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Case Studies

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Case Studies followed by their Suggested Guidelines

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Case StudyGENERAL MOTORS

When Roger B. Smith became the Chairman of General Motors in 1981, theauto-giant’s market share in the US was crumbling and they had reported theirfirst ever loss since 1921. The structure of the company consisted of two centraldivisions - the “Fisher Body” and the “General Motors Assembly Division” (GMAD)apart from their famous five car divisions - Cheverolet, Pontiac, Oldsmobile,Buick and Cadillac. With centralized design engineering and manufacturing overa period of time, all GM cars had started to look remarkably similar to oneanother. Around the same time, GM responded to Japanese competition (of smallcars) merely by making a shrunken version of its larger cars, which obviouslythe market rejected.

Mr. Smith thought that the present structure had some problems of speedyresponse to the market changes, flexibility, accountability and measurement ofperformance. By 1984, an organisational restructuring plan was put in place,which suggested to create two new car groups - Buick, Oldsmobile, Cadillac(BOC Group i.e. large and luxury cars) and Cheverolet, Pontiac, GM of Canada(CPC group i.e. smaller cars). Both the divisions had their own separate designengineering and manufacturing resources while Fisher Body and GMAD weredissolved.

By 1991, when the new CEO (as Mr. Smith retired) Mr. C. Stemple, took over,the reorganisation plan was still not complete and GM's market share hadplummeted from 45% to 35% with losses of $4.45 billion. The losses in the GM'sNorth American Auto Operations had mounted to as much as $7 billion. GM'sBoard of Directors became impatient with the pace of change and in an unusualmove, forced a reshuffling of the company's top management in the process. Mr.John from GM’s European Operations (the most profitable operation of GM) wasmade President and the Chief Operating Officer. In the process, Mr. Stemple, theCEO also lost some of his powers.

Under pressure from the Board, Stemple and John soon announced a managmentreorganisation. Now, the car design and manufacturing activities of the two majorcar divisions (BOC & CPC) were merged into one. In addition, all vehicle salesand marketing operations were combined into one group. The heads of the twonew groups reported directly to Mr. John, eliminating an entire layer ofmanagment. Within a few months, GM announced a cut of 74% of corporate HQstaff. Still impatient with the pace of change, the Board named Mr. John as theCEO and ousted Stample.

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Guidelines for Case Studies

General MotorsThis case study is based on the product development and its corresponding effects on the company sales. It sites a

practical example of General Motors, the world’s largest car manufacturer and the problems it faced.

What had actually happened : In the 1980s the Japanese carmakers like Toyota, Honda, Mitsubishi and a whole lotmore realized the potential of the huge American market and began exporting their cars to the US. The American carmakers– GM, Ford and Chrysler (the largest of them being GM) took the Japanese threat rather lightly.

The three American companies always thought that the American customer couldn’t ever go for the small and mediumcars that the Japanese were offering. However, they were deeply mistaken in their perception and understanding of theAmerican customer. Not only did they appreciate the Japanese concern for quality, but they were so impressed with it thatit actually helped the Japanese corner a substantial market share. It is then that the Big three American car companies satup and took stock of the damage that had already been done.

**GK Tip : The fortunes of the Chrysler Corp were so badly dented that it took the ingenious effort of a person likeLee Iacocca and his creation – the K-car to bring the company back from the brink of sure bankruptcy.

The response of the American car companies was reactionary. They, instead of stressing on the quality aspect, theyrather modified their existing models and attempted to shorten them to fit the definition of the small cars that theJapanese had virtually total domination of. The poor effort made by the American car companies certainly reflected in thesales of their product as well – simply for the reason that the American customer had been already introduced to highquality at very affordable prices. The Japanese car companies, realizing the huge market potential then established theirmanufacturing bases as well in the US and were further able to cut down the costs.

The case throws some light on the situation that General Motors faced.Analysis of the situation :

Ø The company reported its first ever loss in 60 years in 1981. This made the management sit up and take notice of thetrouble that the company is in – It can be inferred that the company’s management has not been pro-active inapproach and was rather high handed in its outlook towards its customers.

Ø Total lack of understanding of the customer’s need – the stress was on selling what they made, not on making whatthe customer wanted.

Ø Sudden policy shifts in a short period of time indicates the lack of long-term vision at the top levels of management.Had there been clarity on policy or the course of action that was now to be adopted, it would probably not havemessed up the situation to the degree that it did.

Ø The customer has been agonized as can be inferred from the market response to the GM’s small cars – a potentiallydangerous situation for any company. This would not only result in a fall in the company’s repute in the customer’smind, but also a negative publicity that will affect the company’s future offerings.

Ø The change of guard at the CEO level not only implies unsteady policies, but also creates uncertainty and confusionin the minds of both – their own employees and their customers as well.

Ø GM’s strategy of splitting the design division into two groups could have turned out to be beneficial had it beenallowed some more time to prove itself. The reason for this is that in the automobile industry, the current productdevelopment cycle stretches for nearly 12 to 15 months (that is with heavy use of all the advanced tools like CAD/CAM that are now available). Earlier, in the 1980’s the typical product development cycle stretched to just under 2years i.e. around 24 months.

And as we can see, the plan to split the development centre was put together in 1984 and was disbanded in 1991. Onemust also realize that any new initiatives in the automobile market then used to take nearly a year. So, probably the GMBoard was a bit over-hasty in shuffling out the newly implemented plan.

The obvious advantage of the new plan could have been that the similarity of all the GM’s brands would have endedand fresher designs might have been tried.The other angle to the same point is that it was indeed a good step for the GMBoard to have merged the two design groups and saved tremendous resources by utilizing the synergies between the two– especially when the company’s fortunes were not looking to be very bright.

Possible strategies that could have been implemented :Ø GM top brass could have identified the brands and the respective segments in which they shall be operating. For

instance, the BOC Group had bee identified with the large and luxury cars. This would have helped create a clearimage about the company’s brands in the minds of the customers, which in turn would have lead to relative ease incommunicating the brand’s values to the customers.

Ø In the automobile market, confusing brands that operate in multiple segments have proven to be a non-starter, if nota failure. Similar seems to have happened with GM as well when it introduced the shrunk versions of their larger cars.

Ø In keeping with the values that each of the GM brands represents, the company would have found it very easy toregain its lost market share to a large extent, if not fully.

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Case Study

ABC LTD.

ABC Ltd. is a large FMCG Co. having a varied product profile which includeswashing soaps, bathing soaps, cosmetics, beauty products etc. It is faced withdeclining sales for the past three years. The Board of Directors have instructedthe CEO to draw up a plan to revive the sales and improve the profitability ofcompany in the short run. The CEO sends the following information to the DirectorFinance and asks for the suggestion to improve the profitability of the company.

The data which reaches the director finance is as follows :

Particulars 1997 1998 1999

Sales in Cr. 500 400 320

Profit before Interest in Cr. 100 80 60

Equity Base in Cr. 150 150 150

Debts - Long Term 75 75 75

- Short Term 60 60 60

Loans Interests - Long Term 10 10 10

- Short Term 20 20 20

Profit after Interest 70 50 34

You being Director Finance suggest the measures that the company shouldtake to improve the profitability in the short run (2 to 3) years.

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Guidelines for Case Study

ABC Ltd.

Moderator's tips: Decrease in the sales is 20% per year while the decrease in the profits after interest is more than20% primarily because of high leverage, i.e., stagnant interest costs. With decrease in sales, shortterm loans should decrease, i.e., WIP, Debtors, Finished Goods Inventory etc. should also comedown. Retire short term loan first from current year's profits and the earlier reserves. Properutilization of short term loans should be looked into.

This case provides an insight into the financial management of any company. The student should be made tounderstand a few of the important aspects of financial management like Short term and Long term debts,Interest costs etc.

Analysis of the situation:

Ø The company’s sales have been registering a continuous declinez over the past three years – to the tune of nearly20% every year.

Ø However, the profits after interests have fallen by more than 20% indicating to higher leverage i.e. stagnant cost ofinterest.

Ø The company’s short-term debts have also been constant over the years and indicate towards a constant manufac-turing and associated costs that are not resulting into the desired sales.

Ø There is not much that can be done with regards to the long-term debts and interests – for they might have beentowards infrastructural improvements or capital expenditure (i.e. expenditure on account of machinery etc.)

Possible strategies that can be implemented:

Ø One possible way is to of course, to retire the short-term debts from the current year’s profits and cash reserves.

Ø Another improvement could be the proper utilization of the short-term loans. Short-term loans are normally taken toservice the costs of day-to-day manufacturing and related costs.

Besides the above suggestions that can be provided as the Director, Finance, in the event that the students find difficultyin understanding the case, a general strategy towards improving the current situation could also be thrown in to improvestudent response.

Ø The company should also focus on improving its cash flows or simply, the sales. This can be done by either expandingthe current product range to cater to an altogether new customer segments or perhaps through introduction of newerproducts in the customer segments that the company is currently addressing to.

Ø Alternatively, it might be the case of improper targeting of customer segment. This could be improved by concertedefforts in repositioning the products to the correct customer segment.

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Case Study

EDWARD F. CROW COMPANYThe Edward F. Crow Company is an industrial distributor located in Memberships, Tennessee. Its principal product lines

include materials handling equipment such as conveyors and transfer stations, electric motors and controls and powertransmissions, and, finally, weighting scales, particularly those used as part of conveyor lines.

The firm covers a territory consisting of nine states – Tennessee, Kentucky, Alabama, Mississippi, Louisiana, Arkansas,Missouri, Illinois and Indiana. Memphis is the hub of the trading area called the mid-South.

The firm was founded in 1937 by the late Edward F. Crow who had earned his mechanical engineering degree from CaseSchool of Applied Science (now Case Western Reserve University) in the 1920s. Before starting his own firm, he had beena design engineer and then a sales engineer for a major manufacturer of conveyors. When he passed away about fiveyears ago, operation of Crow was taken over by one of the lawyers who was handling the estate. There were no heirsinterested in or capable of running the firm.

Over the last five years, annual sales have decreased from slightly less than $3 million to slightly more than $2 million(see Exhibit 1). Because of inflation, actual physical volume has decreased even more (about 40 percent). Five years agothe corporation was very profitable, but last year Crow suffered a very small loss. Five years ago there were five outsidesales people. As conditions worsened, the sales force diminished in size, the last outside salesperson quit last week, andonly two inside salespersons are left.

They are both very competent but are overworked. As a result, the firm lost an opportunity to bid on seven largeelectric motors for the Tennessee Valley Authority when the closing date was missed.

At present (1983), volume is broken down as follows:1. Electric motors and controls and power transmissions 25%2. Parts, repairs and service for motors, and so on 25%3. Materials handling equipment, including parts and design services

but not including motors, controls, transmissions, or scales 30%4. Scales 10%5. Parts, repairs, and service for scales 10%

Over the last five years, dollar sales decreased in all five categories. The share of total sales held according tocategory has changed, with new motors and scales dropping from 35.3% to 30.8%, all parts and repair increasing from34.8% to 39.4%, and material handling holding steady at 29.8%.

In addition to the two inside sales people, employees include a purchasing agent, a parts manager, a service manager,and seven service and repair people, an engineer who designs materials handling systems, some warehouse and deliverypeople, and clerks who handle bookkeeping, billing, and correspondence.

There has been turnover among these employees; consequently, problems have arisen due to being short of help aswell as having inexperienced help. For example, there is a one-month backlog in billing for completed service. Thepurchasing agent also acts as office manager. The engineer has increased the amount of his customer contact because ofa decrease in number of outside sales people.

The firm is the exclusive distributor in the mid-South for Primax, a foreign manufacturer of electric motors whose Eastand Gulf Coast port-of-entry is New Orleans. Primax has a distribution center in Memphis that serves the entire country.Crow's annual Primax sales five years ago totaled 400 units, contrasted with last year’s sales quota of 200 units. So farthis year, sales have been at an annual rate of 200 units averaging $1,000 per unit.

Crow also represents several divisions of Reliable Electric, a manufacturer of electric motors, control, transmissions,and so on. Sales of Reliable products this year are running at an annual rate of $300,000 including parts. Almost 10percent is small power transmission components purchased from Reliable's Lodge Division for materials handling installations.

The firm is the distributor for several different manufacturers of materials handling equipment and scales. Thesemanufacturers are competitors in some of their lines. In these cases, Crow sometimes uses more than one manufacturerfor a given installation of materials handling equipment or scales. For most manufacturers, the firm is the exclusivedistributor in the Memphis area even though they carry competitive lines.

In the almost 40 years that Mr. Crow ran the firm, he had built up an excellent reputation among suppliers andcustomers. Although this reputation has deteriorated somewhat in the last five years, the firm still enjoys a goodreputation. If the situation continues to deteriorate much longer, it will reach a critical state. It may even become anirreversible situation.

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Recently the Fearhank-Moose Scale Company, which manufacturers a line of portable industrial scales, canceled itscontract with Crow because it felt that Crow was not doing justice to its line of scales. Subsequently, Fearhank signed upwith another Memphis-based industrial distributor who is in direct competition with Crow.

Sales : 1978 1982

Motors and so on $669 $112

Parts, repair and service for motors, and so on 642 516

Materials handling/installations* 870 615

Scales 361 224

Parts, repair, and serive for scales 374 298

Total net sales $2,916 $2,065

Cost of goods sold :

Motors and so on 458 288

Parts for motors and so on 237 196

Materials handling 556 406

Scales 243 155

Parts for scales 111 94

Total cost of goods sold 1,605 1,139

Gross Margin $1,311 $926

Operating expenses

Service and repair, labor and overhead** 501 412

Warehouse and distribution expense 212 201

General administrative and selling expense*** 318 319

Basically fixed costs

Total operating expenses 1,031 932

Operating income (loss) $280 $6

Interest expense less interest value 13 4

Net income (loss) before taxes $293 $2

Income tax (refund) 132 0

Net income $161 $2

Exhibit 1 : Income Statement, 1978 versus 1982 (All Figures in $ '000)

* Actual materials handling sales are larger than indicated on the income statement, because they usually include electric motors and controls power transmissions, and something scales. When these components are included as part of a materials handling in

** About 10% of this is assembly labor and warranty labour associated with material handling sales.

Questions for Discussion :1. What is/are the problem(s) of Crow Company?2. Why is there a high turnover of employees?3. What alarming situation for the company has been mentioned in the case ?4. What is the required action to be taken to change the stance of the company?

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Guidelines for Case Study

Edward F. Crow CompanyThis case covers the general principles of management and certain fundamentals of HR management. The faculty should

lay stress in explaining the concepts of HRM to the student. Common principles such as motivation, environment in thecompany etc. should be made absolutely clear to the students in the analysis of the case.

Analysis of the situation:

Ø Substantial drop in the sales of the corporation despite lower operating expenses and lower cost of goods.

Ø High employee turnover rate indicating to employee dissatisfaction and poor working environment.

Ø Due to high attrition rate of employees, the existing employees are heavily over burdened with a whole host of jobs/ responsibilities.

Ø Apparent leadership problems as none of the heirs were willing to or were capable enough of leading the company.

Ø The sales have dropped to such a level and the employees are so saddled with work that proper attention is not beinggiven towards the marketing and selling of the products of the various manufacturers that the company represents.

Ø High turnover rate also means that a lot of time and resources are spent on training and acclimatizing the employees

Some of the underlying causes may be:

Ø The leadership is incapable of understanding the nitty-gritty of the business. Mr. Crow himself was an engineer andwas experienced in design work as well. After his demise, one of his lawyers took over the firm. Another possibility isthat the current leadership is equally involved in practicing law as well.

Ø Possible leadership tussles within the managerial cadre of the company after Mr. Crow’s death. This tussle might havelead to souring of relations and the working environment in the company. This might be a possible reason that explainsthe high turnover rate of the employees. Besides, poor motivation for the employees might be another factor aidingin the high turnaround rate in the organization.

Ø Another possible cause may be the lack of understanding between the technical staff and the company leadership. Itcan be represented with the following cycle.

Ø Thinking Gap between the leadership and technical staff

Ø Poor performance of the company

Ø Drop in sales and market share

Possible actions that could be taken to improve the situation:

Ø Improve motivation levels within the organization. This will help retain staff. Another measure could be an over theboard salary-hike for the employees.

Ø Recruit staff to reduce workload on the existing staff.

Ø Possibly, a change in the leadership.

Ø Efforts to regain confidence of suppliers and customers.

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Case Study

APPLE INC.When Steve Jobs and Stephen Wazniak invented a computer in a garage in 1976, they wanted to make a machine that

was easy and fun to use. With this modest and perhaps naïve mission, the two young upstarts founded Apple Computerwhich developed the billion-dollar personal computer (PC) market.

Today, Apple continues to be a viable force in the industry but faces intense competition from a host of firms, includingIBM, Compaq and Dell. With growth slowing, current chairman John Sculley questioned Apple's long-standing strategy ofhigh prices and huge product differentiation. Apple lost much of its differentiation with the introduction of Microsoft'sWindows, and industry price wars have made PC a commodity product.

The challenge facing Apple is to develop a viable strategy for the 21st century. Sculley is staking Apple's future on newmarkets and new products, including the trillion-dollar megamarket that takes electronics and computers even deeper intothe lives of consumers. As part of this strategy, Apple wants to become the industry leader in Japan. Sales of theMacintosh have grown in Japan from a few thousand units in 1988 to an estimated 180,000 in 1992, market share hasgrown from 1 to 6 percent of the $7 billion Japanese market.

A new distribution agreement with major Japanese companies (Mitsubishi, Sharp, Brother Industries, Kokuyo, andMinolta) could move Apple into Japan's lucrative corporate market. Some experts predict that Apple will eventually controlabout 13 percent of all PC sales in Japan.

In addition to the large customer base in Japan, Apple is also developing relationships with Japanese manufacturers.Working with these firms, Apple plans to link its software with a new generation of consumer electronics products. Toexecute this strategy, Sculley has Sony Corp. building Apple's smallest laptop, the PowerBook 100, Sharp Electronicsmaking Apple's new electronic organizer, and Toshiba manufacturing a new Mac that combines video, text and sound.

By moving toward new markets, Apple hopes to pull away from the US PC manufacturers fighting for modest profitsand small growth potential.

Apple also plans to develop a number of digital technology gadgets for what could be a $3 trillion market in the year2000. As the borders between telecommunications, office equipment, computers, consumer electronics, and media &publishing dissolve, the demand for personal electronic devices is expected to grow substantially. Software will be a keyto making these digital products useful and easy to use, and software is Apple's forte.

Selling $2,000 machines has brought Apple success over the years and now marketing products that sell for $250 orless is quite a change. Sculley believes that the core business in ten years still will be the Macintosh, but Richard Shaffer,Editor of Computer Letter, thinks the personal electronic devices could help Apple double its revenues.

The problem, he says, will not be manufacturing, because Apple can farm out that part and indeed plans to do so, norwill it be software, Apple's strength. The major problem will be marketing – developing and delivering quality Macintoshcomputers for under $1,000. Apple's objective is to strengthen its position in the consumer market with a lower-priced PCthat will come with the software already loaded.

Then the new digital devices should be ready for the marketplace. Products being developed include an electronicRolodex, an electronic scratchpad with a built-in cellular phone that can record handwriting and transmit to any faxmachine, and a multimedia reader the size of a compact tape recorder and weighing only a few pounds.

The strategy is risky. By taking on so many new ventures, Apple could find itself overloaded. And by making itsdistinctive software widely available, the firm could lose some of its appeal.

Finally, Apple may have to relinquish some control to those firms manufacturing its new electronic devices. But Sculleythinks Apple would face even greater risks by avoiding change. If the strategy works, Apple could gain a large share of thegrowing personal electronic devices market by making machines that are easy and fun to use.

Questions for Discussion :

1. What is the mission of 'Apple’?2. What is Apple's organizational strategy for growth?

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Guidelines for Case Study

Apple Inc.This case provides an insight into the strategic management of any organization. This real life case should be able to

provide a very good idea as to what could be expected under the various branches of management.

The faculty should explain the basics of strategic management i.e. long-term planning, short-term planning and otherrelated terms.

Analysis of the situation:

Ø With the introduction of MS Windows, the product differentiation enjoyed by Apple so far has diminished considerably.

Ø As a result, its pricing has been affected – selling its product at lower prices, the ensuing price wars and thecommoditizing of the once niche product.

Ø Suggested foray into the new generation consumer electronics segment – the project has very high stakes due to thefact that the company’s future rests largely on this. Another factor is the massive development costs involved.

Ø Apple has had great success at marketing PC’s that retailed over $2000. The challenge it now faces is in selling PC’sin the sub $1000 category.

Possible future strategies:

Ø Since the company has always developed & marketed its products as “PC’s that are easy and fun to use”, it shouldcontinue with its established repute.

Ø Further, since the primary target of the company’s product has been the youth, it is imperative for Apple to keep onupdating and augmenting its product line with so called “cool” gadgets that appeal to its target customer segment.

Ø Its alliance with several of the Japanese corporations shall prove to be highly useful. First, it will help Apple gain anunderstanding of the huge Japanese PC market and second, it shall be able to establish a head start in this upcomingsegment which shall be of great importance in the times to come.

Ø However, as they say, “discretion is the better part of valor”. Similarly, Apple will have so exercise extreme cautionin investing such a huge sum. A deep understanding of the needs and aspirations of the targeted customer segmentand an eye on the upcoming technologies shall see the corporation through with its strategy successfully.

Ø The alternative strategy for Apple would be to follow the market and tow the line of the competitors. It could throwitself headlong into the price war, expand its customer base and hence its market penetration. This should lead toincrease in its sales volume and a viable path to profit. This strategy however carries the risk of dilution of Apple’scurrent brand equality as a niche market player to a mass market player and further, the company stands a great riskof losing out in both the segments.

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Case Study

FAST TRACK INDUSTRIES

During the late 1970s, when a shipment "absolutely, positively, had to be there overnight",organizational buyers had little choice; they called Federal Express, the pioneer in the overnight shippingbusiness. But today that's all changed. By the early 1980s, competitors had copied FedEx's system,though not necessarily its high-quality service, so the skies have become crowded with competition,much of it priced lower than FedEx. Fred Smith's company must now struggle to find ways to remainthe industry leader.

Aside from FedEx's technical superiority, the company's major competitive edge is its renewedcommitment to serving the demanding organizational sector. Smith understands that as organizationalbuying patterns change couriers must offer their customers maximum flexibility. He also recognizes thegrowing importance of time–certain delivery as a marketing tool. "Distribution has become a primarymeans of product and service differentiation," he says. "How I get the product to you may well becomeas important as what I get to you."

A striking example of the level of service that organizational buyers expect occurred in 1989 whenMcNeil Consumer Products used express shipping to help their new drug Pedia Profen take the marketby storm. "We had a strong sense that our competitors were going to rollout similar products at thesame time," said product director Donald Casey Jr.,"so the moment the drug received FDA approval,FedEx, in one of its largest one-day bulk shipments ever, carried 2,562 cases and 55,000 samples topharmacists and doctors across America.

"Was it worth spending a significant portion of the brand budget on what was essentially a timeadvantage?" Casey asked. The initial wave of orders provided a dramatic answer, Pedia Profen quicklygrabbed two-thirds of the market, indicating that timely delivery can help companies become an overnightsuccess in the market place.

In addition to custom-tailoring its services, FedEx has also established hundreds of retail outlets forgreater customer convenience. The company even developed its own weather forecasting system,which has helped it achieve a 98.8 percent on time flight record. But perhaps the most importantinnovation was FedEx's pioneering effort in electronic tracking and tracing of items in transit. With theintroduction of the company's highly sophisticated Digitally Assisted Dispatch System, customers becameeven more confident that FedEx would deliver as promised.

But with small-package delivery becoming less profitable FedEx spread its wings in search of newhigher margin organizational markets. Delivering heavier cargo – especially overseas – seemed to holdgreat promise. So FedEx bought Flying Tiger, the world's largest heavy-cargo airline, for $880 million.With Flying Tiger under his wing, Smith has the established international routes that he hopes willeventually allow the company to offer two-day service between most cities around the globe.

To avoid competing on price alone, FedEx has continued to diversify in order to offer organizationalcustomers still more services. For example, a growing number of high-tech companies are shiftingfrom traditional warehouses to faster and more flexible distribution systems.

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So in 1990, the company instituted a Business Logistics Services program that handles everywarehouse function from inventory management to bookkeeping. For some customers, says Smith,"Federal Express has actually become a 50 to 500 mile-an-hour warehouse." He believes that as high-speed delivery grows in importance, FedEx’s unique array of services will give the company a wing upon the competition.

Eventually, Fred Smith plans to mold his brainchild into the world's biggest and best transportationorganization. But he knows that to reach his goal, he'll have to attract organizational buyers who areheavy users of express delivery services. And with a little more imaginative risk taking, he'll probablysucceed.

Your Mission :

Fast Track Industries is a small midwestern manufacturer of land-surveying equipment that sells toboth industrial and reseller markets. Mr. John, CEO of the company is a very diligent worker and strivinghard to keep the company afloat with more and more competition.

Recently, he attended a seminar where effectiveness of the delivery system and its impact on thefirm has been discussed. Now, after the said seminar Mr. John is more worried about the same withregard to his company. So, he thought of giving the vigilance duty to a trusted employee of his company.

Fortunately, your name crept up during discussion. And after much thought and enquiry, Mr. Johnhas asked you to screen couriers and recommend the one you think would be best to handle theorganization's overnight delivery services. Of course, Federal Express is high on your list, but you mustconsider other possibilities also.

Mr. John has told to you to keep in mind that although low prices may be important, but there's nosubstitute for dependable, high quality service. Further, he added that your performance will be takenfor consideration during performance appraisal process. So, it adds more weight to the task.

Questions for discussion :

1. “Before you can invite bids and begin the actual screening process, you must analyze your company'sdelivery needs as carefully as possible. A key part of that task will be determining the characteristicsof your organization's particular market place.”As you do that, which aspects would you consider ? Mention the possible alternatives and also thebest alternative that you will keep in mind while selecting the courier services.

2. Now that you've forecast your company's needs based on the characteristics of its market place,you must take a close look at the various forces that will have an impact on which courier yourecommend.As you consider the business element and your company's corporate culture, which factors do youthink will be most critical in influencing the buying process?

3. By analyzing your company's needs and considering the various factors that will influence thefunctioning of the buying center, you've laid a solid foundation for the buying process. You are nowready to solicit bids from a number of express delivery services. As you consider each, there willbe many factors you must weigh before making your recommendation.

Mention the various criteria you will choose and the best among them.

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Guidelines for Case Study

Fast Track IndustriesThe faculty should make the students aware that this case involves a little bit of both, logistics and cost-benefit analysis.

The case presents the various strengths that FedEx has developed to tide over the stiff competition that it faces. It includes the varioustechnological advancements that the company has been able to put to effective use in creating differentiators that have ensured thatthe company stays as the market leader.

The case requires you to analyze and recommend from the position in one of the customers, depending on the needs of your organization– Fast Track Industries.

The student is required to put himself/herself in the shoes of this person and make a justifiable recommendation – for he has much atstake, including his avenues for promotion.

The decision on which courier company to hire shall be largely dependent on the nature of the delivery needs of your organization. Theseinclude:

Ø The company is operating in a highly competitive environment where the rapid technological advances have bluntedthe competitive advantages that the company enjoyed. It has therefore, to rely on very minute differentiators suchas timely deliveries of the equipment in proper condition, extended line of credit etc. to retain its market share. Thisdoes make timely deliveries of prime importance but one shall also need to consider the cost factor involved. That isto say that the cost of timely distribution should not be cannibalizing on the profit margins that the company isderiving from the sale.

Ø An important consideration in deciding the courier service shall be the volume of sales generated from the region. Itwould be one of the most important considerations in deciding what quality of courier service that one opts for. Onewould naturally go for a premium service to serve the customers of a region that provides higher sales volumes. Forinstance, the continuous tracking of the goods consignment might be critical for certain regions while the same maybe an added cost in some other region.

Ø Of course, the cost of transporting as a whole should not be so prohibitive that the company finds it an unviableproposition to make the sale.

Ø Another important factor shall be the reach of the network of the courier company. Simply put, one would definitelyhave to check for the ability of the courier company to service the various destinations as required by the business.

The student will need to identify the various characteristics of the organization that are crucial in deciding which couriercompany to hire. The student shall be expected to make a reasonable estimate of the possible factors influencing thedecision. They could include:

Ø External environment that consists of government, public, supplier competition, and customers.

Ø Internal environment that consists of employees of the organization and shareholders.Ø One must take into account environment forces such as governmental rules and regulations that might affect the way

the company does business.Ø Reviewing organizational goals and procedures such as your company’s sales objectives and corporate purchasing

policies, as well as the size and composition of the buying center for this particular situation.Ø Careful weighing of interpersonal factors that might affect the buying process because the relationships between the

various people who make up the buying center and their decision-making authority will be crucial.Ø Considering the personal traits of the individuals involved because their age, education, experience and standing

within the company may all have an impact on the final buying decision.

Considering the business climate and company’s corporate culture, the third and fourth factors affect the most. Since, theconsidered factors were of internal nature.

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While selecting which express services to recommend, the following points must be considered :Ø Price : There are a number of important questions in this area should we go with the company that offers service for

lowest cost per delivery? Should we ask whether we could win a price break by signing an exclusive, long-termcontract? What overall impact will price have on your company’s profitability?

Ø Warranties in the event of poor performance : Some of the questions to consider include: How will yourcompany be compensated if the courier doesn’t deliver in a timely fashion? What if products are damaged in transit?Will the courier put its performance guarantees in delivering?

Ø Quality observant : How often will pickups be made? Are the drivers helpful and courteous? Are deliveries made aspromised? Do the products always reach their destinations in good shape? Can the courier meet usually differentdelivery schedules?

Ø Technical capabilities : Is the courier able to flawlessly handle large shipments? Does the courier have the abilityto the track the status of shipment within a short time? Is the courier committed to do service by using state-of-the-art equipment as and when they are available? Here, the firm is more concerned about the efficiency of the courierservice. So, they are bothered about the delivery system and not price of the product.

Keeping in mind the above requirements, a suitable recommendation could be made to decide for which couriercompany to opt for.

The student shall be required to analyze the various factors involved and present the arguments for the same. Sincethere are no concrete figures provided, the student shall not be expected to make conclusive recommendations for the same.

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Case Study

LOCTITE CORPORATION– MARKETING & ADVERTISING –

Loctite Corporation is the world leader in the manufacture and marketing of glues and adhesives. The company is wellknown among customers for products such as Super-Glue. However, a large portion of Loctite's annual sales is derivedfrom industrial glues and adhesives used in a wide variety of industrial applications.

One of Loctite's exciting new products was a non-migrating thiotropic anaerobic gel that could be used to repair wornmachine parts with a minimum of manufacturing downtime.

Loctite branded the new product RC-601 and priced it slightly under $10 per tube. RC-601 was sold through industrialdistributors, along with other Loctite products targeted for industrial applications.

This pricing allowed Loctite's industrial distributors to make a desirable margin, while enabling Loctite to make an 85percent profit margin.

At a price less than $10 per 50ml (1.69 ft oz) tube, the management felt that industrial buyers would readily try theproduct. Advertisements describing the technical characteristics of RC-601 and how it could be used were placed in a widevariety of industrial trade magazines.

It took less than one year for Loctite to realize that RC-601 was not achieving the sales success expected. The productwas pulled from the market and shelved for several months. While the product worked well, Loctite's failure to convinceindustrial users of RC-601's strength and reliability led to the product's initial failure. To learn more about perceptions ofthis product and the needs of different industrial decision makers, Loctite engaged in an industrial buyer behaviorresearch.

The market research focused on three types of industrial purchase decision makers – design engineers, productionpersonnel, and maintenance workers. While purchasing agents would logically be the industrial purchaser, Loctite felt thatthe actual users would make the decision to use or not use an adhesive such as RC-601.

Based on these research results, it became clear that Loctite's initial effort to market its new product had no targetcustomer. The results also suggested that maintenance workers would be the most logical starting point, and that Loctiteneeded a marketing strategy that targeted the maintenance worker.

This raised several marketing strategy questions :

Is the brand name RC-601 the right name to communicate target customer benefits ?

How should the new product’s benefits be communicated to maintenance workers ?

Is the price slightly under $10 too low ?

How should we promote trial usage of this new product ?

Recognizing the maintenance worker as the target customer, management realized that the name RC-601 had littlemeaning. A new name, Quick Metal, was thought to be much better because it communicated both the time (quick) andstrength (metal) benefits of the product. To further reinforce the application, the "Q" in Quick Metal was made to look likea gear shaft, a major area of industrial maintenance application.

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A silver box was also designed to reinforce the association with metal. An ad was developed that used pictures todemonstrate "how to use", non technical data or graphs. Also, the ad reinforced key customer benefits:

Salvages worn parts.Prevents costly downtime – keeps machinery running until the new part arrives.

Adds reliability to repairs – sue with new parts to prevent future breakdowns.

This ad was also used as a piece of direct-mail literature. Overall, the new brand name, logo, packaging, and targetedadvertisement were geared to appeal to the target customer, the industrial maintenance worker.

Based on the economic savings Quick Metal offered and the fact that purchases under $25 could be made withoutauthorization, Loctite elected to price Quick Metal at $17.75 for a 50 ml (1.69 fl oz) tube.

Six-milliliter tubes were also made available and used extensively in sales promotions to stimulate trial usage. With atarget customer and a marketing strategy designed around the needs of this target customer, Loctite relaunched its newproduct and achieved a level of success that far exceeded sales expectations.

TABLE A : Industrial Decision Influencer Research Findings :

Decision Influencer Needs and Behavioural Characteristics

Design engineers

Prefer lots of technical data. They have to be convinced that it works based on calculations. They are "risk avoiders" and less likely to try new products until technically proven to work and work under a variety of industrial conditions.

Production personnel

Prefer reliable, time-proven solutions. They want to know where new products have been used successfully. Production personnel are "today-oriented" with a tremendous concern for "reliable solutions". They are less likely to try new products until they have a proven and credible performance record.

Maintenance workers

These are the fixers; they keep things running around the plant. They typically have less formal technical education and are more likely to have worked their way up from a lesser job in the factory. They prefer pictures of how things work and should be used, and are uncomfortable with technical charts and graphs. Maintenance workers are more likely to try new products and typically do not need purchase authorisation for purchases under $ 25.

Questions for discussion :

1. Why did the RC-601 marketing strategy fail and the Quick Metal marketing strategy succeed ?

2. What role did the brand name and package design have on perceptions of the product and on the ability of targetcustomers to remember key product benefits ?

3. Would the strategy have been as successful with the Quick Metal name and Package but no target industrial customer?Explain your position.

4. What changes would Loctite have to make to be successful in Marketing Quick Metal to production personnel ?

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Guidelines for Case StudyLoctite Corporations

– Marketing & Advertising –

This case stresses on advertising, importance of correct identification of the target customer and the communicationof the product’s value to the target customer.

Here, the students need to be made aware of the concept of Brands. The following write-up shall act as a reference:

A Brand is basically the impression of a product, its manufacturer etc. in the minds of the prospective customers.Hence, Advertising is nothing but an effective communication of the product’s values to the target customers in a mannerthat creates a clear image of the product in the minds of the customers.

For instance, consider the toothpaste market. The values that one has come to associate with Colgate are that of ano-nonsense, value for money toothpaste. On the other hand, Colgate Gel, a totally different product from the samecompany offers a unique brand proposition – it appeals to the younger and the so-called “hip market”. Two products fromthe same company presenting totally different values and propositions. The brand name should be easy to spell andremember. A famous example of this is the renaming of McDonalds to Macku Donalado for the sake of convenience of theJapanese customers.

Equally important is the identification of the target customers. Imagine a grandpa promoting a youth brand like Nike orperhaps Lee! The brand is not just what the product is, it also reflects of the aspirations of the target customer segment.The advertisements of Coca Cola and Thums-Up are a point to the case. It is representative of the aspirations of theyounger generation – everyone wishes to impress one’s peer group by emulating the characteristics of some public icons.

Another example shall elucidate the matter further. The brand value that Xerox enjoys in the copier segment isunparalleled. It is common usage now when one talks of getting a document copied – “Get it Xeroxed.” It is precisely thename Xerox that holds so much value that the competitor brand Canon had to adopt an altogether unique punch line“Every copy is an original.” Such is the power of the brand names.

The case here presents a case of ineffective communication of the values of the brand. First, the name of the brandconveys nothing about its qualities. Second, the promotion campaign of the brand failed to identify and influence thetarget customers.

As was exhibited after the renaming of the brand as Quick Metal. The name itself suggested strong adhesive qualitiesof the product. The promotion campaign identified and targeted the maintenance workers by making use of six-millimetertrial tubes to promote the usage of the product in the targeted customer segment. The reformulated price of the productalso might have acted as a catalyst, for the product was priced at $17.75 for the 50ml tube, which was well within the $25cost beyond which, purchase authorization was required. This encouraged the customers to try the product and henceprovided a valuable opportunity for the product to prove itself.

Probability of success of the new campaign and brand name without any target customer segment:As elaborated earlier as well, any product has to be aimed at a particular category of users, the target customer

segment without which, every marketing and promotion effort is bound to fail.

An example :

As for the success of the new campaign and brand name in targeting the production personnel, the table details thegeneral behavior and needs of the production personnel towards the promotion campaigns.

The production personnel look for technical data and avenues to try the product before risking it on any other criticalapplication. As a result, the marketing campaign and the brand name would have to be modified to stress on the technicalaspect of the product and also retain the six-millimeter trial usage tubes. Further, the product planners must also take intoaccount the fact that the product would take a longer time to establish in the market, when aimed at the productionpersonnel who look for a well-tested and reliable product.

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Case Study

P&G and Godrej Soaps

It was a joyous Christmas for both P&G and Godrej Soaps in 1992. The $36 million consumer goodsgiant and India’s second largest soap seller had just signed an agreement to market and distributetheir soaps and detergent brands together. For Adi Godrej, this was the second prestigious link up afterGE which would, he acknowledged, fulfill their long felt need to internationalize. When two giants fight,his explanation went, the smaller player gets hurt, so it is better to team up with a giant. For P&G, thiswould spring board them into becoming a significant player in India, and give it more muscle to competewith Lever. As David Thomas, CEO, P&G, puts it, “We are heading for a relationship in perfecting”.Godrej soaps was stuck with Underutilized capacity that had forced it to manufacture soaps for othercompanies. Godrej also had proven expertise in vegetable oil technology in a country where beef tallowwas taboo. P&G would also get instant access to a non-pharma distribution network. But as a consultantpointed out, “Godrej launched many brands with much fanfare but due to lack of product differentiationthey could not be sustained for long”. P&G paid Godrej an estimated Rs.50 crore to acquire the detergenttrademarks, goodwill and non-competition fees. Godrej invested Rs.9 crore in the Rs.20 crore capitalof PGG (Procter & Gamble & Godrej), transferring its sales force of 400 people to the joint venture.Godrej soaps would be the sole supplier to the joint venture with P&G agreeing to pay all overheads.

P&G Managers worked hands on to bring Godrej up to standards of P&G’s systems and proceduressuch as Good Manufacturing Practices and Material Requirement Planning. Godrej had sold 29,000tonnes in 1992 which increased to 46,000 tonnes in 1994 but dropped to 38,000 tonnes subsequent tothe tie-up. Mean while, other Godrej Soap brands like Key and Trilo started dropping out from storesshelves altogether. P&G changed the advertising strategy on brands like Cinthol and Ganga, removingall emotive and esoteric appeal while focussing on functional propositions. Lackluster sales and costsbecame the bone of contention between the two. Conversed that the win-win aspect of their alliancehad turned into a win-lose, P&G and Godrej sat down with their lawyer to discuss the best way todisentangle themselves from the “relationship in perpetuity”. Both sides emphasize that the parting is awin-win situation.

Read the case carefully and answer the following questions :

1. Define a joint venture and comment on the phrase “relationship in perpetuity” in relation to yourdefinition.

2. What was the rationale behind the joint venture for both the parties ?

3. Why did the joint venture fail ?

4. According to you, was the parting a “win-win” situation for both the parties ?

5. Joint ventures, in general, have been rated to have poor track records. Could you suggest someguidelines to be borne in mind by both the parties to prevent this ?

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Guidelines for Case Study

P&G and Godrej Soaps

1. A joint venture may be defined as an undertaking in which two or more independent companies combine theirresources to achieve specified limited objectives. The very definition of a Joint Venture makes it clear that the JointVenture is formed with a specific objective in mind. Once the objective is achieved, there is no economic rationale forthe continuation of the Joint Venture. Keeping this in mind, the phrase “relationship in perpetuity” is totally meaning-less and impossible, because either the objective is achieved and the Joint Venture is through or the objective is notachieved, and the Joint Venture is going to break anyway because any one or both of the partners is not happy.

2. The rationale for setting up the Joint Venture as can be seen from the facts of the case is as follows:

Godrej

i. Spare capacity utilization

ii. Marketing expertise of P&G

iii. Upgradation of technology

iv. Greater strength to compete with HLL

v. Beginning to internationalization.

P&G

i. Springboard into India

ii. Take on Lever

iii. Saving in time and investment through a Joint Venture rather than setting up own faults

iv. Risk reduction because of the above

v. Godrej’s expertise in vegetable oil technology

vi. Instant access to a non-pharma distribution network

vii. Some good established Godrej brands etc.

Common Objective

To exploit business opportunities together in the wake of liberalization.

3. Causes Failure :

i. Looks as though individual objectives overrode common objective.

ii. Fall in sales and subsequent unutilization of excess capacity.

iii. Cultural mismatch.

iv. Neglect of established Godrej brands.

v. Failure of the marketing strategy.

4. To decide on whether it was a win-win situation we have to look at whether the objectives of both the companies havebeen met. P&G certainly has got a toe hold now in India through Godrej. Godrej has acquired vegetable oil technol-ogy. Godrej may have gained in the short run only because they did not have to pay the overheads. They alsoacquired some marketing expertise. So it appears that both the parties have made small gains from the venture anddid not lose by parting.

5. Determine whether a Joint Venture is the best approach compared to say, expansion, equisition, etc.

ii. Choose the right partner.

iii. Set realistic objectives for the alliance.

iv. Check if the strategic plan is achievable.

v. Ensure balanced pay-offs for all partners.

But as Adi Godrej himself puts it, “Joint Ventures are not necessarily permanent”.

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Case Study

Term lending

To keep pace with inflation, term lenders usually require firms topay floating interest rates.

For example, the interest rate may be set at "1% above the PrimeLending Rate". The PLR itself varies with successive credit policies,busy and slack, announced by the Government from time to time.Your firm has decided to borrow Rs. 40 million for 5 years to part-finance an expansion program. You are faced with 3 alternatives.

You have been banking with Syndicate Bank since inception. Youare on very good terms with them and are considered to be a "mostfavored customer". You can borrow, from Syndicate bank at the PrimeLending Rate + 0.5%. The PLR is currently 10%. The proposed loanagreement requires no principal repayments until the loan maturesin 5 years.

You can issue 26 week commercial paper currently yielding 9%.Since funds are required for 5 years, the commercial paper will haveto be "rolled-over" semi annually.

You can borrow from a State Financial Corporation at a fixed rateof 14%. As in the bank loan, no principal has to be repaid until theend of the 5 year period.

Read the case carefully and answer the following question:

1. Describe the circumstances under which each of the threealternatives is preferred and specify the risk involved.

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Guidelines for Case Study

Term Lending

1. Factors to be considered:

a . Term loans are not expensive to set up and can also be re-negotiated. But a floating rate may risky as future ratesare uncertain, forecast of debt service burden may be difficult.

b. Interest cost is lower for CPs than bank loans but transaction costs will definitely be higher especially with 2 issues ayear required. Another point to be considered would be that success of CP issue especially the future ones are notguaranteed and hence are highly uncertain whereas both Syndicate Bank and SFCs offers are more certain.

c. For the SFC loan, interest rate though higher at present will not change. Hence the debt servicing burden is certainand can be planned for. However, if there is no rise in interest rates in the coming five years this is a very expensiveoption. But this increase of 3.5% may be due to upward sloping term structure of interest rates.

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Case Study

CADBURY– CREATING A NEW AND EXCITING BRAND –

CAFÉ CADBURYINTRODUCTION

Since 1990, Cadbury has developed and implemented an expanding programme of presence marketingas an effective way to promote the Cadbury Masterbrand in the UK. The strategy has been to selecthigh profile sites in theme parks, shopping malls and airports to communicate Cadbury values andincrease the availability of products.

This case study examines the creation of a new and exciting brand - Café Cadbury - which showshow detailed thought has been applied to making this a successful venture which extends the Cadburyreputation by providing a high profile presence and by giving consumers even more reasons to chooseCadbury.

BRAND POSITIONING

Café Cadbury involves providing consumers with a 3D experience of the brand in which they enjoy apremium offer. Consumers are able to experience the brand in a real physical environment. Café Cadburyprovides a warm, contemporary, friendly environment where customers can indulge themselves withCadbury's chocolate.

To secure this premium position, Cadbury set out to differentiate the experience from coffee shopsand chocolate retailers on the high streets or in shopping centres/malls. The total Café Cadbury experienceexposes the customer to chocolate indulgence. The emphasis is on chocolate, offering the customer arange of products and experiences they cannot find elsewhere. Cadbury tries to highlight that the heartof the offer is the chocolate experience - delivered within the theatre of a premium café location. Apartfrom this, they provide retail offers including chocolates and gifts as well as takeaway products.

BRAND VALUES

In selecting values for Café Cadbury, a prime consideration was to select values which reinforce themessage to customers 'choose Cadbury'.

The key values are :

Ø Premium – A premium catering and shopping experience for indulgent chocolate and non-chocolateproducts in a quality environment.

Ø High quality – The best coffee, unique cakes and fresh baguettes.

Ø Friendly service – Café Cadbury staff are trained to treat customers as guests and to welcomethem from the first minute they enter the café.

Ø Novelty – The emphasis in product development at the café is on innovation eg. spiced chocolateor a full size chocolate football.

Ø Celebrating Cadbury Chocolate – A variety of dark chocolate is used, but all of the milk chocolatedelivers the real taste of Cadbury's chocolate.

Ø Adult appeal – The emphasis is on catering for adult taste, but because children love Cadbury'schocolate they are also provided for with a children's meal packed in a Yowie gift box.

Ø Relaxing – The café provides a relaxing atmosphere as a result of the friendly service, the interiordecoration and general ambience.

Ø Contemporary – The design and atmosphere of the café is modern, innovative and dynamic.

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DELIVERING BUSINESS OBJECTIVES

Four objectives were established in setting up Café Cadbury. These were:

l to communicate Cadbury's Master-brand values, projecting a modern and relevant image

l to change public perceptions by associating Cadbury with premium 'special' chocolate as wellas everyday products

l to reduce Cadbury's dependence on traditional retail channels by developing alternative routesto market

l to generate incremental income.

A number of measures were chosen to track performance in meeting these objectives:

l the number of customers who walk through the door

l the number of diners

l the media value of the site

l quantified attitude measurements for Café Cadbury customers and the local population to assessperceptions of the Cadbury's Masterbrand.

THE TARGET MARKET

Following Cadbury's research into the Gifting market, the company analysed market research intothe coffee bar and café markets. Cadbury's then carried out its own research which confirmed that thecafé concept would particularly attract ABC1 women aged 25-45. This research has been confirmed byexperience. Currently, 75% of customers are female and 74% of customers are ABC1.

CHOOSING THE RIGHT LOCATION

Knowing the target market, Cadbury was then able to research the right locations to attract 25-45year old females with high disposable incomes who were regular café users. In addition, it was necessaryto take into account a number of business and practical criteria the location must have:

l a prime site location in the main shopping area of a city with 100,000 people and an upmarketpopulative mix

l a double shop frontage for maximum visibility

l a high number of shoppers all year round - average weekly footfall of 50,000, peaking 5,000per hour during the week and 10,000 per hour on Saturdays

l a size between 2,000 and 2,500 square feet

l planning permission for catering and retailing.

The building required a prestigious location and character to support the luxury and indulgence of theexperience. Getting this right was vital because retailing and catering support each other, for example:

l the customer's experience of high quality, indulgent catering reinforces the premium image ofthe retail products they buy

l restaurant-quality cakes and chocolates can be sold at higher prices in this atmosphere

l when customers try products in the café's seating area or Cadbury Lounge, they may wish tobuy them as gifts and take home purchases.

Cadbury's aim is for customers to aspire to eat and shop in Café Cadbury, so the view of the shopfrontage is important. A double frontage is ideal so that people can see, at a glance from the street,the range of products and services by looking in. Outside seating also draws attention to the food anddrink offer.

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DESIGN GUIDELINES

The design of Café Cadbury seeks to make sure that customers enjoy a unique, shopping and cateringexperience as they make their journey around it from entrance to departure. Efficient links betweenback of house facilities, support and the front of house are needed to service the needs of customers.

Once the customer enters the retail area, the counter and its displays are clearly visible servingboth the retail and takeaway products. The counter is designed to appeal to adults and is sophisticatedand modern, made of warm cherry timber and trimmed in clean stainless steel. As the customer walksover the timber floor, their footsteps add to the hard-edged, busy sound in this part of the Café Cadbury.The customer moves on to browse the retail display fixtures. These show premium chocolate and non-chocolate offers.

From the retail area, clear signage encourages a visit to the café area upstairs. A recording of cafénoise is played at the foot of the stairs to reassure customers that there is activity on the first floor. Arange of music plays in the café including jazz and soul to reflect the tastes of the target market.

At the counter the customers choose from a tempting range of cakes, savoury food, ice- cream anddrinks, served by friendly employees. Most customers stay in the café area for 15-20 minutes.

When the customer wants an even more indulgent experience, signal points are to the lounge area.The furniture is the strongest demonstration of the lounge's distinctive identity. A combination of thesoft chairs and low tables creates a special, related feeling of being in someone's lounge at home.

When the customer leaves Café Cadbury, their purchases are packed in branded bags as a lastingreminder of the experience.

CORPORATE IDENTITY

As a flagship for the Cadbury Masterbrand the interior and exterior of the Cafés are designed tocommunicate the brand's distinctiveness, that it is part of the Cadbury family. The Café Cadbury corporateidentityis made up of three related design elements:

l Cadbury's Masterbrand

l Café Cadbury logo, colour palette, typographic style and image palette

l Café Cadbury icons which help to illustrate and signpost the total offer.

These design elements are used carefully within the café environment to provide a strong andconsistent image.

POSITIONING THE OFFER

The café are designed to reflect the requirements of the target market. For example, the menus arecarefully tailored to the requirements of the target audience at different times of the day. The savourymenu contains freshly baked baguettes with innovative fillings and hot panini. The cake menu includesa range of fresh cakes and there is a wide choice of ice-creams all served with Cadbury's chocolate.There are all sorts of categories of retail products including:

l Traditional/familiar eg Cadbury's Dairy Milk, Roses and Milk Tray

l Chocolate experience eg liquid chocolate fondue and truffles

l Indulgence/gifting eg champagne hearts

l Self-eat eg fudge ranges and ice-creams

l Novelty/kids eg full size chocolate footballs.

Prices charged in Café Cadbury are slightly higher than in coffee shops like Starbucks to reflect thepremium positioning of the brand.

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OPERATING CAFÉ CADBURY

Café Cadbury is not run by Cadbury. Instead Cadbury pays a fee to an independent operator to runand staff Café Cadbury. This means that Cadbury are able to control the quality of the café withoutbeing drawn into the day-to-day operation. An Operator's Agreement was drawn up which includes theperformance criteria which guarantees that the café will meet with the objectives established by Cadbury.

CONCLUSION

Cadbury is one of the best known brands in the world today. It is a brand which is associated withhigh levels of quality and customer satisfaction. The ongoing growth of Café Cadbury provides a flagshipthat further helps to enhance the reputation of the Cadbury Masterbrand. At the same time, it providescustomers with the opportunity to indulge themselves in the enjoyment of high quality products in awelcoming environment.

QUESTIONS

1. How does Café Cadbury help Cadbury to build its brands?

2. What factors give Café Cadbury a distinct advantage over rivals?

3. Why is Café Cadbury targeted primarily at ABC1 women?

4. Why was location an important factor in the marketing mix for Café Cadbury?

5. What measures are being used to monitor the success of Café Cadbury?

Glossary

ABC1 : Wealthy consumers (categories according to occupation).

Brand Positioning : Selecting a suitable position in the relevant market for a particular product.

Masterbrand : The umbrella brand covering a stable of other brands eg Cadbury is the Masterbrandof Café Cadbury, Cadbury's Roses, Cadbury's Flake, etc.

Media value : The extent to which something attracts media attention, and hence publicity throughthe TV, the press, etc.

Objectives : The ends which an organisation works towards achieving.

Premium : Selling for an above average price, offering higher quality.

Presence marketing : Alerting the market to the existence and strengths of brands by having apresence at important locations and events eg having an outlet selling a range of Cadbury products ata major sporting event, or Cadbury World - a themed experience outlining the history of the business.

Quantified attitude measurements : Measurements of what people feel or think about something.

Strategy : Long term plans.

Target market : The section of the overall market that is selected and focused on.

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Guidelines for Case Study

Cadbury– Creating a new and exciting brand –

Café Cadbury

1. Café Cadbury involves providing consumers with a 3D experience of the brand in which they enjoy a premium offer.Consumers are also given to experience the brand in a real physical environment. Café Cadbury provides a warm,contemporary, friendly environment where customer can indulge themselves with Cadbury's Chocolate.

Besides the company has chosen the brand values of Café Cadbury, which should reinforce the Cadbury brand in theminds of the customer.

2. Café Cadbury set out to differentiate the experience from coffee shops and chocolate retailers on the high streets orin shopping centres/malls. The total Café Cadbury experience exposes the customer to chocolate indulgence. Theemphasis is on chocolate, offering the customer a range of products and experiences they cannot find elsewhere.Also they want to ensure that the customer enjoy a unique, shopping and catering experience as they make therejourney around the café.

3. They decided to target the ABC1 women aged between 25 to 45 following their research in the gifting market, coffeebars and café markets because women have weakness for chocolates and since the positioning was at the premiumsegment, therefore they targeted women with high disposable incomes and who were regular café users.

4. The location was important in the marketing mix because the positioning was a totally new experience for chocolatelovers. Therefore the building required a prestigious location and character to support the luxury and indulgence ofthe experience.

Getting the location right was vital because retailing and catering support each other. The customers experience ofhigh quality, indulgent catering reinforces the premium image of the retail products they buy. Also it provides Cadburyan opportunity to sell its product at a premium. When the customer tries out Cadburys products in the seating areaor lounge they may buy to give away as gifts or home consumption.

5. Measures adopted to track performance are as follows:

Ø The number of customers who walk trough the door.

Ø The number of diners.

Ø The media value of the site.

Ø Quantified attitude measurements for Café Cadbury customers and the local population to assess perceptions of theCadbury's Masterbrand.

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Case Study

Unifold CorporationUnifold Corporation holds a meeting of its sales force in the beginning of every year. These meetings

have a two-fold purpose: to reward the salespeople after a hard year’s work, and to announce new productsand strategies for the coming year. But the last year had been particularly unfortunate. The sales weredown, and the company had actually suffered a loss of market share, due to the aggressive introduction ofnew products by a competitor for which Unifold had, as yet, no equivalent. Thus, many salespeople hadfailed to meet their yearly sales targets. Their traditionally high commissions has comparatively reduced.

Another blow to their morale was the resignation of their well liked national sales manager, Mr. AmitGoel, a forceful individual with an inspirational style of speaking who had tried unsuccessfully to championthe cause of sales with top management. A month after his resigning, it was learnt that he had joined amajor competitor as vice-president of sales.

His replacement as national sales manager, Mr. Arjun Thappar, was a young person who had risen rapidlythrough the ranks. Although he was respected for his capacity for hard work and ability to analyze salesproblems, Mr. Arjun lacked the charisma and showmanship of his predecessor, and additionally faced theproblem that many of sales staff was older and more experienced than he was. He realized that he wouldbe the subject of unfavorable comparison with Mr. Amit unless he could quickly establish himself as aneffective leader.

However, more than his personal prestige was involved. Mr. Arjun was convinced that the confidenceof the salespeople in their company was strongly influenced by their perceptions of their top sales executives.If their observation led them to believe that Unifold was in retreat, they might try harder to protect “safe”business than to acquire new customers. If they felt Unifold was on the verge of a rout, they might defectto more successful companies, especially the one that Mr. Amit had joined. His task, therefore, was notmerely to develop a strategy for reversing the company’s fortunes but also to convince the salespeoplethat they were capably led.

Mr. Arjun planned to form “Management Advisory Boards.” These ten-person panels, made up offield andheadquarters managers and sales people, would develop approaches to specific problems. Mr. Arjun woulddefine the problem for each board and indicate the financial and policy limits within which a solution wouldbe acceptable. Mr. Arjun promised to commit himself in advance and accept the recommendations of thesalespeople, provided they were unanimous.

At a sales meeting, Mr. Arjun announced the formation of three boards: one to devise strategies tocounter the inroads of new competitive products, one to develop new applications for existing products,and another to maximize the effectiveness of the limited sales promotion budget. About half of the peopleattending the meeting were assigned to boards. He directed the boards to present their conclusions tothe group the next morning. The immediate reaction was very much in contrast to the cheering andelation that used to follow Mr. Amit's speeches. After a moment of surprise, the salespeople becameserious and thoughtful. Even those not chosen found themselves discussing the problems that had beenpresented to the boards. Many had half expected to be castigated for the year’s poor performance, andthey were relieved at Mr. Arjun’s positive approach. But their prima ry reaction was not to him but to theproblems he had posed. As they debated: the intricacies of these problems, they began to see thattradeoffs were involved and that a long-range view had to be taken. Unanimous agreement was reachedon only a few matters by the boards, but Mr. Arjun was as good as his word: He put the recommendationsinto full effect.

The aftermath of the meeting was subtle. The salespeople were not particularly enthusiastic, as theyhad usually been after a meeting conducted by Mr. Amit. But neither were they depressed and pessimistic,as they had been before the meeting. Their problems still seemed difficult, but no longer impossible.During that year the sales force gradually reversed the losing trend, and as they did so, they began toregard Mi. Arjun with increased admiration.

Questions for Discussion :

1. What adverse factors were affecting the performance of the sales force ?

2. Would a leadership style such as Mr. Amit’s have been effective in solving these problems ?

3. What did Mr.Arjun aim to accomplish with his creation of Management Advisory Boards ?

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Unifold Corporation

1. Unifold had suffered loss of market share, due to the aggressive introduction of new products by a competitor. As aresult of which many sales people failed to meet their yearly sales targets. This brought down their morale. Moreover,their well-liked national sales manger, Mr. Amit goel had resigned. These adverse factors were affecting the perfor-mance of the sales force.

2. Mr. Amit was a forceful leader and had the ability of inspiring others with just his speech. Employees thought that Mr.Amit had a special charisma. Mr. Amit’s leadership style could have helped the company in overcoming the competitionthat it was facing. By introducing new products, the company could have easily faced the competition. Even thesalespeople could have met their yearly targets and would have earned high commissions.

3. Mr. Arjun planned to form Management advisory Boards to develop approaches to specific problems. He wanted theseboards to devise strategies to counter the inroads of new competitive products; to develop new applications forexisting products; and to maximize the effectiveness of the limited sales promotion budget. In other words, Mr. Arjunwanted the advisory Boards to act as catalysts in reversing the company’s fortunes.

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Case Study

Amazon.comAmazon.com (Amazon), the largest virtual bookstore in the world opened its virtual doors in July 1995

with a mission to use the Internet to transform book buying into the fastest, easiest, and most enjoyableshopping experience possible. While its customer base and i product offerings have grown considerablysince its early days, it still maintains its founding commitment to customer satisfaction and the delivery ofan educational and inspiring shopping experience.

Today, Amazon.com is the place to find and discover anything that a customer wants to buy online.Amazon.com has the biggest collection of products, including free electronic greeting cards, online auctions,and millions of books, CDs, videos, DVDs, toys and games, and electronics: More than 29 million people inabout 160 countries are its customers. For the year ended Dec 31, 2000 the net sales of Amazon.comwere $2.76 billion, a 68% increase over 1999 net sales of $1.64 billion. For the year 2001, its net sales areexpected to grow between 20% to 30% over the year 2000.

When Jeff Bezos, Amazon’s founder and CEO, quit his job at DE Shaw his Initial plan was to sell a lowpriced product, which customers would not be afraid of purchasing online. Books, with low prices and morethan three million titles worldwide, seemed to be an ideal product for selling online. Bezos decided that hewould set up the business at Seattle, where book distributor Ingram was also based. The decision to giveup a well paying job on Wall Street and enter the world of e-business had not been easy. Bezos, however,seemed to have made the decision far more easily that what most people would imagine. Bezos recalledhaving used a “regret minimization framework”, convincing himself that when he became old, he would notregret having set off on the bold adventure and failed: “It was like the wild, Wild West, a new frontier. AndI knew that if I didn't try this, I would regret it. And that would be inescapable.”

In an interview with Fortune, Bezos emphasized the importance of having a long-term orientation.While admitting that it would take many more years to consolidate and build on Amazon’s early success, heexplained that thinking long term had been a major factor behind his success:” Say you want to solve worldhunger. If you think in terms of a five-year time frame, you get really depressed; it’s a problem becauseyou'll be dead by then, but the solution becomes more tractable.”

While some analysts found fault with Amazon for rapidly moving into diverse product lines, othersargued that the company had a clear vision. According to one writer, “At Amazon, there is a sense ofdestiny beyond the organization’s eventual profitability. In an Amazonian’s view, the Cyberstore will changethe world of retailing, creating a blue print for future e-retailers. It is a purpose that prompts employees atthe Seattle firm to work hard and long hours...And despite all the new bells and whistles at Amazon, thatbusiness would appear to be e tail... If I were to write Amazon’s mission statement, it might be somethinglike “to make the purchasing experience on the web fun.”

Some analysts felt that more than anything, it was Bezos’ aggressiveness, which made Amazon afearsome force. One of Bezos’ former colleagues at DE Shaw paid the ultimate tribute, “Any business withJeff Bezos in it has a 10 times chance of success than one without him.” Bezos holds regular meetings withhis employees to highlight the importance of the company’s core values. He often expresses anxiety thatthe meteoric rise in the company’s stock price might make the employees complacent. One of his famousstatements to his employees was : “Wake up every morning terrified – not of the competition but of ourcustomers.”

Bezos remained extremely popular among his employees. A Time reporter who attended one of Bezos’staff meetings observed a woman employee asking, “Can I have your autograph ?" Spontaneously, almostthe entire audience, (which consisted mostly of newly recruited Amazon employees) offered hats, dollarbills, and scraps of paper for his signature.

Questions for Discussion :

1. What do you think of Jeff Bezos’ leadership style ?

2. To what or whom would you attribute Amazon.com’s success ?

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1. Jeff Bezos’ leadership style is very effective. He can be considered as a true transformational leader. He motivateshis employees to perform beyond nonnal expectations. His leadership can also be tanned as supportive. The regularmeetings that he holds with his employees proves this.

2. Amazon..com’s success can be attributed to its leader. Jeff Bezos always thinks long-term which is a major contribut-ing factor for his and Amazon.com’s success. Jeffs ambition to make the purchasing experience on the web enjoyablehas paid well. Moreover, Bezos’ aggressiveness has made Amazon a fearsome force.

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Hongkong TelecomDuring the last fiscal year, which closed March 31, 2001, Hong Kong Telecommunications (HKT) earned about US$2.19

billion in revenue from international long distance telephone service (ILDTS), almost half the company's total revenue forthe fiscal year. HKT had been using its profits from ILDTS to subsidize low-priced and unprofitable local telephone service.In 2002, HKT lost its monopoly over ILDTS in the Hong Kong Special Administrative Region (its sole market). Telecomanalysts predict that HKT faces a drop in ILDTS revenues of nearly 50% over the next two years, as a result of the 2002deregulation of ILDTS in Hong Kong Special Administrative Region (henceforth Hong Kong SAR). Faced with the prospectof losing its monopoly, Hong Kong Telecommunications (HKT) management has been seeking alternative sources of revenue.They hope to more than compensate for lost revenues and earnings due to the lost monopoly. A few distinct possibilitiesexist :1. HKT will lose revenues and earnings due to the competition for ILDTS

2. HKT management will find enough new sources of revenues to maintain current levels of revenues and earnings3. HKT management will find new sources of revenues but these revenue sources will fail to generate earnings sufficient

to mitigate the lost ILDTS profits, thus resulting in flat revenues and lower profits4. HKT management will find more profitable ventures, even if the total revenues for HKT fall, thus resulting in higher

profitability with flat or even falling revenues5. HKT management will find new ventures that prove more beneficial to the company's top and bottom line than the old

ILDTS business, resulting in rising revenues and rising profits.

HKT management has developed a plan that would transform the company from a stodgy telecommunications giant to abroadbased Internet, media, telecommunications, and property management company. A key element of this transformationhas been the development of a broadband multimedia network based on sophisticated asynchronous transfer mode (ATM)technology. This broadband multimedia network could be used to carry the full spectrum of data, including Internet andmultimedia information content. HKT will charge companies for use of this broadband network at a rate of approximately $26per megabit-per-second (Mbps), less than the current cost to companies of leasing dedicated telecommunications lines. HKT willalso offer interactive multimedia services (IMS), including broadband video on demand (VOD). The company hopes to sign up300,000 users of VOD by the year 2003. Currently it has 100,000 applicants, with 70,000 users already wired to receive theservice. This is on schedule and indicates that, despite past failures of VOD in Europe, there is some prospect of HKT havingmore success in Hong Kong.

HKT has also applied for a license to provide cable television services. As in the case of ILDTS, cable service is set tobe deregulated this year. Wharf Holdings (rapidly becoming HKT's arch rival - it owns the primary competitor to HKT inILDTS) had held the monopoly over cable services in Hong Kong. HKT expects that it will gain approval to provide cabletelevision services by April of 2002, at the earliest, but anticipates that this could provide a new and lucrative revenuestream for the company.

There is already a price war heating up between HKT and its rivals, particularly the aforementioned subsidiary ofWharf Holdings. HKT has not only slashed the price of ILDTS (by one-third) but has also lowered local calling rates.

HKT has also attempted to lower its operating costs but with limited success. It tried to force employees to take lowerwages but this created such a furor that the company backed down and had to settle for lowering the bonuses paid toemployees.

HKT management and board of directors has decided to expand its business into property management. HKT has noexperience in this area, although it has proven lucrative for many Hong Kong conglomerates. Management has expressedthe objective of generating as much as 10 percent of company revenues from property management within ten years.

QUESTIONS1. What would be the rationale for HKT expanding into property management? Does HKT management run the risk of

losing its focus by not "sticking to its knitting," as the saying goes ?

2. What would be your overall strategy if you were CEO of HKT ? (In thinking about this question, you do not have tomake shareholder value your primary consideration.)

3. Is slashing the prices of ILDTS and local calling rates the appropriate strategy for HKT ?

4. Can HKT compete with upstart telecoms that are able to hire cheaper laborers than HKT ?

5. What factors are important to determining the value of HKT as it transforms ?

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1. The rationale for HKT to expand into property management is that in HongKong property prices are very high andproperty management as a business have really proven lucrative for many of the conglomerates. In our view thecompany might run the risk of loosing its focus from its core business of providing telecom services where it hasproven expertise to an arena about which it has no experience. Moreover, the property management business canprove to be a bugbear for the company.

2. The overall strategy should entail firstly, protecting its own turf in the ILDTS, making its local telephone servicesprofitable (or in case it is not possible, to get out of it), find out new businesses which have synergies with its currentline of operations. The idea is to understand the complete implications of convergence that is taking place betweeninternet, media and telecommunications and exploit the opportunities arising out of it and spread the risk by delimitingthe dependence on telecommunications.

3. No it is not appropriate strategy because the competition can easily catch up by similar rate cuts. Where HKT canscore is by differentiating it self from its rivals in product and after sales service by using its huge existing infrastruc-ture.

4. No it will be very difficult for HKT to compete with upstart telecom companies because its huge labour force has beena legacy of the past when it has complete monopoly on ILDTS and it was running its local telephony services bysubsidising from the profits ILDTS. This labour force had a charmed existence till now, which will resent any cut inthere pay packet or bonuses. Therefore HKT's operational costs are higher then the new companies.

5. For valuing HKT, the following factors are need to be considered :

Ø The divergent businesses in which HKT is entering into, brand equity, infrastructure and distribution facilities, thelevel of competition, the chances of HKT gaining ground and prospering in these new business areas and the structureand shape of the industries in which HKT intends to enter, in the years to come.

Ø The gestation period of the new businesses, the cash flows, the leverage and thereby the riskiness, mode of fundingetc.

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Spectrum Motors Corporation

One of the major problems that had long concerned the top managers of the Spectrum Motors Corporation was thelack of workers interest in doing their jobs. This was true for both the car parts and the final car assembly lines. The resultthat quality had to be ensured by the inspection department for those cars that could not meet final inspection, thecompany found its only answer to set up of a group of highly skilled mechanics in a special work shop where qualityproblems were fixed at the end of the line. Not only was this expensive, but this also caused considerable concern sincemost of the problems were the result of lack of care in assembling components and the automobile itself.

Mr. Sen, the Company President, asked the Division General Manager to call a meeting of his key department heads tosee what could be done about the problem. Mr. Raj, Production Manager, claimed that some of the problems were a matterof engineering department. He held that if only engineering department would design components and the automobilecarefully enough, many quality problems would disappear. He also blamed the personnel, department for not making surethat workers were more; carefully selected and for not bringing the union representative involved in the problem. He pointedout: especially that there was a high turnover rate of more than 5 percent per month among assembly workers and thatabsenteeism on Mondays often reached 20 percent. His stand was that no production department could operate effectivelywith this kind of labor force.

Mr. Gupta, Chief Engineer, held that the car parts and the cars were designed well enough and that if engineeringtolerances were anymore stringent, the fitting of parts would be so difficult and time-consuming that the company’sautomobiles would be too costly to make.

Ms. Priya Mehta, the personnel manager, defended the personnel problems in several ways. First, she pointed outthat her department had little or no control over whom the company hired or kept, in view of the company’s strong laborunion. Second, she observed that assembly work was dull, deadening drudgery and that the company should not expectpeople to have much interest in this work beyond their pay cheques.

Ms. Priya Mehta was of the view that the company could develop more worker interest and consequently higher-quality work with less absenteeism and turnover if assembly jobs could be enlarged. When asked what she would suggest,Ms. Priya recommended that the company do two things. One, to have workers handle several operations on the assemblyline and work as a team, instead of doing only one simple task. Second, to rotate workers each week from one location onthe line to a completely different one in order to give them new and more challenging work.

These suggestions were adopted and put into effect. To everyone’s surprise, workers expressed great dissatisfactionwith the new program. After a week, the assembly lines were closed down by a strike, the workers claiming that the newprogram was only a management scheme to get them to do more work than they had done before and to train them toreplace other workers without any increase in pay.

The division manager and the personnel manager were surprised. When asked by the division manager what hadhappened, Ms. could only say : “This is a mystery to me. We make their jobs more interesting, and they go on strike!”

Questions for Discussion :

1. What do you believe went wrong with the program ?

2. What would you have done if you had been the personnel manager ? Would you have used this program, a differentone, or none at all ? Why?

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1. In the first place, the program was not totally appropriate or right. Ms. Priya’s idea of making the employees work asa team is good because this would promote team spirit and cooperation among the workers. However, her idea ofputting the workers on a job rotation every week was not appropriate. It is impractical.

2. The main problem at Spectrum Motors was the lack of workers’s interest in doing their jobs. This shows that theemployees were not properly motivated. The company should adopt appropriate motivational techniques. It shouldreward the employees’ performance adequately. Both extrinsic and intrinsic rewards should be used. The companyshould also take: up job enrichment.

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Meadows

When Meadows was founded in 1982, there was little advance planning. The company had a singleproduction facility that manufactured cameras for local sales on the basis of rough assessments of likelydemand. Today Meadows produces an array of image, information, and communication products. Productionin its numerous worldwide facilities is based on carefully developed plans that include specific goals. Currently,about 60 percent of sales are in business machines, 25 percent in cameras, and 15 percent in opticalproducts.

The Meadows planning process began in 1985 with the company’s first long-range plan, covering 5years. At that point, 95 percent of the sales came from cameras, but the company was concerned thatmarket growth for cameras was leveling off. Therefore, its initial plan focused on diversification into otherproducts, mainly business machines. The specific goal was to achieve 20 percent of its sales from productsother than cameras in 5 years. The next two 5-year plans included other critical goals, such as furtheringdiversification, boosting production capacity to meet anticipated demand, establishing a worldwide distributionsystem for meadows products, and expanding into the image information industry.

In 1998, the company experienced serious difficulties. It had expanded into producing electroniccalculators. Unfortunately, more than 10 major competitors emerged who aggressively marketed newtechnologies and/or lowered prices. Moreover, a serious defect in a critical calculator part that Meadowshad purchased from an outside supplier led to massive losses. Over optimistic estimations of market demandalso led to an excessive inventory of products that soon became obsolete.

Meadows was determined never to get in a situation like that again. From then on, Meadows launcheda campaign to become a leading global company that would be better able to deal effectively withenvironmental forces. The company reorganized to provide separate divisions for each major-product area,stressed the development of innovative products, and greatly expanded the planning process. Today theplanning system consists of long-range (strategic), medium-range (tactical), and short-range (operational)plans. A central planning staff helps with the planning process.

The long-range (strategic) plan (with a time-horizon of up to 10 years) outlines broad major directionsand goals for the company within the context of the rapidly changing environment. Goals are normally setfor the final year of the plan and may include such factors as sales volumes, pretax income, and capitalinvestment. Other parts of the plan are revised annually as necessary. These parts focus mainly on theorientation of the company, changes of structure, and employee motivation and revitalization.

The medium-range (tactical) plans address short-term issues that amplify long-range plans and goals.They are normally 3-year plans that are revised annually on the basis of current business considerations.Tactical plans guide the allocation of resources, such as human resources, facilities, equipment, and funding,to achieve tactical goals. They also center on what must be done by the various product divisions to meetoverall strategic directives. Contingency plans are also developed to deal with potential serious threats,even when the i probabilities of such circumstances are relatively low.

Meadows’ short-range (operational) goals and plans are oriented to the maximum use of all resourcesto obtain planned results during the current fiscal year. Operational reports are compared with previouslyestablished goals to determine the effectiveness of individual units and the overall company.

Questions for Discussion :

1. Discuss how Meadows has used its planning process to position itself as a global business.

2 . How would you envision tactical goals and plans flowing from the strategic plans at Meadows ?

3. Explain how you would implement goal setting and planning in an international organization.

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1. The planning process at Meadows has help it position itself as a global business. The planning system at Meadowsconsists of long-range (strategic), medium-range (tactical), and short-range (operational) plans. The long-range planoutlines broad major directions and goals for the company within the context of the rapidly changing environment.Goals are set for a ten-year period and may include such factors as sales volumes, pretax income, and capitalinvestment. The medium-range plans address short-term issues that amplify long-range plans and goals. These plansguide the allocation of resources, such as human resources, facilities, equipment, and funding, to achieve tacticalgoals. The short-range plans are oriented to the maximum use of all resources to obtain planned results during thecurrent fiscal year.

2. The tactical goals and plans at Meadows center on what must be done by the various product divisions to meet overallstrategic directives. They basically address short-term issues that amplify strategic plans and goals.

3. Planning practices for multinational organizations are difficult than that of domestic companies. Theoretically, inter-national planning requires the involvement of both subsidiary and headquarters management. Further, planningshould focus on operations and strategic issues. In some, corporation planning is entirely delegated to the subsidiarymanagement. In some cases both headquarters and subsidiaries are involved in planning. A subsidiary planning effortshould be duly coordinated with those of headquarters. Planning should take environmental realities of products andmarkets into consideration. In this effort the parent company plays two roles. The first role involves facilitatinglinkage between corporate and subsidiary perspectives. This amounts to providing corporate wide perspectivesrelative to its overall mission and direction both generally and with reference to the subsidiary, country market. Thesecond rule includes establishing a world wide planning system. Such a system is achieved by developing planningprocedures and communicating them to subsidiaries. An individual role that corporate headquarters must perform isto serve as a catalyst in creating a planning culture among the subsidiary executives.

At headquarters, planning is approved out of the plans submitted by the subsidiaries, as well as formulation ofCorporate wide strategy is done. Thus, the goal-setting and planning is done -which not only reflects the domesticexperience of the company but also management’s orientation toward multinational business.

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Fund Raising

Your company’s R&D department has been working on a newprocess which if it works, can convert certain natural herbs costingabout Rs.25 per kg. to unleaded petrol of high quality which mayfetch around Rs.45 per litre. Half a kg. of such herbs are expected toyield 1 litre of such petrol. The company needs Rs.10 million ofexternal funds at this time to complete the research. The results ofthe research will be known in about a year and there is about a 50-50 chance of success. If the research is successful then your companywill need to raise a substantial amount of new money to put theproject into production. Economists have forecasted that theeconomy will remain depressed next year also. The interest ratesare expected to be high with the government not being able tocontrol either inflation or government expenditure. The South-EastAsian Markets are also not expected to recover immediately.

Read the caselet carefully and answer the followingquestion:

1. How would you recommend the currently required Rs. 10 millionto be raised? Debt or Equity? How would the factors discussedabove influence your decision? What are the other factors youwould like to consider in your analysis.

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Fund Raising

1. The pros and cons of using equity or debt may be discussed as follows :

Equity

Given that this is a high risk project venture funding through equity/equity related instruments may be a good route,where the venture capitalist can exit at a premium later on, when the markets are good. He can also provide theadditional rounds of financing required at each stage from the start-up onward.

A management group that is not concerned about voting control may decide to use equity rather than debt especiallyif the firm’s financial position is weak and cannot support the additional interest burden.

The more conservative the management, the more it will raise finance through equity.

If the credit rating of company is bad, an issue of debt may be difficult to market.

If the existing capital structure is highly leveraged, in order to maintain flexibility and reserve borrowing power, anequity issue may be better as debt may be needed in future.

If firm already has high business risk, financial risk should be kept low to reduce total risk.

Debt Issue

Tax advantage of debt.

Lower cost of debt as well as floatation costs.

Minimizing potential agency costs.

Posture signalling impact of debt.

Growth rate -Rapidly growing firms tend to use debt more than others.

Market conditions -In inflationary conditions a fixed rate debt instrument may be better since it looks as thoughinflation is there to stay for sometime.

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Garden Company

The Garden Company was established in Germany in 1987. The GardenCompany has designed a riding power lawnmower that it less noisy thancompeting machines with the same horse power rat ing and operatingcharacteristics.

The design was done in 1989 and it was approved by the top managementand separate manufacturing unit was also established for manufacturing of ridingpower lawnmowers. The company had established the network of intermediarieslike its competitors. Brochures are prepared highlighting that the product is lessnoisy than rest of the lawnmowers available in the market, but with high operatingcapacity.

Recently, many companies are entering the market of lawnmowers and sothe competition is very intense. The Garden company set the price of its product,equally with the price of the best quality machine available in the market.

The company was confident enough that the product will surely become a hitin the market, as the new product is being available in the market at the sameprice, but with an added feature of less noise.

In the first month, they were able to sell 20 items only. The managementthought that it was because of the lack of promotion. Then, the company increasedits promotion through mass advertising. Even then, the sales did not increase.Vinod Jacob, Vice-President, Finance suggested that the top management shouldcome out with new financial schemes to attract the customers. This idea alsodid not give any positive results.

Later, the company decided to provide free after sales service to theircustomers. Still, there was no improvement in the sales of lawnmowers and thepresident of Garden Company, Roberte Steve is in dilemma.

Questions for Discussion :

1. Why the customers haven't shown interest in purchasing the new productlaunched by the Garden company ?

2. Why did the idea of Mr. Jacob failed in improving the sales of the company?

3. Write the main theme of this case ?

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Garden Company1. For any industrial product to be successful in the market, four kinds of transactions should take place. They are

product and service exchange, information exchange, financial exchange and social exchange. Here, the companyhas failed in providing the necessary information that is to be surely delivered. Normally, people have a belief thatmore the noise moreis the horse power (hp) .

So, the information given by the company is against the belief of the people. Because of the people's false belief anda mistake done by the management in sending the right message, the people did not show the interest in purchasingthe machines.

2. The target segment for the lawnmowers is the rich. They really do not require any special packages from the companyto purchase the product. So, the idea of Mr. Jacob was of no use. The idea of after sales service is really good. But,the situation here is different.

3. The main theme of the passage is that the marketing strategies to be developed for the industrial product and therelation between characteristics of the product and the beliefs of the people.People had a belief that the noise of amachine is mainly because of its operating capacity. If the operative capacity of the machine is more, people tend tofeel that it gives more sound.

The idea projected by the company in this case, is against their belief. So the people did not believe the idea promotedby the company stating their machine produces less sound for the same operating capacity.

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Watts and Volts Ltd.

'Watts and Volts Ltd' was established in Koentla. It has been manufacturingpower generation equipments in small and medium sizes. The sales wereconducted either directly to the customers who would place large orders orthrough distributors.

Mr. ELV is the CEO of the company and plays an important role in buildingsound corporate image of the company. Recently, the company even exportedthe power generation equipment abroad. Exports are also growing well now-a-days.

The Regional Manager, Mr. ABV was responsible for generating sales, makingcalls to conceive new ideas as well as developing new products. Mr. ELV thoughtthat Mr.ABV was overburdened and he wanted to appoint a new marketingmanager. Mr. CSV evolved a thorough marketing plan.

He took into account the present selling efforts as well as the developmentof new products. He was suggested Mr. ELV an entry into systems market. Hemeant that equipment connected to power generators should also be developedby the company (for example, irrigation pumps which are used in the farms).

Mr. CSV felt that it was necessary to appoint a new production incharge forthe systems development. Both power generation and systems are marketed byhimself and the Regional manager, Mr.ABV. But, Mr.ABV, the Regional managerof 'Watts and Volts Ltd' strongly opposed to have a parallel sales organizationunder the same roof. Mr. ELV, the CEO was in dilemma. He called both of them tocome to his room and all of them started discussing the future plans of thecompany.

Questions for discussion :

1. What organization structure would you recommend for the marketing andsales operations of M/s. Watts and Volt Ltd?

2. “A parallel sales organizations should not be operated under the same roof”,says Mr. ABV. Do you agree with him?

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Guidelines for Case Study

Watts and Volts Ltd.1. Mr. ELV should look after the overall organization. MR.ABV and Mr.CSV should be made inchanges for the two sales

divisions. The newly appointed employee look after the production processes of both the divisions.

Mr. ELV should carefully manage the situation through proper allocation of responsibilities to each manager. Both thesales divisions of systems and power generation equipment operate as profit centers.

Transfer pricing mechanism should be implemented, if the company wants to provide some attractive packages for thecustomers who want to purchase both the products. As both are made responsible for their profit centers, they getmotivated.

2. One should agree with the statement given by Mr.ABV as it is really difficult to maintain two different organizations tobe operated under the same roof.

There might be a lot of confusion in dealing with the customers and it disturbs the individual manager's capabilities andefficiency.

It also gives a false impression even to the customers. So, two different divisions should be set up and they should

be assigned clear tasks.

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Case Study

Electronics Ltd.

At Electronics Ltd., absolutely nobody has time to waste. The company established amarketing niche in the bottling and equipment industry by promising its customers a ten-day turnaround, and a drastic reduction in the industry average of four months. With itsmiddle-of-the road prices, Electronics Ltd. has based its competitive strategy on time, andevery employee in every aspect of the business, including the sales force must pursue thiseffort.

The custom-made machinery for bottle’s and packages that Electronics Ltd. sells arebasic models that the company alters to fit customers’ specifications. Since the machinesgo through production and are delivered within ten days. It is imperative that every detailto be set before production begins; such detail is accomplished with an eighteen-pageproduction form filled out by the salespersons. These forms literally serve as surrogatesupervisors for the production workers, and so the salespeople must have extensive productknowledge and no small amount of mechanical know-how. All employees are required toserve as equipment installers before they are eligible to go into sales. In this way, theyaccrue the necessary hands-on skill.

Electronics procedures are also designed for speed. Salespeople call on potentialcustomers by performing the demonstrations in trucks filled with Rs.80,000 of equipment.The expense of the trucks is justified by Electronics’ belief that prospects who see theperformance of the equipment are likely to commit on the spot. The desire for quickcommitments stems from Electronics own production speed; the company keeps no backlogof order, and if orders are not coming in, production workers have nothing to do.

Electronics’ also expects expediency from its customers. No payment is received untilthe equipment is up and running. But as soon as the equipment is performing satisfactorily,the organisations conduct an inspection. In fact, customers are encouraged to make theirpayment to the installer on the day of delivery. Another motivation for Electronics’ to hurryis straight-commission salespeople .They do not get their paychecks until the job is done.

Questions for discussion :

1. Electronics Ltd. has based its competitive strategy on time, and every employee inevery aspect of the business, including the sales force must pursue this effort. Whydo you think organizations are emphasizing on time ?

2. What factors are important for Electronics Ltd. employees’ to manage time ?

3. Most organizations like Electronics adopt straight commission method of payment tocompensate their salespersons. Why do think organizations adopt straight commissionas their compensation plan ?

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Electronics Ltd.

1. For organizations like Electronics Ltd., managing their time and that of their salespeople is one of their crucial tasks.Time is a sales professional’s most valuable resources. It structures the salesperson’s time resources so as tomaximize the productive time, minimize the wasted time.

Sometimes, customer contact effectiveness is dependent upon salesperson’s preparation for each individual salescall. Time invested in planning presentations, anticipating objections and developing appropriate answers for them istime well spent. Also, support activities represent an important function. They involve paperwork, sales reports,order follow- up, and professional development through self-study programs. Organization must maximize thoseactivities that emphasis on customer contact and minimize other activities like travel and waiting time. Organizationslike Electronics are able to strike a balance between sales management and time because of effective management.

2. Three keys to managing time are planning, organization and discipline.

All salespeople and managers must plan for the optimum use of the limited time that they have. They should adopt thefollowing time management skills.

Ø Sales mangers must establish the priorities for sales activities according to A, Band C. The managers should concentrateon completing the most important task or A before turning the attention to B and C activities.

Ø They should anticipate the major tasks that may prevail in future. Sales managers should plan to spend less time on‘fire fighting’ and more on ‘fire prevention.

Ø Organizations must make sure that schedules are flexible. Developing contingency plans to facilitate readiness forchanging conditions and emergencies when they arise.

Good time management is based on self-discipline and the development of good work habits. There must be a sinceredesire to avoid bad work habits and manage time effectively. For example, salesperson should be alert to unnecessaryinterruptions such as casual visits and unnecessary or wrong calls. He must utilize the blocks of uninterrupted time toaccomplish the major tasks like writing a report or preparing a sales forecast.

Another effective time management skill is organization itself. Managers must carefully study the tasks they mustperform and get organized to accomplish them. It includes salesperson to prepare and submit a daily or weekly workschedule. Consolidating the activities whenever possible i.e. salesperson opt to visit one long trip to visit customersin the field than short or local visits.

3. Organizations adopt straight commission plan with an underlying assumption that sales volume is the best productivitymeasure and can, therefore, be used as the sole measure.

Straight commission plan is a combination of progressive changes in commission for different sales volume levels, anddifferential commission rates across products. The straight commission plan has several advantages. To begin with,it provides maximum incentive income for salespeople to strive for higher volume of sales. Since the plan is based onproductivity, the feeling of inequitable pay among employees is relatively low and much of the sales personnel exodusis among the low producers. In addition, straight commission plans provide a means for cost control -selling expenses(including sales compensation) virtually becomes a variable expense. Moreover, the differential commission ratesapplied to various products stimulate salespeople to emphasize those products with the highest gross margin. However,the straight commission plan has certain weaknesses. Management has little control over salespeople’s activities -both operational and financial. In addition, they are careless about transmitting reports, neglect to follow up leads,resist reduction in the size of sales territories, consider individual accounts private property, shade prices to makesales, and may use high-pressure tactics with consequent loss of customer goodwill. Moreover use of differentialcommission rates increases the complexity of the plan thereby increasing the record-keeping expenses. Finally,income uncertainties may reflect on some financially worried salespeople affecting their overall efficiency. In suchcases, management may have to invest considerable time, effort, and money to pep up their spirits.