortable with the concept of entrepreneurship. "I met a lot of like-minded students through this community," informs Sahil.

Once hooked on to the concept of networking, Sahil made sure that he was seen at as many entrepreneur meetings and entrepreneurial events as possible. He also ensured that he met and spoke to as many people at these events as possible. "Later on, due to the kind & quality

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of work I was doing through TTS and Three November Designs, word of mouth spread and my network started growing organically," says Sahil.

When he was stuck for something and asked for feedback from within his network, not only did he get valuable inputs, he also got referred to other people who had more expertise on that subject. "So I actually realized quite early that networking was very critical. Having good contacts always helps you to find the right people."

Sahil’s college was also playing host to the monthly meetings of Pune Open Coffee Club (POCC), a network of new and budding entrepreneurs. "That is where I met a lot of entrepreneurs and was formally introduced to the concept of networking, exchanging business cards and all that," recalls Sahil and adds with a special stress, "Then came Twitter."

On Twitter, it’s all about influence. Your presence and activity on Twitter gives a more precise assessment of your network. What matters in networking is not just your reach, but your credibility as well. "PeerIndex and Klout are two such companies which measure influence," Sahil informs. Besides being 353rd most networked Indian on Facebook, Sahil also regularly features in the ‘Top 100 Indian Influencers’ list compiled by Mumbai-based Pinstorm from time to time.

Sahil cautions that it would be wrong to assume that merely meeting people and exchanging business cards is networking; it is not. "In fact, that’s just the beginning and I have learnt it the hard way," says Sahil. According to him, this is where the tough part kicks in- that of following up. Whenever he met interesting people, he either followed them on Twitter or added them on Facebook to stay in touch because "Recall value is of utmost importance in networking," he says.

Being such a highly networked person at such a young age, Sahil is widely regarded as an expert on Social Media and also consults a few small businesses on leveraging the social media for marketing. The print and the electronic media regularly approach Sahil for quotes and bytes on social media. So it is only natural that you would want to know his take on the views of 2Mike DiLorenzo, the Marketing Director of NHL Social Media who says, "Social networks aren’t about websites, they’re about experiences."

"I completely agree with Mike," says Sahil. "The websites have just made networking and staying in touch easier. The experience that these social networks lend us really determines their power," he adds thoughtfully. According to Sahil, Twitter over Facebook is the best example. Twitter is quick, short and sweet. Hashable has been built over Twitter to negate business cards and measure the relationship strength on the basis of your interaction with the other person. Google+ has touched about 25million users. Google had tried its hand at social networking earlier as well but had failed miserably. With Google+, they managed to create the right experience. He shoots example after example and you have to admit that when it comes to networking, this man knows his onions.

On the role of networking in entrepreneurial success, Sahil has an interesting take, "Hard work may pay off. Hard work coupled with the right network will pay off. In fact, that is what smart work is; it is not the absence of hard work. And networking is important even otherwise. Your friend needs a job, the gas connection is getting delayed; if you have the right contact,

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just pick up the phone and things start happening."

Following the Germany Bakery blast in Pune, Sahil, was able to mobilize resources to create awareness & request people to donate blood and for Twestival (Twitter festival) to raise funds for a local NGO. He had also successfully organized a peace march following the blast. All thanks to his fabulous network.

"Speaking for myself, I’m not from the hospitality industry and being just about twenty is sort of restrictive in being taken seriously in India," laments Sahil. However, despite these inherent limitations, he got started off in the restaurant industry as a core team member "simply because of the people I knew," he insists. Spending over an year as a core team member at ‘Yolkshire’ and going through the rigmarole of scouting for a place to building the initial team to raising funds and to running the operations, he has seen it all and now feels ready and confident to launch his independent venture in the food industry.

Till it lasted, his relationship with the restaurant venture was a perfect case of a ‘win-win’ situation which according to Sahil is of paramount importance in networking. "You cannot just take from your network; you also need to give," says Sahil. "How many people of my age and profile would get this kind of an opportunity in India?" he asks. Not many; you have to agree. "I know the right people who know the right people," Sahil rubs it in as a reason for the kind of opportunities that keep coming his way. And the kind of opportunities he gets could be the envy of any youngster of his age. His advice to the budding networkers: Have a business card with your contact details and profession printed on it. Keep your profile on Linkedin, Facebook and Twitter updated. At meetings and events, don’t be nervous; be shameless. No question is stupid, so feel free and ask the other person whatever is on your mind. Chat up the person for a while if you think he/she could add value to your network.

You are obviously curious to know whether there is a flip side to having such a large network. "Well, to be honest, remembering everyone is a challenge. So when you meet a Facebook friend or a Twitter follower and you cannot recognize the person in person, it does get embarrassing," admits Sahil. "But that’s part of the game," he adds.

3Erin Bury, the Community Manager at Sprouter says his social networking principle is "Don’t say anything online that you wouldn’t want plastered on a billboard with your face on it." Has Sahil ever violated this principle? "I say a lot of things online which would seem awkward on a billboard," admits Sahil. But he firmly believes in ‘saying it as it is’. "Yes, you could keep some of your thoughts to yourself so as to create and maintain a more professional image, but never try to be someone who you are not," he advises like a veteran and you cannot but admire this king of networking.

References(Endnotes)

1 Online and telephonic interview conducted on 05.08.2011 with Mr. Sahil Khan, Founder, ‘www.thetossedsalad.com’ and ‘Three November Designs’

2 http://www.mirnabard.com/2010/04/99-favorite-social-media-quotes-and-tips/

3 http://www.mirnabard.com/2010/04/99-favorite-social-media-quotes-and-tips/

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Prof. Sapan ShrimalAssistant Professor, SIBM, PuneE-mail : [email protected]

Ravi Kumar Ahuja is the Head-Strategy of a large corporate house. He has been working in the field of strategy for last 15 years and has rolled out vision, mission and action plan for half a dozen companies. Besides, he keeps working on the detailed goals of each department and tracks their progress. He has been awarded as excellent performer many times in his role as strategist. He keeps emphasizing the importance of vision, mission and strategy to his own department as well as to his counterparts in other divisions. He strongly believes that without a well deliberated, clear and concrete strategy document, a company cannot move in the right direction. He ascribes success of his organization to the vision of promoters, detailed strategy by top management and goal setting & periodic review by head of departments.

Ask him what is his vision and mission in life; what is the direction he wants to take; what are his values; what are his long term and short term goals; what is his strategy to move forward; how frequently he reviews his goals and progress? He looks a little bewildered. He has to take a minute and then gives an answer, which leaves us wondering if he had ever thought about it, as sincerely as he worked on the company’s strategy.

Is it the story of one Ravi Kumar Ahuja? If we look within and around, we find that this is true for most of us. As management professionals, we always highlight the vision and mission statement, whether it is the company’s website or a presentation about company. However, when it comes to our own lives, these concepts find no role, or the least consideration.

The results are not unobvious, if we take a clear and unbiased look at the life of people around (including ourselves). How many people do we come across, who are truly excited about their work and look forward to going to their workplace? On the other hand, what is the proportion of people who drag themselves to the office everyday, glaring at the weekend - which takes too long to come and disappears too fast?

Have we ever wondered, why do companies find it so hard to get real performers, despite spending heavily on recruitments? On the other hand, so many graduates and post graduates keep struggling to get a decent job or a career rise?

The answer to these and many other questions lies in the grim fact that most of the people choose their education and profession based on flawed reasonings, rather than choosing the path, where their heart, passion and real strengths lie. Our education system as well as

Strategizing for Life

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social system gives least importance to understanding self, finding out the areas of passion, understanding our values and exploring areas of strengths and weaknesses. As a result, when a person is required to make choices about his life, he is not equipped with the proper logic and he takes decisions based on the way he is programmed by parents, teachers, friends and society.

School students are pressurized by parents to choose medical, engineering, Chartered Accountancy, etc, because these professions have got good ‘scope’. Graduates want to pursue MBA, not to become excellent business managers, but under the lure of glamour and packages portrayed in the media.

Even if you speak to MBA students, you will find the similar trend. Most of the students select their specialization or profession based on the education and experience they have already received (as deviating from it would be dent on their resume). Next parameters are ‘scope’ and possible package. Some students choose finance specialization because they do not want to travel, and so avoid marketing (They should take a glimpse on the travel schedule of an investment banker). Students with marketing as specialization say, as they are not good at numbers, so finance is ruled out. Choice is not about what they love, but what is left after shunting away the so called uncomfortable areas.

All these decisions are taken with very superficial understanding of subject, profession and the life ahead. Only on entering the industry, they realize what lies in those 9-10 hours (if not more) of daily routine. It is not surprising to find people feeling disillusioned with the life they chose with lot of fanfare, excitement and struggle. By that time, they have reached a juncture, where it becomes difficult to take any different road. Then starts the struggle to keep yourself motivated on daily basis. HR department keeps inventing new ideas to motivate people, but is mostly disappointed with the outcomes.

Though most of the people remain stuck in the monthly paycheck and status trap, few people are fortunate enough to realize their real passion at some point later and they dare to take the path of their calling.

What is common among Shankar Mahadevan, Nagesh Kukunoor and Chetan Bhagat, besides the bollywood connection? All three of them are engineers, who left their lucrative careers to pursue their dream. Shankar Mahadevan was working as software engineer on Oracle Version six, before he began his full time career as singer and composer. Nagesh Kukunoor was a chemical engineer working in Georgia as environment consultant. He has directed movies like Iqbal and Dor. Chetan Bhagat, a chemical engineer and masters in management from IIM Ahmadabad, is now a well known author.

If we dig little more, a number of such personalities will emerge, who have given up their career to follow their heart. Some of them are publicly known figures, some are not so well known. We read about investment bankers leaving the jobs to grow vegetables in countryside. An IIM graduate starts food business and then contests elections to make difference to the underprivileged.

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If we compare the level of success and satisfaction of these individuals with the traditional employees, there will be stark difference. It is even more striking to note that their success was despite losing initial years in a different arena. They had to make extra efforts to bring themselves back on the track. BomanIrani entered the film industry when he was forty four, but has created a niche from himself. This is testimony to the power of passion. Can we imagine, where these people would have been if they had the opportunity to start on the right platform from the very beginning (Think about Sachin Tendulkar and Lata Mangeshkar).

The earlier we get clarity about the vision, mission and strategy of our lives, the better it is. We cannot live on the chance that this insight will somehow dawn on us someday, and that we will have courage and opportunity to take major deviations from a constant life. Every person, irrespective of his profession and position, must draw his / her life strategy and document it with utmost sincerity.

There are a few standard excuses for not making life strategy. Few people explain that their mantra is to live the moment and they do not worry about future. It should be understood that strategizing does not imply worrying. On the contrary, knowing our destination helps us to enjoy each moment of the journey. Another excuse - "Future is not in my control, things will keep changing and new challenges will keep coming. So I cannot plan for future". It should be noted that if have plans, we would know where to make corrections, when situations change. Without plans, we will be swayed away by the currents of life, with no control from our end.

Before strategizing and making life plans, a few misconceptions should be cleared. First is about the static and dynamic nature of goals. Most of our goals are static, e.g. becoming a CEO or earning certain amount of money or building a business worth billion dollars. These are static goals because achievement and success is for a moment, an hour or a day, it is not continuous. Somebody becomes CEO after years of struggle. He can celebrate for a day or a week, but the struggle to next step begins immediately. Thus the life becomes majorly a struggling episode, with few spurts of happiness.

The real success lies in enjoying each and every moment, and this is possible only with dynamic goals. Take example of a person who takes up a job to reach package of certain amount. He will work hard and may get some results. However, he would mostly be under pressure and job will be a struggle. If the stress is high, he may not perform well. Another person works for own learning & development and to contribute his best to the company. He would enjoy each moment of his working hours, irrespective of the situations and will have better chance to get high appraisal.

It should be noted that static goals are also very important. They are the milestones, which provide measurement to our success. However, it should be remembered that milestones cannot become destinations and journey should not get ignored in anticipation of reaching a milestone.

Second misconception is that strategizing life is all about career planning. Planning our

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professional life is very important (as it occupies more than half of our active hours), however, it is not the end. A holistic plan for life must include the vision for all aspects including, health (physical, mental and emotional), relationships, self developmentand spirituality.

Next misconception is about the duration of life plan. Most of the people can plan for a short duration, but are not comfortable with plan for whole life. This results into piecemeal planning and the final outcome may not be the desired larger picture. In the words of Stephen Covey1, "Always begin with the end in mind". While strategizing for life, we must take the longest duration possible, so that all our short term goals are aligned with the final goals.

Fourth misconception is about the flexibility and firmness of goals. Many people want to make one time goals, which are freezed for whole life. As they find it very difficult to do that, they lose motivation to set any goals. Goals should not be made as rigid aims, but need to be flexible to accommodate new developments. At the same time, goals must be firm enough so as not to get affected by a few failures, disappointments or undesirable developments.

The final point to be noted is that a goal or plan remains only a wish, till it is written. As a Company devotes focus, time and efforts towards finalizing its vision, mission and strategy, every person must clearly document the vision, mission and strategy for his life. This is the most important step on the path of success and happiness. Reference(Endnotes)1. Covey, S. 1989. Seven Habits of Highly Effective People. Free Press

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Why don’t MBAs mind their own business?

Dr. Sanjay BhaleProfessor, SIBM, PuneE-mail : [email protected]

Prof. Vinod ShastriAssistant Professor, SIBM, PuneE-mail : [email protected]

Truth or Myth?

"I do not really agree that management education kills entrepreneurship; in fact, my own entrepreneurial abilities sharpened because of my MBA!" opines Nisaba Godrej, President, Human Capital and Innovation, Godrej Industries. So why this popular myth that management courses teach you to run someone else’s business and not your own; one wonders.

One reason for this strong perception is probably because most b-schools are placement-driven. They take pride in splashing big advertisements claiming hundred percent placements so as to attract students. These are not just claims; in most cases they also succeed in placing a majority, if not all. They make special efforts to prepare their students for the placement process, they earmark a separate budget for the placement activity, appoint an independent person -with a fancy designation in some cases- to liaison with the corporate world and what not. So the perception that is created through all these efforts is that the b-school is a preparatory ground for a corporate job.

From the student perspective, most students these days go for an educational loan to fund their post-graduate studies because of the huge costs involved. It becomes imperative for them to start earning as soon as they step out of the b-school and service the loan. There are of course others who join the course after a few years of work experience. But they already use-up their savings to fund their education, so they too find it difficult not to take up a job soon after their post-graduation.

So whether it is from the b-school perspective or from the student perspective, the very objective of the course seems to be a ticket to immediate return. Now this goes against the very nature of an entrepreneurial venture where returns are not just delayed for an uncertain period, they might never come. In fact, you might just end up losing what you had put-in and more!

What do entrepreneurs say?

Then what about people like Devendra Deshmukh, co-founder and Director of Pune-based

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e-Zest Solutions Ltd. and Vikrant Bhujbalrao, co-founder of Pune-based health food joint ‘Dr. You’? They stepped out of the same b-schools as all their happy classmates with the same degrees. The difference was that while their classmates left the b-school with a job in their hands, people like Devendra and Vikrant left with a dream in their eyes and hope in their heart to create a job for themselves.In fact, not just for themselves; for other as well!

Did they join the MBA course having made the decision to become entrepreneurs or did the decision happen during the course? Incidentally, both have one commonality and one difference. The commonality is that both started their businesses with their like-minded friends as partners. The difference: Devendra knew all along that he wanted to become an entrepreneur. "During my childhood, my father introduced me to some of the biggest personalities of the Indian industry by telling me stories about them. I aspired to be like them. The thought got stronger in my college because I had to pass these rows of factories to get to my college and I would tell myself that I want to own one of these someday!"says Devendra. For Vikrant, it is a different story; it was through his interactions over the two years of MBA with some of his classmates that they came up with this idea of a health food joint. "I was fortunate to find like-minded people as my classmates," admits Vikrant.

Going by the stories of Devendra and Vikrant, one can reasonably conclude that management education does not at least play a spoilsport in someone’s entrepreneurial aspirations and ambitions. But then the next -and probably more important- question is whether it inspires people to look at entrepreneurship as a viable -or at least, probable- career option. Going by plain numbers, it seems unlikely that management education is succeeding in doing it. A miniscule minority of management graduates seem to be taking the plunge into entrepreneurship.

Is there a mandate?

One might ask whether management education is supposed to do it in the first place. Well, one cannot say for sure whether that is the mandate of these courses. But looking at the nomenclature of the degrees like ‘Master of Business Administration’, Master of Business Management’ one cannot even say that the education is meant for managing other people’s businesses alone. So a reasonable inference one can draw is that the mandate is to teach ‘how to manage a business’- whether it’s someone else’s business or your own. If that’s the case, the percentage of management graduates starting their own businesses and ones going for jobs should at least be comparable. It would obviously be naïve to expect them to be equal or even very close; but at least some parity?

The reason for the lack of parity probably lies not so much in the mandate of the courses but in the mandate of the b-schools. There doesn’t seem to be any attempt to pitch the management courses as ones preparing students for an entrepreneurial career. Moreover, some b-schools -especially the tier II- actually shy away from promoting any entrepreneurship development activity on the campus. They evengo to the extent of saying that any entrepreneurship development activity promoted bythe school is perceived by the

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students as an attempt to reduce its burden of placement effort. The students feel that the school is finding it difficult to bring jobs to the campus. So it is actually counterproductive in terms of the student response- it is negative; not even neutral. It would be difficult to assess without a proper survey where the truth actually lies.

What about second generation entrepreneurs?

What about the set of students who come from family business background? It would be interesting to check their perspective. Most of them come and go quietly- neither looking for a job, nor necessarily thinking of a new venture. Broadly, there seem to be fivesub categories within this community. Some join these courses to simply acquire a Master’s degree as it is considered a huge value-add in the marriage market.There are some who join because they wish to bring sophistication to their family business. There is a third category that is somehow not comfortable joining the traditional family business and would rather go for the apparently more glamorous corporate life. There is another category of such students who join a ‘college’, not a ‘course’; they don’t want to lose out on all the fun of college life just because they have a business waiting for them to join. And then there is the fifth category that wants to start their own business in addition to or in spite of joining their family business.Skeptics might say there one more category- that of students joining these courses merely at their parents’ insistence, with none of the above express objectives.

While it might be absolutely fine to treat all other students as non-entrepreneur material, it might just make sense for the b-schools to focus on this lot coming from business families and bring entrepreneurship development on their agenda only for this select group

Is there a way forward?

There is practically no risk of these students coming from business families perceiving this focus as an attempt to reduce the placement burden. It is also likely that they would feel ‘special’ with all the attention they would be getting. In fact, even their families might feel good for all the special inputs their ward is getting.One cannot even ignore the possibility that the other students might just get attracted towards entrepreneurship because of these efforts. It’s then that the entrepreneurship agenda can become more demand-driven than forced.

The essential quality of entrepreneurship is innovation. Innovation leads to creation of new and better products which improve lifestyles of people. Peter Drucker1 argues that most innovative business ideas come from methodically analyzing impending areas of entrepreneurship, some of which lie within particular companies or industries and some of which lie in broader social or demographic trends. So aren’t the management students coming from business families innovative enough to achieve this? They most certainly are. After all, many of thesestudents come with an engineering background and certainly have the technical prowess and creativity and are then equipped with an analytical approach by the b-school.


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Finally, there seems to be another hook these days- Social Entrepreneurship. Youngsters have started showing signs of not just social awareness but also of social activism. And ‘opportunities, the core of entrepreneurship, is one of the commonalities between business entrepreneurship and social entrepreneurship’ according to Drucker2, Opportunities are recognized where ‘unmet’ needs exist, whether these are social needs or economical needs3

If youngsters are good enough to identify social needs, it would be reasonable to assume that they are also good enough to identify needs that can give rise to viable businesses.

To conclude, one might say that MBAs would probably love to mind their own business, if only the b-schools made it their mandate. So the onus seems to be squarely on the b-schools.

References

1. Drucker, P.F. (1985) "The Practice of Innovation", Innovation and Entrepreneurship Practiceand Principles, Harper & Row, New York, pp. 19-33

2. Drucker, P.F. (1999) "Management’s New Paradigms", Management Challenges for the 21st Century, Harper Business, New York, pp. 1-41

3. Johanna Mair, Ignasi Martý´ (2006) “Social entrepreneurship research: A source of explanation, prediction, and delight", IESE Business School, University of Navarra, Av. Pearson 21,


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ITC’s e-Choupal: A case study on Rural Marketing Initiative

Management Case

Prof. Rajesh PandaDeputy Director, Associate Professor, SIBM, PuneE-mail : [email protected]

India is primarily an agrarian economy. It still employs more than 58% of population and accounts for 15 % of the GDP. Though the sector’s share has been dipping, it still is important in generating income and demand directly and indirectly. A typical village in India is characterized by many problems - illiteracy, poverty and an acute lack of basic amenities including electricity, telephone and transport facilities. The rural market does not ensure volumes that urban markets guarantee. In addition, cost of set up and operation remain high making brick and mortar models of rural operations unattractive.

Agribusiness Initiatives

A number of large players across sectors have looked at the rural market with innovative business models – either an E-market place or a one stop shop for agri-products.

All these business models have their inherent problems and challanges. The main problem stems from inconsistent revenues and poor growth. Most organisations were unable to sustain the investments made. Several reasons for the same can be – a lack of trust on the part of the farmers, a significant dependence on intermediaries, a high fixed cost model, high operating costs and low volumes, channel conflict resulting in undercutting and parallel sales models and a lack of procurement knowledge.

Organisation Model Venture

EID Parry E-market place Parry’s Corner

Nagarjuna Fertilizers E-market place ikisan.com

Mahindra & Mahindra One stop shop for agri-products ShubhLabh

Rallis One stop shop for agri-products Rallis’ Kisan Kendra

Tata Chemicals One stop shop for agri-products Tata Kisan Kendra

Prof. Rajesh Panda

ITC ‘s foray into Agribusiness

Set up in 1910, the Imperial Tobacco Company of India Ltd. was as the name suggests a tobacco company. In 1971 the organisation began to diversify in a big way. Diversification

Footnote : Case prepared by Prof. Rajesh Panda, SIBM, Pune. The case is prepared as a basis for class discussion rather than to illustrate either effective or ineffective handling of a business situation.

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resulted in the organisation being a major player in various sectors including Hotels, Textiles (Tribeni Handlooms), Paper ( Bhadrachalam Paperboards) and Cement (India Cements). In 1974 the company name was officially changed to ITC Ltd. ITC's Agri-Business is one of India's largest exporters of agricultural products focusing on feed ingredients, food grains, edible nuts, marine products and processed fruits. But it faced many problems in agribusiness:

• insufficient control over supply chain

• lack of infrastructure for storage, handling and transportation of produce

• middlemen and other intermediaries blocking market and price information

• no direct control over quality of products

New initiative: e-Choupal

To address the above problems and to integrate association with rural suppliers, ITC’s International Business Division started a unique initiative e-choupal. It was initiated to network villages and procure Agri products for export purposes. For the first time, illiterate farmers who lacked basic knowledge of IT were conducting e-commerce transactions. E-choupals work as trust building activity where farmers get all types of crop related information and they can sell their produce directly to ITC in ITC collection centers. E-choupal made use of IT tools to network villages and internet to provide information to farmers and others. It leveraged physical transmission capabilities of intermediaries and dis-intermediated them from flow of information and market signals.

The e-choupal model worked in the following way. It had processing and collection centers as hubs and ‘Sanchalaks’ as conveners. These sanchalaks were chosen from among the farmers and were trained on using the PC. Farmers were provided with information like daily mandi prices, weather reports, global prices, best farming practices and water, soil, PCR testing etc. The farmers sold their produce in the collection centers for cash. It helped farmers in getting better prices, while ITC could directly procure from farmers and remove the intermediaries. It benefited the company by reducing its sourcing cost and gaining wider reach and networks. It helped in creating new markets for own and third party goods. ITC also used this model to sell FMCG products like packaged vegetable oil, salt, wheat flour and sugar, agri-related goods of other companies like Monsanto (seeds), BASF etc.

E-choupals in 2011

Challenges

There are several problems faced by the E-choupal model, most of which were unique and hence all the more challenging. ITC faced many problems like Intermediary unrest, lack of awareness, outdated infrastructure, problem in electricity supply etc. But gradually ITC

States covered 10

Villages covered 40,000

No. of e-Choupals 6,500

Farmers e-empowered 4 million

Prof. Rajesh Panda

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tried to overcome these problems. ITC upgraded the telephone lines using RNS kits. The company made use of specially devised technical solutions to manage data along with new imaging techniques, to deal with the bandwidth-related problems. To handle the problem of sporadic electricity, ITC made use of backup batteries, which could be recharged with solar panels.

FutureThe key success to the e-choupal model lies in its scalability. E choupals have been very successful in states like Madhyapradesh and Maharastra. Now ITC has to work further in its expansion to various states and use of the e-choupals at retail chains for selling different products.

Reference

http://www.itcportal.com/sustainability/lets-put-india-first/echoupal.aspx

http://www.echoupal.com

http://pdf.wri.org/dd_echoupal.pdf

http://www.itcportal.com/itc-business/agri-business/agri-commodities-and-rural-services.aspx

http://www.fao.org/rdd/doc/ITC%20e-Choupal.pdf

http://www.peerpower.com/et/782/ITC-e-Choupal-to-quintuple-reach

Prof. Rajesh Panda

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Invitation to Authors The articles and papers based either on empirical research experience or on a high

level of conceptualization are invited from faculty and students. They should preferably relate to different facets of Economy, Management, Organization of Commerce System, Business Practices, Technology Management etc. The abstract of theses submitted for Ph.D may also be considered for publication (Along with Name of Research Supervisor as co-author).

The Corporate Professionals are also requested to write their account of experiences, reflexes in the form of Case Studies for favor of publication in the Journal.

All views and opinions expressed in the Journal will be treated as the sole responsibility of the author(s). Neither the Publishers nor the Editor in any way are responsible for them.

Submission Guidelines

1. The Manuscript should be prepared on Computer using preferably Windows/MS Word and be submitted in CD with one hard copy on A4 size paper (Times New Roman-12 font size).

2. The copy should be double spaced, including tables, footnotes, endnotes, references and bibliographies with 3 cm. margins on sides of page.

3. Number of text page should appear in upper right hand corner.

4. Proper acknowledgement should be made in case of cited material. Permission should be obtained for any copyrighted material quoted in the text or used in preparing tables or graphs.

5. Footnotes or endnotes and expanded list of abbreviations used in the text should be typed on a sheet separate from the text.

6. Each table or graph should be placed on a separate page and their suggested placement within the text should be highlighted by a text reference.

7. The manuscript should be well wrapped and be sent by a Express Courier service/ Speed post with a backup copy to be retained at your end.

8. The papers received for publications (other than Ph. D abstracts) will be sent to Panel of

Referees (subject experts) for their remarks. Their remarks in turn (Involving corrections,

resubmission etc) will be communicated to the contributor. The Paper will be accepted for publication only after it gets duly refereed. The papers rejected by referees will be returned to the authors within the reasonable time.

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Contents

6. Editorial

(I) Research Papers7. Growing with The Masses A New Approach to Bottom of The Pyramid

Dr. Vivek Sane & Prof. Anil Kshatriya13. An Exploratory Study of Important Aspects of Egg market in Kolkata

Dr. Shibashish Chakraborty & Mr. Sayan Shom35. Sustainable Business : A Tangible Reality Dr. Anupam Ghosh

(II) Viewpoint42. Building Strategies in Turbulent Times Prof. Vijay Kumar Dharmadhikari47. A primer on Credit Default Swap (CDS) & RBI guidelines on CDS Prof. Utkarsh Jain & Prof. Kaustubh Medhekar53. Nurturing Winning Brands Dr. Kaushik Mukherjee56. The Employee Value Proposition- A Key to Attract Performers Prof. Deepika Pandita62. Inflation Vs Growth: The Tightrope Walk Prof. Mahima Mishra & Prof. Kunal Khairnar68. NetworKING KHAN-Profile of an avid Networker Prof. Vinod Shastri71. Strategizing for Life Prof. Sapan Shrimal75. Why don’t MBAs mind their own business? Dr. Sanjay Bhale & Prof. Vinod Shastri

(III) Management Case79. ITC’s e-Choupal: A case study on Rural Marketing Initiative Prof. Rajesh Panda

volume iii september 2011 - sibm. mahima mishra & prof. kunal khairnar 68. ... is to show that...

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