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Parikalpana:KIIT Journal of Management

[ISSN – 0974-2808]

Board of AdvisorsProf. N.L. Mitra

Chancellor, KIIT UniversityProf. P.P. Mathur

Vice Chancellor, KIIT UniversityProf. Anil Bajpai

Director, KIIT School of Management, KIIT UniversityProf. S.N. Misra

Dean, KIIT School of Management, KIIT University

Members of Journal Committee, KSOM, KIIT University

Ashok Kumar Sar Ipseeta Satpathy BCM Patnaik Brajaballav Kar

Editorial Board Artatrana Ratha, St Cloud State University, USA Ashish Dwivedi, Hull University Business School, Hull, UK B. K. Mohanty, Indian Institute of Management Lucknow, India Badar Alam Iqbal, Aligarh Muslim University, Aligarh, India Colin C Williams, She�eld University Management School, University of She�eld Damodar Suar, Indian Institute of Technology Kharagpur – India Hemanta Kumar Baruah, Vice-Chancellor, Bodoland University Kokrajhar-Assam Rajen K Gupta, M.D.I. Gurgaon, India Sailabala Debi, KIIT School of Management, KIIT University, Bhubaneswar, India Saswata Narayana Biswas, Institute of Rural Management (IRMA), Anand, India Sushanta Mallick, School of Bus. & Management, Queen Mary, University of London Vinit Parida, Luleå University of Technology , Sweden Wee Yu Ghee, University Malaysia Kelantan, Malaysia

EditorR. N. Subudhi

(Professor, KIIT School of Management, KIIT University)e-Mail: [email protected]

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Parikalpana(KIIT Journal of Management)

July-Dec 2016

CONTENTS

Customer Satisfaction on Services of Lakshmi Vilas 1-12Bank and Nationalized Banks in Tiruchengode:A Comparative StudyS. Ramesh

Assessment of Technologies for Discoms 13-26in NCR and Development of Power DistributionTechnology Implementation IndexVipin Khurana, Varun Prakash & ORS Rao

Impact of Packaging on Consumers’ Buying Behaviour: 27-34A Case Study of Mother Dairy, KolkataBidyut Kumar Ghosh

Knowledge Management Orientation of B-School Processes: 35-51A Case ResearchSanghamitra Brahma & Sumita Mishra

Business Intelligence Systems: A Necessity 52-65for Agile Supply Chains

Subrat Sarangi

Millennium Development Goals and Post 2015 Framework : 66-74An Indian ExperienceShikta Singh

Paradigm shift towards Mobile Marketing: 75-94A study on Consumer’s PerspectiveRitesh Dwivedi

Application of Bayesian Credibility Theory in Movie 95-106Rankings to Reduce Financial Risk of Production HousesPalash Ranjan Das

Board Composition, Board gender diversity and Firm 107-120performance: Evidence from IndiaSaroj Kumar Routray & Ranjan Kumar Bal

Diffusion of Technological Innovation in Business: A Study 121-134on New Generation Business in India in E-Business EnvironmentSoumendra Kumar Patra, Durga Madhab Mahapatra &Rabinarayan Patnaik

Learning Organizations in Action: Evidence from the 135-151Downstream Hydrocarbon Industry in IndiaAshok K Sar

Determinants of Dividend Policy for Select Information 152-157Technology Companies in India: An Empirical AnalysisSouvik Banerjee

A Review of Organisational Conflict Literature 158-179Rabinarayan Samantara & Nidhi Sharma

Key Processes Adopted For Transportation Management 180-190System In Small Scale FirmsVipul Chalotra

1Parikalpana - KIIT Journal of Management (July-Dec - 2016)

Customer Satisfaction on Services of Lakshmi Vilas Bankand Nationalized Banks in Tiruchengode:

A Comparative Study

S. Ramesh

Associate Professor (MBA),K.S. Rangasamy College of Technology, Tiruchengode, TN

[email protected]

ABSTRACT

The main aim of the study was to examine the level of satisfaction of customers onvarious banking services offered by Lakshmi Vilas Bank and other nationalizedbanks in Tiruchengode taluk and make comparison between the banks. Data wasgathered among 300 respondents in Tiruchengode taluk through a well-structuredquestionnaire and the authors attempted to develop a model for measuring thecontributory level of various factors to customer satisfaction and tested for validitythrough Structural equation modeling. The study revealed that the primary factorsleading to customer satisfaction are Personal attention, Safety, Technical, Staff servicethrough Comfort factor. It is concluded through this study that the overall satisfactionlevel on various banking services of LVB is better than other nationalized banks inTiruchengode taluk.

Key words: Banking Services, Customer Satisfaction, Structural equation modeling

1. Introduction

Customer satisfaction is the key tolong term success of any organization.Keeping the importance of customersatisfaction in mind, banks need tomaintain stable and close relationships withtheir customers. Customer satisfactionlevels need to be judged. The applicationof the knowledge of customer satisfactionis imperative to establishing and maintaininga long-term relationship with customersand long-term competitiveness. Bankingis a high involvement industry. Banks

recognize the fact that delivery of qualityservice to customers is essential forsuccess and survival in today’s global andcompetitive banking environment.Researchers have found that customersatisfaction has a measurable impact onpurchase intentions and on a firm’s financialperformance.

Customers’ wants, needs, andexpectations change quickly. Therefore,what would have delighted and surprisedthem a short while back might not satisfy

Parikalpana - KIIT Journal of Management2

them at present. Banks may not be ableto provide superior services to thecustomers unless customer expectationsare known. Customer expectations can beknown through the knowledge ofsatisfaction levels of customers. Thisnecessitates the measurement of customersatisfaction level. Customer satisfactioncannot be measured unless the factorsaffecting customer satisfaction aredetermined. This necessitates an in-depthstudy about the factors affecting customersatisfaction.

Banks selected for Comparative Study

This study is mainly focuses oncustomer satisfaction in Lakshmi VilasBank (LVB) and Other NationalizedBanks (ONB) like Indian Bank, IndianOverseas Bank, State Bank of India, etc.

2. Literature Review

Ganguli and Roy (2011) studied thefactors affecting customer satisfaction inthe Indian retail banking sector. Onlinestructured questionnaire developed todetermine the factors for customersatisfaction was distributed among therespondents. The dimensions wereidentified using an exploratory factoranalysis (EFA). Next the reliability andvalidity of the factors for customersatisfaction were established throughconfirmatory factor analysis (CFA). Thepaper identifies four generic dimensions inthe technology based banking services,customer service, technology security andinformation quality, technology

convenience, and technology usageeasiness and reliability. It was found thatcustomer service and technology usageeasiness and reliability have positive andsignificant impact on customer satisfaction.

Al-Eisa and Alhemoud (2009)attempted to identify the most salientattributes that influence customersatisfaction with retail banks in Kuwait andto determine the level of the overallsatisfaction of the customers of thesebanks. A multiple attribute approachproposed by Shin and Elliott (2001) wasemployed. This approach was applied inthe analysis of data collected from aconvenient sample of retail banks inKuwait. The most crucial collected froma convenient sample of customersatisfaction with retail banks in Kuwaitwere fast service, courtesy and helpfulnessof employees and availability of self-banking services.

The predictors of customersatisfaction in the German retail bankingsector were studied by Kanning andBergmann (2009). Field study method wasapplied to find the factors affectingcustomer satisfaction. The major factorsidentified were performance of banks andfulfillment of customer expectations.

The factors affecting customersatisfaction in the Malaysian retail bankingsector was conducted by Ndubisi and Wah(2005). A field survey of bank customersin Malaysia was conducted using astructured questionnaire. The data werefactor analyzed to determine the key

3Customer Satisfaction on Services of Lakshmi Vilas Bank...

dimensions of customer satisfaction. Theresults showed that five key dimensions,namely competence, communication,conflict handling, trust, and relationshipquality, were the major determinants ofcustomer satisfaction.3.1 Research Design, Sample Size

and Data Collection

The research design used for thisstudy is descriptive research. The mainpurpose of descriptive research isdescription of the state of affairs as it existsat present. The aim of this approach is toportray the customer’s satisfactiontowards various banking services.Sampling is the act of selecting arepresentative part of a population for thepurpose of determining the characteristics ofthe whole population. Simple size refers tothe number of items to be selected from theuniverse to constitute a sample. Sample sizefor this study is 300 customers, comprisingof 129 from LVB and 171 from ONB.

Primary data collected throughconducting Personal interview by framingquestionnaires. A well structuredquestionnaire was prepared anddistributed to the respondents andinformation was gathered during April,2014. The questionnaire consists of anumber of questions printed in a definedorder on a form or a set of forms.3.2 Tools for the Study

Percentage Analysis, Mann-WhitneyU Test, Factor AnalysisStructural Equation Modelling

4. Data Analysis and Interpretation

4.1 The data gathered from 300respondents in Tiruchengode taluk througha structured questionnaire was entered intoSPSS software and further analyzed toarrive at meaningful conclusions. Theresults of the data analysis and theirinterpretations are described in thissession.

Table 4.1. Demographic details of customersDemographic factor Level LVB ONB LVB ONB

(No.) (No.) (%) (%)Gender Male 91 89 71 69

Female 38 82 29 64Age (years) Upto 35 82 108 64 63

Above 35 47 63 36 37Education Upto H.Sc. 27 41 21 24

UG 54 98 42 57PG 41 25 32 15Professional 7 7 5 4

Occupation Private 41 40 32 23Corporative 28 41 22 24Business 48 51 37 30Professional 5 8 4 5Student 7 31 5 18


It can be seen from the above table that aconsiderable difference in the proportionof female customers and rural customers– more in ONB than in LVB.4.2 Level of Satisfaction – A

Comparative Analysis

The respondents were asked to ratetheir level of satisfaction on variousattributes leading to satisfaction on a 7-point liker scale, 1 being the lowest leveland 7 being the highest level of satisfaction.The mean level of satisfaction of customerson various parameters of study through 26variables along with test results of Mann-Whitney U Test for difference in two banksis tabulated in Table 4.2.1. It can be alsovisually seen from the above table that themean level of satisfaction of all the variablesfor the bank LVB are higher than Other

banks. Hence it can be easily inferred thatthe services of LVB is better than otherbanks in Tiruchengode taluk. The non-parametric test Mann-Whitney U Test wasused to test the differences in mean levelof satisfaction of two banks in differentvariables are statistically significant and theresult are shown in Table 4.2 (onlyvariables with significant difference isshown).

The null hypothesis is taken as thereis no significant difference in the mean levelof satisfaction of respondents on variousvariables with respect to LVB and othernationalized banks against the alternativethere is a significant difference in the meanlevel of satisfaction of respondents onvarious variables with respect to LVB andother nationalized banks.

Table 4.2: Mann Whitney U Test Results : Level of Satisfaction vs. Bank

VARIABLES Name of Banks Mann- Asymp.LVB ONB Whitney U Z Sig. (2-tailed)Mean Mean

Banks fulfils its promises atthe time indicated 5.47 4.20 5294.5 -7.943 0.000Bank staffs have the knowledgeto answer all my questions. 6.00 4.66 6297.5 -6.538 0.000Distance to the office (premises)of the bank. 5.39 3.96 5894 -7.005 0.000Materials like pamphlets, statementsare virtually appealing at the bank. 5.48 4.91 8113 -4.090 0.000Bank performs the services exactlyat the first time. 5.67 4.86 7096 -5.485 0.000Banks has my interest at heart. 5.68 5.22 8858.5 -3.058 0.002Bank gives me individual attention. 5.70 4.86 6993 -5.62 0.000Bank has modern equipment & tools. 5.36 4.6 8475.5 -3.499 0.000Bank staffs give me prompt service. 5.76 5.08 7951 -4.339 0.000Bank operating hours convenient to me. 5.87 5.12 7721 -4.631 0.000Bank show a keen interest in solvingyour problems. 5.82 5.24 8069.5 -4.126 0.000

5

Bank staff behavior instills confidence in me. 5.95 5.3 7567.5 -4.888 0.000Bank physical facilities virtually nice. 6.59 5.88 6700 -6.331 0.000I feel safe in my transactions with the bank. 6.16 5.43 7432.5 -5.055 0.000Bank staffs are courteous with me. 5.78 5.26 7924.5 -4.355 0.000Banker staff tells you exactly the time theservice will be performed. 5.91 5.12 7445 -4.997 0.000Bank employees are neatly appealing. 5.82 5.46 8866 -3.045 0.002Bank staff always willing to assist you. 5.84 5.35 8416.5 -3.68 0.000Bank insists on error free records. 6.09 5.61 7935 -4.373 0.000Bank staff understands my specific needs. 5.95 5.41 8314 -3.807 0.000Bank staffs are not too busy to respondto my request. 5.67 4.85 8145.5 -4.008 0.000Bank offers online trading facility. 6.23 5.75 1957.5 -3.181 0.001Overall satisfaction with your bank 6.35 5.92 8484.5 -3.669 0.000

4.3 Factor Analysis

Factor analysis was used to reducethe number of variables contributing tocustomer satisfaction; the study includedas many as 26 variables and in order toreduce the number of variables and tofind the main underlying constructs of

customer satisfaction, factor analysis wascarried out and the results of factoranalysis are presented in Tables 4.3. Thefollowing table represents the rotatedcomponent matrix using 0.3 as a cut-offpoint for factor loading for naming thefactors. In this way we get five factors.

Table 4.3 : Rotated Component Matrixa

Factor Variables Component (Factor Loadings)1 2 3 4 5

Personal Bank gives me individual attention. .766 Bank show a keen interest insolving your problems. .714 .384Banks has my interest at heart. .707 Bank insists on error free records. .684 Bank staffs are courteous with me. .658

Technical Bank staff have the knowledge toanswer all my questions. .883 Distance to the office (premises)of the bank. .765 Banks fulfils its promises at thetime indicated .744 Materials like pamphlets, statementsare virtually appealing at the bank. .701

Comfort Bank staff always willing to assit you. .714Bank operating hours convenient to me. .677

Customer Satisfaction on Services of Lakshmi Vilas Bank...


Safety Bank has modern equipment & tools. .689Bank offers safe and securede-banking services. .684Bank offers safe bill payments. .642 .434

Staff service Bank staffs are not too busy torespond to my request. .837Banker staff tells you exactly thetime the service will be performed. .504 .598

Extraction Method: Principal Component Analysis.Rotation Method: Varimax with Kaiser Normalization.a. Rotation converged in 9 iterations.

Factor 1 will comprise of variables Bankgives me individual attention, Bank showa keen interest in solving your problems,Banks has my interest at heart, Bank insistson error free records, and Bank staffs arecourteous with me. This factor is namedas ‘Personal’. Factor 2 comprises thevariables Bank staff have the knowledgeto answer all my questions, Distance tothe office (premises) of the bank, Banksfulfils its promises at the time indicated,Materials like pamphlets, statements arevirtually appealing at the bank. This factoris named as ‘Technical’. Factor 3comprises of the variables Bank staffalways willing to assist you, Bankoperating hours convenient to me. Thisfactor is named as ‘Comfort’. Factor 4comprises of the variables Bank hasmodern equipment & tools, Bank offerssafe and secured e-banking services, andBank offers safe bill payments. This factoris named as ‘Safety’. Factor 5 comprisesof the variables Bank staffs are not toobusy to respond to my request, andBanker staff tells you exactly the time theservice will be performed. This factor isnamed as ‘Staff service.

4.4 Structural Equation Modelling

The characteristics of customersatisfaction of the banks have been studiedusing the five factors, viz. Personal factors,Technical factors, Comfort factors, Safetyfactors, and Staff service factors, asdepicted in the model depicted below.

Figure 4.1 : First Order Measurement Model

7

4.4.1 MEASUREMENT MODEL OFCUSTOMER SATISFACTION (CS)

The above six factors are validatedand accepted in IndependentMeasurement Model by performing FirstOrder Measurement Model ConfirmatoryFactor Analysis. It helps to study themodel very closely. In the above table allthe factor loadings are above therecommended value it shows the factorshaving individual reliability.

Table 4.4 : Results of the confirma-tory factor analysis – Model fit Chi-square df p CMIN/df CFI RMSEA 242.25 94 .000 2.577 .903 .073

These results reveal that all the pre-requisites for the acceptance of the FirstOrder Measurement model are nearly met.After establishing the individual itemreliability of the model, the validity of themodel is tested and found to be satisfyingthe conditions (results not produced dueto lengthy tables.

4.4.3 STRUCTURAL MODEL

A structural model was developedand tested for its validity explainingcustomer satisfaction through the measuredfactors tested in the previous section. Thestructural model is depicted in the followingfigure.4.2

Figure 4.2 : Structural ModelThe results of the validity confirmatory factor analysis is tabulated below.



Table 4.4.3.1 : Results of the confirmatory factor analysis – Model fitChi-square df p CMIN/df CFI RMSEA293.150 120 .000 2.443 .905 .069

These results reveal that all the pre-requisites for the acceptance of the modelare nearly met. The following table gives the unstandardized and standardized estimatesof various regression models and their significance involved in the structural model.

Table 4.5 Estimates of independent factors in the modelRelationships Estimate S.E.

Standardized estimate

C.R. P R2 Significance

Technical <--- Bank -0.785 0.102 -0.528 -7.729 *** 0.279 Significant

Personal <--- Bank -0.054 0.118 -0.032 -0.461 0.645 0.324 NS <--- Technical 0.624 0.105 0.551 5.915 *** Significant

Safety <--- Personal 0.693 0.111 0.755 6.268 *** 0.589 Significant <--- Bank -0.059 0.114 -0.038 -0.513 0.608 NS

Staff Service <--- Personal 0.309 0.213 0.238 1.448 0.148 0.578 NS <--- Safety 0.689 0.27 0.487 2.552 0.011 Significant <--- Bank -0.386 0.141 -0.177 -2.744 0.006 Significant

Comfort <--- Personal 0.385 0.117 0.396 3.286 0.001 0.92 Significant <--- Staff Service 0.476 0.104 0.636 4.575 *** Significant <--- Bank -0.046 0.116 -0.028 -0.396 0.692 NS

Satisfaction <--- Comfort -2.039 3.161 -1.553 -0.645 0.519 0.766 NS <--- Staff Service 0.947 1.559 0.964 0.608 0.544 NS <--- Safety 0.343 0.221 0.246 1.552 0.121 NS <--- Technical -0.281 0.107 -0.195 -2.636 0.008 Significant <--- Personal 1.619 1.242 1.269 1.304 0.192 NS <--- Bank -0.16 0.284 -0.075 -0.564 0.573 NS

S.E. : Standard error; C.R : Critical Ratio; P : Probability value; R2 : R-squared; NS: Not significantSignificant relationships are identified at 5% level of significance.

It can be seen from the above tablethat some of the relationships aresignificant. i.e., relationships betweenName of Bank and Technical / StaffService factors have negative coefficients;relationships between Technical andpersonal factors, Safety and Staff Servicehave positive coefficients; relationshipbetween Technical factor and Satisfactionhas a negative coefficient. The negativecoefficients imply that the concernedfactors are inversely related to oneanother. It can also be observed from the

above table that the factor ‘Comfort’ hasbeen well explained by the factorsPersonal and Staff service, as 92% ofvariation in comfort is explained by thesetwo factors. Hence the structural modelwas developed with ‘comfort’ as mediatingfactor and overall satisfaction as the endvariable. The end variable customersatisfaction measured through a straightquestion ‘overall satisfaction’ shows thataround 77% of its variation is explainedby the model, with only one significantcontributory factor ‘Technical’ with

9

negative coefficient. However, the directand indirect effects of different factorsinvolved in explaining customer satisfaction

were further analyzed to arrive at an indepth conclusion.

Table 4.6 : Standardized effects of contributing factors

Standardized Total Effects (Group number 1 - Default model)

Bank Technical Personal Safety Staff Service Comfort

Technical -0.528 0 0 0 0 0

Personal -0.323 0.551 0 0 0 0

Safety -0.282 0.416 0.755 0 0 0

Staff Service -0.391 0.334 0.605 0.487 0 0

Comfort -0.405 0.431 0.781 0.31 0.636 0

Satisfaction -0.200 0.261 0.826 0.235 -0.024 -1.553

Standardized Direct Effects (Group number 1 - Default model)


Technical -0.528 0 0 0 0 0

Personal -0.032 0.551 0 0 0 0

Safety -0.038 0 0.755 0 0 0

Staff Service -0.177 0 0.238 0.487 0 0

Comfort -0.028 0 0.396 0 0.636 0

Satisfaction -0.075 -0.195 1.269 0.246 0.964 -1.553

Standardized Indirect Effects (Group number 1 - Default model)


Technical 0 0 0 0 0 0

Personal -0.291 0 0 0 0 0

Safety -0.244 0.416 0 0 0 0

Staff Service -0.214 0.334 0.367 0 0 0

Comfort -0.377 0.431 0.385 0.310 0 0

Satisfaction -0.125 0.455 -0.443 -0.011 -0.988 0

It can be seen from the above tablethat the factor Bank has negative total effecton almost all the factors. Lakshmi VilasBank, being coded as ‘1’ in the datapreparation, implies that the services ofLVB are better than SBI in all thecontributing factors of satisfaction. The

negative coefficient in the total effect -0.528 means that LVB is well ahead ofSBI in technical factor (Pamphlets/statements are virtually appealing,Banks fulfils its promises at the timeindicated, Distance to the office(premises) of the bank, Bank staffs have



the knowledge to answer). This isachieved by LVB despite the fact that SBIhas more number of branches SBI in thedistrict than LVB. The model for overallsatisfaction explained by the contributoryfactors can be expressed by the regressionmodel Satisfaction = -0.200 + 0.262(Technical) + 0.826 (Personal ) + 0.235(Safety) – 0.02 (Staff Service) – 1.553(Comfort). From this equation it can beinferred that the factors Staff service andcomfort have an inverse relationship withthe explained variable Satisfaction. Thevariable Technical has a positive indirecteffect, the variable Personal has a positivedirect effect, but however it has little bit ofindirect effect also; the variable Safety hasa positive direct effect and the variableStaff Service has a positive direct effect.But the factor comfort has a strong indirect

effect on satisfaction. Hence it is suggestedthat the banks have to pay more attentionto the customers to make them morecomfortable by way of offering flexibleservice timings and assisting customers tomeet their requirements. Also it can beseen from the table that there is positivedirect path between Staff service andComfort (.636), meaning if the Staffservice is good, the customers will feelcomfortable. Further, there is positivedirect path between safety and personal(.755) implying that if the customers aregiven personal care, they feel they aresecured.

The various hypotheses set in themodel are tested for their validity and theresult is reproduced in the following table4.4.3.4:

Factors Hypothesis P R2 Inference

Technical <--- Bank The factor Bank does not have any impact on the ‘Technical’ factor <.001 0.279 Rejected

Personal <--- Bank Bank does not have any impact on ‘Personal’ 0.645 0.324 Not rejected <--- Technical Technical does not have any impact on ‘Personal’ <.001 Rejected

Safety <--- Personal Personal does not have any impact on ‘Safety’ <.001 0.589 Rejected <--- Bank Bank does not have any impact on ‘Safety’ 0.608 Not rejected

Staff Service <--- Personal Personal does not have any impact on ‘staff service’ 0.148 0.578 Not rejected <--- Safety Safety does not have any impact on ‘staff service’ 0.011 Rejected <--- Bank Bank does not have any impact on ‘staff service’ 0.006 Rejected

Comfort <--- Personal Personal does not have any impact on ‘comfort’ 0.001 0.92 Rejected

<--- Staff Service Staff service does not have any impact on ‘comfort’ <.001 Rejected

<--- Bank Bank does not have any impact on ‘comfort’ 0.692 Not rejected

Satisfaction <--- Comfort Comfort does not have any impact on ‘satisfaction’ 0.519 0.766 Not rejected

<--- Staff Service Staff service does not have any impact on ‘satisfaction’ 0.544 Not rejected

<--- Safety Safety does not have any impact on ‘satisfaction’ 0.121 Not rejected <--- Technical Technical does not have any impact on ‘satisfaction’ 0.008 Rejected <--- Personal Personal does not have any impact on ‘satisfaction’ 0.192 Not rejected <--- Bank Bank does not have any impact on ‘satisfaction’ 0.573 Not rejected

Table 4.7: Hypothesis testing of factors in the model

11

It can be seen from the above table thatbank has an impact on the factors Technicaland Staff service. The factor ‘Technical’has significant contribution to the factor‘Personal’ and overall satisfaction. Thefactor ‘personal’ has a significant influenceon the factors ‘Safety’ and ‘Comfort’. Thefactor ‘safety’ is significantly influencing‘staff service’.

Conclusion

The main aim of the study was toexamine the level of satisfaction ofcustomers on various banking servicesoffered by Lakshmi Vilas Bank and othernationalized banks in Tiruchengode taluk.The sample customers across threedifferent resident areas, viz. rural, semi-urban and urban areas comprising of 300numbers were studying by issuing aquestionnaire on 26 items of services andthe data was gathered. The principalcomponent analysis was used to reducethe 26 items which were finally reducedto four main components of service namelyPersonal, Comfort, Technical and StaffService. A model was developed formeasuring the contributory level of thesefactors to customer customers and testedfor validity through Structural equationmodeling.

The results revealed that about 77 percent of the variations in customersatisfaction was explained by these fourfactors and within these four factors,several of them were leading to contributemuch to the factor ‘comfort’. It is derivedfrom the analysis that the banks should

concentrate to improve the comfort levelof their customers to raise the overallsatisfaction which will ultimately lead toincrease in business volume and therebywill result in more profit. It is concludedthrough this study that the overallsatisfaction level on various bankingservices of LVB is better than othernationalized banks in Tiruchengode taluk.

References

Abdullah, D.N.M.A. and Rozario, F.(2009), Influence of Service and ProductQuality Towards Customer Satisfaction: ACase Study at the Staff Cafeteria in theHotel Industry, World Academy ofScience, Engineering and Technology53,185-190.

Aldaigan, A.and Buttle,F. (2005),Beyoung Satisfaction: Customer Attachmentto Retail Banks, International Journal of BankMarketing, 23(4) 349-359.

Anderson, E.W., Fornell,C. AndLehmann, D.R. (1994), CustomerSatisfaction, Maket Share, andProfitablilty: Findings from Sweden, Jounalof Marketing, 58(3),53-66.

Arasli, H., Katicrioglu, S.T and Mehtap-Smadi, S. (2005), A comparison of servicequality in the banking industry Someevidence from Turkish-and Greek speakingareas in Cyprus, International Journal of BankMarketing, 23(7), 508-526.

Bowen, J. And Hedges, R.B. (1993),Increasing Service Quality in RetailBanking, Journal of Retail Banking15(3),21-28.



Buttle, F. (1996) SERVQUAL :Review, Critique, Research Agenda,European Journal of Marketing, 30(1), 8-32.

Cronin, J.J. Jr and Taylor, S.A.(1992), Measuring Service Quality: A Re-Examination and Extension, Journal ofMarketing, 56(3), 55-68.

Caruana, A. (2002), Service Loyalty.The Effects of Service Quality and TheMediating Role of Customer Satisfaction,European Journal of Marketing, 23(3),273-291.

Edvardsson, B. (1998), ServiceQuailty improvement, Managing ServiceQuality 8(2), 142-149.

Galloway, R.L & Blanchard,R.F.(1996), Variation in The Perceptionof Quality with Lifestage in Retail Banking,International Journal of Bank Marketing14(1),22-29.

Allred, A.T.(2001), EmployeesEvaluations of Service Quality at Banksand Credit Unions, International Journalof Bank Marketing, 19(4), 179-185.

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Assessment of Technologies for Discoms in NCRand Development of Power Distribution Technology

Implementation Index

Vipin KhuranaAssociate Professor & Area Coordinator (QT) IBS Business School, Gurgaon

Varun PrakashSr Manager, BSES Rajdhani Power Limited (Reliance Energy)

[email protected]

ORS RaoVice Chancellor, ICFAI University, Jharkhand

ABSTRACT

Power distribution system acts as a bridge between the customers and the utility.With changing times , the consumers expectation is not power supply to them but areliable and quality power supply with timely redressal of complaints . With adventof IT , and mobile technologies changing of our lives , consumers expects the utilitieswith accurate metering and billing free from any errors with facilities like onlinepayment of bills and from mobile applications All of these can be possible only byadopting innovative and smarter technologies to curb human intervention andprovide better services to the consumers in terms of handling complains and automatethe consumer’s redressal mechanism. IT and associated technologies also address insolving energy audit issues and identification of more problematic areas and whichneeds more focus and attention.

The paper tries to assess the level of technologies implementation in powerdistribution companies in National Capital Region and proposes a power distributionTechnology Index .

Literature Review

M P Gupta (2007) et all empiricallyassessed the level of IT use in governmentorganizations, and study the role of topmanagement, IT management, usersatisfaction, organizational culture, and ITuse through descriptive and inferentialstatistics.

Meeta Dasgupta (2011) tried tobring together different aspects of

technological innovation and technologystrategy at North Delhi Power Ltd, Delhiwhich has taken various initiatives toturnaround the dilapidated powerdistribution industry in India. It details thevarious technological initiatives taken bythe company to revamp the powerdistribution situation of the country.

Hiroshi Kashiwazaki et.al (2002)

Parikalpana - KIIT Journal of Management


elaborates New Technologies for ElectricPower Distribution Systems, the intelligentsubstations applying IT (informationtechnology) and system configurationsaimed at high-speed communication. , withthe incorporation of needs for the futureintelligent control of substations,protection, monitoring, and communicationsystems that have advantages in terms ofhigh performance, functional distribution,information-sharing and integrated powerdistribution management.

Kam-Hoong Cheong in his thesis onIT Strategy for utilities did extensive studyon existing IT strategies within electricutilities, mostly formulated with thetraditional mind-set of the industrial-agethat focused primarily on technology, isinadequate and ineffective in dealing withtoday’s IT which has a broader implicationon an organization’s business activities. Inorder to enhance the effectiveness of futureIT strategy, a framework that adopts asystem approach is proposed in this thesis.

P.V.Chopade B.E.Kushare Dr.D.G.Bharadwaj discusses InformationTechnology Solution for PowerDistribution System Automation, providedIT solution which will enable the businessoperation at the transaction level andimprove the overall quality in DecisionSupport System. Information Technology(IT) would thus become the foundation forsustainable reforms.

R. P. Gupta and S. C. Srivastava(2007), described the indigenousdevelopment and implementation of a

Power Distribution Automation system atpilot level in Indian Institute of Technology(IIT) Kanpur, India. Electric PowerDistribution Automation (DA) system isbeing increasingly adopted by the electricutilities to reduce the operational problemsof distribution networks.

Aurobinda Basu, Surajit Banerjee,Gautam Banerjee(2006) focuses onReduction in T&D Losses in CESC by ITbased Surveillance focuses on various ITbased initiatives which had led to reductionof T&D losses in Kolkata.

K V Ravithran (1999) talks aboutthe ,Power system of Kerala technoeconomic analysis, analyses the trends insupply and demand variable affecting thepower system and power systemefficiency of the state in terms of load factor, demand factor transmission anddistribution network and tariff structure.

United Energy (2013), a Victorianpower distribution Company in Melbourne, in its Distribution annual Planning Report,elaborates the company strategy ineffective utilization of various technologieslike GIS,SAP,SCADA,AMI etc for betterservices to the customers and increasingefficiency of the organization .

Robinson (2013) has effectively triesto gives the brief idea regarding the impactof electricity on economic status of peoplein Delhi and effectiveness of DelhiElectricity Regulatory Commission(DERC) regulation for annual/multiyeartariff rates calculation.

15

Research Objective

To empirically evaluate the status oftechnology implementation among thepower distribution companies bydeveloping a comprehensive index, viz.,Power Distribution Technology Index(PDTI). The paper also tries to find outcorrelation between the AT&C lossesincurred by the power utilities over theyears and automation and informationtechnologies they have implemented inimproving their system.

Hypothesis

The through literature review oftechnologies used by Discoms in India aswell as over the world and interactionwith Discom officials at various forums andmeetings led to formulation of hypothesis.The hypothesis are as follows:

Ho1- There is no difference in levelof technology implementation in powerdistribution companies.

Ho2: There is no correlation betweentechnology implementation index & AT&Closs of power distribution companies.

Research Techniques Used

The tools and techniques used in thisstudy is mixed mode approach wasadopted including qualitative analysis andgrounded theory which is one of the wellknown qualitative analysis techniques hasbeen used in this research. Along withgrounded theory of research, few simplequantitative methods too has been usedto develop technology index.

Grounded Theory

‘‘Grounded Theory is the study of aconcept! It is not a descriptive study of adescriptive problem’’ (Glaser,2010).‘‘Most grounded theorists believethey are theorizing about how the world israther than how respondents see it’’ (SteveBorgatti).

A grounded theory design is asystematic, qualitative procedure used togenerate a theory that explains, at a broadconceptual level, a process, an action, oran interaction about a substantive topic(Creswell, 2008).The phrase “groundedtheory” refers to theory that is developedinductively from a corpus of data.‘‘Grounded Theory is the most common,widely used, and populer analytic technicin qualitative analysis’’ (the evidence is: thenumber of book published on it) (Gibbs,2010). It is mainly used for qualitativeresearch, but is also applicable to otherdata (e.g., quantitative data; Glaser, 1967,chapter VIII).

The basic idea of the grounded theoryapproach is to read a textual database and“discover” or label variables (calledcategories, concepts and properties) andtheir interrelationships.

The data do not have to be literallytextual- they could be observations ofbehavior. Often they are in the form of fieldnotes, which are like diary entries.Types of data collections :

• Interviews• Observations• Documents

Assessment of Technologies for Discoms in NCR....


• Historical Records• VidoetapesThe data collection was basically in

two forms:Primary Data collection: The

methods of data collection were basicallyin form of survey, focused and unstructuredinterview. The researcher made use ofvarious forums, seminars and workshop

for conducting interviews and collect thedata from the Discoms officials.

Secondary Data Collection: Thesecondary data collection mainlycomprised regulatory and audit reports,information from Discoms websites etc,

Summary of primary and secondarydata referred are as follows:

Sl No Factors Considered for Technology Implementation Index Details Nos

1 Utility Customers Survey No. Customers Surveyed 300 2 Utility Energy Audit Reports No. of Audits Reports Referred 21

3 Discoms Reports Shared with Power Regulator No. of Discoms Report 15

4 MOP Reports No. of Ministry of Power Reports Referred 12

5 Inputs from Customer Care Dept and Helpline No

6 Utility Website Websites of Power Distribution Companies 7

7 Press Release & Power Market News No. of Press Released referred 35

8 Interview with Power Utility Officials No. of Utility Officials Interviewed 45

Table 3. Summary of sources of data collection

The author made use of MOP DRUMtraining program where Haryana Discomsofficials came to BSES for training. Theauthor conducted semi structure interviewwith Haryana Discoms officials aboutvarious technologies being currently usedand technology which are at differentstages of implementation. The workshop

and DRUM training program interactionand semi structured interview helped ingrouping of ideas and concepts .

Codes identified during earlierworkshops facilitated by constantcomparison between data fromparticipants from the Discoms , data andcategory, category and other categories.

17

Fig 3. Dissertation logic scheme based explanation of obtaining the grounded theory (source: created by the author)



Power Distribution Technology Index(PDTI)

Measuring multiple dimensions of IT& an automation technology in Powerdistribution sector is indispensable inunderstanding its components, benchmarking success, and catalyzingimprovement. While there have been somelaudable efforts to measure wellbeing,these capture only limited aspects oftechnology implementation in power utilitysector , and are uneven in breadth andscope across different utilities in IndianPower Sector scenario.

Power Distribution Technology Index(PDTI) is a tool designed tocomprehensively measure and track thelevel of Information Technology (IT) andautomation technologies implementation inpower distribution companies . Theresearch area currently is National Capital

Region of India. The instrument designedcan be used a powerful tool to measurethe success and failures of different whichare being implemented in powerdistribution sector .

The research focuses ondevelopment of Power DistributionTechnology Index (PDTI) is to providea rigorous tool to benchmark technologyadoption and diffusion within utilities.Power Distribution Technology Indexdepends on the policy choices,investments, and implementationcapabilities of multiple stakeholders—mainly utility ,government, civil society,and business.

The overall definition can bedisaggregated into various dimensions ofPower Distribution Technology Index thatdefine the basic architecture of the modelwhich has been defined below :

Fig 1. Dimensions of Power Distribution Technology Index grouped by Researchers

19

Dimension of Power DistributionTechnology Index (PDTI)

The four dimensions of the of PowerDistribution Technology Index roughlymirror of the progression of contemporarytechnologies which are being implementedin achieving automation and increasingefficiency for better customer satisfaction.

The first dimension captures thedegree to level of implementation ofdifferent types of metering technologieswhich are the most essential part for anyPower distribution company. The currentscenario has witnessed the major seachange transformation in metering frommechanical meters to current prepaidmeters just as we do pre paid recharge inour mobiles. The Metering technologiesdiscussed in the research are divided intofour components:

• Installation of Electronic Meters -LTConsumers.

• AMR for HT Consumers.• AMR for Feeder Meters.• CMRI Metering reading for HT/LT

Consumers.• Prepaid Metering

The second dimension of PowerDistribution Technology Index captures thedegree to which a power utility hasimplemented IT (Information Technology)to address its various needs anddeveloping Power Distributionapplications. IT Distribution Apps aredivided into following major components:• Energy Accounting System.

• SCADA• Load Forecasting Applications.• Outage Management System.• Meter Data Management System.• GIS & Network Analysis.• Smart Grid Pilot Project

The third dimension IT Retails Applicationconfine the level customers are able toget in touch with power distributioncompany for their various issues . Thisdimensions exhibits initiatives and waysdeveloped by power utility to reach itsconsumers and how IT applications canhelp in solving its various issues.

The IT Retails Applications dimension isdivided into the following components:

• Customer Information System.• Centralized Call centre..• Online Web based Grievance redressal

system.• Online Bill Payment..• Prepaid Metering.• E- Complaint.• Online Cash Collection.• Spot Billing.

The fourth dimension Enterprise LevelApps mainly arrests the degree to whichpower utility has implemented SAPModule or any other similar modules inassets management and its human resourcedetails.

The Enterprise Level Applicationsdimension is divided into the following twocomponents:

• Assets Management



• Finance• Human Resource Development Dept.• Performance Management System

The Power Distribution TechnologyIndex provides the platform to assemblesets of technology implementation

It lets each power distributioncompanies to discover explicit areas ofstrength or weak point in context totechnology being implemented andexecuted by them, as well as to benchmarkthemselves against peer power distribution.

The Power Distribution TechnologyIndex is designed based on extensiveresearch on technologies being

implemented by power utilities and quantifyin depth each components and dimensionswhich leads to overall score of utilities. Asmentioned the Index spotlights onindicators of technology implementationresults; rather than measuring inputs, thePower Distribution Technology Indexfocuses on what level of technologyprogress has already been achieved withina power utility.

The four different dimensions of themodel—Metering Technologies, ITDistribution Apps, IT Retails Applicationsand Enterprise level Applications —areassigned weighted in the overall index andsum of the four components which are

Fig 2. Power Distribution Technology Index with Indicators

21

being weighted differently gives the clearpicture of each dimensions . Finally scoreis developed for different powerdistribution companies calculated usingmethods discussed in Research Designand methodology section.

Measuring Individual ComponentsEach technology identified in the researchwhich has been used by the powerDiscoms are well defined in order tomeasure the level of technologyimplementation. The measurement of thetechnology implementation is being doneusing indicators against each technology.

Category Technologies Indicators Definition

Metering

Installation of Electronic Meters -LT Consumers

Reduction of AT&C Losses. Decrease in AT&C losses over the years

100 % Metering of Consumers. Increase in electricity consumption

% People having electronic meters

AMR for Feeder Meters Availability of real time electrical parameters on web

Automated capturing & monitoring of data from Meter

Prepaid Metering % of prepaid meters installed in the Discoms

Total no of prepaid consumers by total consumers

IT Distribution Apps

Energy Accounting System

Area Wise Loss Report Divisionwise/Circlewise loss report

Feeder/DT wise Loss Report. DT wise Loss Report.(Year)/Chapter)

Identification high loss/theft clusters

Use of energy accounting system to identify areas/pockets with high losses

SCADA Remote Grid Operation. Manless Grids of Discom Online Monitoring Centralized SCADA Centre

Load Forecasting Applications Use of IT in forecasting load Load Forecasting application is being

done using software or application

Meter Data Management System

Existence of analytics based Reports

Prevention of theft & various reports based on data collected from meters by use of analytics

Outage Management System

Intimation to Consumers about outage on web.

Providing accurate Information on the extent of outages and number of customers affected.

Outage Data History/Causes Identifying the location of fuse(s) or breaker(s) that operated to interrupt a circuit or portion of a circuit

No of Outages data Data Availability of no of outage area wise per day on software application .

Geographical Information System & Network Analysis

Network Mapping Network Maps availability on website GIS Based customized applications

Availability of customized GIS Applications

Customer care offices on GIS Mapping of Discom Offices. Smart Grid Pilot Project Ministry of power reports.

Customer Information System

Time Taken for new Connection /Details of all consumers in IT system

Discom maintains all consumers details in IT module / Time taken to new connection from Discom

Awareness about energy conservation tips

Awareness among consumers to save electricity and reduce their bills.

Centralized Call Centre Round the clock customer care No

Availability of Customer care no which is available round the clock



IT Retail Applications

Online Bill payment A Various types of Bill payment options

on website of Discom Availability of Mobile App for Bill Payment

Availability of Mobile App on play store for payment facility

E Complaint No of Complaint resolved through E Complaint

Spot Billing Collection Efficiency Consumers gets bill at spot when meter comes in his home to take reading

Enterprise level Apps

ERP Module for Finance ERP Module implementation for Finance Dept

Financial Details Of Discom on ERP

ERP Module for HR Payroll Details login to employees.

Payroll details of all employees are in ERP

ERP Module for HR Online leave/attendance Employees attendance management system is through ERP

Performance Management System of employees

Appraisal and Performance of Employees using ERP Software

ERP platform is being used for appraisal system

ERP for Assets Management Tagging all equipment with IDs. All Discom Assets are maintained in

ERP

Table 2. The individual indicators within the Power Distribution Technology Index Framework

Data Analysis

Calculation of Power distributionTechnology Index (PDTI)

Based on the data primary data collectedby the researcher and also informationderived from the secondary sources ofinformation , technologies in each categoryhas been assigned a marks out of 5 whichhelps in judging the level of technologyimplantation in the Discoms.

Formula for Power DistributionTechnology Index

Power Distribution technology index is anindicator of extend of the technologiesbeing used by the Discoms and also how

this has helped in reducing their operationalefficiency.

Total Technology Score = Summation ofIndividual Technology Scores of Discoms

Power Distribution Technology Index ofDiscom = Summation of (Weights *Individual Technology Indicators Score)

Power Distribution Technology Index= Score of [Metering + IT DistributionApplications + IT Retail Application +Enterprise Level Application]

The table below shows the differenttechnologies taken up for study and theirindividual scores and weights-

Sl Category Technologies Total Score

Weights Avg

Score (Delhi)

Avg Score

(Haryana Discom)

Delhi Weighted Score

Haryana Weighted Score

1 Metering

Installation of Electronic Meters -LT Consumers 5 0.4 4 4 1.6 1.6

AMR for Feeder Meters 5 0.05 4 3 0.2 0.15 Prepaid Metering 5 0.05 4 1 0.2 0.05 Energy Accounting System 5 5 2 0.75 0.3 SCADA 5 5 1 0.75 0.15

23

2 IT Distribution Apps

0.15

Load Forecasting Applications 5 4 1 0.6 0.15

Meter Data Management System 5 5 1 0.75 0.15

Outage Management System 5 5 1 0.75 0.15

Geographical Information System & Network Analysis

5 5 2 0.75 0.3

Smart Grid Pilot Project 5 1 0 0.15 0

3 IT Retail Applications

Customer Information System 5

0.2

5 4 1 0.8

Centralized Call Centre 5 5 3 1 0.6 Online Bill payment 5 5 4 1 0.8 E Complaint 5 4 3 0.8 0.6 Mobile Apps 5 4 1 0.8 0.3 Spot Billing 5 5 4 1 0.8 ERP Module for Finance 5 5 1 0.75 0.15 ERP Module for HR 5 4 1 0.6 0.15

4 Enterprise level Apps

Performance Management System of employees 5

0.15 5 1 0.75 0.15

ERP for Assets Management 5 5 1 0.75 0.2

100 1 89 39 14.95 7.55

Table No 4. Discoms Power Distribution Technology Index Score

Category Total Delhi Haryana Delhi % Haryana %

Metering 15 12 8 80 67

IT Distribution Apps 35 30 8 86 27

IT Retail Apps 30 28 18 93 64

Enterprise Level Apps 20 19 4 95 21

100 89 38

Table 5. Scores of individual technology of Discoms

Relation of Power Distribution Technology Index and AT&C losses

incurred by Discoms and level oftechnologies being implemented.

The loss figures of the Discoms and theirtechnology index is shown in the figurebelow:

After evaluation of technologies being usedby power distribution companies usingpower distribution technology index,researcher tried to find out whether thereis any relation between AT&C losses



AT & C Losses

DISCOM Technology Index 2003 2005 2007 2009 2011 2013

Delhi Discom 22 45 36 27 22 19

Haryana Discom 10 38 34 26 26 23

Source AT&C Loss: Ministry of Power Reports

Table 7. Loss Trends of Discoms with Technology Index

The figures shows below the Discoms losstrajectory with respect to years which also

be compared with the technologies indexcomputed for these Discoms.

DIscoms Loss Trajectory

0

10

20

30

40

50

2003 2005 2007 2009 2011 2013

Year wise

AT

&C

Lo

sses

Delhi Discom

Haryana Discom

Fig 4. Discoms Loss Trajectory

Conclusion

The power distribution utilities inIndia are have already implemented fewIT and automation technologies and therest are in the different stages ofimplementation of these technologies.Based on the data collected throughsurvey and interviews and further analysisthe results were derived, there isdifference in level of technologyimplementation in power distributioncompanies. The power distributiontechnology index is a clear indicator of

technology implementation in Discomswhich clearly shows PPP Discoms scorebetter than Govt Discoms in NationalCapital region. If we closely look atAT&C losses at these Discoms we canclearly see Discoms with higher indexhave been able to reduce their AT&Closses as well. But if observe at the losslevels of the both Discoms there is notmuch difference in loss level but huge gapin terms modern technologyimplementation in both Discoms.

25

One of the key outcomes of theresearch which gives answer to AT&Closses and technology was Metering.Metering for all and replacement ofelectronic meters from mechanical metersincrease income of the Discoms and whichsubstantially led to lowering of the AT&CLosses. Metering for all initiative andconversion of mechanical meters toelectronic meters brought down AT&Clevel drastically in 2003-2005 , the losslevels from 45 % to 36 %. Implementationof Information Technology cannot bedirectly responsible for drastic reductionin AT&C losses. Technology takes itsown time for acceptance among users andbrings affects on AT&C losses. AT&Cdepends directly on many factors &especially commercial losses & socialeconomic conditions where sometimestechnology has to play little role.Information Technology implementationin billing also led to increase billingefficiency of the Discoms which in turnled to reduction of AT&C losses.

References

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2. P.V.Chopade B.E.Kushare Dr.D.G.Bharadwaj, InformationTechnology Solution for PowerDistribution System Automation.

3. R. P. Gupta and S. C. Srivastava ,Technology Development &Implementation for Power DistributionSystem Automation System (2007).

4. Kam-Hoong Cheong , IT Strategyfor Electric Utilities- A Frameworktowards Effectiveness (1999).

5. K V Ravithran, Power system ofKerala techno economic analysis(1999).

6. Oleg Gulich , Technological andbusiness challenges of smart grids(2010).

7. Aurobinda Basu, Surajit Banerjee,Gautam Banerjee, Reduction in T&DLosses in CESC by IT basedSurveillance (2006).

8. Ministry of Power Report:Technology enabling thetransformation of Power Distribution,Nandan Nilekani (2008).

9. Robinson, Economic and FinancialAnalysis of Electricity in Delhi (2013).

10. M P Gupta, Shivraj Kanungo, RajeshKumar, and G P Sahu , A Study ofInformation TechnologyEffectiveness in Select GovernmentOrganizations in India(2007)

11. Vanita Ahuja(2007), IT EnhancedCommunication Protocol for BuildingProject Management by small &Medium Enterprises in IndianConstruction Industry(2007).

12. S. T. Surulivel, A Study on the impactof technology on the performance ofIndian Banking Industry (2010).

13. Ajeya Jha, A study on the role ofinformation technology in marketingpharmaceutical products (2005).

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technology with impacts on humanresource development in public sectorbanks (2010).

15. William.F.Hamilton, The dynamics oftechnology & Strategy(1990).

16. Betz, Frederick. Strategic technologymanagement. New York: McGraw-Hill, 1993. .

17. Chatterjee, Sheshadri , and RanjanChaoudhary. “A System TheoreticAnalysis of IT/IS Outsourcing: CaseBased Approach.” Journal ofModeling and Simulation of SystemsVol.1.2 (2010): 131-143. .

18. Dasgupta, Meeta. “Enabling excellencein operations through technologicalinnovation.” Emerging Markets CaseStudies Collection 1.2 (2011): 1-22. .

19. Herstatt, Cornelius. Management oftechnology and innovation in Japan.Berlin: Springer, 2006. .

20. Khalil, Tarek M., and Ravi Shankar.Management of technology: the keyto competitiveness and wealthcreation.. New York: McGraw-HillPublishing Company, 2000.

21. Schilling, M.. Strategic Managementof Technological Innovation. NewDelhi: McGraw-Hill, 2005. .

22. Tesar, George, Steven W Anderson,Sibdas Ghosh, and Tom Bramorski.Strategic Technology Management..London: Imperial College Press, 2008.

23. White, Margaret. A. and Garry.D.Bruton. 12. The Management ofTechnology & Innovation. 2007. Re.New Delhi: Cengage Learning, 2011.

24. CitiPower and Powercor Australia(2012),Australian power distributioncompany Annual Report.

25. United Energy (2013), a Victorianpower distribution Company,Distribution annual Planning Report.

26. European Institute of Technology &Innovation management(2004),Bringing Technology andInnovation into the Boardroom

27. Husain, Zafar, and R.d Pathak. “Atechnology management perspectiveon collaborations in the Indianautomobile industry: a case study.”Journal of Engineering andTechnology Management 19.2(2002): 167-201.

28. Zafar Husain a, Sushil b, R.D.Pathak, A technology managementperspective on collaborations in theIndian automobile industry, Journal ofEngineering & TechnologyManagement. a case study.2002.

29. Philip Anderson , Toward exemplaryresearch in the management oftechnology-An introductory essay,Journal of Engineering & TechnologyManagement1993.

30. Shlomo_Maital,_D._V._R.Seshadri,Innovation Management- Strategies,concept & tools for growth & profit.

31. David, Bin Xie, A Survey ofManufacturing Strategy andTechnology in the Chinese FurnitureIndustry (2003).

32. World Bank Publication, WorldDevelopment Indicators.

27

Impact of Packaging on Consumers’ Buying Behaviour: A Case Study of Mother Dairy, Kolkata

Bidyut Kumar GhoshChinsurah, Hooghly (WB),

[email protected]

ABSTRACT

This study seeks to examine the impact and role of product packaging on the buyingbehaviour of consumers for the dairy of products of government owned Mother Dairy.It has been observed that packaging elements such as color, background image,wrapper design and innovative ideas, have significant impact on consumers’ buyingbehaviour. The study also makes the conclusion that the visual appeal is moreimportant than the qualitative aspect of packaging in the study area. In the case ofMother Dairy, the quality of materials used in packaging and the information printedon packaging of the products, do not have any significant bearings on the consumers.

Keyword: Packaging, consumer behaviour, sales promotion.

Introduction

In the fiercely competitive market,aesthetic elements of packaging haveoccupied an important and uniqueposition in delivering the product/serviceto the end users. It has become importanttool of differencing the product/servicefrom the similar kinds of products/services available in the market (Wells,2007). Rundh (Rundh, 2005) has clearlyobserved that the packaging attractsconsumers’ attention to particular brand,packaging enhances the product imageand influences consumers’ perceptionabout the product or service. Theappearance of the package is believedto have a strong impact on influencingconsumers’ purchase decision thanadvertising (Mutsikiwa and Marumbwa,

2013). Givee (Givee, 2011) haveestablished that an appealing andsuccessful packaging design with relevantdesign, pictures and decorations is moresuccessful in attracting consumers.However, an obvious question arises thatdoes this phenomenon applies to allcategories of product and services, viz.daily necessities, luxuries commodities,cosmetics products, food items etc.Moreover, though there is abundance ofliterature on this particular issue in general,there is dearth of quality literature on theissue of role of packaging particularly inthe dairy products on the consumers’purchasing decisions. Under thisbackdrop, this paper tries to examine thefollowing specific objectives:



i. to determine the effect of packagecolour on consumers’ purchasedecision;

ii. to examine the effect of backgroundimage used in packaging on consumers’purchase decision;

iii. to examine the impact of packagingmaterials on the consumers’ purchasedecision;

iv. to examine the influence of productspackage typography on consumers’purchase decision; and

v. to examine the impact of informationprinted on the packaging onconsumers’ purchase decision.

The present study is planned into fivesections. The After the introduction insection I, section II deals with the literaturesurvey of the research problem. Data andmethodological aspects of the study areoutlined in section III. Section IV consistsof results and discussion of the study, whilethe final section V summarises theconclusion and policy prescriptionemanating from the overall analysis.

REVIEW OF LITERATURE

There are numerous literaturesavailable on this particular issue of impactof packaging on consumer purchasedecisions. (Kuvykaite, 2001),(Underwood, 2001), (Speece, 2007),(Wells, 2007), (Marumbwa, 2013),(Givee, 2011) to name a few of them.(R.L. Underwood, 2001), (Speece, 2007)have clearly established that packaging hasgreat impact on product marketing as

2004), works as a tool for differentiation,i.e. helps consumers to choose the productfrom wide range of similar products andthus, stimulates customers buyingbehaviour.

Garber (L.L. Garber, 2000) hasobserved that though the package designis an integrated element of the promotionalmix, it is also an important carrier of brandequity in the store.

Packaging communicates brandpersonality through many elements,including a combination of brand logo,colours, fonts, package materials,pictorials, product descriptions, shapesand other elements that provide rich brandassociations (Underwood, 2003). A studyperformed by CM Research (cited inGautier, 1996, p.37) demonstrated thatconsumers ‘did not consciously believethey were purchasing products because ofthe packaging alone… There are strongindicators, however, of the subconsciousinfluence of the packaging on thepurchasing processes.

While some research was conductedby Wisenblitz (Wisenblitz, 1999) oncolour choices with packaging in fastmoving consumer goods, they alsohighlighted the need for more researchinto colour as a stimulus when they statedthat ‘colour research in the field ofmarketing still appears to be in its infancy’(p. 86). Underwood (R.L. Underwood,2001) highlighted the importance of bothcolour and packaging as a brandcommunication vehicle.

29

The focus of colour as a stimulus isrelated to its ability to aid companies whoare looking for ways to improve their salesand obtain a dominant market share(Kotler, et al. 1998). While some colourshave the ability to make goods stand outfrom their competitors among the clutterof the goods and promotional material atthe point of purchase (Heath, 1997, andKey, 2000) other colours do not have thiseffect (Key, 2000).

DATA AND METHODOLOGY

The present study is purely based onthe primary data collected through thestructured questionnaire from therespondents. In total 150 filledquestionnaires were collected from thedistricts of Howrah, Hooghly andBurdwan of the state of West Bengalduring the months of June-July, 2015.However, after scrutiny of the data, 18filled questionnaires were not included inthe final study and thus, total number ofobservations reduces to 132.

The main theoretical framework of thisstudy focuses on the finding of relationshipbetween dependent variable (consumer’sdecision about buying the dairy products)and independent variables (differentelements of packaging such as packagingcolour, background image etc.). It ishypothesised that consumer’s purchasingdecision of dairy products is a function ofthe different packaging elements. These setof packaging elements either jointly orindividually may influence the consumer’spurchase decision. Accordingly, the followingtheoretical framework is sought for.

The associations between thedependent variable and independentvariable have been analysed individuallywith the applications of Chi-square test.Accordingly, the following set ofhypotheses have been framed keeping inmind the objectives of the study.

ormationpackaging

,wrapper

packaging,insize&stylefont

materials,packagingofquality

packaging,inusedimagebackground

colour,packaging

=behaviourbuyingConsumers'

infdesing

Impact of Packaging on Consumers’ Buying Behaviour....


For the entire hypothesis, thedependent variable is the consumer’spurchasing behaviour. The dependentvariables are the different elements ofpackaging viz. Packaging colour,background image used in packaging,quality of packaging materials etc. Eachof above mentioned dependent variableswas measured by using the 5 pointsitemized rating type scale ranging from (1)strongly disagree to (5) strongly agree[Likert’s Scale].RESULTS AND DISCUSSION

Demographic Characteristics of theRespondents: The sex distribution shows

that 69 percent of the respondents weremale, while 31 percent were female. Theage distribution shows that only 2 percentof the surveyed population belongs to theage group of below 18 years, 37 percentbelongs to the age group of 19-35 years,31 percent belongs to the age group 36-50 years, 18 percent belongs to the agegroup of 51-65 years while the age group66 years and above captures the remaining12 percent of the sample observations.With respect to occupational standard ofthe respondents, 43 percent of totalrespondents were service holders, 27percent were business and the remaining30 percent were from others occupation

31

(students, housewife, etc.). As far as theincome levels of the respondents areconcerned, it has observed that 44 percentbelongs to lowest income category (Lessthan Rs. 10000 per month). Each of theincome categories, Rs. 10000-20000 andRs. 20000-30000, constitutes 20 percentof the surveyed population while thehighest income category (income morethan Rs. 30000) constitutes 16 percent ofthe surveyed population.

Again if we look at the consumptionfrequency of the surveyed population, ithas been observed that 72 percent of themare daily consumers, 8 percent of themconsumer milk on alternative day. Another14 percent of the population is weeklyconsumers of milk and the rest 6 percentconsume milk for other purposes.

Reliability checking of the analysis:Any empirical research work shouldqualify the reliability analysis for checkingof the internal consistency of thequestionnaire and reliability of the primarydata. As such the Cronbah alpha statisticis found to be 0.57 which is quiteacceptable.

T-test for Testing the Perception ofPackaging in Mother Dairy’s Products:

Firstly, an attempt has been made toassess the customer perception about thepackaging of products of Mother Dairy,Kolkata. For this, the respondents havebeen asked to rate the different productsof Mother Dairy on a 5-point Likert scale.The greater the value of the rating, the moreis the satisfaction level. Now on a 5-pointLikert scale, the median value is 3. So, if aparticular consumer rates his satisfactionlevel 3 or more, it implies that he is satisfiedwith the packaging of Mother Dairy’sproducts. The following table shows themean satisfaction levels of differentaspects of packaging in Mother Dairy.

It is evident from the results thatcustomers of Mother Dairy is, in general,satisfied in packaging colour,‘background image’ of packaging, qualityof packaging materials, wrapper design,printed information, packaginginnovation. However, they are notsatisfied with the typographic style ofpackaging as the calculated t-value ismuch higher than the critical t-value andthe corresponding p-value is smaller thanthe level of significance (0.05).

Table 1: Tests for the perception of Packaging Mother Dairy’s productsPackaging elements Mean t-value df Sig. level

(p-value) Packaging colour Background image Packaging materials Typographic Wrapper design Printed information Packaging innovation

3.01 3.09 4.01 2.92 3.40 3.84 3.26

2.61 1.007 10.64 0.928 4.178 9.494 2.736

131 131 131 131 131 131 131

0.000 0.158 0.000 0.822 0.000 0.000 0.000

Source: Authors’ calculation based on primary data.



Chi-square test for testing the associa-tion between Consumer buying behaviourand packaging elements: Having examinedthe customers’ demographic profiles andtheir perception about the different aspectsof product packaging, we are in a posi-

tion to see the degree of association be-tween consumer buying behaviour andpackaging elements of products of MotherDairy, Kolkata. For this purpose, we haveused Chi-square test of association. Theresults are shown in table 2.

Table 2: Chi-square test of association between packaging elementsand consumers’ buying behaviour.

Source: Authors’ calculation based on survey data.

The above results show that theindependent variable such as packagingcolour, background image, wrapper designand packaging innovation have properassociation with the dependent variable(i.e., consumer buying behaviour).However, no association has been foundin cases of packaging materials, font styleand printed information in marketing ofdairy products. Therefore, it is evident thatif the elements of packaging are improvedthen the sales of the dairy products mayimprove to a certain extent.

After finding the association betweenthe dependent variable (consumer buyingbehaviour) and the set of independentvariable, we go for Carl Pearson’s co-relation test in order to find out to whatextent and strength of association betweenthe independent variables and thedependent variable in dairy productpackaging. The results of the co-relationanalysis is shown in the table below.

Variables examined for association

2 - test statistic

Critical value of 2

Remarks

Packaging colour and buying behaviour background image and buying behaviour Packaging materials and buying behaviour Font style and buying behaviour Wrapper design and buying behaviour Printed information and buying behaviour Packaging innovation and buying behaviour

44.34 (16) 28.76 (16) 17.59 (16) 14.97 (16) 26.29 (12) 17.82 (16) 56.77 (16)

26.29 26.29 26.29 26.29 21.09 26.29 26.29

Null hypothesis is rejected and there is association Null hypothesis is rejected and there is association Null hypothesis is accepted and there is association Null hypothesis is accepted and there is association Null hypothesis is rejected and there is association Null hypothesis is accepted and there is association Null hypothesis is rejected and there is association

33

Table 2: Co-relation between Consumers’ buying behaviour andElements of packaging

Dependent variable

Independent variable Co-relation Coefficients

t-statistic

Buying behaviour Packaging colour background image Packaging materials Font size Wrapper design Printed Information Packaging innovation

0.42 0.35 0.11 0.07 0.38 0.02 0.01

4.33 4.26 1.22 0.83 4.66 0.26 0.15

Source: Authors’ calculation based on survey data.

It is evident from the above resultsthat packaging colour, background imageand wrapper design of dairy product havemoderate and significant association withthe consumer buying behaviour. However,the other dimensions of packaging suchas materials used in packaging, font size,printed information, innovative ideas inpackaging etc., and the correlationcoefficients were found to be very weakand as such there is no such effects onconsumer buying behaviour. Thus, boththe Chi-square association test and co-relation study produce the same results asfar as packaging of dairy products isconcerned and its effects on consumers’buying behaviour.

CONCLUSION AND SUGGESTIONS

Thus, we find that packaging couldbe treated as one of the valuable marketingweapons with respect to making propercommunication between an organisationand its consumers. The study makes it

clear that the overall perception of theconsumers about the different elements ofpackaging of Mother Dairy’s products issatisfactory. A right choice of packagingcolor, background image, wrapper design,innovative ideas when imparted to aproduct’s packaging will create a happyfeeling in consumers’ mind. All thesepackaging elements contribute animportant effort to catch consumer’sattention and interest. As far as theassociation between dairy productpackaging and impact on consumers’buying behaviour is concerned, it is clearthat visual appeal is more important thanthe qualitative aspect of packaging. Thisis implied from the significant associationbetween packaging colour, backgroundimage, wrapper design and innovation inpackaging and the higher positivecorrelation among these elements ofpackaging with consumers’ buyingbehaviour, whereas no significantassociation was observed between



consumers’ buying behaviour and qualityof materials used in packaging, informationprinted on packaging etc. and very weakor no correlation among them. The presentstudy also indicates the lacuna of MotherDairy in terms of packaging its products.However, there are certain areas such astypographic factor in packaging, colourused in packaging, background imagewhere Mother Dairy should give moreattention to improve and thereby try toretain the existing consumers and attractnew consumers.

REFERENCES

Givee, A. A. (2011). The Role of GraphicDesign in Packaging and Sales ofProduct in Iran. ContemporaryMarketing Review, 1(5), 30-34.

Kuvykaite, R. (2001). Managing Imagesin Different Cultures: A Cross NationalStudy of Colour Meanings andPreferences. Journal of InternationalMarketing, 8(4), 90-107.

L.L. Garber, R. B. (2000). The Role ofPackaging Color in ConsumerPurchase Consideration and Choice.Cambridge: Marketing Science InstituteReport.

Marumbwa, M. a. (2013). The Impact ofAesthetics Package Design Elementson Consumer Purchase Decisions:A

Case of Locally Produced DairyProducts in Southern Zimbabwe. IOSRJournal of Business andManagement, 8(5), 64-71.

R.L. Underwood, N. K. (2001).Packaging Communication: AttentionalEffects of Product Imagery. Journal ofProduct and Brand Management,10(7), 403-422.

Rundh, B. (2005). The Multi-facetedDimension of Packaging. British FoodJournal, 107(9), 670-684.

Speece, P. S. (2007). The Importance ofPackaging Attributes: A ConjointAnalysis Approach. European Journalof Marketing, 41(11-12), 1495-1517.

Underwood, R. L. (2001). PackagingCommunication: Attentional Effects ofProduct Imagery. Journal of Productand Brand Management, 10(7), 403-422.

Wells, L. E. (2007). The Importance ofPackaging Design for Own-label.International Journal of Retail andDistribution Management, 35(9),667-690.

Wisenblitz, R. G. (1999). What WeKnow about Consumers’ ColorChoices. Journal of MarketingPractice: Applied MarketingScience, 5(3), 78-88.

35

Knowledge Management Orientation of B-SchoolProcesses: A Case Research

Sanghamitra BrahmaHeritage Business School, Kolkata (WB)

[email protected]

Sumita MishraSchool of Management, KIIT University, Bhubaneswar

[email protected]

ABSTRACT

The purpose of this research article is to understand the awareness and relevance ofKnowledge Management (KM) initiatives in the management institutes/ B-Schoolsaffiliated to a state university. The methodology involves semi-structured interviewsof 30 senior professors who have worked in different management institutionsaffiliated to such a state university in West Bengal. The interview transcripts havebeen analyzed for key phrases/words, categorized, examined for their frequencies.The findings from the study suggest implications for future development in themanagement education though integration of their key processes with that ofKnowledge Management.

The integration of Knowledge Management Process with the key academicadministration processes in tune with the favourable strategic enablers may lead tobenchmarking of the B-School processes that offer degrees affiliated to the stateuniversities.

Key Words: Knowledge Management Implementation, Knowledge Management inB-Schools, Key Strategic Enablers for Knowledge Management

Introduction:

Management education in India is incrisis. They fail to compete on vitalinternational parameters like research,rankings and accreditation. The mid-tierB-Schools are fighting for their survivalwith fewer takers for MBA programmes,especially in tier-3 and tier-4 B-Schools,owing to a variety of reasons, like, students’increasing awareness on the quality ofeducation being provided, lack of

infrastructure and faculty in the lower-rungB-Schools, decreasing return oninvestment (fees), absence of industry tie-ups and collaborations etc.

Drop in interest among students hasforced most lower-rung institutes tostruggle with low occupancy rates, or insome cases even cease operations.Virtually any graduate can get admissionto a B-School. The mid-tier and bottom



tier of management programs whichmajorly include 3000+ low-cost MBAsoffered by public universities and theiraffiliated colleges, have little direction andrelevance. As per CRISIL Researchestimates, tier-3 and tier- 4 B-Schoolstogether account for about 85 per cent of

intake capacity of B-Schools in India.However, students clearly are not bitingthe bullet, as indicated by the slowdownin growth in the last 3-4 years. (Pleaserefer to the Annexure below forunderstanding the approach to categorizingB-Schools in India.)

Categorization of B-Schools in India (Source: CRISIL Research) CRISIL Research has categorized B-Schools in 4 buckets namely Tier-1, Tier-2, Tier-3 Tier-4 based on four parameters.

Type Occupancy Rate (in Percent)

Average salary offered (in Lakhs)

No. of students placed (in Percent)

Average Fees (in Lakhs)

Tier-1 95-100 9+ 98-100 12-15 Tier-2 80-95 5-9 80-98 8-12 Tier-3 70-80 3-5 60-80 5-8 Tier-4 0-70 0-3 0-60 0-5 Note: B-Schools have to fulfill the requisite criteria for all four parameters considered in order to fall into a particular bucket. For instance, a business school with a capacity utilization rate of 98%, with 100% of students placed but with an annual average salary package of Rs. 7 lakhs would classify as a tier-2 college and not a tier-1 college.

In this situation, MBA programadmissions are badly affected in the stateof West Bengal. A number of collegeshave been compelled to shut down theiroperations in the last five years.

The challenges faced by the B-Schools is further amplified by the evolvingrole of academics lately in all streams ofprofessional education and training withthe rapidly changing dynamics in thenational, international and global scenario.Path breaking developments in informationand communication technology allows themanagement/ professional students to availimmense number of scholarly articleswithin seconds through internet. A largevolume of the content is increasingly ‘GreyLiterature’. There are doubts regarding the

quality of this supply chain of knowledgeamidst a ‘Tsunami of Intellectual Content’.

Institutional entities, whether for profitor non-profit, like Universities, university-level Autonomous Institutes, publishers foracademic content (both physical andvirtual) operate the distribution function inacademics.

Though a variety of mechanisms arethere to control the quality of education,but their adoption in B-Schools is verylimited. Apart from those graded in thepremium segment in our country, B-Schools are not competent in adopting andimplementing the suitable methods andtechniques for current quality control inmanagement education and training.

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Success of the universities/ academicinstitutions is contingent on the assumptionthat they possess relevant expertise,knowledge and skills that the students mustlearn to emerge as befitting for the real/business world. The faculty ofmanagement education supply chain istasked with the role of constantlyintegrating the currently accepted andrelevant business doctrines and practicesin their curricula. Also, distinguishing‘what is relevant’ from ‘what is fad’ isequally important. Periodic retooling ofthe various segments of academicprograms must be a regular ordeal.

Knowledge Management Processand Practices (KMPP) can assist a B-School/ management institute tocontinuously assess and upgrade its qualityby identifying ‘what is known and whatmust be known’. It is fortunate that KMconcepts, its mechanisms and theirapplications which are used to manageorganization knowledge and memory arebeing taught in the classrooms.

But it is unfortunate that theinstitutions are themselves very slow inadopting these concepts and techniques.For instance, a central premise of KM isknowledge sharing. However, in mostacademic institutions physical andpsychological barriers often hindereffective sharing and transfer ofknowledge. As a result there istremendous lack of cross-disciplinarybrain storming and consequentknowledge generation.

KM process implementation inbusiness institutions must begin with initialassessment of the current intellectual capitalrelated to teaching, research and servicesat distinct levels like individual,departmental and organization as a wholeto set the knowledge boundaries.Effective implementation of KMPPs isensured by certain strategic enablers(KSE) like supportive Leadership &Governance, conducive Work Culture,IT Infrastructure & System andIntegrated Performance Evaluation;and certain individual-level factors likeAttitude & Perception.

Previous academic researchers havelooked at implementation of KM and theirstrategic enablers in higher educationinstitutions (Ramchandran, Chong andWong, 2013). However, specific researchin private, self-funded institutions, affiliatedto the state universities which are strugglingto survive the crisis of redundancy and howintegrated KM may serve as a revivalstrategy is not evidenced.

Literature Review:

KM and KM Process inOrganizations: Knowledge is notindependent of its knower; it is the resultof cognitive processing triggered by theinflow of new stimuli (Fahey and Prusak;1998). Knowledge is not a radicallydifferent concept from information. Rather,information is gradually converted toknowledge when it is processed in themind of the individuals and knowledgebecomes information when it is articulated

Knowledge Management Orientation of B-School Processes....


and presented in the form of text, graphics,words and other symbolic forms (Schubertet al 1998).

The concept of KnowledgeManagement has originated in the early1990s. It was initiated from the difficultyof dealing with complexities, everincreasing competition spurred bytechnology and the growing sophisticationof customers’ demands. Polanyi’s (1966)discussion on distinction between explicitand tacit knowledge was one of thegerminal tasks which led researchers todevelop management definitions,concepts, process, stages, circulations andprocedures. Drawing on the work ofPolanyi (1962-1967), Nonaka (1994)identified two dimensions of knowledge inorganizations: tacit and explicit. Tacitknowledge is rooted in action, experience,mental maps, beliefs, paradigms,viewpoints, concrete know-how, craftsand skills etc. that apply to a specificcontext. The explicit dimension ofknowledge is articulated, codified andcommunicated in symbolic form and/ornatural language.

Knowledge Management is a riskwith a huge payoff and the risk returnbalance is the prime condition underconsideration. Organization is aKnowledge Field, which is a dynamicsynthesis of inherently limited andfragmented bodies of knowledge thatcomprise its K-inventory. Also, the K-Field is structured and contoured by theemotions and feelings of those who inhabit

it (Spender; 2003). Knowledge basedorganizations host knowledge managementepisodes which are triggered by aknowledge need/ opportunity andculminate with the satisfaction of that need(Holsapple & joshi; 2003). Teece andPisano (2003) argued that competitiveadvantage of firms stem from dynamiccapabilities rooted in high performanceroutines operating inside the firms. Thecollective body of knowledge offered byemployees of the organizations hasemerged as a key point of differentiation,providing a foundation upon which thequality of products and services can beimproved (Balthazard and Cooke, 2004;Jashapara, 2004; Andrade et al., 2003).

Organizational Learning and KM:Organization learning is a way to createnew knowledge, apply it for a purpose andthereby learn from the process and itsoutcome. Brown and Duguid (1991)described organization learning as ‘thebridge between working and innovating’.The implications of organization learningon KM involve creation of an ideal learningenvironment, awareness about how andwhy something has been learned andusefulness of the new learning to theorganization.

Peter Senge (1990) argues that oftenfailure provides richest learning experienceto the organizations. He criticizes the waywe reward success and look upon failurecan be detrimental to the long term healthof the organization. Levitt and March(1996) discusses superstitious learning

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where positive or negative results areassociated with the wrong results. Realorganization learning results fromexamination of the information generatedfrom their actions rather than the relativelyarbitrary success or failure criteria. Thereare two approaches to organizationlearning, namely, cognitive perspective thatexamines the entire firm’s learning as awhole and community based perspectivewhere firm’s practitioners createknowledge in their own networks calledCommunities of Practice (Lave & Wenger;1991). These two views arecomplimentary and not contradictory.

KM Systems (KMS):

Systems designed to supportknowledge in organizations may notappear radically different from the standardinformation systems, but they enable usersto assimilate information into knowledge.KM is becoming a research priority forthe academic community (Salmador andBueno, 2007) and companies areallocating a greater share of spending forits implementation (Beijerse, 1999; Call,2005). A KMS is distinct from transactionprocessing systems (TPS), decisionsupport systems (DSS) or executiveinformation systems (EIS) because of itsmain mission is to transform experiencesinto explicit knowledge within theorganization. Experience is important andcritical part of a KMS (Nonaka, 1994)because when individuals receive newinformation, the information is processedin light of one’s past experience to develop

and create new knowledge (Prahalad andHammel, 1990); in better words itconnects the past to the present(Davenport and Prusak, 2000).

Influence of KMPP on the KSE in theAcademic Setting:

The academic institutions workculture is often resistant to learning.Researchers have found that even in firmsthat embrace innovation and recognize theimportance of managing knowledge maytake years at times to share and adoptcertain ‘best practices’ (Szulanski, 1996).Instead of considering knowledge as anasset whose value increases only whenshared, most faculty members considerknowledge as proprietary and is not to beshared freely (Wind and Main, 1999).Lack of intra-organizational relationshipslike hall talks and social networks tosupport formal and informal mechanismsneeded for knowledge sharing becomes abarrier (Szulanski, 1996). Leadership isthe cardinal thread that runs through thewhole gamut of KM initiatives in anorganization. In every organization leadershave a direct impact on how companiesshould approach and deal KM processesand practices. KM programs can beeffective only when they permeate to alllevels in the organization, beginning at thetop (De Tienne et al., 2004). Davenportet al. (1998) and Storey and Barnett(2000) had concluded that support of theupper level management should beongoing and delivered in a practicalmanner.



Technology is an essential mediatingfactor in effective implementation of KMprocess and practices in an organization.The intervention of information technology(IT) is inevitably important as a tool forsuccessful KM implementation (Bhatt,2001; Kim, Suh and Hwang, 2003). Therole of ICT in knowledge sharing is fullyunderstood only if it is related to motivationfor knowledge sharing (Hendricks, 1999).Brazelton and Gorry (2003) had inferredthat technology alone may not effectivelyencourage knowledge sharing activities.Kim and Javenpaa (2008) concluded thatthe existing relationship betweencommunicating parties play a vital role inshaping technology-enabled-knowledge-activities.

Most of the activities areindividualistic and limited to internal peergroup, if shared; Interactions with externalexperts are limited to personalacquaintance (Basu and Sengupta, 2007).Wah, Menkhoff, Loh and Evers, (2007)conducted a study in the tertiary educationinstitution in Singapore to reveal thatrewards and incentives, open-mindedness of the knowledge sharer, andcost-benefit concerns of knowledgehoarding are the strongest predictors ofknowledge sharing in comparison to pro-social motives or organizational care.Abdullah, et al. (2008) studied sevenmajor public universities in Malaysia toinfer that appropriate incentives andrewards should be awarded for sharing,searching and the usage of KM Systemsas a mode of motivation. Cheng et al.

(2009) has emphasized the importance ofproviding the right incentive system andunderstanding the individual’s expectationtowards knowledge sharing in order tofacilitate knowledge sharing behavior.

Objective and Methodology of theStudy: The objective of the study is toempirically examine the KM Orientationof the mid-tier private managementinstitutes affiliated to the state technicaluniversity in West Bengal in lieu of the KeyStrategic and Individual-level Enablers. Itexplores the awareness about KnowledgeManagement Process, relevant Practicesand their Key Enablers in academics atindividual-level and organizational-level.Also, through thematic content analysis, thestudy seeks to establish that thefavorableness of certain strategic-level andpersonal-level enabling factors mayencourage the KM process basedimplementations in managementacademics.

Methodology of the Study:

This study is a thematic case researchwith holistic as well as embedded units’analyses. It has investigated the knowledgeorientation in the mid-tier, privatelyadministered B-Schools, MBA Institutesand Departments with courses affiliated toMAKAUT – Maulana Abul Kalam AzadUniversity of Technology, West Bengal.There are approximately 40 such institutes.The embedded units of analysis are 30senior academicians with at least 10 yearsof experience in management education insuch institutes.

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The theoretical construct for the studyhas been decided through analysis of thecertain public reports related to theproblem like CRISIL review, etc. andreview of extant literature. The constructconsiders:

• Effective implementation of the KMProcess & Practices (KMPP)

• Key Strategic Enablers (KSE) atOrganization-Level i.e. SupportiveLeadership & Governance, ConduciveWork Culture, IT Infrastructure &System and Integrated PerformanceEvaluation

• Individual-Level Enablers i.e. facultymembers’ Attitude and Perception

• Context - B-Schools and MBAdepartments affiliated to theMAKAUT

The two rival theories that are beingadvocated are:

(i) Organizational/Institutional enablerswhen favorable encourageparticipation and involvement atindividual-level by inducing positivityin their Attitude and Perception andthereby facilitate the effectiveimplementation of KM initiatives/KMPP.

(ii) Lack of autonomy in institutionaloperations and administrationimpedes the favorableness of theKSE and in due course Individual-level enablers for effectiveimplementation of KMPP.

The findings of the study are basedon both primary and secondary data thathas been gathered from multiple sourcesof evidence. Primary data has beengathered through in-depth, open-endedbut focused interviews, direct observationand participant observation. Secondarydata has been gathered from online webportal documents and archives. The datahas been corroborated through datatriangulation to converge the line of inquiry.30 senior academicians and someadministrative staff and managementrepresentatives from the contextual casehave been interviewed. The draftsummaries have been reviewed by aselected number of senior respondents andthen finalized.

The interview transcripts have beenanalyzed for key phrases and words,categorized into arrays and examined fortheir frequency. The thematic analysis isguided by the theoretical propositionsconsisting of two rival theories mentionedabove. The technique of explanationbuilding has also been appropriately used.

The Case Context Profile: The B-Schools/ Institutes affiliated to MAKAUTexercise little autonomy in running its MBAprogram. They rigidly follow the prescribedsyllabus and curriculum prescribed by theUniversity. In fact, all institutes affiliated tothe same state university in a state districtfollow the same curriculum. Examinationand evaluation system is fully coordinatedand controlled by the University. They arebound normatively to the bureaucratic



structure prescribed by the affiliating bodyand blindly follow the schedules set by it.

The University came into operationformally in the year 2001. Almost all the40 (approx) institutes offering its affiliatedMBA degree came into existence after2001. The privately run self fundedprograms are also approved by the AllIndia Council for Technical Education(AICTE). The MBA programme ismodeled on semester system withspecialization in Marketing Management,Financial Management, Human ResourceManagement and Systems Managementand a few others which have not been verypopular. The selection of the students foradmission into the course is through state-level WBJEMAT (West Bengal JointEntrance - Management Aptitude Test).

Findings & Discussions:

The data gathered from observationsand interviews conducted with seniorfaculty members and administrative staffshave yielded the following findings, whichecho the research findings of SharimllahDevi et al. (2007) and Chong et al. (2009).MBA institutes affiliated to the statetechnical university of West Bengal -MAKAUT are nonchalant about the KMinitiatives and rather complacent towardsbenefits of aligning their institutionalprocesses to that of KM process.

• Knowledge Based Initiatives:There is tremendous lack of mindsetfor strategic partnerships andcollaborations with the Industry. Theydo not have any structured policy,

objectives towards national andinternational strategic partnerships andcollaborations (Davenport et al., 1998;Storey and Barnett, 2000). They donot venture beyond routine delivery ofthe university courses, conductingexaminations, admissions andplacement. There is no fund flow fromthe industry or an outlook to even craftsuch channels. There is little or noconcern about the opportunities thatlie in institute level and individual levelcreativity and talent, which may enablefuture innovations to be taken to themarket in collaboration with theindustry to deliver long term (5-10years) benefits to the society.

Senior faculty members are seldomengaged in mapping out the keyquestions and challenges throughbrainstorming that have opportunity toadd to the knowledge capital/intellectual property (IP) of the institute.Multidisciplinary approach to researchand learning to breakdown thetraditional academic silos and drive anew multidisciplinary culture andcurricula to attract industry projects isseldom exercised.

• Leadership & Governance: Thepolicymakers and governors of theInstitute are inefficient and sloppy toensure a predictable and stablestrategic plan to co-op up with thecurrent volatile environment. They failto realize the priority of KnowledgeManagement and the criticality ofinvesting in such projects. Such a

43

policy even if present in a rudimentaryand unstructured manner is notcommunicated through the entireacademic community in the institute.

There is a requirement to redefineinvestment in KM as a source ofcompetence and problem-solving forthe society as advocated by De Tienneet al., 2004. Their thought focus mustshift from regular admissions-grooming-placement cycle toincremental value addition to thecontinuing batches and to the societythrough industrious contributions inintellectual capital. Visionarycollaborations between industry anduniversities may accelerate innovationand help to deliver solutions to socialchallenges. But to harness the tandem,the mission and objectives of theuniversity needs to be redefined in tunewith the KM process.

• Organization Work Culture: It isfound that often the institute’s ownboard and faculty have little freedomto decide and implement on strategicissues. As a result, there is a lack ofmotive and potential to practiceautonomy in actual sense to improveefficiency and effectiveness of theacademic processes and outcomes.The faculty and knowledge resourcepersons mostly have a tendency toresist any innovative initiative as theserequire more involvement but notincentivized.

Too much emphasis on routineresponsibilities leaves the facultydrained out of time. The lecture hoursrange from 12-20 hours in a week.The faculty dedicates most ofpreparation time in updating andcustomizing his study material andhandouts so as to make it readilyaccepted to the students. Facultyassessment focuses mainly on hisregular course coverage and studentassistance. Little credence is given tocontributions in other parameters likeR&D and consultancy projects.Therefore, academics is driven moreby drawing of a stable monthly salarythrough routine tasks rather thancontributory incentives.

A few accomplished senior professors,who have joined post-retirement on adhoc but high pay structure supplementthe marketability and brand image ofthe institute to boost admissions. Theinstitute lacks the intention to tap suchresources to actually contribute toinstitute’s intellectual goals andachievements. A much larger numberof the faculty members are young andbear the regular course coverage load.Besides, there are a large number ofvisiting/guest faculty from both industryand academia, who commit to theinstitute only for the allotted time slot.The manpower is also deficient inpositive cross-cultural understanding asthe B-Schools/ management institutesemploy local residents of therespective states mostly.



There is no directive to developopportunities for academic andindustry researchers to dialogue on aknowledge sharing platform. Aninformal exchange through lectures andseminars that may spark conversationsleading to new relationships is verylimited.

• IT Infrastructure & System: Theinstitutes are usually found to have asound infrastructure to administer theroutine activity schedules. But theconcept of Institutional KM andMemory is to be instilled yet. Thiswould require faculty to engage andcontribute as subject matter experts(SMEs) with the assistance of theknowledge engineers and skilledtechnicians. Scheduled training for allthe human resource on the KMS isrequired. Top Management is notaware or not convinced about thereturns from such investment in KMSystem Infrastructure and is thereforereluctant.

Strong two-way communicationbetween B-School administrators,academics and senior corporateofficers; regular follow up to keep thedialogue flowing; and impromptufeedback from either side may help todevelop a substrate of academics whounderstand the benefits of KMS.Information system is integratedeffectively to implement the routineday-to-day operations but its effectiveand efficient implementation fails due

to lack of skilled in-house technicalstaff (Kim and Javenpaa, 2008).

Organization Knowledge must beorganized into three specializedcategories (Knowledge Marts),namely - Strategic Knowledge to setthe path and direction to accelerate theorganizations’ future research,developmental and intellectualcontributions; OperationalKnowledge- to scale up the quality ofthe pedagogical procedures andprotocol for current operations; andDomain Knowledge in the variouscore and special fields of management.

• Integrated PerformanceEvaluation and Reward System: Awell-structured incentive/rewardsystem for research/developmentaloutcomes and contributions is absent.Industry Institute Cell tackles only thestudent placement related issues.There is no effort to club the basic andapplied research with industry formutual benefit of the institute and thesociety. Ample funding may be tappedfrom the Industry through suchcollaborations to meet the industrygap/ requirement with academicassistance. Leading position must begiven to those who bring in more thantheir academic and research pedigree.Multidisciplinary individuals who maymentor in bridging the knowledge gapi.e. what we have and what is requiredmust be encouraged in creativeendeavours.

45

The Institute should not hang up oncounting chickens before they hatch i.e.measuring the results of a strategicalliance in the short run. Most fruitfulprojects take time to fruit (Szulanski,1996). Setting artificial metrics tomeasure them can often undercut thealliance and fail to capture theunanticipated benefits that accruewhen a well-structured strategicrelationship is built on trust and ismanaged by people who understandboth worlds. Focus should be onquality instead of quantity. Selectiveprojects with focus on excellentstrategic benefits through peer reviewshall attract industry investment andensure better results.

• Individual Perception and Attitude:The faculties as resource persons arefound to be quite reluctant to discussand share their research ideas in intra-organizational forums or engage inintrapreneurial initiatives beyondroutine responsibilities (Wind andMain, 1999). This is because there isno regular incentive system toacknowledge and reward suchcontributions. Besides, some are quitecomplacent in their attitude and do notventure to any further to routine work.

There is a tremendous lack of‘Learning by Doing’ attitude in theacademicians as very few are with anexperience in industry or the proclivity tonetwork outside their area of expertise. Asubtle insinuation of job insecurityadversely affects cultivation of personal

ties that can lead to most creative andpromising KM collaborations. Mostfaculty members consider knowledge asproprietary which should be protected. Asa result, the personal knowledge andintellectual capital remains isolated in silosinstead of getting integrated with theInstitutional knowledge.

The individual-level attitude towardstheir job and career is to keep things easy-going and comfortable. They are reluctantto take challenges to chase their individualgoals based on career planning, and restricttheir mobility. They are family oriented andtherefore prefer job security to growth anddynamism.

Autonomy may allow the institute todevelop structured policy for knowledgebased initiatives which may encourage apositive attitude and perception amongtheir employees. The academics focus theirefforts towards personalized goals andrarely engage in institutional gains beyondroutine (Basu and Sengupta, 2007). Thereis tremendous lack of organizationalbelongingness and team spirit among theacademics in the context of innovativeundertakings.

Conclusions

Following are the suggestions foreffective orientation of the managementinstitutes/ B-Schools to KnowledgeManagement and the successfulimplementation of the KMPP in itsoperations.1. Implementation of the KM based

Initiatives or knowledge orientation



to support organizational learningand innovatively contribute to thesociety must address the concern ofmultiple stakeholders at theinstitution’s strategic level as wellas operational level. KM basedinstitutional processes must support abroad user base and incorporate a costeffective approach to knowledgevalidation. Such initiatives must meetthe two basic objectives: (1)Integration of the KM initiatives withthe key processes of the organization(2) KM must enable sharing of thevaluable knowledge gained from theprevious knowledge capture task. Thecombination of the two objectives mayhelp to improve the connection of theKM process to the entire academicand administration process in theinstitute, including the concern of all thestakeholders.

2. New knowledge generated throughintegration of the multidisciplinaryknowledge (Bush, 2008; Oplatka,2010a; Ribbins, 2006) may berelevant to meet the industrialrequirement and therefore channel infunds from the corporate projects.Collaborations with the Industry onone hand may enable employment ofthe newly created knowledge in solvingthe real-world problems and on theother hand allow inclusions of the latesthappenings in the classroomdeliberations (Gunter, 2012).

3. Barriers due to Institutionalbureaucratic mindsets between

those tasked with operating thebureaucracy and those who areworking within it, i.e. two differentthought worlds, must be mitigatedto maximize participation and get thebest results from such KM initiatives.While the bureaucratic administrationis more focused on the quality ofadmissions, placement etc., amplefocus must be given to collaborationswith the industry. The KM initiative canbenefit only though involvement,commitment and transparency of thesenior administrators and theirendorsement to the KM strategies(Useemmay, 2014).

4. Autonomy at both strategic andoperations level is a key requirementfor effective KM in the managementInstitutes.

5. Organization may begin withimplementation of one program andgradually in encroach into other toolsand processes. KM implementationconsisting of scheduled initiatives andprograms must be based on a realisticplan and expectations. Firstly, theorganizations vision, mission,objectives and its behaviouralintentions must be aligned with thatof the KM processes. Topmanagement must be counseled andconvinced regarding the impact of KMoutcome on the institutionaleffectiveness. It must reasonably setthe goals, perceptions and beliefs.

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6. Institutions’ vision, mission andobjectives must be corroborated tothat of the individual employees tocontinuously motivate them to committowards knowledge –centric behaviorfor long-term competitiveness. Strongand consistent power and at timescoercive power requires to beexercised to promote KM. Visionaryleadership must be cultivated withinvestment of money, time andresources. Persistent idea generationand knowledge creation from all levelsof staff comes through receptiveperception and attitude.

7. Feasibility assessment of theorganizational infrastructure (i.e.physical, technological and financial),the organizational work culture,performance evaluation system,employees’ attitude and perceptiontowards KM must be conducted toset the KM goals. Reasonably feasiblegoals may inspire the employees toassess their personal knowledge andenhance through knowledge transferto meet new challenges.

8. Cultivate and nurture a conducivework culture in contrary to a push/coercive strategy. KM initiativerequires a collective and coercive effortto use all the available resources intoeffective utilization.

9. Stories from the colleagues, peersand senior leaders are rich, credibleand effective tools in transferringand sustaining learning both for the

storyteller and for the listener. Any KMintervention should be less than anhour for reasons: the delegates aremore likely to clear time to attend; thefacilitator is more likely to retain theattention span of all the attendees.External delivery partners(Federman, 2014), their styles, methodof delivery, connection with thedelegates, conference calls after theprogramme, even humor and personalteaching stories of the facilitators canaffect the effectiveness of the KMinterventions.

10. KM oriented behavior can beencouraged through integration ofmonetary and non-monetarybenefits/ incentives to suchcontributions. KM Process phaseslike knowledge sharing, creation/capture, transfer, dissemination/usemust be complemented with balancedperformance evaluation/rewardingsystem. In the beginning, employeesshould be encouraged throughpersonal benefits in the form of direct,monetary, explicit returns withimprovement in the course content,innovative teaching pedagogy,publications – both research articlesand reference books etc. Alsoadditional increments in the salary andpromotions may be awarded. Overtime rewards may be made implicit likepublicizing the names of the employeesalong with their ideas/ contributionsmade to the institute, its processes orprovide skill enhancement programs,



extended job-scope. Gradually, thereward system may be geared towardsteam achievement to encouragecreativity, team-work and harmonyamong the people.

11. Operational staff greatly affects thesuccessful implementation of theKM programs with their attitude,behavior and participation. Any kindof negative perception or negativeattitude at individual level must bealleviated. Also, fears andmisconceptions about KM as that itmay lead to downsize organizations orlead to heavy workload or may requiretoo rigid IT expertise.

The study reiterates the impact ofenabling factors like organizational workculture as stressed by Tippins (2003) andindividual perception and attitude. It alsoestablishes the criticality of SupportiveLeadership & Governance, favourableWork Culture, Integrated PerformanceEvaluation & Incentive System and well-integrated IT infrastructure in creating alearning environment in the educationsector.

The findings strongly support both thetheoretical propositions. Further, thetheories are mutually complementary andnot contradictory.

(I) Organizational/Institutional enablerswhen favorable encourageparticipation and involvement atindividual-level by inducing positivityin their Attitude and Perception andthereby facilitate the effective

implementation of KM initiatives/KMPP.

(II) Lack of autonomy in institutionaloperations and administration impedesthe favorableness of the KSE and indue course Individual-level enablersfor effective implementation of KMPP.

Affiliation to the State Universitybinds the Institute to operate within themandate set by the university and impartthe syllabi ‘as is’ to the students.Internalization of the KMPP at all the levelsof operations, implementation of fullyintegrated IT and KM System, regularizedpolicy for rewarding/ incentivizing KM/ICcontributions, clear perception and positiveattitude at individual level throughengagement and acknowledgement aredrivers of the KM implementation.

An improved management ofKnowledge and Intellectual Capital shallunfailingly add rigour to the B-Schools/management institutes. This shall help themanagement academics in the mid-tier inparticular, to recover from the lull.

Future research in the context maybe extended with quantitative techniquesand tools. The construct may beresearched in other geographical territoriesand zones to strengthen the argumentspresented in the paper. Quantitativeresearch with the construct may considermore enabling factors like training,empowerment, benchmarking,organization structure etc. A longitudinalstudy may serve to reinforce thesuggestions of the study.

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Business Intelligence Systems:A Necessity for Agile Supply Chains

Subrat SarangiSchool of Management, KIIT University,

Bhubaneswar- 751024, India, [email protected]

ABSTRACT

Enterprises today have to be more responsive and agile to customer needs. In additionto being able to deliver in shorter lead times, they also need to manage much widerassortment of products. Thus the challenge for the enterprise is threefold – increasednumber of SKU’s (Stock Keeping Units); reduced lead times and flexibility toaccommodate last minute order amendments. In such a scenario, the entire valuesystem has to be seamlessly integrated with every upstream and downstream channelpartner sharing business intelligence for an integrated decision making process,thereby establishing a globally optimized system. Business intelligence (BI)overarches the decision support systems and processes for effective decision makingwhile building agile supply chains. This paper bridges the gap in extant literatureon the importance of BI in building agile and responsive supply chains through bestpractices and case examples of global and Indian firms. The paper enumerates theguiding principles of an agile supply chain and the critical success factors to establishsuch a system. The paper also analyzes the factors that are essential for firms toadopt technology which is a key enabler in the entire process.

Keywords : Agile supply chain, business intelligence system, data mining, datawarehousing, decision analytics, real time information, technology adoption, decisionsupport system.

Introduction

Lack of patience, restlessness, valueprice offerings and extended customerservice facility are some of the attributeswhich characterise a typical customertoday. The need of the hour is to makegoods and services available, acceptableand affordable to the customer. The“Three A’s” take a heavy toll on themanufacturer, distributor and the retailer

as they look to establishing an efficient andagile supply chain. From the neighbouring“Kirana Store” in the locality to thesupermarkets1 and hyper markets2 (e.g.Big Bazaar, Hyper City Mall, and StarBazaar) at the town centre, every retailstore has to face this challenge to retain itscustomer base first and work on increasingmarket share. Catering to the needs of the

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customers with varying demographic andsocio economic backgrounds in a diversecountry like India becomes all the morechallenging. Understanding buyingbehaviour in terms of wallet share bycategory and SKU, time of purchaseduring the day, spend per visit, brandpreferences by category, to name a fewbecomes critical in order to avoid loss ofsales, enhancing customer lifetime valueand focusing on high margin items. Thesedecision analytics can be made availableto the retailer and the upstream channelmembers only if there is a robusttechnology layer which collects, analyzesand provides the necessary dashboards atthe right time intervals. All these lead tobuilding an agile supply chain connectingthe supplier’s supplier and customer’scustomer. Modern day enterprises takehelp of robust BI systems (BIS) to takeinformed and globally optimized decisionsthat help firms not only to increase revenue,but also at the same time control costs andoverheads. This paper studies the role andimportance of BIS in establishing aresponsive and agile supply chain throughbest practices of leading firms across theglobe and India spreading various industrydomains.

The paper is divided into eightsections starting with the introduction andfollowed by the review of literature.Subsequent sections define the features of

an agile supply chain, criticality oftechnology adoption and role of BI inbuilding agile supply chains. The concludingsections of the paper deal with challengesand impediments in building an integratedBI, conclusions and references.Literature Review

Business Intelligence (BI) as a termwas first used by Gartner Group in 1989.Extant literature defines BI as acombination of concepts, methods andprocesses to improve business decisionmaking (Muller et al., 2010). Cabral et al.,(2012) specifically discuss the role of BISin enhancing overall supply chainperformance in terms of selection of keyperformance indicators by applyinganalytic network process (ANP) in an automaker’s supply chain. While it can beobserved in extant literature that BI hasbeen studied considerably in general,specific research pertaining to supply chainperformance has been scant. One of thelatest works on this theme (Sangari &Razmi, 2015) discusses the relationshipbetween agility in supply chain and BIS,measured by agile capabilities and agileperformance. Sangari, Razmi, &Zolfaghari, (2015) have proposed areference framework for measuring supplychain agility using grounded theory. A dipstick view of extant literature throws lighton several research papers that approachthe correlation between BI and supply

1 Supermarket is a self-service store offering a wide variety of food and household merchandise, organized into departments.

2 Hypermarket is a superstore combining a supermarket and a department store carrying awide range of products under one roof, including full groceries lines and general merchandise

Business Intelligence Systems: A Necessity for Agile Supply Chains


chain performance in a more generic way.Sahay & Ranjan, (2008) study the role ofreal time BI in ensuring customer loyaltyin service oriented firms. The importancefor integration of the value chain partnersto have a single holistic view of the systemas a whole has been brought about byPower (2005). Similarly the importanceof BI in demand forecasting has beenhighlighted by Krupnik (2013). In acomprehensive review of literature on BIand its application between the period1997 and 2006 covering 167 articles, itwas observed that about 94 articlespertained to implementation of BI (e.g.CRM, ERP, SCM) and aspects ofcollaboration, integration, customizationetc, (Jourdan, Kelly Rainer, & Marshall,2008), thus indicating the importance ofthe topic.

An analysis of the importance of BIwas studied in detail in extant literaturetracking various reports from technologyanalyst firms. It may be deduced thatincreasingly firms have startedimplementing state of the art BIS to notonly get a handle of the historical andcurrent performance trends, but to predictthe future performance using predictiveanalytics of BIS. The adoption oftechnology is fast and growing, more so inthe developed world. Gartner Inc. hasforecasted a 5.2% increase in BI spendglobally year on year, with the figureestimated to touch 16.9 billion USD in20164. Further, it is predicted by a leading

analyst firm, Research and Markets thatBI spend would grow at a compoundedannual growth rate (CAGR) of 8.25% overthe five year period 2014-19 and reachabout 27 billion USD in 2019. Thus it canbe concluded that role of BI in establishingand nurturing agile supply chains is one ofthe most relevant research areas the fieldof technology and operations management.

This paper bridges the gap in extantliterature on the need for BI systems todevelop an integrated, collaborative andagile supply chain. The paper is conceptualand is based on best practices and successstories of firms both in the developed andthe emerging world. The author also shareshis consulting experience in developmentand implementation of BI systems to buildagile supply chains.

Agile Supply Chain - Features

The characteristics of an agile supplychain are its ability to be responsive tochanges in demand patterns much faster.They are nimble and based on a pull systemrather than push. Best in class supplychains make use of predictive analytics andpredict demand real time for raw material,components and end products or servicesbased on past and ongoing trends. Thephilosophy that drives the design of suchsupply chains is goods made to order orconfigure to order or assemble to orderbased on the trends. Fig.1.0 represents theguiding principles of an agile supply chainadopted from the

4 http://www.yellowfinbi.com/YFCommunityNews-Business-Intelligence-software-spend-to-boom-in-new-era-of-accountability-216786

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A detailed analysis of the guidingprinciples indicate that to establish an agilesupply chain there are certain enablers andattributes which every member in thesupply chain needs to adhere to. They are:

1. Establishing a Virtual System:Every entity in the value system i.e. bothupstream and downstream needs to beintegrated with seamless exchange ofinformation. Real time access toinformation pertaining to inventory i.e.finished and work in progress (WIP),production schedules and job schedules,tracking logistics carriers, etc is critical. Theview of the overall supply chain real timeenables informed decision making whichis much faster and reduces time to serve.Transparency in the chain reduces bull-whip effect and overall inventory in thechain, thus reducing the cost of goods sold.

This is possible with technology layerintegrating the various entities. We discussin the subsequent sections the varyingdegrees of maturity of virtualization andnetworking within supply chains and itseffects.

2. Trust: As agile supply chains needto be transparent and operate on globalobjectives rather than operating in silos,there needs to be a great level of trustbetween different entities. Manufacturer’ssuppliers need to reveal all information vitalfor the manufacturer to know i.e. identityof supplier’s supplier, delivery schedules,delays or postponements if any, qualityissues and its impact on delivery schedulesetc. In turn the manufacturer also needs tobe transparent in sharing the order volumesand pipeline across different orderbuckets, order amendment status,production schedules etc. This is possiblewhen all the entities in the supply chain arewilling to collaborate and shareinformation which may be viewed asconfidential to their business. Thus trustbetween the partners enables free flow ofinformation and data which helps informeddecision making.

3. Investment in Supply Chain:Supply chains have limitations unless thereis certain degree of automation at everyentity level. Building a resilient and agilesupply chain demands technologyenablement of the various entities. Whetherdisparate enterprise applications or similar,

5 Source: Martin Christopher, Cranfield School of Management,http://www.sclgme.org/shopcart/Documents/creating_the_agile_supply_chain.pdf

Fig.1 Agile Supply Chain Guiding Principles5



an integration of the platforms for real timeexchange of data, transactions andanalytics is key. This is possible only whenfirms are willing to invest in technology torealize the long term benefits. Building anagile supply chain is a strategic decisionand hence to have a sustainable businessecosystem, firms need to committhemselves for a long term period.

Though agility and responsiveness iskey to reducing supply chain risk, thereare impediments which need to beovercome. One of the critical successfactors in setting up an agile supply chainlies in adoption of technology andtransitioning from age old manual systemsto an integrated technology platform.Hence firm preparedness and willingnessto adopt state of the art technology isessential for building an agile supply chain.Based on the author’s personalexperience, it can be stated that maturityof supply chains is a function of the industryin which the firm operates, age andmaturity of the enterprise, scale of businessand the vision of the firm. Adoption oftechnology by a firm is impacted by allthese factors. In the following section weanalyse the criticality of technologyadoption across a few industry sectors.

Criticality of Technology Adoption

There is a linkage between technologyadoption and supply chain performance.The paper attempts to bring out this aspect

across a spectrum of scenarios and theimpact it has on overall firm performance.

1. Shorter Product Lifecycles:Firms offering products and services whichhave a very short product life cycle i.e.music, books, garments and accessories,mobile phones, laptops and computershave a greater dependency on a pull basedsupply chain. The sales of the productspeak within three to four months of launchand start declining by the fourth quarter.Thus production and sales planning withhistorical data becomes irrelevant. It isimportant to have a better assessment ofpoint of sales (POS) data including “earlysales data”)6.

Researches have indicated significantimprovement in forecast accuracy basedon early sales data. A case example of anapparel firm dealing with fashion garments,indicates an improvement of forecastaccuracy to 92% based on first two weeksof sales data vis-a-vis 45% in a gut feelbased forecast (Fisher et al., 2000). Insuch a scenario, it is essential to haveaccess to POS data on early sales, patternsof sales by competing brands, past salesperformance by demographics (e.g. age,gender, income group) of similar products,sales performance by region and storeformat (e.g. specialized vs. Conveniencevs. Supermarkets). The data is then runthrough various cycles of analysis toprovide the key metrics and patterns on

6 Sales patterns in the initial one or two weeks of launch of the product across different retail formats

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demand by SKU, margins, revenue, storeformat etc which then goes into theplanning cycle. For example, data analyticsenables a fashion garment manufacturer toorder a specific number of a particularcolour, size and design of T-Shirt from itscontract manufacturer based in Pakistanor India for sales in a Target store inoutskirts of Baltimore, USA. The sameexample may be extended to the mobilephone display manufacturer in Taiwan fora particular model which has been justlaunched along with few more for sales inLondon. Hence nature of the industry forthe firm has a strong influence onpropensity for technology adoption.

2. Maturity of Firm: Technologyadoption by a firm is also a function ofnumbers of years in business, especiallyfor categories in the maturity stage ofproduct lifecycle. These would be productcategories i.e. cement, hot rolled coil steel,television sets, and refrigerators, to namea few. However, exceptions do exist andthere are innumerable examples of firmsthat are technology savvy and within thefirst 2-3 years of inception, invest onautomation and are early adopters oftechnology. This has got to do more withthe nature of leadership. But the generallyacceptable norm while setting upenterprises is to first stabilize theoperations, build a customer base andecosystem and then venture out to otherareas which need funds. In a conservativeset up like this, adoption of technology isslow. Hence it becomes a bottleneck tobuild agile supply chains around such firms.

For example, steel firms globally andespecially in India have been very slow inadopting enterprise applications thoughthey have a multi tier supplier and customerbase with huge complexity in productionand inventory management. Even postadoption, managing change andacceptance of technology by workforceis another daunting task. But once thesuccessful integration happens, the firm isable to plan inventory across the supplychain, including the steel service centreswhich are closer to the customer andsupply cut to length sizes to the automotive,consumer durable, infrastructure andengineering customers. For the steel mill,the historical demand data by customeracross various specifications in differentquarters provides a sound database forstatistical analysis to ascertain demandpattern. Mining of historical data, assessingseasonality in demand, identifying lowvolume and high margin variants are someof the analysis done by the marketing andplanning departments. For example,considering the surge in demand for whitegoods during festival times i.e. Diwali,Dussehra or Christmas, steel firms plan theproduction schedule in such a way thatspecific grades of colour coated steelrequired by white good manufacturers areproduced in those periods and the steelservice centres also stock the desiredlength and sizes of blanks to be suppliedto the end customer.

3. Impact of BusinessEnvironment: The influence ofcompetitors, channel partners, customers



and the quality of technology solutionsavailable for the industry in general and firmin particular makes a huge impact on speedof technology adoption. In an industrywhere there are a plethora of softwaresolutions, the rate of adoption is higher.Similarly, when the adoption is high in theecosystem i.e. most suppliers (tier 1, tier2) are automated and there are EDI(Electronic Data Interchange) systems inplace, there is peer pressure for theincumbent to bring in automation.

Thus, adoption of technology andembracing change from a manual processto a transparent and real time integratedtechnology platform is a hugetransformation for a firm. This is a greaterchallenge in emerging economies like India,China, Brazil, Vietnam, Indonesia,Malaysia and Russia that have experienceda dramatic growth phase over the past oneand a half decades. While the firms havegrown significantly, the talent pool is yetto catch up with the desired skill set tomatch the growth, and therefore itbecomes a case of complextransformation. This challenge is to stay forthe next few years at least, as theseeconomies battle the economic crisis andthe human change related issues acting asimpediments to technology adoption.

After having discussed and analyzedthe features of an agile supply chain andthe influencers of technology adoption, thepaper explores in greater detail in the nextsection the role of BI in transforming firmsand making them more customers focused,

agile and responsive to market dynamics.Further, the paper goes on to bring outthe latest trends and what have been someof the challenges which firms are going toface in the times to come, with theproposed counter measures.

Role of BI in Building Agile SupplyChains

Before a detailed analysis of thebenefits and implications of BI in buildingagile supply chains is discussed, it isimperative to map the progress of this fieldof study i.e. Decision Support Sciences(DSS) as has been termed over the last 5– 6 decades. Analytics in its first avatarappeared in the late 1960’s and early1970’s as Decision Support Systems(DSS). Terms like Data Warehousing(DW) and BI started to be used by bothindustry and academia in late 1980’s andearly 1990’s. Today BI is used as anumbrella term covering different aspects,namely, technologies (e.g. data cleansingtools), processes and applications (e.g.Online Application Processing). Anarchitectural schema of BI system is givenin Fig.2. It represents the various datasources from various technology platformsleading to a data warehousing system andsubsequently to generation of reports foreffective decision making. Analytics is alsobeing used interchangeably for BI,predominantly from a commercialengagement stand point wherein firms areoutsourcing the function to specializedservice providers e.g. Infosys, Wipro,TCS, Genpact, to name a few.

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Supply chains can be designed to beagile on robust BIS within the value systemof the enterprise. Though firms have beenoperating with very basic data mining and

At different points in time researchershave defined BI in their own way. Adelmanet al. (2002) describe BI as a term thatencompasses a broad range of analyticalsoftware and solutions for gathering,consolidating, analyzing and providingaccess to information in a way that helpsenterprise’s users make better businessdecisions. Malhotra (2000) defines BI asthe platform which facilitates networkingand bringing real-time information tocentralized repositories and supportanalytics that can be exploited at everyhorizontal and vertical level within andoutside the firm. There are many similarexplanations on BI in extant literature.However, a comparison of the definitionsreflect that the main objective forenterprises to invest on BI applications hasbeen to derive meaningful inferences fromhuge data repositories generated fromvarious business transactions, which in turnassist in better decision making, maximizingcustomer and firm performance.

intelligence systems, they are significantlyconstrained in building a world class supplychain. Success stories of some successfulenterprises and how they have approachedin designing their supply chains is explainedbelow.

Case Examples in Western Countries

1. Caesars EntertainmentCorporation: An American public gamingfirm with interests in casinos, hotels, golfcourses and resorts became a marketleader by devising its growth strategy usingBI to understand customer profitability,lifetime value of loyal customer base, targetsegments and need gaps. The firm realizedthat to create sustainable competitiveadvantage, it had to develop a DSS basedon robust a BIS especially in a high growthindustry like entertainment.

2. World Group: Japan basedWorld Group, a leading fashion garmentplayer is able to manage the entire cyclefrom new product design to delivery at thestore within three weeks and a cycle timeof just two weeks from order to deliveryat the store. This has been possible withadoption of robust sales forecastingpractices of early sales trends, seasonalityand integrating production, design anddistribution centres with real timeinformation exchange. World Group withits various group companies haveintegrated on a single technology platformwith real time information exchange,leading to setting up a responsive firm tochanging fashion trends and patterns.

Fig.2 Architectural Schema of a BI System7

7Adapted from Solutions, L. (2016). Business Intelligence, (February). Downloaded on 1st July, 2016



3. Proctor & Gamble (P&G):P&G is arguable the leader as far asadoption of technology and BI isconcerned among consumer productgroup (CPG) firms globally. BI is claimedto be one of the four pillars in their digitalstrategy and the firm proudly claims to havecompetitive advantage in the field. The BIprogram at P&G centres around the fiftyplus “Business Spheres”8 where eachBusiness Sphere provides executivesaccess to 500 million data points eachmonth ranging from POS data fromretailers, syndicated market reports,internal ERP, inventory and shipment data.In addition to the systems generated data,information collected from letters, emails,phone calls and blogs also reside in systemproviding insights, drill downs, charts andon the fly analysis (termed as DecisionCockpits) for better decision making. TheBI tool has also helped P&G significantlyin their innovation drive, in identifying newopportunities and breakthrough product orservice ideas. On the whole, P&G hasbeen able to build a responsive and agilesupply chain integrating all its value chainpartners with the help of the state of theart BI tool.

4. Wal-Mart, TESCO, Target &Other Retailers: Retail industry along withfew others have derived maximum benefitfrom BIS in not only managing CRM leddecisions, but also enhancing efficiency andeffectiveness of suppliers, warehouses and

logistics service providers. TESCO, Wal-Mart, CostCo, Amazon, Kroger andCarrefour have been the pioneers as faras leveraging technology in building DSSis concerned9. With a modest beginningof identifying sales patterns by SKU at astore level, today there is real time linkagebetween the retail outlets with the DC(Distribution Centre), TPL (Third PartyLogistics Carrier), corporate data centreand the gamut of suppliers. BI in retailsphere has been at the most advancedlevel with assistance in decision making interms of shelf arrangement, stocking inshelves, stocking near billing counters, typeof store lighting by category of stocking,to name a few. All these analysis are beingdone at a SKU level so that right itemsare stocked at the right places in the rightquantities. Retailers through loyalty cardsare also tracking customer specific buyingbehaviour, spend by category, and spendby season / month / days and time of days.

With emergence of one market - theglobal market, enterprises have realized theneed to serve customers faster in terms of“what they want”, “where they want”, atthe “right time” in “right quantity”, “rightquality” and at an “affordable price”. Thishas been a benchmark for firms desiringto build a responsive supply chain withminimum disruptions. The above examplesof the developed world demonstrate therole played by BI in enabling thistransformation.

8 In-house BI tool at P&G9 http://www.investopedia.com/articles/markets/122415/worlds-top-10-retailers-wmt-cost.asp

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While adoption of BI as a businessenabler has been more prevalent in thewestern markets, of late emergingcountries like India, Brazil, China, SouthAfrica, and Malaysia have shown a drasticimprovement in implementing BIapplications and solutions. Some of theIndian firms that have implemented best inclass BI DSS have been explained below.

Case Examples in India

1. Tata Steel: Tata Steel is one ofthe early adopters of predictive andprescriptive decision analytics, especiallyfor the outbound supply chain. The firmhas well established marketing and planningdepartments who have the responsibilityto determine the sales plan and theproduction plan based on historical trendsand future demand projections bycustomers. Robust statistical analysis isdone on historical data by customer andby time period analyzing the spikes.Market intelligence on competitors, bothin India and globally is also integrated withthe forecasts collected by field sales forcefrom the customer pool to arrive at thedemand plan and the production plan. Thetechnology platform integrates theproduction centers, yard, sales force andthe leading channel partners sharing realtime data on orders, stock positions,production runs etc to make informeddecisions.

2. Toyota Kirloskar Motors Ltd(TKML): TKML has been one of the firstfirms to have an integrated dealer

management system (DMS) connectingthe firm’s dealers across India. The coreof the DMS is the Warranty ManagementSystem which provides vital decisionanalytics on frequency of failures bycomponent and vehicle type that is usedas an input in vendor rating and evaluation.This particular aspect of evaluating andrating vendors is being used today by mostof the leading automotive OEM’s (OriginalEquipment Manufacturers).

In addition to the above two specificexamples, there are innumerableapplications in banks, insurance, retail andtelecommunication industry. The case ofBharti10 is very well documented in publicdomain as how they have gone about withthe on demand business solution offeredby IBM India encompassing CRM, datawarehousing, billing and other onlinecollaborations. This has helped Bharti inunderstanding the diverse customer basebetter and design specific servicesdepending on the target segments tomaximize lifetime customer value.

The above success stories of firmsthat have understood their customers andserve them better, have in place a robustBI solution. These firms have have used itas a source of competitive advantage. It isan integral part of their value system thatintegrates the supply chains of suppliersand customers. This has been possible bypractising certain processes and norms ofgovernance over a period of time. Agilesupply chains are built over years of trust

10 https://www-03.ibm.com/press/us/en/pressrelease/6910.wss



and process driven behaviour by partnersand the following section reflects some ofthe impediments and challenges in buildingan integral BI system.

1. Challenges & Impediments inBuilding an Integral BI System

Organizations face various challengeswhile implementing a BI system. Thesource is manifold – technology, people,processes and governance, to name a few.The impact is far reaching as it could verywell make the entire system redundant anddis-functional. Based on prior experienceand published research some of theseimpediments are highlighted below.

1. Discipline in entering data atPOS, Warehouse, DC: Many retailers,especially in emerging economies aresceptical about the quality of data that theypossess and hence are unsure of takingdecisions based on system reports. Thismainly happens due to lack of discipline inprocess adherence by personnel manningthe billing counters and goods returncounters. Some glaring practices are thoseof using price look up function andmatching product by price rather thanproduct code and thus resulting in mis-match in actual store stock vis-a-vissystem reporting stock. For example, abilling counter clerk in a hurry could entertwo items for Coke 1 Litre bottle which ispriced at INR 50/- as against 1 item of 1Litre. Coke bottle (priced at INR 50/-)and 500 gm of Tide Detergent (priced atINR 50/-), which is the actual transaction.As a result the in-store inventory for Coke

1 Litre is erroneous by +1, while Tide 500gm by -1 as against the system. Similarerrors also crop up when data entry is notproper for product exchanges and returnsor even maintaining inventory records atwarehouses and distribution centres. Thebest practices to address such concernsand improve data quality are:

a. Physical matching of stock with systemdata: Matching in store physical stockwith system data and amending errorson a periodic basis

b. Training: Periodic training of store staffat billing counters, returns desk, backroom inventory from time to time andexplaining the importance of dataquality and its impact on sales. Thesame may be experienced at thewarehouses as well.

c. Skill levels: One of the key successfactors in any technology interventionin business processes is the skill levelsof people performing the function.Thus, hiring of skilled resourcesperforming the various functions i.e.inventory tracking and record keeping,billing, goods return and warehousesystems provides the necessary edgeto firms in implementing technologysolutions, be it ERP or a BI platform.

2. Technology solution andbusiness requirement fitment: On manyoccasions availability of the right solutionfitting the business need is an impediment.The mismatch in the need versus availabilitymay be due to single or a combination offactors.

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a. Not meeting the business functionality:Non availability of a BI solution whichis able to provide the necessaryfunctionality to capture the nuances ofthe business processes is a challenge.As a result, the extent of customizationis huge which impacts the Total Costof Ownership (TCO) andcompromises on some of the in-builtfeatures which are not made to use.

b. Size of business: An assessment of BIspace indicates established playerswhich typically cater to largebusinesses. Though of late SMBsegment has been a focus area, it hasnot been a very attractive segmenthistorically. So there have been gapsin terms of market segments andsolutions which hinder adoption of BI.Besides fringe players do not have avery robust offering and their futuresupport is questionable, which makesthem vulnerable as a partner of choice.

c. Implementation and support: Thisfactor is more applicable for start upsand SMB segment firms who do notget the right quality of skills forimplementation and support for thebudget they could afford. Henceaffordability becomes a challenge.

Building a robust BI solution liespartly with the enterprise and to a greatextent with the business environment.While firms transform their mindset andmove towards building responsivesystems, the business environment, namelythe IT product and services firms also need

to expand their coverage and offerings forgreater penetration and adoption of smalland medium sized firms.

Conclusion

Business Intelligence and analyticsshall continue to be the drivers of intelligentdecision making in the times to come.While Gartner forecasts global BI spendto touch about 17 billion USD by 2016end, Research and Markets projects thevalue of BI market at a whopping 27 billionUSD by 2019. Though structured data hasalways played a pivotal role in supply chainanalytics, of late unstructured data sourcesfrom social and digital media throughFacebook, Tweeter, Instagram andPinterest, to name a few, are havingsignificant influence in determiningconsumer choices and trends. Theinfluence and impact of social networkingsites does not just restrict itself to B2C(business to customer) transactions, buthas far reaching influence on B2B (businessto business) transactions blurring andtransforming supply chain drivers.

Estimates indicate that 30 billionexchanges are shared in Facebook everymonth and Wal-Mart on an averagehandles more than 1 million customertransactions every hour, feeding databasesat more than 2.5 petabytes. Datameasured in terms of volume, velocity andvariety has been given supreme status thatof a new class of asset like currency orgold by none other than the WorldEconomic Forum4 2012 held at Davos,Switzerland. Thus to be competitive in the



future, firms need to acknowledge thereality that data leading to meaningfulbusiness decisions shall drive business inthe future. Key to building a sustainablebusiness model will lie in having an agilesupply chain enabled by a robust BIplatform. It also provides a huge scopefor researchers to focus on this areaconsidering industry specific nuancescovering aspects of people, processes,technology and governance as some of theworthwhile dimensions.

References

Acker, Grone, Blockus, Bange,(2011), “In-memory analytics – strategiesfor real time CRM”, Journal of DatabaseMarketing and Customer StrategyManagement, Vol.18, No. 2, pp. 129-136.

Cabral, I., Grilo, A., & Cruz-Machado, V. (2012). A decision-makingmodel for lean, agile, resilient and greensupply chain management. InternationalJournal of ProductionResearch, 50(17), 4830-4845.

Charles Dennis, David Marsland,Tony Cockett, (2001),”Data mining forshopping centres – customer knowledge-management framework”, Journal ofKnowledge Management, Vol.5, No. 4,pp. 368 – 374

Christopher Martin, “Creating theAgile Supply Chain”, http://www.sclgme.org/shopcart/Documents/creating_the_agile_supply_chain.pdf

David C. Chou, Hima BinduTripuramallu, Amy Y. Chou, (2005),”BIand ERP integration”, InformationManagement & Computer Security,Vol. 13, No.5, pp. 340 – 349

Fisher, Ananth Raman, McCleeland,(July-August’2000), Rocket ScienceRetailing Is Almost Here. Are You Ready?,HBR.

Jourdan, Z., Kelly Rainer, R., &Marshall, T. E. (2008). BusinessIntelligence: An Analysis of the Literature.Information Systems Management,25(2), 121–131. http://doi.org/10.1080/10580530801941512

Krupnik, Y. (2013). DeployBusiness-Specific Predictive Analytics inThree Easy Steps. Supply & DemandChain Executive, (June), 32–33.

Power, D. (2005). literature reviewSupply chain management integration andimplementation/ : a literature review.Supply Chain Management: AnInternational Journal, 10(4), 252–263.h t t p : / / d o i . o r g / 1 0 . 1 1 0 8 /13598540510612721

Sahay, B. S., & Ranjan, J. (2008).Real time business intelligence in supplychain analytics. InformationManagement & Computer Security,16(1), 28–48. http://doi.org/10.1108/09685220810862733

Sangari, M. S., & Razmi, J. (2015).Business intelligence competence, agile

11 Big Data Big Opportunity, Financial Executive, July-August’ 2012

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capabilities, and agile performance insupply chain: An empirical study. TheInternational Journal of LogisticsManagement, 26(2), 356–380. http://doi.org/10.1108/IJLM-01-2013-0012

Sangari, M. S., Razmi, J., &Zolfaghari, S. (2015). Developing apractical evaluation framework foridentifying critical factors to achieve supplychain agility. Measurement, 62(February2015), 205–214. http://doi.org/10.1016/j.measurement.2014.11.002

Solutions, L. (2016). BusinessIntelligence, (February).

Tajinder Pal Singh Toor, Teena Dhir,(2011),”Benefits of integrated businessplanning, forecasting, and processmanagement”, Business Strategy Series,Vol. 12, No. 6, pp. 275 – 288

Watson (January’ 2012), “How P&GMaximizes Business Analytics”,www.cioinsight.com

Watson J. Hugh, “BusinessAnalytics Insight: Hype or Here toStay?”, Business Intelligence Journal,Vol. 16, No.1, PP. 4-8

http://www.sclgme.org/shopcart/D o c u m e n t s /creating_the_agile_supply_chain.pdf -(downloaded on 28th June 2016)

http://www.investopedia.com/articles/markets/122415/worlds-top-10-retailers-wmt-cost.asp

(downloaded on 1st July 2016)

http://www.yellowfinbi.com/YFCommuni tyNews-Bus iness -Intelligence-software-spend-to-boom-in-new-era-of-accountability-216786 -(downloaded on 28th June, 2016)

https://www-03.ibm.com/press/us/en/pressrelease/6910.wss - (downloadedon 1st July, 2016)



Millennium Development Goals and Post 2015Framework : An Indian Experience

Shikta Singh

School of Management, KIIT University, [email protected]

ABSTRACT

It is already clear that progress has been rather mixed. The agenda of the MillenniumDevelopment Goals (MDGs) has been cut back to a standard set of statistics, andmacroeconomic, sectoral or institutional reforms of a technical nature. Growth hasbeen equated as panacea for all forms of deprivation. However, the MDG agendafailed to bring fundamental transformations in human development and society tomake it more inclusive. An objective and impassionate analysis of the pastachievement and current trajectories are essential to understand reveal ourconceptual, structural and operational deficiencies and the kinds of reorientationneeded to ensure that SDGs are much more attainable. Such reorientations wouldinclude; prioritizing type of growth, disaggregated regional and local targets ratherthan global standards, focus on qualitative aspects of human wellbeing over technical‘solutions’, and the painstaking work of developing national and sub-nationalenablement over quick outcome indicators. It further probes into the matter relatingto India’s recent development experience which shows that achieving the ambitiousvision by 2030 will require addressing a wide range of challenges. Agenda ofinclusive and holistic growth can accordingly no longer neglect the link betweenthe economic, social and environmental dimensions of development which needslong term integrated policy making. Conceptualizing, planning and implementationbeyond 2015 must be made integral, normative part of economic, social andenvironmental objective of the nation.

Keywords: MDG, SDG, Sustainability, Sectoral, Economic growth

1.1 Introduction

The Millennium Development Goals(MDGs), an off shoot of MillenniumDeclaration agreed by 189 countries inSeptember 2000 marks the beginning ofa momentous global effort ushering in newmethod of worldwide mobilization

towards achieving a set of vital human anddevelopmental objective. They embodywidespread public concern about growingpoverty, hunger, malnutrition, dreadeddiseases, illiteracy, gender disparity, andenvironmental degradation. These

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concerns synthesized into easilyexplainable set of eight goals, with 21targets and time lines, the MDGs not onlypromoted global awareness, but also buildpublic pressure and made accountabilityof ruling class, improved metrics, socialfeedback & public pressures.

1.2 INDIA’s experience with MDGs:A mixed bag of glories & pitfalls

The MDGs has been an integral partof development agenda for India.According to the UN Report & IndiaCountry Report 2015, though India hasmade remarkable progress in achievingsome of indicators of 4the MDGs targets,achievement in some others indicators hasmissed the target or unlikely to beachieved. With below poverty line(national) reading of 21.9 per cent of thepopulation as per official estimate, povertyreduction by half target is alreadyachieved.

On education indicators, the countyis on track to achieve universal primaryschool enrollment for both boys and girlsand according to the report and alreadyabolished gender disparity in primary &secondary and likely to do so in tertiaryeducation by 2015. Goal of reducinghunger by half and maternal mortality bythree quarters is likely to be achieved.Trend reversal has been achieved in spreadof deadly diseases like HIV/AIDS, malariaand tuberculosis. Increment in forest coveris achieved and more than 50% reductionis achieved in number people who do nothave access to safe drinking water. The

achievement in penetration in telephoneand internet connection has beenspectacular.

However, the country’s performancehas been far lagging behind on otherindicators. On indicators for 1empoweringwomen through wage employment andpolitical participation(Goal 3), reducinginfant and child mortality(Goal 4) andimproving access to safe drinking water,1access to adequate sanitation & eliminateopen defecation(Goal 7), the progress isfar off the track. It is evident that progressand achievement of MDGs across statesis uneven irrespective of the state ofeconomic growth.

1.2a The Unfulfilled Agenda

Despite rapid economic growth andpositive human development, Indianremains highly segmented and incomeinequality is widening. Nearly 50% declinein Poverty Gap Ration (PGR) both in ruraland urban areas during 2004-05 to 2011-12, is a statistical mirage as share ofpoorest quintile in national consumptionwhich is an indicator of inequality hasdeclined over the period 7.1 % (urban)& 9.1%(rural) in 2011-12 againstcorresponding figure of 8%(urban) and9.6%(rural) in 1993-94. Estimate ofnational poverty line and differences amongstates in India itself is matter of muchdebate and contention. A large number ofpeople whose consumption levels are atthe threshold of poverty line remainvulnerable and minor shocks—naturaldisaster, crop failure, illness,

Millennium Development Goals and Post 2015 Framework : An Indian...


indebtedness—can easily push them belowthe poverty line.

Skewed growth pattern and wideninginequality have led to concentration ofpoverty in poorer and less developedstates. Poverty incidence in rural area isalmost twice that of urban areas, and moresevere among marginalized groups.

Large numbers of school going agechildren are still out of school and drop-out rate is very high at secondary and highereducation level. Quality of education asreported by ASER (Annual Survey ofEducation Report) of PRATHAM andrecent UNESCO study is a major causeof worry. Learning in the area ofmathematics and reading are very poor asrevealed by direct testing of primary schoolstudents.

Gender inequality remains high.Literacy rates among women fall behindthat of men, thus evidencing women‘spoorer participation in learning outcomesand opportunities. Empowering womenremains a major development challenge.Economic, political and socialempowerment still elude them as reflectedin low proportion of women working innon-agricultural jobs (19.3% by 2011-12)and will certainly miss the target of 50%by 2015. With declining share of womenin rural labour force, they suffer lack ofland ownership for those engaged infarming; and women are poorlyrepresented in parliament ( only 96, shareof 12.2%, out of 784 in nationalparliament) against target of 50%. This

reflects a picture of bad and ugly withrespect to the achievement of MDGindicators.

1.3 MDG & GROWTH – The debategoes on

The linkage between economicgrowth and achievement of MDG Goalshas always been a point of debate. Growthcan be termed as pro poor if it leads tomeasure of poverty to fall. An functionaldefinition of pro-poor growth has beenprovided by Pasha (2007). For growth tomeaningfully contribute in poverty-reduction, it should happen in sectorswhich provides maximum employment tothe poor, like agriculture, construction; insectors whose outputs constitutes majorportion of poor‘s consumption basket,like food, in areas predominantly inhabitedby poor - rural and tribal areas and utilizefactors of production which the abundantwith poor, e.g unskilled labor. The linkbetween pattern of economic growth &its sectoral composition, employment andpoverty reduction and what is needed fordevelopment beyond economic growth isdiscussed below.

• Employment

Employment is one of the maininstrumentality which leads to povertyreduction through growth. Employmentbeing the principal source of income, whichin turn is the key measure of poverty,employment generation must be the at thecore of poverty reduction agenda, whichcan be labelled as- ‘employment nexusbetween growth and poverty’ and remain

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unaddressed. The importance ofemployment growth in influencing the rateof change in the incidence of poverty, aftercontrolling for the effects of economicgrowth has been established in studiesacross south Asia.

Sectoral composition of economicgrowth, the choice and level of technologyand effective functioning of the labor marketalso influence the rate of growth ofemployment. In line with the above, labor-intensive sectors like agriculture andconstruction can be identified as pro-poorsectors. Agricultural and allied activitiesmostly take place in rural areas whichaccounts for substantial portion of poor.Hence, structurally, growth to be pro poor,employment intensity sector must lead toexpansion in the outputs directly orindirectly induced. The pattern of growthis no less vital than overall growth, forpoverty reduction.

• Beyond Growth & Poverty Reduction

Growth is not sine qua non fordevelopment. Pro poor economic growth,directly contribute towards the povertyreduction target of Goal 1. However, areduction in income poverty is, to someextent, tautological (Saikia 2007); aperson is not considered as poor when hisincome crosses the poverty line. However,this is not sufficient for attainment of Goals2 to 7. Availability and consumption ofcertain minimum goods and services called¯MDG goods & services (Saikia,2007)is essential for achievement of other goals.For example, consumption of minimum

amount of food is required to reducesomebody’s hunger and a pregnantwoman must be under supervision ofqualified medical professional for regularcheck-up for reduction of maternalmortality rate, and birth must be attendedby skilled health personnel i.e. ¯consumption of health services.

Customs, traditions, social norms,lack of awareness are some of the non-income barriers which impedimentsconsumption of “MDG goods andservices,”( i.e. nutritious food, safe drinkingwater & sanitation, health services andeducation leading to learning) in spite ofpossessing adequate level of income. Veryoften, severe supply constraints likeabsence of health clinic / hospitals inneighbor hood and cost of transport tonearest health centre increases the cost ofhealth services and impede consumption.Similar linkage hold good for safe drinkingwater, sanitation, education. Apart fromagriculture and construction, certain otherkey sectors of the economy road,transport, energy, water, health, sanitationand education are of critical importanceto achieve the MDGs.

In essence, if economic growth alongwith contributing to income generation tothe poor leads to improvements in bothphysical and social infrastructure, thenMDG goods and services becomeaffordable and available for consumptionin adequate quantities to the poor. Thenthat will facilitate achievement of Goals.On the other hand, an expansion in theMDG goods and services sector can also



act as an engine of growth. ¯pro-MDGgrowth into ¯pro-growth MDGs (Saikia‘2007).

• Growth needs to be Inclusive

Though Cross-country studiesindicates that, on average, growth andincome of poor people are positivelycorrelated (World Bank, 2005), averages,however, conceal how poor people(poorest quintile) benefit from growth incomparison to the whole population.Robust and persistent economic growthin Asia, Africa region, has not been ableto achieve employment related MDGs,due to joblessness of growth. The impactof growth on MDG can not only bethrough individual and householdinvolvement in labour or agriculturalsectors. Redistribution and channelizationof the benefits of growth, through socialprotection schemes, entitlement programis also crucial – both to reduce povertydirectly and to allow people to benefit inother human development.

1.3 MDG to SDG – Leaving No Onebehind – Road Ahead for India

The apparent deficiency in MDGsachievement are a pointer to conceptualand operational failures that should bemajor cause of worry and learning pointfor all stakeholders, in both north andsouth. Too many were left behind,Individuals forgotten in the race to improvestatistical averages. In its broadest sense,¯Leave No One Behind means that allgoals, targets and indicators will not beconsidered met unless they have been met

for every person on the planet. While theworld community will take few more yearsto even achieve the unfulfilled basic goalsacross continents, concerns about climate,environment and sustainability of thepresent pattern of growth have forced allstakeholders to set new goals toencompass all above concerns.

1.4a Why & What of SDG?

The idea of the SustainableDevelopment Goals(17 nos. 169 targets)based on the Open Working Group(OWG) deliberations which wasmandated by the Rio+20 outcomedocument The Future We Want‘, hasbecame the rallying point for discourse ondevelopment and sustainability beyond2015. Although specific definitions vary,sustainable development encompasses thetriple bottom line approach to humanwellbeing which are combination ofeconomic development, social inclusionand environmental sustainability (JeffrySach, 2013). While poor were the focusof all MDGs; SDGs are envisaged to gomuch beyond that, with goals touchingupon inequality, quality of governance,urbanization, agriculture, infrastructure,and climate change.

Though the developed countries willnot have the least difficulty with few SDGsaround ending poverty, hunger, health,education, sanitation, many of these whichare unfinished MDGs, are the problemsthat developing countries, on the otherhand, will likely struggle with for muchmore longer period. India along with other

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middle income emerging economies(BRICSAM) are key protagonists of theSDGs, notwithstanding the fact that theyhave their own domestic task cut out tofine tune the complex and competing goalof eradication of poverty, maintaininggrowth and environmental sustainability.

Hence, India‘s development agendaand its priority programs and policies mustbe in alignment with the SustainableDevelopment Goals (SDGs), and recentdevelopment experience shows thatachieving the ambitious vision by 2030 willrequire addressing a wide range ofchallenges as discussed in following points.

• Broad Based Inclusive EconomicGrowth

Structural shift of the Indian economyover the years from agriculture to servicesector, thus giving a pass to sustainablemanufacturing sector, which had the effectof reducing the role of growth as a channelof poverty reduction needs to beaddressed. Adoption of sustainableagriculture practice, foray into high yieldingbut labour intensive agriculturalcommodities, to generate employment andeconomic return; enhancing the backwardand forward linkages between theagricultural sector and the non -farm sectorin order to create a virtuous cycle of growthof incomes and employment will be keyto reduce inequality, remove hunger whileputting least pressure on eco- system. Skillbuilding, expanding manufacturing basewith productive employment, encouragingsmall and medium enterprises,

implementing the ‘Make in India‘ programby leveraging the large domestic markettaking the demographic advantage andhuge defence sector can contributesubstantially to poverty reduction throughemployment generation. Infrastructuredevelopment, land reform and labourreform, availability of cheap and easycredit, and enhancing governance andease of doing business to kick startdomestic investment cycle and FDI willunleash the trajectory of growth whosetickle down effect will help in attainmentof remaining MDGs. More inclusivegrowth can be achieved throughuniversalization of the Government‘sfinancial inclusion program Pradhan MantriJan-Dhan Yojana across the nation,expanding and integrating with micro-finance( MUDRA Bank) and recentlylunched three social security schemescovering all marginalized sections.

• Focus on human development

The sectors in which augmentedrevenue generated by growth is spend bygovernments is critical for achieving theSDGs. Among competing need for fund,the investment in human developmentsectors – such as education, health,livelihood promotion and other basicservices, ought to be 1at the top of thedevelopment agenda. In health andeducation, where India is underperformingmust increase spending from 4.05% of itsGDP to 8 % to 12% and from present3% of GDP to 6% respectively as in uppermiddle and high income countries.



In both health and education,participation of private sector in a massiveway in terms of capacity building, technicalknowhow, is critical to provide quality,accountable service to the poor andmarginalized who can be subsidizedthrough direct cash transfer rather thanwasting resources through government runagencies where corruption and poorquality delivery is the norm.

• Strong design and effectivedelivery of public goods

Effective delivery of public goods andservices is an area of governance whichwill be most critical for SDG performance.Effective targeting and delivery of the fundsunder employment generating MNREGAaccording to local needs to prepareenvironmentally sustainable project thatwould be drought proofing and createbasic infrastructure in rural areas andtransformation in speed & efficiency of offtake of food grains per person throughPDS and integration with newly finalizedFood Security Program must get priorityattention. Another massive transformationalchange will be the direct delivery ofsubsidies, which has been started with LPGcylinders, needs to be extended to everysphere of entitlement based program like– food, fertilizers, education, health, etcwhich will help target the real needy in aeffective way and make huge savings ingovernment spending which can be betterutilized towards progressive taxation whichin turn will go to benefit the poor and justabove poverty line population.

• Resilient & SustainableInfrastructure

Infrastructure is another area of majorconcern towards sustainable developmentand leaving no one behind. Though thebasic infrastructure like all weathermotorable roads, electricity andtelecommunications are key to delivery ofbasic services, the same must not come atthe cost of damage to environment, forestcover, bio sphere, marine eco system.Development of national waterway will bea play a vital link in that direction. Ruralroad connectivity, grid power to all villagesand hamlets, massive expansion ofrenewable energy program like solar,wind, bio fuel are essential towardsdelivering achieving many of the unfulfilledgoals.

• Macro-economic Policy Stance

For attainment of unfinished MDGsand to move on the path of SustainableDevelopment Goals which is moreambitious, massive financing will berequired and nothing substantial emergedfrom Adis Ababa in July 2015. Withfinancial volatility still besieging most of therich nations, developing nations like Indiahave to raise resources internally. Hence,with in the overall inflation-growth tradeoff, the policies stance can be tunedtowards facilitating accelerated economicgrowth rather than focus solely on inflationtargeting. Public investment withenvironment friendly and locally adaptedpractices with participation of stakeholders is the key to these goals since it

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eases supply side constraint, increasescapacity, and must be so designed toaccrues income gains to the poor whileputting least pressure on the environment.With inflation softening to the RBItrajectory for 2016, 2017, a moreexpansionary counter-cyclical fiscal policy,facilitated by public spending is the needof the hour, combined with appropriatemonetary and exchange rate policies.

Conclusion

The single biggest achievement forIndia from the SDGs agreed upon is thatthe central focus of the vision-theoverarching emphasis on eradicatingpoverty and hunger and inequality in anyform- is in sync with the priorities of theIndian government. It is of very vitalimportance to India’s national developmentagenda as it gives India required flexibilityto frame and achieve national developmentagenda within the broader framework ofSDGs. The debate about the post-2015framework need not be over the relevanceof global targets but about their improvedarchitecture, political will, internationaleffort for financing and technologicalcooperation and facilitation. Havingreviewed the good, the bad and the uglythat beset the MDGs since they werecreated, this article tries to rekindle thedebate over challenges and ways towardsachieving the post-2015 agenda. Thus, itcan be concluded that India should learnfrom her experiences of MDG-good orbad and as to how to go forward with SDGfocusing on its ways and means andnational priorities.

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Dr Susilo Bambang Yudhoyono,Ellen Johnson Sirleaf, David Cameron; Anew global partnership: eradicate povertyand transform economies throughsustainable development; The Report ofthe High-Level Panel of Eminent Personson the Post-2015 Development Agenda,United Nations Publications, 2013

Sachs Jeffrey D., From MillenniumDevelopment Goals to SustainableDevelopment Goals, Lancet 2012, EarthInstitute, Columbia University

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HAFIZ A. PASHA and T.PALANIVEL, Pro-poor Growth andPolicies: The Asian Experience, ThePakistan Development Review 42 : 4 PartI (Winter 2003) pp. 313–348

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Paradigm shift towards Mobile Marketing:A study on Consumer’s Perspective

Ritesh Dwivedi,

Assistant Professor, Amity Business School, Amity University UP, [email protected]

ABSTRACT

The news, media and advertising is quite immediate in the marketing and businessworld, nowadays. People login to their Facebook accounts from their mobile devicesseveral times a day, e-mails are sent directly to people’s smartphones and so on.Mobile marketing is currently one of the most important tools when it comes toadvertising. It provides consumers time and location sensitive information that ispersonalised for them, promoting goods, services and ideas. This research paperdiscourses the understanding of mobile marketing and the consumer’s perceptiontowards it, as well as their comfort level in receiving ads through mobile marketing.

Consumers have shown dissatisfaction when it comes to receiving commercialmessages on their mobile and suggested that they will accept this only when it isrelevant to them and the number of messages sent to them are reasonable. This studyhas tried to identify the possible factors that are liked and disliked by the consumerin India and other countries so that companies can run their mobile marketingcampaigns as per the consumer’s preferences.

Keywords: Mobile Marketing, Digital Marketing, Mobile Consumer, ConsumerPerception

1. Introduction

Mobile marketing is currently one ofthe most important tools when it comes toadvertising, promotion and goodbusiness. Mobile marketing conceptuallymeans promoting goods, services andideas using mobiles and nowadays it hasbecome a necessary medium of marketingalthough there are reservations about itsusage.

Mobile communication technologymakes the instant correspondencepossible and it permits expandedportability and services even to remotezones. Because of remote communicationframework, mobile telephone clients canget to their messages, emails, search forinformation and purchase items from allaround without computer devices (Yen and



Chou, 2000; Aungst and Wilson, 2005).Now that we have Data Services, ShortMessage Services (SMS), MultimediaMessage Service (MMS), MobileInternet, and so on, mobile is quicklyturning into a practical business marketingstation.

Positive industry changes havemoved marketing spending plans towardmobile. Despite the brand or organization,a mobile marketing technique must beactualized on the grounds because notdoing as such would give the opposition anoteworthy benefit. Before the end of2014, mobile publicizing spoke to almostten percent of all media promotionspending, surpassing daily papers,magazines, and radio interestingly. Whatmakes mobile marketing one of a kind isthat it is dependably on, and, all thingsconsidered, gives advertisers the steadychance to convey drawing in substance,messages, and a positive client experience.Brands ought to consider working withorganizations whose incorporation mastery

can inventively align digital and onlinenetworking marketing with all otherpromoting endeavours. Despite the factthat organizations are putting intensely inmobile business and mobile marketing, thenature and ramifications of this channelhave yet to be completely comprehendedand research should be performed toknow into how to use it in the best way(Bauer et al., 2005).

According to the latest report fromIAMAI, titled Mobile Internet in India2016, the country is estimated to have 371million mobile internet users by June 2016.India will attract 65 million new mobileinternet users coming on board during theperiod of six months, ending June 2016.Putting these growth figures of mobileinternet users in India along-side the totalnumber of internet users in India, mobileemerges as the clear winner. According tothe previous report from IAMAI, thenumber of total internet users in India willreach 462 million mark by June 2016, a31% year on year growth during the first

Figure 1

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half of 2016. The percentage, however, isway below than the estimated 56% yearon year growth in the number of mobileinternet users in India during the sameperiod. (Source: http://dazeinfo.com/2016/02/08/mobile-internet-users-in-india-2016-smartphone-adoption-2015/)

1.1 MAJOR BRANDS USINGMOBILE MARKETING

BMW

Numerous worldwide auto producershave made a decent passage into mobilemarketing, the most remarkable beingBMW, which has attempted variousincredible mobile marketing ventures. Tooffer more snow tires in fall 2008, BMWtire based in Germany sent tweaked MMSmessages to every BMW owner exploredfrom their client database. The messagehelped beneficiaries to remember thesignificance of snow tires in awful drivingconditions. It had a customized welcoming,suggested a particular tire for their auto,gave the cost, and recorded dealershipsin their general vicinity. The crusadeaccomplished 30% transformation rate,which is undoubtedly owing to the focusedon nature of the offer to their rundown ofbeneficiaries.

STARBUCKS

Starbucks is another organization thatgrasped mobile marketing early. Starbucksattempted various diverse crusades,however in 2009; it propelled a mobiledevotion battle in Mexico that saw giganticachievement. It began with postcards that

urged the beneficiary to message“Starbucks” to a short code. At the pointwhen clients messaged in, they got a 2Dstandardized tag (QR codes) coupon thatcould be checked off the telephone in theStarbucks bistros. The offer changed everytime the scanner tag was checked, sobeneficiaries were urged to recover thecoupon different times. Starbucksencounters a 60% recovery rate on theprimary reclamation of the coupons, andthe program created an engaged audienceof recipients.

NASCAR

NASCAR is another huge brand thathas had gigantic accomplishment withmobile marketing. NASCAR has gone inan alternate course, working specificallywith the transporters, for example, Sprintto give fans uncommon NASCARhighlights on a few handsets that Sprintoffers. NASCAR has likewise hadaccomplishment with content informingand ring tone downloads, and additionallyBluetooth area based marketing at races.NASCAR has incorporated mobilemarketing with TV telecasts amid racesand with its marked reality appears,NASCAR Angels.

Also, NASCAR has exploreddifferent avenues regarding mobilemicrosites devoted to helping its crowdspare gas. This task has incorporated amobile coupon component that gavemembers rebates at Exxon Mobile andAuto Zone.

Paradigm shift towards Mobile Marketing: A study on Consumer’s Perspective


2. RISE OF MOBILE MARKETINGIN RURAL INDIA

11% of India’s Internet users live inrural areas. The rise of e-commerce, socialmedia and smart education has alreadyencouraged the rural consumer to goonline. Disruption in traditional models ofbanking, insurance, and governance willpromote will increase the relevance andpenetration of Internet. A shift to a low-carbon economy, ways to connect farmersand ease of payments and business willmean that rural economy needs to beincluded and brands should prepare forthis change. (Source: http://www. l ivemin t . com/Consumer /6zf5fb1va3fhhbr7n73g6l/In-India-digital-would-mean-more-of-mobile-in-2016-Study.html)

The latest IAMAI report highlightsthat 71% of the estimated 371 millionmobile internet users in India willbelong to urban area. However, the ruralarea still holds an enormous potential to

drive the future growth of mobile internetin India. In 2015, the number of mobileinternet users from rural area doubled from2014 and in 2016 the growth percentageis estimated to outclass all the previousfigures.

As the number of mobile internetusers is increasing with each passing year,mobile users in India are becoming moredata hungry. In 2015, the share of mobileinternet spending in the average monthlybill rose to 64% from 54% in the previousyear. However, this has a clear impact onthe cost of accessing mobile data that fellabout 18% in 2015. These changes canbe attributed to the fact that with theimproving mobile infrastructure and theavailability of improved high-speed 3G and4G connectivity, people are shifting to appsand internet for most of their activities. Thedependency on Voice call has beenreduced and people rather prefer theinternet on their mobile phone to makemore informed decisions.

Figure - 2

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In Tier 2/ 3 cities of India theconsumption of mobile video content ismuch higher than those from urban India.According to the latest report fromCisco, Mobile video traffic in India willgrow at 83% CAGR between 2015 and2020. Video content will account fornearly 50% of total mobile dataconsumption in India by 2017. The reportfrom IAMAI emphasizes on the fact that52% of internet users from rural areasaccess the internet for the prime purposeof entertainment, followed by 39% forsocial media and 37% for communication.Interestingly, m-commerce fails completelyto lure mobile users in rural areas. As ruralIndia has been clocking more than 100%year on year growth in the number ofmobile internet users and publishers arefocusing more on creating video contentin entertainment category nowadays, thetotal consumption of mobile data in therural area would soon outpace urban India.

(Source: http://dazeinfo.com/2016/02/08/mobile-internet-users-in-india-2016-smartphone-adoption-2015/)

3. REVIEW OF LITERATURE

A study done by Heinonen &Strandvik (2003) showed that mobilechannels are perceived to be morepersonal than traditional and e-mailchannels. This creates high expectationsfor the relevance of marketingcommunication messages. A consumerexpects messages to be personal and ofhigh interest and this makes thedisappointment greater when they get

undesired messages. Mobile advertisingmay even step over the line of discretionand invade consumers’ privacy becauseof the personal nature of the mobile device.The channel influences consumerresponsiveness to marketingcommunication by being perceived aseither disturbing or acceptable (Abernethy1991). If the consumer considersmarketing communication via a channel asdisturbing it may negatively affect theattention to and perception of the message.In contrast, the channel may also enhancethe acceptance of the marketingcommunication if it is perceived asappropriate for the specific marketingcommunication.

Direct marketing now has reached acritical stage where innovative tools arebeing used to communicate the messagewithout consent of consumer. Initial phasesgave rich output in terms of advertising butnow consumer has started showing itsdislike for this intrusion. Consentmarketing was presented as anotheradministrative methodology in marketingcommunication. It has been contended thatorganizations advantage from persuadingshoppers’ consent to be reached(Marinova, Murphy and Massey 2002).

Authorization from the shopperwould resolve the challenges to access thecustomer. Authorization is, nonetheless, notas a matter of course an assurance thatthe buyer focuses; it is just an entrywayopener and gives a sign of the shoppers’potential interest zones.



Krishnamurthy (2001) additionallyproposes a calculated system foroverseeing internet promoting utilizing theconsent marketing approach. Consentmarketing requires the buyer to take aninterest in the project by giving theauthorization and the data for proceedingwith the relationship. The enthusiasm forthis investment emerges from theequalization of advantages (messagesignificance and money relatedadvantages) and costs (individual data,message preparing costs, security costs)for purchasers.

While trying to cash in on this day byday increasing trend of mobile marketing,it is important to study how consumersperceive this advertising. The majordeterminants that formulated the attitudeof consumers pertaining to in-appadvertising were found to be: involvementwith the app, hindrance caused by the ad,screen size, contextualization,personalization, relevance, credibility,permission, control and incentives (Bhaveet al 2013).

The key to use shared wireless mediato offer customers with time and locationsensitive, personalized information thatpromotes goods, services and ideas,thereby generating value for allstakeholders (Dickinger et al. 2004).Barwise & Strong (2002) take up theflexibility, and time-based nature but alsothe fact that the small screens restrict the

length of the message. Barnes (2002)stresses the interactive nature of mobileadvertising and the ability to use contextualinformation to target the messages toindividual receivers, in other words topersonalize the message. Location-awareadvertising messages are creating five toten times higher click-through ratescompared to traditional internet advertisingmessages (Ververidis & Polyzos 2002).

4. RESEARCH METHODOLOGY

Study analyses the rise of mobilemarketing in urban and rural areas andwhich is then compared with globalperspective to know the status of mobilemarketing in rest of the world. The studyin rural India is qualitative work donethrough secondary sources whereas thestudy done in urban India and rest of theworld has been carried out with the helpof primary research amongst people witha sample size of 120 respondentsconsisting of the students and recent passouts of Indian Universities. 60 respondentsare from in and around Delhi as well asrest 60 are from other countries.Objectives of the study are:

• To assess the level of satisfaction ofpeople towards the mobile marketing.

• To understand the consumer’sperspective on mobile marketing.

• To compare the consumer perceptiontowards mobile marketing in India andabroad.

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AGE FREQUENCY PERCENTAGE Below 16 0 0% 16 to 25 56 93.3% 26 to 35 4 6.7% 36 to 45 0 0% 46 to 55 0 0% Above 55 0 0% TOTAL 60 100%

OCCUPATION FREQUENCY PERCENTAGE Self-employed 4 6.7% Student 47 78.3% Job 2 3.3% Working Professional 5 8.3% Homemaker 2 3.3% Other 0 0% TOTAL 60 100%

GENDER FREQUENCY PERCENTAGE Male 30 50% Female 30 50% TOTAL 60 100%

Table 5.1 Demographics of Indian Respondents

AGE FREQUENCY PERCENTAGE Below 16 0 0% 16 to 25 54 90% 26 to 35 6 10% 36 to 45 0 0% 46 to 55 0 0% Above 55 0 0% TOTAL 60 100%

OCCUPATION FREQUENCY PERCENTAGE Self-employed 2 3.3% Student 44 73.3% Job 0 0% Working Professional 13 21.7% Homemaker 0 0% Other 1 1.7% TOTAL 60 100%

COUNTRY FREQUENCY PERCENTAGE USA 11 18.3% Mexico 5 8.3% Canada 2 3.3%

Table 5.2 Demographics of Global Respondents



Puerto Rico 3 5.0% Pakistan 5 8.3% South Korea 3 5.0% China 5 8.3% Taiwan 5 8.3% Brazil 5 8.3% Japan 6 10.0% Gibraltar 3 5.0% Kyrgyzstan 4 6.7% Hong Kong 3 5.0% TOTAL 60 100%

5. DATA ANALYSIS

5.1 DEMOGRAPHIC INDICATORS

The age of both Indian and Globalrespondents is in between 16 to 35 whilemajority of them are in 16 to 25 age group.The sample size of Indian respondents isdivided equally as males and females (i.e.,

50% males and 50% females). Majorityof respondents in both the questionnairesare Students, followed by WorkingProfessionals. The 60 global respondentsare from 13 countries – 11 from USA andaverage of 4 from rest of the countries.

5.2 NUMBER OF PEOPLE RECEIVING ADVERTISEMENTS ON MOBILE

Table 5.3 Indian Respondents

YES/NO FREQUENCY PERCENTAGE No 2 3.3% Yes 58 96.7% TOTAL 60 100%

Table 5.4 Global RespondentsYES/NO FREQUENCY PERCENTAGE

No 5 8.3% Yes 55 91.7% TOTAL 60 100%

In India, 97% of the respondents saidthey receive advertisements while amongglobal respondents, 92% receiveadvertisements. Therefore, it can be

inferred that people not receivingadvertisements either get filtered messagesfrom their service provider or they paymoney to not receive any ads.

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5. 3 NUMBER OF PEOPLE ALLOWING PUSH NOTIFICATIONS ON MOBILE

75% of the Indian respondents and87% of the Global respondents said theyallow push notifications on their mobilewhereas rest of them never allow thepush notifications. If compared from the

previous question, it can be inferred that22% of the Indian respondents and 5%of the Global respondents receive eitherSMS or Voice advertisements.

Figure 5.1 Indian Respondents

Figure 5.2 Global Respondents



5.4 ACCEPTANCE OF ADVERTISEMENTS IF SENDERS SEEK PRIOR PERMISSION


YES/NO FREQUENCY PERCENTAGE No 8 13.3% Yes 52 86.7% TOTAL 60 100%

Table 5.6 Global RespondentsOPTIONS FREQUENCY PERCENTAGE

No 3 5% Yes 57 95% TOTAL 60 100%

87% of the Indian respondents are notcomfortable receiving advertisementseven if the senders seek prior permissionfrom them, whereas only 5% of the glo-bal respondents are uncomfortable re-ceiving advertisements after they havegiven permission to the sender. As perthe study done by Marinova, Murphy andMassey in 2002 (Refer Page 5) it is easier

to access consumers if their permissionis taken before sending them the com-mercial messages. This has been proventrue with these responses. Also, it showsthat people in rest of the world are morewelcoming towards information regard-ing new offers or products once theirpermission has been taken.

5.5 BENEFITS OF ACCEPTING ADVERTISEMENTS ON MOBILE


BENEFITS FREQUENCY MEAN

Offers discount 38 0.63 Instant Awareness 37 0.62 Easy to share message 14 0.23 Other 0 0.00

Table 5.8 Global RespondentsBENEFITS FREQUENCY MEAN

Offers discount 37 0.6 Instant Awareness 29 0.48 Easy to share message 18 0.30 Other 0 0.00

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Discount Offers is the benefit thatmaximum number of respondents receivethrough mobile marketing advertisements,

closely followed by Instant Awarenesswhich pretty true in case of mobile adver-tisements

5.6 INCENTIVES THAT CAN ENCOURAGE PEOPLE TO ACCEPT ADVERTISEMENTS





In the Indian survey, maximum numberof respondents would like get Free Internetaccess as incentive to allow receiving ad-vertisements on their mobile, closely fol-lowed by Unlimited Calls. Maximum num-

ber of global respondents also chose toget Free Internet access; however, thesecond best incentive they chose was aMonetary Award.

5.7 PREFERENCE MATRIX


PREFERENCE MATRIX

STATEMENTS FACTORS

MEAN VALUES 1 2 3 4

5

It is likely for me to accept mobile marketing if the marketing messages provide information value to me.

Information Value

2.4 18.30% 38% 28.30% 15% 0%

It is likely for me to accept mobile marketing if my mobile service provider monitors and filters the messages.

Filtered Messages

2.45 21.70% 28.30% 33.30% 16.70% 0%

It is likely for me to accept mobile marketing if the number of messages sent to me are reasonable.

Reasonable No. of

Messages 2.58 8.30% 40% 37% 15% 0%

If I am satisfied with a product/service, I am likely to share with my family/friends.

Share if Satisfied

2.53 15% 36.70% 33.30% 10% 5%

If I am dissatisfied with a product/service, I am likely to share with my family/friends.

Share if Dissatisfied

2.8 15% 23.30% 36.70% 16.70% 8.30%

I am afraid I will receive spam messages if I agree to accept advertising message on mobile phone.

Receive Spam

Messages 2.38 21.70% 35% 28.30% 13.30% 1.70%

As per the mean values, reasonablenumber of messages with a mean of 2.58is being selected by the sample size of 60Indian respondents. This indicates that40% of people are in favour mobilemarketing only if the sender sendsreasonable number of messages.

Another factor “Information Value” got38% in 2 point scale which is a positiveresponse.

The above graph shows the comparisonof all the 6 factors together worth theirhighest ranks, for instance, first is“reasonable no. of messages” with 40%.

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Second is “information value” with 38%,third is “share if satisfied” with 36.7% on2 point scale. Fourth is “share ifdissatisfied” with 36.7% on 3 point scalewhich is a neutral response. Fifth is“receive spam messages” with 35% on 2point scale and sixth is “filtered messages”

with 33.3% on 3 point scale. Thisindicates that people wish to receivereasonable number of messages in a day.Therefore, companies should take careof this factor while sending promotionalmessages to people.

PREFERENCE MATRIX

STATEMENTS FACTORS

MEAN VALUES 1 2 3 4

5

It is likely for me to accept mobile marketing if the marketing messages provide information value to me.

Information Value

3.18 5% 30% 26.7% 18.3% 20%

It is likely for me to accept mobile marketing if my mobile service provider monitors and filters the messages.

Filtered Messages

2.77 16.7% 18.3% 41.7% 18.3% 5%

It is likely for me to accept mobile marketing if the number of messages sent to me are reasonable.

Reasonable No. of

Messages 3.13 13.3% 18.3% 20% 38.3% 10%

If I am satisfied with a product/service, I am likely to share with my family/friends.

Share if Satisfied

2.52 20% 43.3% 11.7% 15% 10%

If I am dissatisfied with a product/service, I am likely to share with my family/friends.

Share if Dissatisfied

2.7 26.7% 31.7% 8.3% 11.7% 21.7%

I am afraid I will receive spam messages if I agree to accept advertising message on mobile phone.

Receive Spam

Messages 2.18 51.7% 13.3% 15% 5% 15%

Table 5.10 Global Respondents

As per the mean values, informationvalue with a mean of 3.18 is being selectedby the sample size of 60 Globalrespondents. However, if we look at theresponses according to the percentagefrom scale 1-5, “Receive spam messages”was selected the most by 51.7% of theglobal respondents on 1 point scale whichmeans strongly positive response. Thatmeans 51.7% of the respondents do not

favour mobile marketing as they are afraidto receive spam messages.

Another factor “Share if satisfied” got43.3% in 2 point scale which is a positiveresponse.

The above graph shows thecomparison of all the 6 factors togetherworth their highest ranks, for instance, firstis “receive spam messages” with 51.7%.



Second is “share if satisfied” with 43.3%,third is “filtered messages” with 41.7% on3 point scale which is a neutral response.Fourth is “share if dissatisfied” with 31.7%on 2 point scale. Fifth is “Informationvalue” with 30% on 2 point scale and sixthis “reasonable number of messages” with

38.3% on 4 point scale which is a negativeresponse.

This indicates that people needinformation that is of much value to them,to accept the ads. Also, they are afraid toreceive spam messages, unlikely of Indianrespondents.

5.8 ANALYSIS OF VARIOUS MODES OF RECEIVING ADS



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This is a rank analysis of variousmodes of receiving Ads. Indianrespondents receive ads mostly throughSMS (55%) and Notifications from Apps(36.7%). Therefore, Rank I is taken bySMS and Rank II by Notifications fromApps.

Global Respondents receive adsmostly through Notifications from Apps(46.7%) and SMS (43.3%). Therefore,Rank I is taken by Notifications from Appsand Rank II is taken by SMS.

Voice Calls and Whatsapp Messagesgot Rank III and Rank IV respectively inboth India and abroad.

5.9 RELATIONSHIP BETWEEN OCCUPATION AND PERMITTING PUSHNOTIFICATIONS ON MOBILE

Table 5.11 Indian RespondentsPARTICULARS

Allowance to push notifications from apps Occupation ALWAYS SOMETIMES NEVER

Self-Employed 2% 0% 5%

Student 10% 52% 17%

Job 0% 3% 0%

Working Professional 2% 3% 3%

Homemaker 0% 3% 0%

Other 0% 0% 0%

PARTICULARS Allowance to push notifications from apps

Occupation ALWAYS SOMETIMES NEVER

Self-Employed 0% 2% 2%

Student 2% 67% 5%

Job 0% 0% 0%

Working Professional 0% 17% 5%

Homemaker 0% 0% 0%

Other 0% 0% 2%


Amongst Indian respondents,most students have chosen the midwayto this question saying they allow pushnotifications sometimes. Self-employedpeople, however, are extremists. While2% said they always allow push

notifications (can be news), 5% saidthey never allow push notifications.Global respondents are diplomatic andsaid they allow push notificationssometimes, depending on the App andits usefulness.



5.10 RELATIONSHIP BETWEEN LEVEL OF COMFORT IN RECEIVINGADS AND PAYMENT OF MONEY FOR REMOVING ADS



31.67% of the Indian respondents havenever paid money to remove ads andare therefore, dissatisfied in receivingcommercial messages on mobile.46.67% of the respondents stand neutraland 6.67% are satisfied. Whereas, 3.3%of the respondents who have paidmoney to remove ads are satisfied withthe ads they receive on mobile.However, 5% of the ones who have paid

money are still dissatisfied. Surprisinglyin the global survey, none of them whohave paid money to remove ads aresatisfied with the advertisements theyreceive on mobile. Also, 58.3% of therespondents who have never paidmoney are dissatisfied, with only 5%being satisfied. Probably, 5% are theones who don’t bother about thecommercial messages they receive.

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5.11 RELATIONSHIP BETWEEN FORM OF RECEIVING ADS THAT DIS-TURBS AND INCENTIVES FOR ACCEPTING ADS


PARTICULARS Disturbing Form of receiving advertisements

Incentives to accept ads Notifications from Apps

SMS

Voice Calls

Whatsapp Messages

Unlimited SMS/MMS for that month 11.67% 6.67% 5% 3.33% Monetary award for each commercial

message accepted 11.67% 11.67% 8.33% 3.33% Unlimited phone calls for that month 15% 16.67% 13.33% 1.67%

Free internet access 25% 28.33% 25% 1.67% Other 0% 0% 0% 0%

PARTICULARS Disturbing Form of receiving advertisements

Incentives to accept ads Notifications from Apps

SMS

Voice Calls

Whatsapp Messages

Unlimited SMS/MMS for that month 5% 8.30% 6.7% 0% Unlimited phone calls for that month 13.3% 5% 6.7% 0%

Monetary award for each commercial message accepted 25% 15% 13.3% 8.3%

Free internet access 41.7% 15% 15% 8.3%

Other 0% 0% 0% 0%


Amongst the Indian respondents,25% of the people who get disturb mostby the Notifications from Apps said theyare willing to accept those ads if they aregiven free internet access as incentive,followed by unlimited phone calls. Similaris the case with people who get disturbmost by SMS (28.33%) and Voice Calls(25%). However, 3.33% of therespondents who get disturb most bywhatsapp ads are willing to accept them ifthey get unlimited SMS/MMS andmonetary award.

In the global survey, respondentsgetting disturbed from any of the fourmediums of receiving commercialmessages look for free internet access asincentive followed by monetary award foraccepting each commercial message.

3. OBSERVATIONS AND FINDINGS

Major findings are listed below:

• Conducting this survey with Indiansand people from 13 other countrieswas a good choice as it gave a broaderaspect to the study and comparing the



Indian mobile market scenario with thatof the world was much easier.

• In India, 97% of the respondents saidthey receive advertisements whileamong global respondents, 92%receive advertisements. Therefore, itcan be inferred that people notreceiving advertisements either getfiltered messages from their serviceprovider or they pay money to notreceive any ads.

• 87% of the Indian respondents are notcomfortable receiving advertisementseven if the senders seek priorpermission from them, whereas only5% of the global respondents areuncomfortable receivingadvertisements after they have givenpermission to the sender. This showsthat people in rest of the world aremore welcoming towards informationregarding new offers or products oncetheir permission has been taken.

• Discount Offers is the benefit thatmaximum number of respondentsreceive through mobile marketingadvertisements, closely followed byInstant Awareness which pretty true incase of mobile advertisements. Thus,companies mostly offer discountswhen they send a commercial messageto a person.

• In the Indian survey, maximum numberof respondents would like get FreeInternet access as incentive to allowreceiving advertisements on theirmobile, closely followed by Unlimited

Calls. Maximum number of globalrespondents also chose to get FreeInternet access; however, the secondbest incentive they chose was aMonetary Award.

• This survey revealed that the 3 mostimportant factors in making peopleaccept the advertisements on theirphone are – Giving free internet accessto them, unlimited phone calls andmonetary awards for each commercialmessage.

• The 2 most common modes ofreceiving advertisements in India andrest of the world are Notifications fromApps and SMS.

4. CONCLUSION

Mobile Marketing is the most usedtechnique of informing consumers by thecompanies, which soon might be replacedby other technology in the digital world.Many of the e-commerce companies havenow turned to only mobile functional i.e.,earlier they had websites where peopleused to shop but then they shifted to onlymobile applications. One notable exampleis Myntra.

The primary survey conducted for thepurpose of analysing the consumer’sperspective on mobile marketing in Indiaand 13 other countries gave pretty goodinformation of the satisfaction level ofcustomers. The survey results reveal thatpeople are not very happy with receivingtoo many commercial messages on theirphone. A study done by Heinonen &Strandvik in 2003 says that a mobile

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phone is considered a device for personaluse and generally nobody prefers to bedisturbed with irrelevant advertisements.This has been proved true with theresponses in this survey and the case hasbeen same with the respondents of almostall the countries.

As per the study done by Marinova,Murphy and Massey in 2002 it is easierto access consumers if their permission istaken before sending them the commercialmessages. This study has also been proventrue through this survey. 87% of the Indianrespondents and 95% of the globalrespondents said they would happilyaccept receiving advertisements if thesender takes prior permission from them.

5. RECOMMENDATIONS

Companies using mobile marketingas a tool for advertising their products andservices should take prior permission fromthe consumers before sending thecommercial notifications or messages. Thisway, the consumer will select only relevantcategories and would genuinely payattention to whatever the company sendson their mobile.

Companies should make sure they donot send too many messages to the existingor potential customer as this can beannoying. People have preferred to receivereasonable number of messages in a day.

Moreover, sending an email is alwaysa better option than an SMS. Since, mobileis considered a personal device, peoplegenerally don’t prefer to receive too manySMS or Notifications from the Apps

installed. Therefore, most of the messagessent through these mediums go unnoticed.

REFERENCES

Abernethy, A.M. (1991) ‘Physicaland mechanical avoidance of televisioncommercials: an exploratory study ofzipping, zapping and leaving’, in Holman,R. (Ed.): Proceedings of the AmericanAcademy of Advertising, The AmericanAcademy of Advertising, New York,pp.223–231.

Bauer, H., Barnes, S., Reinhardt, T.,Neumann, M. (2005) Driving ConsumerAcceptance of Mobile Marketing: ATheoretical Framework and EmpiricalStudy, Journal of Electronic Commerceand Research, Vol. 6 (3), 181-192

Barwise P. & Strong, P. 2002.Permission-based mobile advertising.Journal of Interactive Marketing. Vol 16.No. 1, 14-24.

Barnes, S.J. 2002b. Wireless digitaladvertising: nature and implications.International Journal of Advertising, Vol.21, 399-419

Dickinger, A., Haghirian, P., Murphy,J. & Scharl, A. (2004) An investigationand conceptual model of SMS marketing.Proceedings of the 37th HawaiiInternational Conference on SystemSciences, Big Island, Hawaii, January.

Krishnamurthy, S. (2001) ‘Acomprehensive analysis of permissionmarketing’, Journal of Computer-mediated-communication, January, Vol. 6,No. 2



Marinova, Murphy and Massey(2002). Permission email marketing as ameans of targeted promotion, CornellHotel and Restaurant AdministrationQuarterly. February. 61-69

Ketaki Bhave, Varsha Jain, SubhadipRoy.( 2013) Understanding the orientationof Gen Y toward Mobile Applicationsand In-App Advertising in India –International Journal of Mobile Marketing

Ververidis, C. & Polyzos, G. (2002)Mobile marketing using location basedservices. Proceedings of the FirstInternational Conference on MobileBusiness, Athens, Greece.

Yen, D.C., Chou, D.C. (2000)Wireless communications: applicationsand managerial issues, IndustrialManagement & Data Systems, Vol. 100(9), 436- 443

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Application of Bayesian Credibility Theory in MovieRankings to Reduce Financial Risk of Production Houses

Palash Ranjan Das

Dept of Applied Mathematics, University of Calcutta, Kolkata

[email protected]

Tripti Chakrabarti

Dept of Applied Mathematics, University of Calcutta, Kolkata

[email protected]

ABSTRACT

Credibility theory is a branch of actuarial science devoted to quantify how unique aparticular outcome will be compared to an outcome deemed as typical.

In this paper, we will examine the application of the principles of Bayesian CredibilityTheory in rating and ranking movies by a premier online movie database based onuser’s votes. Although the Bayesian credibility theory was developed originally as amethod to calculate the risk premium by combining the individual risk experiencewith the class risk experience, it is generic enough to deal with a wide range ofpractical applications quite different from the classical application mentioned above.One such diverse application of the theory in an unlikely domain will be discussed inthis paper.

Keywords: Credibility Theory; Prior distribution; Likelihood function; Posteriordistribution; Loss function; Bayesian approach

Introduction

Undoubtedly, the financial risk is aprimary characteristic of the motionpicture industry-prediction of demand isnotoriously difficult and almost all costsare incurred before any demand is realized.Thus to suggest an appropriate financialstrategy is the key variable that shapes thefilm industry. It thus became necessary for

production houses to consult a reliabledatabase of movie rankings so that theycan co-finance a motion picture byconsidering its ranking on the basis ofuser’s votes. Simultaneously, it becameimperative for movie databases to rank themovies using robust statistical techniquesso as to avoid any controversy regarding



these rankings, the whole process beingstatistically sensitive in nature.

In this paper, we will analyse thestatistical approach adopted by a well-known online movie database in rating andranking movies based on user’s votes andwill argue on the superiority of its approachover other traditional unsophisticatedstraightforward approaches known so far,thereby reducing the risk of haphazard andunscientific rating of movies. This makesthe database more reliable among theproduction houses which can now consultit freely to finance a movie thereby layingmore importance on the public’s opinionabout box office hits through user’s votes.

This minimizes their risk of financiallybacking unproductive movies whoseranking based on user’s votes do not seemsatisfactory. Thus it is almost certain thatsuch movies will flop in the movie businessmarket and producing them is financiallyhazardous. So production houses canaccept or decline to financially back amovie on the basis of its ranking by somereliable movie database. As mentionedearlier, this substantially reduces thefinancial risk associated with theproduction in movie business industry.

The paper is organized as follows:Literature review on credibility theory andobjectives of this study are followed byan overview of IMDb, a well-knownonline movie database and the process bywhich it rates and ranks movies isdiscussed. It is followed by explaining thestatistical formula adopted by IMDb for

calculating the Top Rated 250 titles andthe similarity in the formula adopted withthe Bayesian credibility theory formulaused by actuaries of insurance companiesto calculate premiums. Thereafter, wediscuss Bayesian estimation in general andits use in determining credibility estimates.Subsequently, application of credibilityestimates in movie rating problem ispresented and analysed in details. Furthera comparison between the classicalpremium pricing insurance risk problemand the movie rating problem is shown inthe form of a table. Numerical results andfindings are then presented. Finally theconclusion is offered along with scope forfurther research.

Literature Review

In actuarial parlance the term‘credibility’ was originally attached toexperience rating formulae that wereconvex combinations (weighted averages)of individual and class estimates of theindividual risk premium. Credibility theorythus was the branch of insurancemathematics that explored model-basedprinciples for construction of suchformulae. The development of the theorybrought it far beyond the scope so that intoday’s usage credibility covers morebroadly linear estimation and prediction inlatent variable models.

The origin and advent of credibilitytheory dates back to Whitney[11] who in1918 addressed the problem of assessingthe risk premium ‘m’, defined as theexpected claim expenses per unit of risk

97

exposed for an individual risk selectedfrom a portfolio (class of similar risks).Incorporating and advocating thecombined use of individual risk experienceand class risk experience, he proposed thatthe premium rate be a weighted averageof the form:

= z* + (1-z)* ì

Where, is the observed meanclaim amount per unit of risk exposed forthe individual contract and ‘ì’ is the overallmean in the insurance portfolio.

Whitney viewed the risk premium asa random variable. In terms of moderncredibility theory, it is a function of m(è) ofa random element è representing theunobservable characteristics of theindividual risk. The random nature of èsignifies and expresses the notion ofheterogeneity, the individual risk is arandom selection from a portfolio of similarbut not identical risks and the distributionof è describes the variation of individualrisk characteristics across the portfolio. Itis to be noted that the weighted ‘z’ in theabove formula was defined as thecredibility factor since it measures theamount of credence attached to theindividual experience and ‘ ’ was calledthe credibility premium.

T.Bauwelinckx.et.al (1991) [6] intheir study on loaded credibility premiumintroduced a new technique for estimatingcredibility premium risks, containing afraction of the variance of the risk as

loading on the n et insurance premium. Thismethod provides us with another approachto the known results for credibility loadedpremiums, not having the drawback ofestimating an approximation of the so-called fluctuation part. It also provides uswith an elegant extension to loadedpremiums in the hierarchical credibilitymodel. The results are obtained in the semilinear hierarchical credibility theory.

E. Gomez-Deniz (2007) [7]considered an alternative to the usualcredibility premium that arises for weightedbalance loss function. He generalizes thecredibility theory by balance loss functionand it includes as a particular case theweighted quadratic loss functiontraditionally used in actuarial science. Thisfunction is used to derive credibilitypremiums under approximate likelihoodand priors. Further generalized credibilitypremiums are obtained that contain asparticular cases other credibility premiums.

Jean-Philippe Boucher and MichelDenuit (2007) [9] explored and comparedthe credibility premiums in zero-inflatedPoisson models for panel data. Theyderived predictive premiums based onquadratic loss and exponential loss. Theyshowed that the credibility premiums of thezero-inflated model allow for moreflexibility in the prediction and argued thatthe future premiums not only depend onthe number of past claims but also on thenumber of insured period with at least oneclaim. Their model also analysed in anotherway the hunger for bonus phenomenon.

Application of Bayesian Credibility Theory in Movie Rankings....


Harald Dornheim and VytarasBrazauskas (2010) [8] embedded theclassical credibility theory models withinthe framework of mixed linear models withthe objective to develop robust andefficient methods of credibility when heavytailed claims are approximately log-local-scale distributed. To accomplish that, theyexpressed additive credibility models asmixed linear models with symmetric orasymmetric errors. They adjusted adaptivetruncated likelihood methods and computehighly robust credibility estimates forheavy-tailed claims.

Joseph H.T. Kim and Yongho Jeon(2013) [10] in their study proposed acredibility theory which is based ontruncation of loss data, or the trimmedmean. Their proposed frameworkaddresses the classical credibility theoryas a special case and is developed on theidea of varying the trimming threshold toinvestigate the sensitivity of the credibilitypremium. They showed that the trimmedmean is not a coherent risk measure andinvestigated some related asymptoticproperties of the structural parameters incredibility. They finally showed that theproposed credibility models cansuccessfully capture the tail risk of theunderlying loss model, thus providing abetter landscape of the overall risk thatinsurers assume.

This widespread research oncredibility theory has opened new avenuesof application of the theory hithertounknown. Thus now, its applications werenot only confined to the classical premium

risk problem but also to other diversefields.

Prasham M. Rambhia (2015) [4]hinted at the application of the theory byIMDb to rank and rate movies based onuser’s votes. Although detailed calculationsand statistical theory is missing in the study,he gave an overall picture of the unusualapplication of this usual theory known sofar. His article was an attempt to examinea diverse application of the credibilitytheory actuaries encounter in theircurriculum to a field that is as different fromactuarial science as chalk is from cheese.

With further passage of time we willcertainly observe more interesting, myriadand diverse applications of such knownstatistical theories.

Objectives

The present study focuses primarilyon the approach adopted by IMDb forranking the Top Rated 250 titles. Theultimate purpose of this research is to studythe diverse application of Bayesiancredibility theory in movie rating problemthereby exploring new avenues ofapplication of known statistical theories.

The paper primarily aims to:-

1. Examine the financial risk ofproduction involved in movie businessindustry and how production housescan minimise financial risk byconsulting movie ranking database.

2. Study the application of Bayesiancredibility theory in movie rankings.

99

3. Exhibit the similarity in approach of themovie rating problem and the premiumcalculation problem of insurancecompanies.

4. Finding the unknown parameter andcredibility estimates of the movie ratingproblem.

5. Demonstrating the formula of WR (theweighted rating) in the form of thecredibility estimate. The credibilityfactor is also shown as the function ofnumber of user’s votes (v) and minimumnumber of required votes (m).

IMDb and Movie Ratings:

Internet movie database (abbreviatedas IMDb) [1] is a premier movie databasewhich rates and ranks movies based oncinephile votes. Most cinema lovers use itto know movie ratings and collect otherancillary information about movies. Eachregistered user is eligible to rate eachmovie. The rating of a movie is done byassigning a positive integer score of 10,where 10 is regarded as the highest scorepossible. Each such rating is regarded asa ‘vote’ by an individual registered user.For each movie, the average rating fromvarious individual users (say, R) iscomputed and displayed.

Incorporating the special popularfeature ‘Top 250’ chart of IMDb [2], weare mainly concerned about the theoryadopted by IMDb in determining theserankings of movies given that the averageratings of each movies( and other ancillarydata like number of votes of each movie,etc) is known.

Approach adopted by IMDb

A screenshot taken from IMDb [2]reveals the formula adopted by them.

The formula for calculating the TopRated 250 Titles gives a true Bayesianestimate:

Weighted Rating (WR) = ( )* R +

( )*C

Where:-

R= average for the movie (mean)=(Rating)

v= number of votes for the movie= (votes)m = minimum number of votes required tobe listed in the Top 250 (at present 25000)

C= the mean vote across the whole report(at present 7.0)Note:- For the Top 250, only votes from regularvoters are considered.

It is interesting to notice that theweighted rating (WR) used for rankingmovies is a weighted average between R(the movie’s own average rating based onuser’s votes on it) and C(average ratingof all movies). Clearly WR will lie betweenR and C. Also it is worth mentioning thatR and C are averaged with weights in theratio v: m. Hence, a higher value of v impliesmore weightage being given to R, than C.This is intuitively reasonable as R is morerelevant if v is large. When v tends to infinity,the weighted rating (WR) approaches Rwhich is also intuitively obvious.

The formula of WR can berearranged and written as:



WR = ( )* R + [1-( )]* C

= Z*R + (1-Z)*C, where Z= ( )

Thus we see that the weighted ratingadopted by IMDb fits exactly to theBayesian Credibility Theory adopted byinsurance companies to calculate riskpremiums. Here the credibility factor Z=( ) which is a real number lying between0 and 1 consistent with the usual theoreticaldevelopment.

However the discussion appearsvague and intuitive without a strong andrigorous statistical foundation which we willdeal in the subsequent sections.

Bayesian Estimation and its use indetermining credibility estimates

The Bayesian approach to credibilityis discussed in this section.

Under the Bayesian framework, theunknown parameter (say, è) is estimatedon the basis of some observed data (say)by involving the following steps:-

Prior parameter distribution

A prior parameter distribution isadopted to describe the possible valuesof the unknown parameter underconsideration. The form of the priordistribution is derived from the collateraldata.

The unknown parameter è is regardedas a random variable which has a specificdistribution. Some idea about is it knownbeforehand without considering theobserved data ( ). We call that the priordistribution of è.

Likelihood function

For any given value of the parameter,there is a certain probability of incurringthe particular pattern observed in the directdata. This determines the likelihood of agiven pattern as a function of the unknownparameter.

On the basis of the observed data( ) and the probability density function(PDF) of /è, we construct the likelihoodfunction L(/è).

Posterior parameter distribution

The prior parameter distribution iscombined with the likelihood function usingBayes’ formula to determine a posteriorparameter distribution for the parameter.

The Bayes’ formula enables us todetermine the posterior distribution of èusing the observed data X_ by the followingrelationship:

Posterior PDF Prior PDF* Likelihood

Loss Function

The loss function quantifies thedifference between the true value of theparameter and it’s estimated one. It showshow serious misjudging the parametervalue would be.

We find the Bayesian estimate of theunknown parameter è on the basis of thechosen loss function and the posteriordistribution. For the mostly applied‘quadratic error loss’, the mean of theposterior distribution is the requiredoptimal Bayesian estimate.

101

It is to be noted that this Bayesianestimate is regarded as a credibilityestimate if it can (after rearrangement) beexpressed in the form:-

Z*Mean based on Sample data +(1-Z)*Mean of prior distribution

Thus in the movie rating problem, wewill make appropriate choices for the priordistribution, the likelihood function and theloss function to obtain the credibilityestimate of the above form in the nextsection.

Application of Credibility Estimates inmovie rating problem

We will use the Binomial/Beta modelto realistically approach the movie ratingproblem in contrary to the more commonBayesian credibility models such as thePoisson/Gamma model and the Normal/Normal model.

Suppose Rj denote the individualrating score by the jth user.

Likelihood function:

Let us assume that for j=1,2,...v, Rj/è are independent and identicallydistributed as Binomial(10, p). Thisdistribution is realistic and consistent withthe demand of the problem since users canonly assign integer scores on a scale of10. The likelihood function will bedependent on ‘v’ and ‘R’ (used above)and ‘p’ where p is the unknown parameterto be estimated.

The likelihood function is thus written as:

L(p) =

= (constant).

Thus we see that:

L(p)

Prior distribution:

‘p’ denoted the probability which cantake all real values between 0 and 1. Hencewe consider a Beta(á, â) distribution as aprior. This is because the Beta distributionis the conjugate prior of the Binomialdistribution. Particular values of ‘á’ and ‘â’would be functions of ‘m’ and ‘C’, denotedbefore.

Thus if f(p) is the pdf of the prior then:

f(p)=[{Ã(á).Ã(â)}/Ã(á+â)]

Thus we see that:

Prior distribution

Posterior distribution

The posterior distribution is obtainedby multiplying the prior probabilitydistribution function with the likelihoodfunction.

Thus we have:


=

Hence,


That is, Posterior distribution



Loss function

Using the quadratic loss function, themean of the above posterior betadistribution will be the Bayesian estimatefor ‘p’. Let us regard it as .

Thus we have: =

The expected weighted rating for aBinomial (10, p) distribution would be =

=10* ..

Therefore: =

Calculations

Now, we have from definition of ‘R’

that

Thus: ........(1)

Substituting (1) in the expression of........(1), we get:

=

= ( )*R+ ( )

= { }*R+ { }

= { }*R+ { }*

= { }*R+ [1-{ }]*

Thus we have:

= *R+ {1-( )}*C

where, m = C =

Thus the expression of can berearranged to yield the formula in the formof the credibility estimate as:

= = 10*{Z* Mean based onSample data + (1-Z)*Mean of priordistribution}

(where + (1-

Thus, here we have the credibility factor

Z = =

Also we have the following relations:

á + â = 10m, C =

Hence the parameters ‘á’ and ‘â’ areexpressed in terms of ‘m’ and ‘C’ as:

á =

â = 10m-á

= 10m-

=

Thus we have: â =

Comparison

We provide a comparison betweenthe classical premium pricing of insurancerisk problem and the movie rating problemto highlight the similarity of the Bayesiancredibility theory approach to twocompletely different problems in Table 1.

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Rating movies Premium pricing of insurance risk

Fitting in the Bayesian Framework

Direct data Average rating for the particular movie(R)

Average cost of claims for a particular insurance risk(X)

Sample data, its mean

Collateral data Average ratings for all movies(C)

Average cost of claims for all insurance risks(μ)

Prior distribution, its mean

Overall rating/price

Weighted average of R and C

Weighted average of X and μ

Posterior mean, credibility estimate

Weights and Z and (1-Z) Credibility factor

Results and Findings

The primary source of data is the InternetMovie Database (IMDb), which isaccessible on the internet atwww.imdb.com. The study period is forthe last three months during which IMDbupdates its database daily.

The top rated movie for the last threemonths is ‘The Shawshank Redemption’which gathers an IMDb ranking of 9.2. Inthis section, we will calculate how thisfigure is achieved.

The sample size (number of votes cast infavour of the movie along with breakdowndetails) is already mentioned in the IMDbwebpage [4] and given below as it is.

1646089 IMDb users have given aweighted average vote of 9.3 / 10

Demographic breakdowns are shownbelow.

Votes Percentage Rating

923158 56.1% 10

410536 24.9% 9

184472 11.2% 8

60339 3.7% 7

18291 1.1% 6

9196 0.6% 5

4285 0.3% 4

3358 0.2% 3

3244 0.2% 2

29210 1.8% 1

Arithmetic mean = 9.1. Median = 10Ranked #1 in the Top 250 MoviesThis page is updated daily.


Table 1


Votes Average

Males 1116365 9.3

Females 209537 9.2

Aged under 18 11034 9.4

Males under 18 9112 9.5

Females under 18 1869 9.3

Aged 18-29 652538 9.3

Males Aged 18-29 538479 9.4

Females Aged 18-29 109128 9.3

Aged 30-44 505941 9.3

Males Aged 30-44 430044 9.3

Females Aged 30-44 70253 9.2

Aged 45+ 104706 9.0

Males Aged 45+ 85070 9.0

Females Aged 45+ 18110 9.0

IMDb staff 94 8.7

Top 1000 voters 925 8.6

US users 268384 9.3

Non-US users 736569 9.2

IMDb users 1646089 9.3

So, here using the credibility formula usedby IMDb.we have: v = 1646089, m =25000, R = 9.3, C=7.0Hence,

= *R+ {1-( )}*C

= *9.1+ {1-

( )}*7.0

= 8.9639 + 0.1047 =9.0686, which is approximately ratedby IMDb as 9.3. This approximation isdue to the consideration of manipulativevoting and trimmed means.

It is to be noted that although theactual ranking approach followed byIMDb is more complicated and only anapproximation of the actual ranking isfollowed presently, the Bayesianframework provides a necessary tool totackle the basic problem of actual ranking.The complexity arises from the fact thatIMDb now treats votes from differentusers differently (for tackling manipulativevoting) and uses trimmed means[9]( tominimise influence of outliers).[3]

Conclusion

The approach adopted by IMDb ismore robust than any other statisticalapproach known so far in rating andranking movies as it considers both thelikelihood function of the individual ratingscores and the prior distribution of theunknown parameter ‘p’, thereby reducingthe risk exposure due to anomalous ratingusing straightforward and unsophisticatedapproaches.

Thus for calculating the Top Rated250 titles based on user’s votes, itconsiders the weighted rating which isactually a true Bayesian estimate calculatedusing the credibility approach by applyingit on both the direct data (average ratingbased on user’s votes) and the collateraldata (mean number of votes across thewhole report) and finally finding a suitablecredibility factor. The robustness of thisapproach is best understood when wecompare it with the following two layman’sapproach of ranking movies.

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Layman’s approach-1:

Consider the approach of rating allthe movies in descending order of theiraverage rating. This approach is simpleand obvious, but there exists shortcomingsin this approach. Let there be a little-known movie with just a few votes but ofa high score. Consider an extreme exampleof just one vote of score 10. The averagebeing 10, the movie would be on the topof the list which is quite undeservingconsidering the fact that very few peoplehave seen it and thus voted for it.

Layman’s approach-2:

Let us now refine the aboveapproach in an attempt to cover theshortcomings of the previous approach.We modify it by stipulating that a minimumnumber of votes, say ‘m’ should be castfor movie before it becomes eligible to beconsidered for such a listing. Among themovies that meet the cut-off, a simplesorting is done in descending orderaccording to the average rating as before.However, this approach is also far fromperfect. Let us consider two movies M1and M2 each with an average rating of 8.5in a scale of 10, but having a widelydifferent number of votes, say 40,000 and6,00,000 respectively. If the stipulatedminimum number of votes, ‘m’ is less than40,000 (say 30,000) then both thesemovies will be ranked equal under thisapproach. Intuitively, though, we know thatthere is a significant difference in numberof user votes. The rating of M2 having beenvoted by a much larger number of users is

more reliable than that of M1. Thus M2’srating is more credible than that of M1.

This notion of credibility is made moreprecise, robust and rigorous by IMDb inits approach. IMDb’s approach is morestatistically robust in the sense that itscalculations of ratings not just depend on‘R’ and ‘m’, but also on ‘v ( the numberof votes received for a movie).

Thus we see significant difference inweighted rating of M1 and M2 accordingto the approach adopted by IMDb. Thecalculations to justify it are as follows:Weighted rating of M

1 (according to

IMDb):

Here: v= 40,000, m=30,000, R =8.5, C= 7.0

Therefore, = *8.5+

( )*7.0

= 4.857 + 3 = 7.857Weighted rating of M

2 (according to

IMDb):

Here: v= 6,00,000, m=30,000, R =8.5,C = 7.0Therefore, = *8.5+ ()*7.0 = 8.095+ 0.333 = 8.428

This matches with our intuition thatrating of M2 is more credible and closerto the average rating 8.5 than that of M1

as it received significantly larger numberof user votes. Thus we find that IMDb’s



approach is not only statistically robust andrigorous but also intuitively sound andmatches with general perception.

Scope for further research

Based on the facts and findings, it issuggested that future studies may focus onincorporating manipulative voting (treatingvotes from different users differently) andusing trimmed means of truncated data toreduce effect of outliers. Also in line withloaded credibility premium, studies can betaken up to include loaded user’s voteswhere votes of regular viewers were givenmore weightage to present a more realisticand accurate rating list.

References

http://www.imdb.com/http://www.imdb.com/chart/toph t t p : / / w w w. i m d b . c o m / h e l p /

showleaf?voteshttp://www.imdb.com/title/tt0111161/

ratings?ref_=tt_ov_rt

Prasham M.Rambhia, “Usual theory,unusual applications: Credibility Theoryand Movie Rankings”, The Actuary India,Vol VIII, Issue 9(2015) 18-20.

T. Bauwelinckx, E. Labie and M.J.Goovaerts, “A new approach for loadedcredibility premiums” Journal ofComputational and AppliedMathematics 37(1991) 301-314.

E. Gomez-Deniz, “A generalization ofthe credibility theory obtained by using theweighted balance loss function”,Insurance: Mathematics andEconomics 42(2008) 850–854.

Harald Dornheim, Vytaras Brazauskas,“Robust-efficient credibility models withheavy-tailed claims: A mixed linear modelsperspective”, Insurance: Mathematics andEconomics 48(2011) 72-84.

Jean-Philippe Boucher, MichelDenuit, “Credibility premiums for the zero-inflated Poisson model and new hunger forbonus interpretation”, Insurance:Mathematics and Economics 42(2008)727-735.

Joseph H.T. Kim, Yongho Jeon,“Credibility theory based on trimming”,Insurance: Mathematics andEconomics 53(2013) 36-47.

Whitney, A.W, “The Theory ofExperience Rating”, Proceedings ofCasualty Actuarial Society 4(1918) 274-292.

107

Board Composition, Board Gender Diversity and FirmPerformance: Evidence from India

Saroj Kumar RoutrayAsst. Professor, KIIT School of Management, KIIT University, Bhubaneswar

[email protected]

Ranjan Kumar Bal,Professor, Dept. of Commerce, Utkal University, Bhubaneswar

ABSTRACT

Corporate governance is the burning topic of discussion all around the world amidthe corporate frauds happened in the last two decades. For better corporategovernance in firms, the board of directors collectively play a major role. Boardcomposition matters a lot in the governance of the company because independentdirectors will not have any incentive to adhere to all the proposals of the management.Again worldwide it is also seen for the last couple of years, that board is increasinglyrepresented by women directors. So the study has been made in that direction to findout the possible effect of board composition and gender diversity on the firmperformance. Another dimension has also been studied here in this paper is to see theeffect of the above two variables on firm performance in the presence of CEOduality(when CEO becomes the Chairman of the board) and in the absence of CEOduality. The study has been done taking NSE 200 companies, which represent 86%of total market capitalisation of NSE. After excluding the banking and financialcompanies and few companies for incomplete date the final data set is of 141companies. A positive association has been observed in relation to firm performance.

Key words: Corporate governance, Board composition, Board gender diversity, CEOduality

1. Introduction

In spite of important development inthe field of corporate governance reforms,there are many examples of corporatedelinquencies and unethical conduct, evenin countries like USA, long considered abastion of best practices in corporategovernance. Corporate misconduct andaccounting frauds done by companies likeWorldcom.con, Enron, etc damaged the

fiduciary relationship between thecorporate management and investors. Toreduce the recurrence of such frauds, UScame with the Sarbanes-Oxley Act of2002, a new act to deal with the emergingsituation and provide a strict guideline forcorporate to follow in governance, at thesame time there is regular interventionsby the Securities and Exchange



Commission (SEC) of US. Worldwide,there was a need felt to have bettercorporate governance measures andregulations to protect the interest of theinvestors and stakeholders, so that thecurrent format of corporation based oncapital market should not get damaged.

In India the reform in the field ofcorporate governance started withestablishment of Securities and Exchangeof Board of India(SEBI) in 1992, toprotect the interest of investors in securitiesand to promote the development ofsecurities market. Since then, SEBI hasgone a long way by taking measures toestablish the faith of investors and speciallyby introducing Clause 49 of listingagreement for submission of quarterlyreports by the corporate to bring moretransparency in the system. From time totime different committees are made in Indiato strengthen corporate governancestructure, many of the recommendationsare voluntary in nature and some needmandatory compliance. In 1998, TheConfederation of Indian Industry broughtout its ‘Desirable Corporate Governance-A Code’. It was a welcome step towardsgovernance measure on a voluntary basis.

Then in year 2000, SEBI formed acommittee under the chairmanship ofKumar Mangalam Birla, which made far-reaching recommendations in governancearena. Since then various committees areformed by either the government or SEBI( i.e., Naresh Chandra Committee,Narayan Swamy Committee, etc) and their

recommendations are accepted and nowfollowed by the companies. India has alsopassed the New Companies Act, 2013which also stipulates the provisions relatingto corporate governance, in harmony withglobal practices.

The need to further strengthen thecorporate governance regulation was felt,when India came across the biggestaccounting fraud of Satyam(onceconsidered as the best practicing corporategovernance firm).This brought out thefailure of our corporate governancestructure, which centres around theindependent directors, who are supposedto oversight the function of the board andbring more effectiveness in the governance.It is not possible in the part of the individualindependent director to bring goodgovernance, instead it should be acollective effort.

If governance is to be seen in thisperspective, then board composition mayplay a measure role in improving thegovernance of company. Differentcommittees have also given lot of emphasison board independence and boardcomposition. If, collectively board takesdecisions, where independent directorsplay a major role, it will lead to goodgovernance and in the long run the firmwill perform better in comparison to firmshaving poor governance record.

In this study, it has been tried to findout the impact of board composition onfirm performance. The composition ofboard of directors remains a focus

109

whenever the effectiveness of board is triedto be studied(Fama and Jensen,1983).Van der Walt and Ingley(2003) expressdiversity in the context of governance asthe composition of the board and thecombination of the different qualities,characteristics and expertise of individualmember. In the current study boarddiversity is taking two major aspects intoconsideration, board independence andgender diversity in the board.

Board independence in the eyes oforganizational theorists is a signalling toolthat works to protect the interest ofinvestor community(Peng, 2004;Certo,2003) and the presence ofindependent directors increases theeffective monitoring of managers(Jensenand Meckling; and Shleifer andVishny,1997; Fields and Keys, 2003).Research has also stressed therequirement of having more non-executivedirectors in the board to protect theinterest of stakeholders from theopportunistic behaviour of executivedirectors (Jensen and Meckling, 1976).The other positive aspect of independentdirectors in the board is their experienceand the important connections they bringto the firm, which can ultimately enhanceperformance of the firm (Fama andJensen, 1983).

1.1. Board composition

Board composition can be studiedfrom two perspective, one is the mix ofindependent and executive directors andthe second one is the mix of people in the

board based on diverse attribute(gender,age, ethnic background). This paperspecifically investigates the boardindependence and gender diversity, thesetwo factors of board composition on thefirm performance. Board independence ismeasured on the basis of proportion ofindependent directors in the board andwomen diversity is calculated on the basiswomen directors in the board.

Agency theory says that there is anatural conflict between the interest ofmanagement and the shareholders offirm(Fama & Jensen,1983), thereforeadequate monitoring is required to protectthe interest of shareholders frommanagement’s self-interest. One of thedevice in the hands of the shareholders tohave a board consisting of more numberof independent director to have bettermonitoring and supervision the activitiesof the management. From agency theoryperspective a high proportion of outsidedirectors is considered good forgovernance. Lot of study has been doneon this and have different findings.

Board diversity takes many othercharacteristics like age, gender,socioeconomic roots and educational andfunctional background and forms aheterogeneous group, while undoubtedlyvulnerable to more prolonged discussionsand disagreements, have been observedto produce more balanced and betterresults. Resource dependence theorists arehaving the view that diversity might bringdivergent and unique opinions that wouldnot come from directors from homogenous

Board Composition, Board gender diversity and Firm performance....


background. In this study, the impact ofgender diversity is tried to be observedon the firm performance because it is themost easy distinguished characteristics ofdiversity and can be easily noticed fromthe annual report of the firm.

In 2013, taking S&P 1500 firms,EY(Earnst and Youngs) has done a surveyand found that only 15% of the board ofdirectors positions are held by womenwhich was a 4% increase from 2006survey. The study also find that genderdiversity is more in the case of largerfirms(S&P) rather than smaller firms andsince 2010, more and more opening in theboard positions have been filled bywomen. In other part of the world alsogender diversity in board is recognized asa major challenge. In 2007, the Europeanaverage was 8.4%, an increase from 5%in year 2001, gradually increasing. In IndiaBased on 2091 Bombay Stock Exchangelisted companies filings, it is found that only4.9% were women directors. This is moreor less the story in other countries, but aninteresting fact is that representation ofwomen on board has increased in last fewyears. Therefore, a study of their influenceon firm performance becomes relevant inthat context.

The impact of board composition getsdiluted when the Chief Executive becomesthe board chair. Most of the governancefailure(Enron, WorldCom and HIH) hasbeen observed in companies where theCEO, was at dual role, therefore all mostall committees on governance reforms have

given lot of stress on separating theposition of CEO and board chairman.CEOduality increases the agencycost(Jensen,1993), the board could notable to address the poor performance ofthe firm(Goyal and Park,2002) and also,board find it difficult to replace the poorperforming CEO. In this study, CEOduality is taken as a moderating variable,and the impact of board composition andboard diversity on firm performance isobserved. There is no such credible studyhas been done to see the impact of CEOduality as a moderating variable.

2. Literature Review andHypothesis formation

2.1. Board Composition(Independence of board)

Agency theory says thatoutside(independent) directors are in abetter position to monitor managementbecause of their assumed independencefrom the company’s managers(Fama andJensen,1983), and their expertisedeveloped from prior experience(Mace,1986). They will follow higherimpartiality while evaluating the decisionof the management (Baysinger andHoskisson,1990). Outside directorsarrives at more objective solutions, asthere career is not affected(salary,promotion and performance appraisals,etc) due to their decision unlike insiders(Rechner and Dalton, 1991). In manyinstances they act as arbitrators in resolvingthe disagreements among internalmanagers. It is found from various studies

111

that having more outside directors on theboard improves the firm performance(Fama & Jensen, 1983; Daily andDalton,1994; Bijalwan and Madan,2013), while other studies did not find acorrelation between independent Non-Executive Directors and improved firmperformance (Hermalin and Weisbach,1991; Kota and Tomar).

In India, as per clause 49 of the listingagreement based on Birla committeerecommendation, there should be at least50% of the board members beindependent, if the chairman is a full timeexecutive director. So it is knownassumption that board independence leadsto effective monitoring of management andbrings more transparency to the functioningof the board. In the absence any confirmresearch result whether outsider directorsadd value to a firm or not, the followinghypothesis is taken:

H1: There is no relation betweenboard composition (independence) andfirm performance.

2.2. Board Gender diversity

New insights and perspectives aregiven in diverse board and that increasesthe firm performance (Siciliano, 1996).;thus Keeping with these arguments, Whileseveral researchers have found that genderdiversity of the board bolsters firm’sreturns, other have found no such impact(Dimovski and Brooks, 2006; Carter, etal., 2010) and still others have foundnegative relationships(Shrader andBlackburn, 1997). As such, evidence as

to the notion that board diversity isassociated with better firm performanceis still inconclusive (Adams and Farreira,2009).

Mclnerney-Lacombe et al.,2008,intheir study found that group dynamics ofcommunication, interpersonal interactionchanges due to the presence of womenon boards leading to more creative andinnovative decisions and results in betterperformance of firms. Study says thatwomen are less tolerant than men towardsopportunistic behaviour(Srinidhi, et al,2011) and exhibit greater diligence inmonitoring the management andmaintaining transparency in reporting.Normally, women are considered as moreempathetic, caring and having concerns forothers and shows interest in creating valuesin relationships of great importance tocommunity (Dobbins, 1985; Boulouta,2013), thus women can create long lastingrelationship between firms andstakeholders.

It suggests that the presence offemale directors in boardrooms helps firmsmaximize access to critical resourcesthrough their skills, competencies andknowledge, which are different from thoseof male directors(Hillman, et al., 2007).The above views suggest that diverseboards monitors the management moreeffectively as a result the firm performancewill increase (Smith et al.,2006). (Gul etat. 2011) document that board genderdiversity improves stock price informationthrough the mechanism of increased publicdisclosure in large firms and by



incorporating private information in smallfirms.

In contrast, Lau and Murnigham(1998) says that with women on board,the board will have more diverse opinionand critical thinking leading to delay indecision making and the board will becomeless effective. Women directors will raisemore questions than the other directors andmight be more active and tougher monitorsthan usually required (Adams and Farreira,2009). Among other things, they findevidence that boards with women directorsare more likely to remove chief executiveofficers (CEOs) after poor stockperformance and compensate directorswith higher levels of equity-basedcompensation. In their study, Adams andFerreira (2009) also observed a negativecorrelation between the percentage offemale directors on the board and Tobin’sQ. Greater gender diversity leads to morediffering opinions and critical questions canbe time consuming which hold back thefirm, which affect the performance of thebadly ,especially if the firm is competing ina turbulent business environment (Smith etal.,2006). We get a mixed empiricalevidence in relation to women on boardand firm performance.

Resource dependence theory regardscorporate boards as an essential linkbetween the company and its environmentand the external resources on which acompany depends. This link is necessaryfor good performance, as the firm getsbenefit from the stakeholders(Pfeffer and

Salancik, 1978). From having femaledirectors, companies get better connectedwith the stakeholders, including currentand prospective employees (Hillman et al.2007). As there is no confirm establishedrelationship between the variances, hencethe hypothesis is formed as follows:

H2: There is no relationship betweenGender diversity and firm performance.

2.3. CEO duality

The proponent of agency theory saythat separating the CEO and Board chairensures a balance of power and no onehas unfettered authority of decisionmaking. The CEO is responsible for theinitiation and implementation of plans andpolicies; the board chairman is responsibleto see that board of directors monitor andguide the CEO. By combining the roles ofCEO and chairman, one person is havingso much power that the board becomesineffective in monitoring opportunism,which leads to scandals and corruption.But there are contrasting views alsoregarding the duality. Stewardship theorysuggests that CEO duality gives unity ofcommand, it avoids the roleambiguity(Anderson and Anthony, 1986),which fastens the process of decisionmaking. Researchers have found that incertain circumstances, CEO duality resultsin better performance where as in othercases CEO duality (Boyd, 1995; Lam andlee, 2008). Contingency theorists seek toidentify factors within a firm and itsenvironment that are positively ornegatively related to CEO duality(Boyd,

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1995). The current study is one, in thatdirection to identify the effect of factorslike board composition and boarddiversity on firm performance with orwithout CEO duality.

Hypothesis 3: The proportion ofindependent director does not have anyassociation with firm performance in a firmwithout CEO duality

Hypothesis 4: Gender diversity doesnot have any association with firmperformance in a firm without CEO duality

3. Data and Methodology

This paper uses the Nifty 200companies, ranked on the basis ofNational Stock Exchange(NSE) marketcapitalisation and includes high and midcapitalised companies, as the beginningdataset. As per the estimation on March31, 2016, Nifty 200 includes around 86%of the free float market capitalisation onNSE. Hence, this dataset reasonablycovers the population of interest i.e., Indianpublic corporations.

The data has been collected primarilyfrom two sources i.e., CMIE data baseand Company Annual reports. TheAccounting and Market related data hasbeen collected mostly from CMIEdatabase, where as most of the governancedata has been collected from the Annualreports of the companies.

Banks assets includes the loanswhich is consisting of depositor’s fund ,therefore the banks were excluded by Kieland Nicholson(2003) from the sample size

for their analysis. In this study also thebanks are excluded from the sample sizebecause of mainly two reasons, first oneis the above reason and the second oneis, banks are governed by the RBIguidelines hence little scope remains forthe board to decide the governancestructure. Also, because of lack ofcomparable data in some financialinstitutions and missing data in some otherfirms, the size of the sample has beenreduced further. The final list of 162companies are obtained as the sample forthe study.

The board composition has beenmeasured in this study based on twodimensions, independent directors in theboard and gender diversity of the board.The annual report of the companies, clearlydiscloses the independent directors as wellas the women directors in the board. Theboard composition and financial data hasbeen assessed at one point of time i.e.,31st March, 2014 as disclosed in theannual report and CMIE database.

The firm performance has beenmajorly assessed by various researcherstaking Tobin’s Q, return on Assets(ROA),Return on equity(RoE). Here in this study,the firm performance has been measuredthrough two variables, accounting profitand market value and book value of equityratio(a replacement of Tobin’s Q).Accounting profit is considered as ROAi.e, EBIT/Total Asset and the followingmodel is used to observe the associationat two different conditions of CEO dualityand No CEO duality.



ROA = á + â1BdGenDiv+â2BdComp + â3BdSize + â4 LnSize+ â5LnAge +â6Lev +

The second model used for thepurpose of regression is to observe theimpact of Board composition and BoardGender diversity on market value andbook value ratio. This ratio represents thecapital market performance of firms, againfor both the conditions.

MVBV = á + â1BdGenDiv+â2BdComp + â3BdSize + â4 LnSize+ â5LnAge +â6Lev +

Firm age, firm size, leverage andboard size are taken as control variablesin the model to remove the endogenityproblem and to account for potentialadvantages of large scale economies,market power and financial risk featuresof firm. Many prior studies(Hermalin andWeisback, 1991; Boone et al.,2007) havetaken these variables in the model andfound that they are correlated with firmperformance.

The analysis of results begins with thepresentation of summary of descriptivestatistics of variables in Table II. Out ofthe total sample size of 141 firms, it is foundthat 43 firms are having CEO duality,whereas majority of the firms are havingseparation in the chairmanship and CEOpositions. Statistics show that the averageof performance variances(RAO andMVBV) are more in the case of firms withNo CEO duality. The average ofROA(MVBV) is 10.99(5.98) in case ofNo CEO duality firms in comparison to

9.82(3.34) in case of firms with CEOduality, but the standard deviation is veryhigh in the case of No CEO duality firms,which says that there are some firms withvery high firm performance. But theaverage board size(11.86) is more in caseof CEO duality firms, than the firms withNo CEO duality(i.e., 10.8) and proportionof independent director(BoardComp) isaround almost same in both the cases.Average lady director is less than 1 in thetotal sample size, but in companies withCEO duality the average lady director is0.744, where as in the case of the othercompanies is 0.684. Based on this statisticsit can reasonably be said that in case ofCEO duality to justify the boardindependence and board strength indecision making they have kept morenumber of board members andindependent director, although difficult toprove the board independence from thepowerful CEO and Board chair.

MVBV = á + â1BdGenDiv+â2BdComp + â3BdSize + â4 LnSize+ â5LnAge +â6Lev +

Correlation Analysis

A positive correlation is therebetween MVBV and ROA and significantat 0.001 level, which is obvious becauseof the relationship between both theperformance variable. Board compositionis showing a negative relation with boththe performance variable but correlationstatistics shows the non significance of thevariable. The board diversity is also notvery significant as per the correlation table,

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Annexure:Table. I. Variable definitions and measurement Type of variable Variable Definition and measurement Dependent Variables: Dependent: Performance Dependent: Performance Independent Variable: Independent: predictor Independent: predictor Independent: control Independent: control Independent: control Independent: control Moderating Variable

ROA MVBV BdGenDiv BdComp BdSize LnSize LnAge Lev CEOduality

Return on Asset Market value to Book value ratio Women director on board Proportion of Independent directors on board Number of directors in the board Firm size, measured as the natural logarithms of the firms total asset Firm age, measured as the natural logarithm of the number of years since the establishment of a firm Total borrowings/Total Assets A dummy variable: 0, if the CEO is also the chairman of the board, 1 otherwise.

CEO Duality No CEO Duality Variables

Mean Std.

Deviation N Mean Std.

Deviation N

ROA 9.8191 9.69497 43 10.9912 15.43493 98 MVBV 3.3435 2.727 43 5.9864 7.027 BdGenDiv .744 .7896 43 .684 .8446 98 BdComp .5302 .12705 43 .5107 .09255 98 Bdsize 11.86 3.219 43 10.08 2.444 98 lev .1799 .17720 43 .1623 .17641 98 LnSize 12.0088 1.57365 43 11.3329 1.20231 98 Lnage 3.5566 .50386 43 3.6011 .64909 98

4. Results and discussions

Table.III. Correlation Matrix MVBV ROA BoardComp BdGenDiv Bsize CEOdual LnSize LnAge MVBV 1.000 ROA 321*** 1.00

0

BoardComp -.019 -.020 1.000 BdGenDiv .082 .120 .080 1.000 Bdsize -.097 -.092 -.096 .311*** 1.000 CEOdual .198** .039 -.086 -.034 -.292*** 1.000 LnSize -

.357*** -.258** -.015 .106 .403*** -.230** 1.000

LnAge .114 -.001 -.090 -.047 .079 .034 .034 1.000

***Correlation is significant at the 0 .001 level(2-tailed)** Correlation is significant at the 0.01 level(2-tailed)*Correlation is significant at the 0.05 level(2 tailed)



* significant at 0.1 level** significant at 0.05 level*** significant at 0.01 level

Table IV Regression of 141 companies ROA Market value/Book value

Unstandardized Coefficients

Beta

Std. Error

t Value


Beta

Std. Error

t Value

Board Diversity Board Independence -2.199 10.458 -0.21 0.607 4.61 0.131 CEO duality -0.638 2.454 -0.26 1.804 1.082 1.667 Board Size -0.336 0.451 -0.746 0.061 0.198 0.308** Firm Leverage -30.955 6.531 -4.739 -9.002 2.879 3.126** Natural log of Total Asset -1.159 0.922 -1.257 -1.185 0.406 -2.915*

Natural log of Age of the firm -0.515 1.779 -0.289 0.99 0.784 1.262

R Square 0.22 0.23 Adjusted R Square 0.18 0.19 F statistics 5.48*** 5.69***

Table V Results of Regression(Dependent Variable: Return on Asset) CEO duality No CEO duality Unstandardized

Coefficients Beta

Std. Error

t value VIF UnStandardized Coefficients

Std. Error

t value

Board Diversity 3.995 1.531 2.610* 1.08 1.502 1.878 0.799 Board Independence 5.483 10.17 0.539 1.24 -3.278 16.33 -0.201

Board Size -0.702 0.44 -1.596 1.48 -0.152 0.663 -0.23 Firm Leverage -33.03 7.47 4.41** 1.3 -30.43 9.002 -3.381 Natural log of Total Asset

0.175 0.987 0.177 1.79 -1.784 1.389 -1.284

Natural log of Age of the firm -0.763 2.565 -0.297 1.24 -0.688 2.25 -0.304

R Square 0.484 0.191 Adjusted R Square

0.398 0.138

F statistics 5.633*** 3.580*** *** At 0.01 significance level

Table.VI Results of Regression(Dependent Variable: Market Value/ Book Value) CEO duality No CEO duality


Beta

Std. Error

t Value


Beta

Std. Error

t statistic

Board Diversity .734 4.174 1.681 .614 .847 .725 Board Independence 4.468 .436 1.541 .377 7.364 .051 Board Size -.208 2.899 -1.657 .200 .299 .669 Firm Leverage -6.194 .125 -2.908** -10.500 4.058 -2.587** Natural log of Total Asset -.330 2.130 -1.175 -1.541 .626 -2.460**

Natural log of Age of the firm .686 .281 .937 1.094 1.018 1.075

R Square 0.470 0.382

5.328**

0.207 0.154 3.950**

Adjusted R Square F statistics

**significant at 0.01 level

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but otherwise it shows a small positiverelationship with ROA and MVBV. Boardsize is having a positive relationship withboard diversity with statistical significance,which shows that increased board sizeencourages more women on board. CEOduality is positively associated withMVBV and is a significant variable but notsignificant in relation to ROA, althoughhaving a positive relationship with it also.It is also found that natural log of total assetis having a negative relationship with firmperformance at 0.001 significance level.The collinearity problem is not therebecause the correlations are less than 0.70.

Table IV shows the regression tableof all 141 companies. Here, it is found thatBoard composition and board diversityboth variables are statistically significantto have any effect of firmperformance(both ROA and MVBV).Therefore it becomes more important tostudy by splitting the firms into two groupsi.e., CEO duality and No CEO duality.The F statistics show that the model issignificant with Adjusted R2 of 18(19) foraccounting performance and Marketperformance. Firm leverage and boardsize is having negative association with thefirm performance at 0.01 significance level.It is required to study in longer perspectivetaking data for few years to confirm theresult, specifically for assets.

Table V states that the model issignificant at 0.01level for both theconditions i.e., CEO duality and No CEOduality. VIF less than 3 says that there isno multicollinearity among the independent

variables. It reports the effect ofindependent variables on Return onAsset(ROA) at the conditions of CEOduality and No CEO duality. It is observedthat Board independence is having apositive coefficient when there is CEOduality , but a negative coefficient in caseof No CEO duality, although butstatistically not significant. Board diversityis positively associated with firm ROA, incase of CEO duality at 0.05 significantlevel but without CEO duality boarddiversity is not a significant variable. Firmleverage is negatively associated with firmaccounting performance again in the caseof CEO duality but not in the case of withNo CEO duality and also significant at 0.01level.

Table VI shows the association ofindependent variable with that of firmmarket performance(MVBV). The modelis found to be significant at 0.01 level. Butboth Board diversity and boardcomposition are not significant variable indetermining firm performance. It confirmsto the finding given by Dimovski andBrooks, 2006; Carter, et al., 2010, thatthere is not significant association has beenfound between gender diversity and firmperformance. Similarly board compositionis not found to have any association withMVBV, confirms to the finding ofHermalin and Weisbach, 1991; Kota andTomar, where they observed that there isno statistically significant correlationbetween the firm performance and boardindependence. At 0.01 significance level,firm leverage is negatively associated with



firm market performance that shows thatincreasing debt in the capital structure willnegatively impact the firm performance,but it is only 2014 data, so more no. ofyears are to be taken to confirm the result.

5. Conclusion

This study examines whether theboard composition consisting of boardindependence and board diversityinfluence the firm performance. NSE 200data year 2014 has been used for thisstudy. The banking and financial servicecompanies data has been excluded fromthe sample size. The second part of thestudy was to see the impact of boardindependence termed as boardcomposition in the study and genderdiversity on firm performance in thepresence of CEO duality and absence ofCEO duality. The whole data has beensplitted into two groups, one with CEOduality and the other with No CEO duality.Firm performance variable measuredthrough one accounting performance i.e.,Return on Asset (ROA) and Marketperformance i.e., Market value to Bookvalue(MVBV) ratio. In addition, a numberof control variables(e.g. firm size, boardsize, age of the firm and leverage) are alsoadded in the prescribed model.

The study found that with CEOduality, the board gender diversity ispositively associated with firm’s accountingperformance, whereas in case of No CEOduality it becomes a significant variable.Board composition(board independence)is a insignificant variable in case of

accounting performance. when firmperformance is measured through marketvalue, both the variables are found to bestatistically insignificant. Taking the wholedata(without splitting into groups), it isfound that board size is positivelyassociated with Market value and Bookvalue ratio and statistically significant.

The limitation of this research is thedata, which is consisting of only year2014. Taking a period more than 1 yearwill have better consistency in result.Banking and financial companies data hasnot been considered in this study. Only twogovernance components are studied. Theresearch can be extended by taking othergovernance factors into the model.

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Diffusion of Technological Innovation in Business:A Study on New Generation Business in

India in E-Business Environment

Soumendra Kumar Patra

Sr. Assistant Professor (QT & Decision Science),School of Management Studies, Ravenshaw University,Cuttack -7530031, Odisha, [email protected],

Durga Madhab Mahapatra

Lecturer and Head in Department of CommerceMPC Autonomous College, Mayurbhanj, Odisha

[email protected]

Rabinarayan Patnaik

Associate Professor (Marketing)Institute of Management & Information Science (IMIS), Swagat Vihar, Bankuala,

Bhubaneswar-751002, Odisha, [email protected],

ABSTRACT

E-commerce is expanding steadily in the country. Customers have the ever increasingchoice of products at the lowest rates. E-commerce is probably creating the biggestrevolution in the retail industry, and this trend would continue in the years to come.Various business process owners including retailers should leverage the digitalretail channels. Customers in the Indian market place have started adopting the newways of getting their requirements fulfilled and in the process there is a pool oftechnology savvy customers have stated emerging out. These changes are fuelled byvarious agencies of Government of India and made popular by multiple stake holderslike online firms, banks, investors and customers at large. The pace at which thepreference towards online transactions in India is growing it has become essentialto understand the technological factors influencing this recent form of gettingconnected to the market place. Digital India lies the development of the digitalecosystem in terms of apps and app-based government services as well as free andequal access to all these for consumers across the country. The Research paperdiscusses the opportunities and roadblocks of new generation business in India.

Keywords: Digital, E-commerce, New generation, Opportunities, Identification andMobile apps



Introduction

Over last couple of decades, therehas been a tremendous change occurringin the information technology sector ofIndia. Most importantly, India is almost onthe path of becoming the fastest growinge-commerce market of the world ifcontinuing at the same pace. This growthhas been fuelled by huge investment in thesector and the increase of internet users inthe country. In a span of 7 years from 2007to 2014, the internet users in the countryhave increased from 50 million to 300million. In the year 2014, the shipments ofsmart phones to India have been doubledto 80 million. The Indian internet marketsize is going to touch $137 billion by 2020,the market capitalization of which isexpected to be $ 160-200 billion1. As persources, the e-commerce market isdominated by Flipkart with a GMV (GrossMerchandise Value) of 45% whileSnapdeal is on second place with 26%.The Amazon India is at third position withGMV of 12%. Today, companies connectwith their customers and partners throughmobile web applications. Companies arenow able to track conversations with andbetween customers on Facebook, Twitter,LinkedIn, YouTube, P interest and more.According to IAMAI (Internet AndMobile Association of India), it hasreported that India’s online advertisingmarket is set to touch Rs. 2938 crore in2013–2014 such as search, display,mobile, e-mail and video advertising aswell as social media advertising. Themobile live stream launches like NexG TV,

Ditto TV (launched by Zee), and ZengaTV is another player that has been seeingad revenues. The mobile wallet companieslike Airtel money, ITZ cash, Oxicash andGI Tech have built a base of more than3.5 million customers. The prospects ofselling products and services to this digitalpopulation create real excitement bothamong the analysts as well as researchers.

LITERATURE REVIEW

In line with the development of theInternet, E-business is currently animportant requirement in the globalbusiness world. E-business has offered avariety of potential benefits for both SMEsand large enterprises.

According to Scarborough andZimmerer, although the web-based salesstrategy does not guarantee success,companies with online presence haverealized many benefits such as: opportunityto increase revenues, the ability to expandits reach into global markets, ability toremain open 24 hours a day and sevendays a week, capacity to use interactiveweb to improve customer service, abilityto lower the cost of doing business,capacity to improve the efficiency of thepurchasing process, etc (Scarborough &Zimmerer, 2006). According Engsbo andScupola, most SMEs adopt e-commerceby chance, not as a consequence of thesystematic consideration and planning(Scupola, 2002; Engsboet al., 2001).Meanwhile, according Kartiwi andMacGregor companiess do not adopt e-business at the same speed as larger

123

companies because of various obstaclesassociated with the adoption of the uniquecharacteristics of companies (Kartiwi &MacGregor, 2007). A study on theimplementation of e-commerce/ e-business by companies found that manycompanies in developing countries areslower to adopt e-commerce than indeveloped countries ((Kartiwi &MacGregor, 2007; Intrapairot & Srivihok,2003). One basic difference is the speedof adoption of this paradigm differencebetween owner/managers of companies indeveloped countries and in developingcountries, examples of comparative casebetween Sweden and Indonesia (Kartiwi& MacGregor, 2007). Companies inSweden are more concerned withtechnical issues, while companies inIndonesia are more concerned withorganizational resistance. In addition toorganizational and managerial factors(Chong, 2008; Sarkar, 2009; Rashid &Al-irim, 2001; Chong & Pervan, 2009;Sarlak et al., 2009; Wilson, et al.,2008),other factors are also an obstacle sufficientsignificant at the e-commerce/e-businessadoption in companies is the infrastructureand technical factors (Kapurubandara &Lawson, 2008; Sarkar, 2009),environmental factors (Kurnia et al., 2009;Sarkar, 2009; Rashid & Al-Qirim, 2001;Kurnia, 2008), innovation andtechnological factors (Rashid & Al-Qirim,2001; Kurnia, 2008). Based on the theoryof innovation diffusion (Diffusion ofInnovation - DOI) Rogers, the adoptionof technological innovation is divided into

3 phases, namely initiation, adoptiondecision and implementation (Rogers,1995). In this stage of the adoptionprocess is often discovered constraintsfaced by companies are in transitionmoving to e-commerce (Tucker &Lafferty, 2004; Matlay & Addis, 2003;Mendo & Fitzgerald, 2005). As alreadymentioned above that although e-commerce can provide many benefits forcompanies. While referring the previousresearches gap is incorporated with thefollowing objectives to complete the study.

OBJECTIVES OF THE STUDY

The present study has beenundertaken with the following objectives:1. To understand e- commerce as a

significant factor in the emergingscenario of Indian business.

2. To study the import factors influencinge-business environment

RESEARCH METHODOLOGY

In order to substantiate the objectivesof the present study, an exploratoryresearch supported with quantitativeanalysis was undertaken. The findings andinferences are supplemented with thecurrent trend in the business environmentto signify the prospects and outcomes.

Sampling

With a view to examine empirically,an opinion survey was conducted amongdifferent respondents with a structuredquestionnaire. The opinion survey covered143 respondents selected on the basis ofa simple random sampling method.

Diffusion of Technological Innovation in Business: A Study....


Data collection

The present study is primarily anexploratory type. The data have beencollected from both primary andsecondary sources. The secondary datawere collected from different secondarypublished reports followed by thecollection of primary data throughstructured questionnaires and individualinterviews. The respondents wererequested to fill in a structuredquestionnaire.

Data Analysis

In order to analyse the data,descriptive analysis, such as mean,percentage, standard deviations andreliability coefficients, and inferentialanalysis, such as Regression analysis, havebeen used. All the variables were testedfor outlier, missing data and normality.

Sample profile

The primary data is obtained througha well framed questionnaire circulatedamong the different respondents. Inparticular the study ascertains the age,marital status, qualification and income ofthe respondents.

As shown in Table – I, most of therespondents are male 109 (76.2 per cent)and female was very few in no. i.e. 34 (23.8per cent). In marital status of therespondents, maximum of the respondentsare married 67.13 per cent (96 no) and32.87 per cent are unmarried. Similarly inage category of the respondents, maximumof i.e. 52.4 % of respondents are in the

age group of 46 - 55 years and followedby 22.4 % in the age group 36- 45 years.It is also found 14.0% and 9.1% of theemployees found to lie in the age group56-60 and 26-35, respectively. Further,in qualification level maximum of therespondents are graduates 51.85 per cent,then coming post graduate which constitutearound 37.05 per cent and undergraduateare very low in percentage i.e. 11.19 percent only. In annual income maximum ofthe respondents are having less than INR6 lakhs of income (51.05 percent) and lesshaving INR 7 to 15 lakhs of income.Table-I: Demographic Profile of the

Respondents (N = 143)

Category Frequency Percent Sex Male 109 76.20 Female 34 23.80 Total 143 100.00 Marital Status

Married 96 67.13

Unmarried 47 32.87 Total 143 100.00

Age 18–25 yrs 3 2.10 26–35 yrs 13 9.10 36–45 yrs 32 22.40 46-55 yrs 75 52.40 56 - 60 yrs 20 14.00 Total 143 100.00

Qualification Under graduate 16 11.19

Graduate 74 51.85

Post graduate 53 37.05

Total 143 100.00 Annual Income

Upto INR 6 lakhs 73 51.05

INR 7 - 15 lakhs 23 16.08

Above INR 15 lakhs

47 32.87

Total 143 100.00

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Reliability and Validity

As shown in Table - II, it can beinferred that the items used in thequestionnaire are internally homogenous

and consistent. At the same time, all itemsthat validated the questionnaire were good.Therefore, all the factors and variables inthe questionnaire are significant for thestudy.

Table – II Reliability Statistics (questionnaire)

Cronbach's Alpha Cronbach's Alpha Based on

Standardised Items No. of Items

0.870 0.876 8

Sl. No.

Items

Scale Mean if

Item Deleted

Scale Variance

if Item Deleted

Corrected Item-Total Correlation

Cronbach's Alpha if

Item Deleted

1 Understanding Web Terminology 44.44 19.107 0.467 0.865 2 Technology legislation 44.85 19.915 0.32 0.875

3 Internet/broadband – consumer & business markets 44.18 19.277 0.618 0.857

4 Technology infrastructure in a country (Web/Broadband/Mobile)

44.37 19.941 0.283 0.878

5

Technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones…

43.93 18.158 0.776 0.847

6 Secure Systems: encryptions, digital certificates, SSL (secure sockets layer protocol mechanisms)

43.95 18.604 0.669 0.853

7 Distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions…

43.785 18.455 0.726 0.850

8

Technology offer companies a new way to communicate with consumers e.g. Social media, Customer Relationship Management (e CRM), etc.

43.641 18.251 0.785 0.847

Table - III Reliability Item-Total Statistics (questionnaire)

After reviewing the above analysis it can be concluded that the items used in thequestionnaire are internally homogenous and consistent. At the same time all the itemsare good.



Sl. No.

Items Mean Std.

Deviation N

1 Understanding Web Terminology 3.769 0.646 143 2 Technology legislation 3.356 0.643 143 3 Internet/broadband – consumer & business markets 4.028 0.488 143

4 Technology infrastructure in a country (Web/Broadband/Mobile) 3.832 0.691 143

5 Technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones…

4.272 0.558 143

6 Secure Systems: encryptions, digital certificates, SSL (secure sockets layer protocol mechanisms)

4.251 0.562 143

7 Distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions 4.537 0.475 143

8 Technology offer companies a new way to communicate with consumers e.g. Social media, Customer Relationship Management (e CRM), etc.

4.747 0.410 143

Table - IV Descriptive Statistics (Variables)

Sl. No.

Items


Standardized Coefficients

t Sig.

R2 F Sign.

B Std. Erro

r Beta 0.789 37.36 0.00

1 Understanding Web Terminology 0.321 0.131 0.241 2.321 0.002*

2 Technology legislation -0.601 0.306 -1.963 0.053

3 Internet/broadband – consumer & business markets

0.235 0.059 0.234 3.965 0.000*

4 Technology infrastructure in a country (Web/Broadband/Mobile)

0.177 0.073 0.211 2.434 0.017**

5

Technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones…

0.202 0.078 0.244 2.596 0.011**

6

Secure Systems: encryptions, digital certificates, SSL (secure sockets layer protocol mechanisms)

0.217 0.043 0.353 5.035 0.000*

7

Distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions

0.204 0.043 0.271 4.719 0.000*

8

Technology offer companies a new way to communicate with consumers e.g. Social media, Customer Relationship Management (e CRM), etc.

0.154 0.052 0.195 2.961 0.004*

Table – V Regression coefficients of Job Performance

*Significant at 1 per cent level, ** significant at 5 per cent level

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Table - IV reveals that each factorused in this study is a good dimension.Since the mean value of each item wascoming more than 3.0 which signify thatall the respondents respond positively tothe factors. It has been observed that outof the total 8 different variables the totalmean score of the 8th variable - Technol-ogy offer companies a new way to com-municate with consumers e.g. Social me-dia, Customer Relationship Management(e CRM), etc. was coming highest i.e.4.747, then coming 7th - Distributionchanged by new technologies e.g. booksvia the Internet, flight tickets, auctions4.537 and least is coming Technology in-frastructure in a country (Web/Broad-band/Mobile). Further, the standard de-viations of all the factors are shown in theabove table. The standard deviation of thevariable i.e. Technology infrastructure in acountry (Web/Broadband/Mobile)(0.691), Understanding Web Terminology(0.646) and Technology legislation(0.643) was coming high in comparisonwith other variables.

Further in Table – V, the R2 squarevalue is coming to be 0.789 i.e. all theindependent variables influenced thedependent variables by 78.9 per centwhich is a good sign of the modelformulation. The F statistic is 37.364, andits significant value was coming 0.000 sothe model is significant. The t value tells usthat the predictor, The variables like -

Understanding Web Terminology, Internet/broadband – consumer & businessmarkets, Secure Systems: encryptions,digital certificates, SSL (secure socketslayer protocol mechanisms), Distributionchanged by new technologies e.g. booksvia the Internet, flight tickets, auctions,Technology offer companies a new wayto communicate with consumers e.g.Social media, Customer RelationshipManagement (e CRM), etc. are significantat 1 per cent level and the variables -Technology infrastructure in a country(Web/Broadband/Mobile), Technologiesoffer consumers and businesses moreinnovative products and services such asInternet banking, new generation mobiletelephones… are significant at 5 percentlevel. Out of all the variables taken to studytechnological factors of e-businessenvironment the variable - Technologylegislation is not coming significant.EMERGING FACE OF INDIANBUSINESS ENVIRONMENT

There is a need for need for retailersto communicate authentic valueproposition consistently across digital andphysical channels, enhance customers’ endto end shopping experience through useof technology, increase two wayengagements with customers throughdigital channels and deliver a seamlessshopping experience across channels byfocusing increasingly on data analytics,managing rapid changes in business

13 CII and Deloitte Touche Tohmatsu India LLP Report14 Pew Research Center, The Economic Times, Bhubaneswar edition,, 29th February 2016



environment and technologies, and buildingmore agile systems to connect multiplechannels, channels and points of sale whileproviding a unified view of the customer1.The emergence of social media (Table-VI)

has made the process really easy andaccessible in several countries includingIndia. In India, over 57% of people onFacebook are connected to smallbusinesses.

Table- VI 14Social Media Popularity of Top 10 and top bottom countries

Top 10 Countries Bottom 10 Countries SL Country % SL Country % 1 Jordon 90 1 Germany 50 2 Indonesia 89 2 Pakistan 50 3 Phillippines 88 3 Japan 51 4 Venezuela 88 4 South Korea 51 5 Turkey 87 5 France 57 6 Palesti-Ter 86 6 India 52 7 Chile 85 7 China 63 8 Malaysia 85 8 Burkina Faso 65 9 Nigeria 85 9 Italy 65

10 Russia 85 10 Spain 65

Another factor adding to theemergence of E-commerce is the mobilewallets. According to a survey by Nielsen,Indian consumers are adopting the walletalmost as rapidly as their counter parts inmore developed countries. Customers

want apps to also help with mobilerecharging, booking maite tickets,shopping and such other facilities. Paytmhas three in every 10 smart phone usersusing their app, just one in every 10 usersuse the company’s website.

Table- VII Top Mobile Payment Apps in India15

15 Nielsen Informate Mobile Insights, Dec 2015, Business Standard, Bhubaneswar edition, 29th

February 2016, p.6

SL Company Top Mobile Payment Apps (%)

Time Spent by Users (Mins) Month

1 Paytm 39% 70 2 Mobikwik 26% 40 3 Freecharge 17% 29 4 My Airtel 10% 18 5 My Vodafone 7% 17 6 Oxigen Wallet 6% 17 7 Paytm Wallet 5% 14 8 Pockets by ICICI 4% 23

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Along with mobile apps e-commerceis expected to grow at more than 30%annually. Reliance industries is extendingthe Jio brand name to new businesses, thelatest of these being a fashion ecommercesite dubbed AJIO Com. The company hasnamed its telecom unit Reliance Jio and isupcoming digital wallet Jio Money.According to the Boston Consulting Groupand the Retailers Association of Indiaestimated that the size of India’secommerce market, including travel andother services, will swell to $60-70 billionby 2019 from about $17 billion in 2014.Snapdeal launched seven regionallanguage versions of its app. Quikr is nowavailable in seven Indian languages. HikeMessenger launched Eight Vernacularlanguage and Ola cabs have its driver’sapp in several regional languages. A steadygrowth in the telecom subscriber base inIndia (as per Table - VIII, Figure I) hasalso been working as a change agent inthe Indian business environment.Table -VIII India’s Telecom Subscriber base (Mn)

Year User Base (Mn) Teledensity** 2007 200 15 2008 300 20 2009 400 30 2010 600 45 2011 800 65 2012 900 75 2013 850 70 2014 875 70 2015 900 70

*2016 975 75 *Till Nov 2015 ** Connections as per100 individuals

Figure I: India’s Telecom Subscriber base16 (Mn)

In addition to all these factors, the bank-ing sector in India has played a vital role inmaking E-commerce as an emerging busi-ness practice and a preferred tool by thecustomers. Retail payments in India hasseen a paradigm shift with card paymentsare tending positive over the years (asshown in Table- IX)

Table- IX Retail Payments in India(Transaction Mix by Volume17)

Year Paper Cleaning

Electronic Clearing

Card Payments

Prepaid Payment

Instruments 2012 53.0 20.2 25.6 0.00 2013 44.7 23.6 29.4 0.00 2014 34.7 30.6 31.1 0.00 2015 29.9 26.7 35.6 7.9

Table- X Top 5 Banks with Mobile BankingTransactions18 (Figures are for December 2015)

Mobile Transactions Market Share SL

Bank

Volume (lakhs)

Value (cr) By Volume

By Value

1 SBI 152 17,636 39 36 2 ICICI 70 10,577 18 22 3 Axis 60 6,268 15 13 4 HDFC 39 8,717 10 18 5 Kotak 17 2,325 4 5

16 TRAI, TechSci Research), Published in Business Standard, Bhubaneswar edition.20-21st February 2016, p.6

17 RBI, JM Financial, Business Standard, Personal Finance, Bhubaneswar edition,14th March 2016, p.1

18 RBI



State Bank of India has its own digitalbaby in the name of SBI rewards. AxisBank behind with its Pingpay, ICICI Bankhas launched “all new mobile bankingapp”, HDFC Bank with its launch ofPayzapp is almost replicating a Flipkart orPaytm.

With the enthusiasm and the supportcoming from all directions includingcustomers and government alike, the futureof business seems to be mostly in the e-commerce interface. However there arecertain challenges this emerging form isexpected to overcome. The followingparagraphs brief about these prospectsand challenges, e-commerce in India isgoing to have.

Developments and prospects

• The connectivity is improving becauseof Government of India’sannouncement of Rs 20,000 crorepackages to extend variable coveragein India and Digital India’s initiative tocover 2.5 lakh villages with broadbandaccess which improve internet access.

• Online companies like Snapdeal andCraftvilla are in various stages ofmultiple-local-language rollout.Snapdeal has built a lighter mobilebrowser “Snap-Lite” to allow users toshop online using slower 2G networks.

• Merchant loyalty and engagement havebecome key factors in India’s cut-throat e-commerce industry.

• E-commerce majors like Amazon,Paytm and Shopclues are recreating

the click-to –buy model for their sellerson business-to-business (B2B)platforms as well.

• Cash backs are an incentiveprogramme where a fixed or apercentage of the amount spent backto the wallet holder’s account. Itprimarily boosts repurchase atpurchases, reduces cash on deliveryorders and order returns.

• Many consumers in metro cities haveseen their cash transactions go downsignificantly because of growing e-commerce.

• Paytm has plans to buck the trend anddouble the salaries of around 200employees across the company asreward their noteworthy performance.

• Marketers and publishers are usinginnovative methods to create format anddeliver digital advertising. One form is“native advertising” content that bearsa similarly to the news, feature articlesproduct reviews, entertainment andother material that surround it online.

• The secular shift in technology,mobility, social computing and analyticshave led to changing consumerbehavior. Thus, the digital and physicalworlds are starting to come together.So the innovation has broughtefficiencies creating a better customerexperience through best pricing, speedand convenience.

• DIPP (Department of Industrial Policy& Promotion) clarified 100 percent

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FDI is only for the market place formatof e-commerce, where the companyprovides a platform to act as afacilitator between buyers and sellersand not for the inventory led model.

• Almost all online stores offer benefitslike 100 percent purchase protection,guaranteed one day delivery, easyreturns and COD (Cash on Delivery)etc.

Issues and challenges

• Failure of deliveries, pilferage in cashon delivery orders, or theft; logisticsremains as one of the biggestheadaches.

• E-commerce and mobile-app basedservice provides such as Amazon,Flipkart, Snapdeal, Paytm and Ola areincreasingly roping in ethical hackersto lack for loop holes in their systemby continuously trying to hack intothem from outside.

• Online discounts are mostly limited toselect brands such as online-exclusiveones, old merchandise and own levelsas ecommerce companies looked toprotect margins and turn profitable.

• Amazon plans to offer loans to keyvendors selling on its portal in an effortto lock-in sellers from shifting loyaltiesto rivals Flipkart and Snapdeal.

• Internet as a medium of sale andpromotion effectively addresseschallenges faced by traditionalconsumer’s brands like maintenanceof huge inventories that incur significantstorage costs.

• Companies like Flipkart and Amazon,Paytm operates on a zero inventorymodel. It, however, encourages itssellers to store stocks in third partyfulfillment centers to control quality andreduce delivery timelines.

• While E-commerce adoption isgrowing in the country, there is still alarge section of population that ishesitant about making purchasesonline. The companies are workinghard to convey features like easyreturns and access to genuine productsthat essentially build customers trustand confidence in shopping.

• There have been several negativeissues which are coming frequently, likethe ecommerce giant Amazon has beenin a heated battle with the stategovernment over a taxation issue ofKarnataka. Also Flipkart is engagedwith several stakeholders to urge theUttarakhand Government to revokethe addition tax on e-commerce.

• Coming to the authenticity test ofsellers, Flipkart has blacklisted 250sellers on its platform after its ongoing-”Mystery Shopping” initiative called“Secret Agent”, they were selling poorquality products or defaulting ondeliveries or making wrong packagingor price labeling.

• The absence of quality broadband insmaller cities and towns in particularhas come in the way of growing themarket for online retail.



CONCLUSION AND FURTHERSCOPE OF STUDY

E-commerce has started influencingthe lifestyle of Indian households as wellas commercial entities. As realized overpast years, the business processes havealmost started adopting different platformsby incorporating technology thanks to e-commerce. National Informatics Center(NIC), a Government of India enterpriseis primarily looking after the developmentof information technology in India. NICwas the beginning of an effort tocomputerize government and digitalizeIndia for the 21st century. Further, NIChas done a remarkable job of buildinghuman capacity, institutional frameworksand programmers for e-governancefunctionalities. Another, organization suchas C-DOT digitized India’s networks andthe number of phones has increased from5 million to 1 billion. Further, the creationof the National Knowledge Network(NKN) is a high bandwidth network toconnect all educational institutions in thecountry to enable high-end research andcollaboration. Another internet access forthe rural population is the National OpticalFibre Network aimed to provide highspeed broadband connectivity to 2,50,000 Panchayats in the country. Withall these developments happening quiteoften, there is still a requirement of realresearch work required to understand andaddress several areas related to thisrevolutionary process which have got atremendous potential to influence thebusiness and economy at large.

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Learning Organizations in Action: Evidence from theDownstream Hydrocarbon Industry in India

Ashok K SarSchool of Management, KIIT University Bhubaneswar, India

[email protected]

ABSTRACT

The objective of this study is to investigate the dynamics of organization developmentin the Indian downstream hydrocarbon industry. The qualitative approach adopted,allows author to understand better all the dynamics, challenges and complexitiesthat characterize companies facing change. The author used public information,internet resources, in-house journals and companies’ document to gather necessaryinformation. In building a learning organization, organizations go through specificdevelopment stages: “(a) knowledge acquisition, (b) knowledge sharing, and (c)knowledge utilization”. Six dimensions influence these three stages: (a) culture inorganizations, (b) empowerment and leadership, (c) communication dynamics, (d)knowledge transfer, (e) employee quality, and (f) capability upgrading. If other casestudies confirm or improve upon the author’s suggestions, useful guidelines couldarise for companies dealing with change management. This paper shows how threehighly bureaucratic companies have built learning organizations to manage changeeffectively.

Key words: Learning organization; change readiness; hydrocarbon sector;knowledge management.

Indian Downstream HydrocarbonIndustry

Historically, the industry has been fullyregulated by the government throughrespective bodies with prices set under anadministered pricing mechanism (APM),and assured 12% return on net worth post-tax (Dey, 2001). As a part of the ongoingeconomic reforms, the Indian governmentwas actively pursuing privatization of thepublic sector organizations. There was a

clear message from the government thatall public sector organizations should havea business orientation irrespective of thesocial obligations. In 1995, SundararajanCommittee Report: ‘Hydrocarbon-2010’was published. It suggested dismantling theAPM for the Indian oil and gas sector(Kazmi, 2008).

In 1998 APM was partially



dismantled and was expected to beremoved by 2002 (Jeyavelu, 2006). Thegovernment control on distribution andmarketing was also expected to be relaxedby 2002. This also did not happen.Although it did not happen till 2013 forvarious reasons, the sense of competitionhas come into the oil marketing scenarioin a big way.

The partial deregulation of the Indiandownstream hydrocarbon sector thusbrought opportunities to win: oil companiescould create and capture opportunities inseveral product market segments and earnreturns far more than the assured returnunder the APM (Personal, Archive, &Bandyopadhyay, 2010). They were nomore bound by the cost plus pricing inthese product markets and had opportunityto design strategies to get into value addedproducts or services and charge premium.

Mr. U Sunderajan, the CEO ofBharat Petroleum Corporation Limited(BPCL) provided the key drive fororganisation change in the industry in thenineties (Bharat Petroleum, 2000). Thepublic sector status and the assured rateof return on investment under the APMkept the industry in a state of inertia. Histwo trusted lieutenants - directors duringthe change management process in the late1990s - became CEO’s of the other twooil companies. Mr. M.B. Lall became CEOof Hindustan Petroleum CorporationLimited (HPCL) in 2002 and Mr. S.Behuria became CEO of Indian OilCorporation Limited (IOCL) in 2004. The

change initiatives in the other twocompanies reflect the basic philosophy oftrying to build organizations characterisedas learning.

Learning Organization (LO) Concepts

There have been a number ofapproaches to define LearningOrganization (LO). Senge (1990),popularized the LO concept in his bookThe Fifth Discipline. Senge emphasizesexpanding organizational capability through“system thinking, personal mastery, mentalmodels, shared vision and team learning”.Garvin (1993) highlights LOs as “havingthe capability for problem solving,experimentation, learning from pastexperience, learning from the bestpractices of others, and quick and efficienttransfer of knowledge”. Goh (1998)identifies LOs as “possessing certainstrategic building blocks, such as sharedleadership and involvement, teamworkand cooperation, transfer of knowledgeacross organizational boundaries and anEmphasis on mission and vision”. Bennettand O’Brien (1994) came up with “keyfactors which have an effect on anorganization’s ability to learn and change”.Watkins and Golembiewski (1995)emphasize that “a learning organizationcontinuously learns and transforms itself”.Gephart and Marsick (1996) emphasize“an improvement in the organizations’ability to learn, adapt and change forinnovation”. “An organization in whichEmployees are continually acquiring andsharing new knowledge and are willing to

137

apply that knowledge in making decisionsor performing their work is referred to asa learning organization” (Lewis, 2002). “Alearning organization is a consciouslymanaged organization with learning as avital component in its values, visions andgoals as well as in its everyday operationsand their assessment” (Moilanen, 2005).

Sequential stages of developing intoLOs and Dimensions

Based on preceding discussions onthe meaning of LOs, such organizationsdevelop capability to learn to managechange thereby create sustainablecompetitive advantage. Three key stageof development- “a) knowledgeacquisition, b) knowledge sharing and c)knowledge utilization” seem to be a featureof such organizations (Crossan, Lame, &White, 1999).

“Knowledge acquisition” refers to thestage in the development of a LO, wherelearning by members individually as wellas cooperatively is reflected- “(a) frompast experiences and the best practices ofothers, (b) from others’ success or failure,(c) from experimentation, and (d) fromtraining and educational activities”. As aresult, members in organizations obtainknowledge from continuous learning.

Once members in an organizationacquire knowledge, it must benefit theorganization in achieving its purpose. Thenext step in LO development –“knowledge sharing” helps the organizationtoo benefit from the acquired knowledgeas the knowledge is then shared with other

employees and other external stakeholderslike customers, suppliers, service-providers and complementors. Theprocess of sharing knowledge can startsimple with one-to-one sharing andbecome very complex with many-to-manysharing.

The third step – “knowledgeutilization” is the ultimate means to managechange to achieve the purpose of theorganization. In this step, internally as wellas externally acquired and sharedknowledge is managed to benefit fromopportunities arising from the externalenvironment as well meet environmentalchallenges. It also becomes a means tocreate and capture opportunities throughcreativity and innovation.

Knowledge Acquisition

The key to acquire knowledge is toappreciate the location of learningactivities. These can been at three points,(a) individual level learning, (b) team levellearning and (c) organization level learning.

Individual level Learning

All three companies studied, have astrong tradition of formal as well asinformal learning activities. Most of thenew recruits join the companies at the entrylevel either in management or non-management category of employees, withon-boarding programs, hence theimportance of learning the technical as wellas behavioral skills. The strong motivationand incentives are reflected in the linkbetween performance and training anddevelopment initiatives. The knowledge

Learning Organizations in Action: Evidence from the Downstream....


acquisition happens at the formal levelthrough year-long managementdevelopment programs, short-term skilldevelopment programs and the executivedevelopment program at leading nationalinstitutes. All three companies have had asystematic training and developmentcalendar for all employees. At the informallevel learning takes place through plannedrotation of work assignments. Crossfunctional lateral transfers happen on aregular basis considering potential inprospective employees. To summarize, itis clear that the companies encourageknowledge acquisition as an essentialcharacteristic, especially the integratedapproaches comprising of formal as wellas informal learning activities and reviewof performance with focus of possibleknowledge shortfalls which serves as keyfeedback to the know acquisition process.

Team level learning

During the last five years there hasbeen significant change in the modes ofcommunication creating greateropportunities to learn in team by; (b) freely-shared information; (c) an atmosphere oftrust; and (d) a supportive relationshipbetween members and co-operativeplanning”. During 1997-2003 all threecompanies have been restructured from apurely functional structure to structurescapturing customer based strategicbusiness units. One key highlight of the newstructure is the decisions based on teamsrather than individual positions. The teamlearning has been particularly significant at

learning from the experience of beingmembers of multiple teams and from thecommunication between teams in all threecompanies. Going a step forward, the teaminteractions also involve external memberssuch as suppliers, customers andcompetitors. For example there arecommon forums like state levelcommittees, the monthly regional salesreview forum and the monthly performancereview forum associating the government(MOP&NG, 2013).

Organizational Level Learning

The institutional mechanism in placein the companies clearly indicatedevelopment of norms driven by strongcultures that have enabled people andteams to share knowledge openly leadingto greater levels of effectiveness in arelative dynamic business environment. Forexample, in BPCL and HPCL, theperformance management system is partlybased on balanced scorecard, where“learning and growth” perspectives drivemost of initiatives at the corporate level,strategic business unit (SBU), team andindividual levels (BPCL, 2013). This alsoa reflection a strong structure, systems andprocesses base mirroring an appropriateculture forming a strong base to facilitateorganizational level learning.

Learning Sources

While the companies under the studyhave realized the importance of the locationof learning, they have also realized thesignificance of the learning sources,

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specifically, interaction with employees,customers or clients, vendors, suppliersand competitors. Some key evidence andpractices are explained in the followingsection.

Employees

Employees have been found tosharpen their analytical as well as creativeproblem solving capabilities with greaterappreciation of interdependency amongteam members. For instance, at HPCL, adifference in authority and responsibility isbuilt into the system which enablesemployees to cooperate (HPCL, 2013).Employees as a source of learning, isprimarily directed towards individuallearning. This individual level learningextends to team learning, when employeesare grouped with superordinate goals witha strong motivation for sharing knowledgeamong members of the group(s). With theappropriate norms in the studiedorganizations, learning appears to havetaken place at the organizational level.From the above arguments, it is evidentthat Employees constitute an importantsource of learning at all levels of theorganization in three companies.

Customers

Today in a deregulated businessenvironment, meeting customers’expectation has been the key to success.This is reflected in the significance of andimportance given to the “customerperspective” in balanced scorecard inBPCL (BPCL, 2014). IOCL and HPCL

use a slightly different variant of thisperspective in their business planning.Further some form of CustomerRelationship Management (CRM) hasbeen in operation in all the companiescapturing various dimensions of servicequality. Mystery customer audits arecarried out in regular interval to assess theservice quality gaps giving vital input forfurther action. To summarize, there is veryclear evidence in the three companiesabout learning customer needs.

Competitors

Competition is one of the mainsources of knowledge acquisition forproductivity and innovation. All threecompanies have been found to be awareof any newly developed activitiesundertaken by rivals. They learnt from whatcompetitors do to beat them. Thisreflection process provides an organizationwith the opportunity to turn its weaknessesinto strengths, or through cooperation, turnhead-to-head competition intocollaboration, thus, rivals are an importantsource of knowledge acquisition for anorganization in building up a competitiveadvantage. There are a number of formalforums at corporate, regional, SBU/Divisional/ State level where periodicinteraction takes place between theemployees of the three companies. Forexample, for developing a new retailnetwork, the industry coordinator atMumbai interacts with the state levelcoordinators (Sector & Companies,2014). Final annual marketing plans are



developed based on the prevailing volume-distance norms. Similar proposals todevelop consumer fuel storage anddispensing facilities for industrialconsumers are discussed at the state orSBU levels. The monthly regional reviewmeetings and the monthly performancemeetings have also been forums to learnabout competitors (PPAC - MOP&NG,2014).

Suppliers and Vendors

Organizations can learn from theirsuppliers through collaboration. Suppliersor vendors are able to offer knowledgemanagement seminars or conferences totheir clients (Arroyo López, Holmen, &de Boer, 2012). For instance, BPCLdevelops partnerships with its liquefiedpetroleum gases (LPG) equipmentsuppliers by giving them training throughthe corporate training center and requiringthem to upgrade production systems(BPCL, 2014). Similarly IOCL hascollaborated with its key vendors in therefinery and pipelines division for qualityup gradation and inventory management(IOCL, 2008). HPCL has collaboratedwith lubricants packages manufacturers onjust-in-time inventory management(HPCL, 2014). Over all there aresystematic vendor relationshipsmanagement processes that are automatedthrough the enterprise resource planning(ERP) applications.

Continuous Learning

Continuous learning has beensupported with experimentation and

allocation of financial resources. The threecompanies have demonstratedcommitments to promote creativity,thereby have multiple opportunities andavenues to learn. Apart from this, theorganizational climates have enabled hostof opportunities for employees’ self-development and a culture whereemployees seek knowledge. A strongemphasis is placed on learning and skilldevelopment, through either formal orinformal learning programs. Beyond thisemphasis, the companies have createdideas by going outside their boundaries andlearning from what other companies do orby benchmarking for development as wellas imitation.

Dimensions of learning organizationthat facilitate knowledge acquisition

Going beyond the identification oflearning locations and sources, learninginvolves culture in organizations,empowerment and leadership,communication dynamics and employeequality (Awasthy & Gupta, 2012). Somekey evidence and practices with respectto the three oil companies studied areexplained in the following section.

Culture in organizations that facilitateknowledge acquisition

The multi-divisional structureorganized into strategic business units; clearset of decision rights and rules andprocesses driven by meritocracy in thethree companies have mirrored a culturefacilitating knowledge acquisition. Thisculture displays itself in several ways.

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The organization structure in BPCLis organic in part. There is extensivedelegation of decision making authority(BPCL, 2015). Similarly in many of thenew strategic initiatives, IOCL realized thatthe knowledge base for decision makingis specialized and can’t be transmittedupward to the top management throughthe hierarchy. This necessitates vertical andhorizontal decentralization. Thus thecompanies have demonstrated thetranslation of learning to action with a strongcapability to learn.

Alongside decision rights and rulescapturing – who has the right to take aparticular decision and what the decisionrule(s) concerning that decision, there areprocesses in the form of strong networkof personal relationships that accompanythe flow of work. The companies have thusdemonstrated flexibility and adaptabilitysupported by a climate of openness.

The performance management mapin BPCL and HPCL for all managementemployees captures stretched targets.They realize that this is the key means totrap the latent capabilities in people.However the fear of failure could hauntemployees. To overcome the fear of failureand leverage the latent capabilities, theperformance management map captureslimitations to perform and an action planthereof. This encourages people withdecision rights to take risk and develop astrong willingness to learn from pastperformance including poor performance.

Learning and development are nomore support services, but part of keybusiness processes in BPCL, with clearHR scorecards, drawn from the learningand growth perspective of balancedscorecard. Assessment and developmentcenter related activities reflect theimportance attached to the learning anddevelopment processes. This creates anorganization climate that supportexperimentation and continuousdevelopment of competencies.

Gone are the days of keepingknowledge secrete from fellow colleagues.It’s the era of super ordinate goals andshared values, more evident in a gapbetween individual responsibility andauthority. This is captured in theperformance management maps andannual budgets, thus there are boundary-less organizations within which employees’desire to learn and share knowledge hasimproved greatly.

The career progressions in all threecompanies studied are driven by atransparent process. Particularly in BPCL,there is a high weightage for theperformance domain and potential domainconcerning learning and growth. Forinstance, if an employee meets the learningand growth related targets, there is a clearreflection in the overall performance andpotential score, thus there are rewards formembers or teams who continuously learnand share knowledge with others.



Empowerment and leadership thatfacilitate knowledge acquisition

Leadership empowerment issueshave begun taking a peculiar shape inBPCL following the restructuring during1998 - 2000. A concept of visionaryleadership, where the co-created sharedvision leads, has come be the dominanttheme. This has been institutionalizedacross the length and breadth of theorganization through the Foundation onLearning (FOL) and Visionary LeadershipProgram (VLP). The role of employees intop and senior managerial positions hasbeen limited to facilitating the functioningof teams. The new set of governancecouncils comprising of the board, apexcouncil, executive council, andmanagement council have been thestructural evidence of the profile ofleadership and empowerment, thus,leaders have been able to play a vital rolein process of building LO: “(a) they designorganizational policy and strategy; (b) theyare role models for employee learning andcontinuous improvement; (c) they activelyencourage and experiment; (d) theyencourage leadership skills at all levels;and (e) encourage empowerment in theirorganization”. A similar reorientation profilehas been observed in HPCL after the rollout of the ERP application.

Communication Dynamics thatfacilitates knowledge acquisition

The realization of the current realitywith reference to the importance ofknowledge base in decision making inBPCL during the restructuring exercise hasgiven way to a host of informalcommunication channels and medium. Thehighlight has been to appreciate the positionof the knowledge base and delegatedecision rights to that position, sub-entityto ensure timely decision making, whileensuring quality of decision making. Suchdelegation of decision rights has thepotential risk of being misused owing toagency problems. The new channels ofcommunication, primarily automatedthrough the SAP application ensures thatthere is free, open communication andshared with customers, suppliers,competitors and between other members:communication is fast, clear, and focused;communication has entailed a willingnessto share ideas; communication has beenconducted in a climate of trust; and ablame-free culture in which members feelfree to report errors. In this way, membersin BPCL have been learning, sharing andutilizing knowledge over time.

Employee quality that facilitateknowledge acquisition

The oil companies in the study -IOCL, HPCL and BPCL have a rigorous

19 Indian Institute of Technology20 National Institute of Technology21 Indian Institute of Management22 Xavier Labour Relations Institute

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human resource policy which emphasizesplanning, recruitment and selectionprocesses to ensure quality input, whichfit the organization. As a result they recruitthe best candidates from premiertechnology schools like IITs1 and NIT2sas well as premier business schools likethe IIMs3 and XLRI4. As a result thecompanies have: “(a) the ability to learn;(b) shared leadership and coachingbehavior; (c) ability in teamwork, (d)creative workplace problem solving andinnovation; (e) develop a strongcommitment to generating and transferringnew knowledge and technology; (f)develop a commitment to lifelong learning;(g) gain knowledge and understanding ofhow their jobs are important and contributeto organizational goals; and (h) a strongcommitment to the mission and vision ofthe organization”.

Dimensions of learning organizationthat facilitate knowledge sharing

In BPCL, leading from theperspective of superordinate goals orshared values, the importance ofknowledge sharing has been highlighted inthe premises to the performancemanagement map (BPCL_HRI, 2014). Itis clear from the associated documents thatwithout knowledge sharing, theknowledge base may not be useful.Further, sharing ensures upgrading andupdating the inventory of the knowledgebase. The sharing has been operationalizedin part by disseminating valuable

information. Employees learn from thisdissemination of knowledge withinorganizations, as well as that transmittedfrom other entities. The next sectiondiscusses how knowledge has been sharedin the three companies.

Culture in organizations that facilitateknowledge sharing:

Shared-mindset-which includesshared vision, value, communication andinformation-has been a key outcome of therestructuring processes in all the three oilcompanies. Particularly, in BPCL, theentire gamut of activities relating to strategyformulation and management andperformance management starts from theco-created shared vision (BPCL_Vision,2012). Similarly, in HPCL and IOCL therolling business plans reflect the sharedmindset.

A review of the in-house journals23

of the three companies reveal of a normof open communication, which is reflectedin sharing of errors, acceptance of conflictsand collaborative efforts to solve problems.With a view to make business transactionstransparent, IOCL implemented anintegrity pact through a Memorandum ofUnderstanding (MOU) with“Transparency International India (TII)” inJanuary 2008. IOC’s belief in maintainingtransparency in dealing with stakeholdersis based on its assumptions that in acomplex and dynamic multiproduct multi-location environment require a reflectionof fairness.

23 BPCL INFOLINE, IOCL Publications & HPCL Employee Portal



HPCL initiated a process oforganizational development called Project-“Achieving Continuous Excellence(ACE)” (14Ma). It project aimed totransform HPCL from a conventionalfunctional organization to a more customerdriven organization. The key means of thetransformation was a strong moral culturewith a focus on learning and growth. Theco-creation of a strategic direction was oneof the early outcomes, which paved theway for further development. This hasnecessitated development of a culture oflifelong learning, and a boundary-lessenvironment. The development thereof hasbeen possible owing to the e-learningportal in place, with interactive e-learningmodules on technical, functional andbehavioral aspects.

Use of learning and developmentconsistently as a means to win in themarket place has been recognized, whichis reflected in the “BML Munjal Award forExcellence in Learning and Development”(IOCL_BMLMA, 2014). The evaluatorsfor the award, had very high appreciationof the general management programs forall levels of management, a deviation fromthe conventional logic where suchprograms were primarily for senior and topmanagement. In the acceptance speech,the CEO, reflected his belief that a strongHRD along with a robust business strategyis an important foundation for success(14Ma1). He further mentioned that theassociated initiatives would enhance thecompany image as a portfolio ofcompetencies as opposed to the

conventional logic of seeing the companyas a portfolio of businesses. Thisexemplifies an environment culture in whichemployees feel confident in sharingknowledge with each other and the cultureof teamwork, collaboration and trust.

Empowerment and leadership thatfacilitate knowledge sharing:

The performance managementsystems put in place in the balancedscorecard format capture the fourperspectives-”financial, customer, internalprocesses and learning and growth” inBPCL and HPCL. It has facilitated theleaders’ commitment to the achievementof knowledge sharing related objectives.Their actions have shaped organizationalstructure, decision-making processes andemphasized teamwork.

In BPCL, the CEO was involvedthroughout the restructuring process. Hecommunicated his support to the changeactivities by personal involvement, andregular appreciation to the changemanagement team and the special taskforces. He played the role of a mentor tothe team members. He also interacted witha large number of employees during thevisioning, assessment and implementationstages. Young managers recount stories ofhis support to the change team, where hegave total freedom to come up withcreative ideas and safe guarded them frombacklashes from establishedconstituencies. This exemplifies a leaderbeing a role model in knowledge sharingactivities including inspiring leadership at

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all levels, both management and non-management. This further exemplifies aleader encouraging members to learn aswell as inspiring a clear, shared sense ofteam work and empowerment within anorganization.

The co-created shared vision set bythe CEO, Mr. U Sunderajan during theprocess of restructuring BPCL,demonstrates his commitment to learningand to creating a learning organization.These companies have business operationsin multiple product markets. The corporaterole in all three companies reflects theability to control the operations of SBUsand to seek coherence in businessoperation so that the inventory ofresources and capabilities are upgradedand updated. Leaders have been able todesign organizational policy, createstrategies that integrated vision, value andpurpose. Further, leaders have been ableto inculcate a sense of purpose in mindsof employees at large, encouraging teamwork and risk taking.

Post-restructuring, the businessplanning has been a bottom-up approachwith a set of strategic directions from thestrategic apex. This has been driven by thebalanced scorecard based performancemanagement system for all managerialemployees. This has resulted in givingopportunity to the teams to set their goalsunder the overall strategic direction of thecorporation. Leaders have thus facilitatedemployees’ self-regulation by finding waysto set goals. Leaders also have helped inindividual goal setting and creating a

framework for timely performancefeedback.

Communication dynamics thatfacilitate knowledge sharing:

In 2008, BPCL earned theprestigious Association of BusinessCommunicators of India (ABCI) awards,primarily in the Web Communicationcategory, with the Intranet and CorporateWebsite Promotions winning the GoldAwards and the e-magazine, Petrozinewinning the Silver Award. This encouragescommunication as a way to enhanceknowledge; encourages a chance for allemployees to enhance participation andcontribution concerning critical activities;create effective communication of visionand purpose to all members; and createcommunication which is transparent withdirect as well indirect stakeholdersincluding the community (BPCL_Awards,2008).

Communication betweenmanagement and non-management hasbeen a critical aspect in all the threecompanies owing to presence of strongtrade unions. Over a period of time, allthe managements have been able to usethe information technology (IT) channelsto automate interaction with a view toimprove knowledge and insights with theorganizations.

Overall the communication practicesreflect both formal and informal channelsof communication “(a) fast, clear andfocused; (b) open and shared; (c)conducted in a climate of trust-a blame free



culture in which members feel free toreport error”.

Knowledge transfer that facilitatesknowledge sharing

Knowledge transfer can be seenconsidering the nature of knowledge,which is broadly classified as either tacitor explicit (Crossan, 2016). Tacitknowledge is embedded in individuals. Itstransfer requires sophisticated media andcontext. The perspective of shared vision,performance management based onbalanced scorecard and the ITcommunication infrastructure and channelsexemplify the presence of strong mediaand context for effective tacit knowledgetransfer. The organizational hierarchycapturing the formal channels ofcommunication, systems and processexemplify the ability to transfer explicitknowledge which can be codified anddocumented. Knowledge transfer hasbeen (a) taking place within and acrossorganizational boundaries; (b) circulatedfrom one individual to another; (c)providing opportunities and an informationbase for members to continue an innovationof products or services and processes; (d)observed by rapid and effective flow ofknowledge across hierarchy and storedwithin an explicit form of organizationalmemory; (e) distributed through advancedinformation technology; and (f) ensured by

the positive motivation of organizationalmembers.

Employee quality that facilitatesknowledge sharing

All three companies have identicalrecruitment and selection process. Beingcompanies in the public sector, recruitmentand selections are subject to a lot of publicscrutiny. Recruitment and selection areconducted in two routes, (a) openrecruitment and (b) campus recruitment.A rigorous process consisting of invitingapplication through public media, scrutiny,tests (both written and oral) is followedfor open recruitments. Senior members inteams visit top tier schools of technologyand management to recruit technical andmanagement graduates through campusrecruitment24. They also recruit CharteredAccountants from various centers of theInstitute of Chartered Accountants of India(ICAI). All three companies induct officersat the junior-most level of the managementhierarchy (A Grade). The growing numberof job application reflect the high qualityof talent which the oil companies are ableto attract. A systematic on-board trainingand orientation, job rotation and inter-location transfers throughout the countryfacilitate planned development of careersand broaden outlook of the talentedgraduates.

24The process has been done away with since 2014 consequent to result of a court case. Accordinglyall recruitments are done through the direct route. The short listing for technical graduates isbased on GATE score and the same for management graduates is UGC-NET score.

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Career growth is based on theindividual performance and contribution tothe common goal of sustained growth.Most of the industry’s top executivesstarted their careers as officers/ executivesin entry level, a testimony to the unlimitedopportunities for growth available to themeritorious management staff. Thisexemplifies collective knowledge,understandings, outlook, image and openminded communication; pledge to produceand transfer first-hand knowledge;interaction and facilitation; and the abilityto work in team.

Knowledge Utilization

In the following section, evidenceconcerning the ability to accumulateknowledge in a location where it can beretrieved easily for application whenneeded is discussed for the threecompanies-IOCL, HPCL, and BPCL.

Organizational memory: The keyto knowledge utilization is knowledgemanagement and organizational memory.Organizational memory is an implicit andexplicit stock of organizational knowledge.

In BPCL, the activities on the learningand growth perspective are very clearlyset out supported with due documentation.The input from the assessment anddevelopment processes are also set outclearly and documented. There exists a setof systems and processes for storing andusing both implicit and explicit knowledge.The processes capturing organizationalroutines and networks through cluster ofprofessionals support managing implicit

knowledge in particular. Knowledge as aresource base is implanted both in formsand structural routines in all threecompanies.

Further, in BPCL, the IntegratedInformation Systems (IIS) team hadlaunched “Project Aryabhatta” to redefineknowledge management strategy forBPCL for the next 3 to 5 years. Keythemes had been identified, which wouldhelp businesses achieve their targets andsustain BPCLs leadership in theknowledge management sphere in the oiland gas sector. One of the first initiativesundertaken was the implementation of thesolution to manage the supply chain (SCM)in the LPG business to optimize bulkproduct movement, product bottling,packed movements and hospitalityarrangement with other oil marketingcompanies. It has resulted in significantsavings on cost of inbound and outboundlogistics. The project has been completedin a record period of 100 days by an in-house team drawn from the business andIIS with minimum support from externalconsultants. Since April 2008, the demandprojections are being captured in the SCMsolution at the distributor level. Based onthe demand, planning projection in thesystem, all orders are getting generated inthe SAP system. Again During 2008, aBusiness Intelligence group was formed forharnessing knowledge for businessapplications. Dashboards for TerritoryManagers in the different businesses havesince been launched. The focus has beenon the knowledge needs of the customer



facing staff. With the active engagementof the businesses, Business Intelligencereports have been designed and madeavailable to the field force, thereby givingdeep insights into customer behavior andproviding up- to-date data. Thisexemplifies storage of organizationalknowledge in explicit forms such asworking guidelines and computerizeddatabanks.

Culture in organizations contributes toknowledge utilization

Over a period of time, a learningculture appears to have developed in thethree companies. In BPCL, the retailbusiness has been achieving successthrough mobilizing people and teaming atvarious levels, encouraging a culture offocused thinking and decisive actionamong staff, resorting to new andinnovative means of overcoming obstaclesin execution of plans. Because ofaggressive, marketing of its propositions,the retail business was able to achievehigher growth position in the fuels marketwith sales of 25.38 MMT during 2015-16, showing an impressive growth of 5.1%over 2014-15. Initiatives in IOCL reflectcontinuous improvement in operations andmaintenance through harnessing inherentstrengths of employees. A series of learningand development programs are in placeaimed at building critical managementskills. The calendar of learning anddevelopment activities has been integratedto the work plan of employees at all levels,thereby enhancing the level of commitmentfor competency development. The

eLearning portal with interactive learningmodules have helped HPCL to strengthenthe learning culture. The portal receivesself-nomination without having to assignemployees to learning programs, areflection of higher level of commitment forcompetency development.

Empowerment and leadership thatfacilitate knowledge utilization

The business functioning in BPCL isreflected in the decision rights and rules.For instance, all capital expenditureproposals in a retail territory need to becleared by the territory team comprisingof the territory manager, area sales officer,area engineering officer and the areaoperations in-charge. Similar team baseddecision making has been observed in thelubricants business in IOCL. In the retailstrategic business unit of BPCL, the roleof the regional manager has been limitedto facilitating the functioning of the territoryteams and managing the interface withother interdependencies. Senior managersnow have critical role in fostering use oftechnology to share knowledge for valuecreation. With this profile of delegation ofdecision rights and empowerment of theoperating units, the senior managersdevote their time to designing businesspolicies that integrate with strategicdirection.

Knowledge transfer that contributes toknowledge utilization

All three companies have employedadvanced information technology to gainand disseminate organizational knowledge.

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For instance the year 2007-08 waseventful and marked with many significantachievements in the IIS domain of BPCL.The year saw a strategic thrust being givento the future IT road map of theorganization. Besides, BPCL’s internalteam has successfully upgraded the SAPHR module to SAP ERP ECC 6.0. Theupgrade would help in the implementationof Employee Self Service (ESS)/Management Self Service (MSS) besidesseveral new age functionalities. Work hascommenced on the upgrade of the non-HR modules to ERP ECC 6.0. Oncerolled out, the SAP user base will increasesignificantly and make improvedfunctionalities available. BPCL has alsomigrated to SAP Net Weaver XIMiddleware, which would be the singlesolution utilized for interfaces withcustomers, vendors, dealers, distributorsand others. This makes organizationalknowledge freely available. Knowledgetransfer has provided an information basefor members so they can engage in productand process innovation makingorganizational knowledge useful.

Employee quality that facilitatesknowledge utilization

In HPCL, more stress has been laidon learning not only to improve thecompetences of the employees, but alsoto update their functional skills. Thelearning programs have a judicious mix ofin-house and external input. Employeesthus (a) realize their purpose and how theirefforts are aligned to organizational goals;(b) develop the skill sets such as

teamwork; (c) create workplace problemsolving and innovation competencies; and(d) enabled to lead from whatsoeverposition they hold. Similarly, in BPCL,employees are enabled to lead fromwhatsoever position they hold owing to thefocus on team based interdependentfunctioning.

Capability upgrading facilitatesknowledge utilization

In BPCL and HPCL, use of abalanced scorecard approach to strategicmanagement and performancemanagement has been the hallmark tocapability upgrading with respect toachieving productivity and growth byaddressing the issues concerning internalprocesses and capabilities in particular.Both companies have been able to accesscapability gaps and have taken timelyaction to bridge the gaps to achievesubstantial productive gains and growth.This is reflected in the strategic mapshowing a network of cause and effectrelationships with the four perspectives-financial, customer, internal process andlearning and growth. In IOCL there aresimilar efforts to benchmark best practicesand share the same across businessprocesses.

Conclusion

The analysis of the secondary data inthe three companies reveals presence ofthe significant learning organizationcharacteristics. The three stages ofdevelopment of learning organizations-“knowledge acquisition; knowledge



sharing; and knowledge utilization”-clearlyreflect in the three companies. These threestages are influenced by six dimensions-culture in organizations; empowermentand leadership; communication dynamics;knowledge transfer; employee quality andcapability upgrading. The companies havetherefore demonstrated the potential tobecome learning organizations.

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Determinants of Dividend Policy for Select InformationTechnology Companies in India: An Empirical Analysis

Souvik BanerjeeAssistant Professor,

Acharya Bangalore Business School, Bangalore, [email protected]

ABSTRACT

Determinants of Dividend Distribution are one of the hotly debated topics in corporatefinance. In this research paper top 4 Information Technology (IT) companies in Indiaare analysed over a span of 5 financial years. Three factors namely Leverage, PERatio, and Return on Equity are found to be statistically significant, as far as DividendDistribution Decisions are concerned. This is a significant addition to the theory onDeterminants of Dividend Distribution, especially in the Indian context.

Key Words: Dividend Distribution, Leverage, PE Ratio, Return on Equity

Introduction

Distribution of profit to shareholdersis termed as dividend (Pandey, 2004).Profit earned by companies can be retainedby them for future usage, or can bereturned to shareholders as dividends.Each business organization, has their ownunique circumstances to take a verystrategic decision with regards to the moneygenerated through profit, i.e. whether tokeep retain it or to return it to theshareholders. A number of conflictingtheories have also been developed withrespect to this (Alkuwari, 2009). Thepertinent in this respect to note that

“The harder we look at the dividendpicture the more it seems like a puzzle, withpieces that just do not fit together” (Black1976). There are different theories on

dividend payment, and they deal withwhether dividend payment increases ordecreases the valuation of the company.It is not difficult to identify the variableswhich affect the dividend paymentInformation Technology sector in India isone of the few areas where India becameglobally competitive. According to a reportprepared by India Brand EquityFoundation (IBEF), India approximatelycounts for sixty seven per-cent of theglobal outsourcing market of US$ 130billion. According to the industry bodyNASSCOM (National Association ofSoftware and Services Companies) data,the industry employ close to 10 millionpeople putting together both direct andindirect employment.

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Literature Review:

Krishman (1963) propagated a birdin the hand theory, regarding dividenddistribution. According to this theoryinvestors are risk averse by their verynature. Linter (1962), Gordon andShapiro (1956) got support for this theory,through their research. The underlying logicfor this behaviour was that returns fromthe equity market is uncertain, also thereis considerable information asymmetry inthe system, as a result, investors will likedividend payment, as it transfers moneyfrom the company to the investors. On theother hand ‘Agency Theory’, propagatedby Jensen (1986), argues that the dividendpayment restricts the fund available tomanagers, as far as investment in newprojects is concerned.

Lintner (1956) focussed on thebehavioural side of the policy regardingDividend Payment Decisions. Heconcluded that the managers take thedecisions to increase the proportion ofDividend Payment, only when they arecertain that the firm’s earnings haveincreased permanently. Brittain (1966)studied the Dividend Payment Policy andtax structure, over a long period (1919-1960) of time and concluded that, theprincipal determinant of Dividend PaymentPolicy decisions are Cash Flow of firms,and not the Net Profit figure. On the otherhand Fama and Babiak (1968), concludedthat Net Profit is a better determinant ofDividend Payment, than either the CashFlow figures or the Net Profit and the

Depreciation figures are taken separately,they reached this conclusion, on the basisof data analysed of 392 major firms, on atimeframe of 1946 to 1964.

In the Indian context, there are certainstudies, in this regard. For example, Raoand Sarma (1971) concluded that Lintnermodel can explain the Dividend PaymentDecisions, in industries such as coal mining,sugar, jute textiles, chemical, and cementindustries. Bhattacharya (1979) was of theview that bird in hand hypothesis is notproper. Moreover, it was furthersuggested, that the firm’s level of riskassumption affects the level of dividend.Bhat and Pandey (1994) found supportof Lintner’s model in the Indian context,which proved that Indian managersincreased the level of dividend, only whenthey became absolutely certain about thepermanent nature of the increase inprofitability.

Mishra and Narender (1996) testedthe Lintner’s model of Dividend Paymenton Public Sector Units (PSUs) in India.The study concluded that, the number ofDividend Paying PSUs compared to thetotal number of PSUs is quite small. Thestudy also came to the conclusion that, theDividend Payment Ratio (DPR), remainconstant for most of the companies, evenif the Earning per Share (EPS) figureshows a constant improvement. On theother hand Saxena (1999) found that, pastrevenue growth rate, future earningsforecast, how many shareholders acompany has, and systematic risk act as

Determinants of Dividend Policy for Select Information Technology....


the Determinants of Dividend Pay-outPolicy.

Naceur, Goaied and Belanes (2006)tested Lintner’s model in the context ofTunisian companies. This research foundthat, Tunisian firms follow a stable dividendpolicy; it also found that the primarydeterminant of Dividend Paymentdecisions is current earnings, instead ofpast Dividend Payment decisions. Husamet al (2007) examined the determinants ofcorporate dividend policy in the contextof Jordanian companies. This researchendeavour found that, the proportion ofownership by insiders and the governmentare important determinants of DividendPayment decisions; other determinants aresize, age, and profitability of the firm.Naeem and Nasr (2007) concluded on thebasis of their research on Pakistan basedcompanies, that the companies are eitherreluctant to pay dividends or pay very lessamount of dividend. The main determinantsof Dividend are profitability of thecompanies and their previous year’sDividend Payment rate.

Kuwari (2009) researched onDeterminants of Dividends in the contextof Gulf Co-operation Council (GCC)countries, this particular study found that,the primary intention of paying dividend isreduction of agency cost. This study alsofound that, the firms do not look for longterm target as far as Dividend Pay-outRatio is concerned. The study concludedthat, Dividend Pay-out Ratios have strongpositive correlation with Ownership

Structure, Firm Size, Firm Profitability, andnegative correlation with the LeverageRatio.

Objective of the Research:

In this research endeavour, theobjective is to check what determines theDividend Payment decisions in the listedIndian companies. The primary objectiveof this research is to understand the effectof Size, Profitability, PE Ratio, LeverageRatio, and Liquidity Ratio of the companieson Dividend Payment decisions of thefirms.

Hypotheses:

The null hypotheses of the researchare depicted belowH01- Size of the company has a no effect

on the dividend policy.H02- Profitability of the companies has no

effect on the dividend policy.H03- PE Ratio of the companies has no

effect on the dividend policy.H04- Leverage Ratio of the companies

has no effect on the dividend policy.H05- Liquidity Ratio of the companies has

no effect on the dividend policy.

Research Methodology:

Variables Used:

In this research endeavour DividendPay-out Ratio of the firm is taken as thedependent variable, whereas Size,Profitability, Risk, Leverage, and Liquidityof the firm are taken as the independentvariables.

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The Size of the firm is computed asthe natural logarithm of the book value ofthe firm’s Total Assets. This method is inaccordance with Joseph (2001).

Profitability of the firm is measuredby three parameters, i.e. Return on Equity(ROE), Return on Assets (ROA), Earningsper Share (EPS).ROE = Net Profit after Preference

Dividend/Book Value of Equity CapitalROA = Net Profit/Total AssetsEPS = Net Profit/ Number of Equity

shares outstanding. This is taken in termsof Indian Rupees.The Risk is measured by PE Ratio.PE Ratio= Market Price of One Share/

Earning per Share

Leverage =Total Debt (Short Term Debtas well as Long Term Debt)/TotalShareholder’s Fund.

Liquidity = Current Ratio (CR) = CurrentAssets/Current Liabilities

Dividend Pay-out Ratio (DPR) = CashDividend/Net Profit *100

Profitability, Risk, Leverage, andLiquidity are taken in accordance to themethod adapted by Mehta (2012).

Data Used:

The source of the data for thisresearch has been Capital Market andSecurities Exchange Board of India (SEBI)databases. The companies are chosenfrom the Cement sector in India. Theperiod of the study, which is taken intoaccount is five years period starting from1st. January, 2010 to 31st. December,2014. The sample selection framework isin accordance to Gupta and Banga(2010). In total 4 top listed IT companiesare taken into account. These 4 companiesare the top 4 IT companies listed in Indianstock exchanges, in terms of revenue. Thecompanies considered for analysis in thisstudy are TCS Ltd., Infosys Ltd., WiproLtd., and HCL Technologies Ltd.

Results:Model Summary

Model R R Square Adjusted R Square

Std. Error of the Estimate

1 0.404a 0.163 0.202 33.05 2 0.543b 0.295 0.219 32.87 3 0.576c 0.332 0.302 32.98 4 0.692d 0.479 0.442 33.01 5 0.712e 0.507 0.483 33.07

a. Predictors: (Constant), PE Ratio, CR, LEV, EPS, ROA, LTA, ROEb. Predictors: (Constant), PE Ratio, CR, LEV, EPS, ROA, ROEc. Predictors: (Constant), PE Ratio, CR, LEV, EPS, ROEd. Predictors: (Constant), PE Ratio, LEV, EPS, ROEe. Predictors: (Constant), PE Ratio, LEV, ROE



Table: Coefficients

Model Unstandardized Coefficients

Standardized Coefficients

T Sig. Collinearity Statistics

B Std. Error Beta Tolerance VIF (Constant) 0.014 3.452 0.406 .532 PE Ratio 1.604 0.456 -0.224 4.346 0.001 0.674 1.548 LEV 3.402 0.345 0.354 5.462 0.005 0.542 1.688 ROE 4.065 0.455 0.456 7.080 0.002 0.754 1.243

Dependent Variable: DPR

The step wise regression model, usedhere, gradually removed the insignificantpredictors one by one. The final model,with three predictors namely PE Ratio,LEV, and ROE can explain 50.7% of thevariations in the Dividend Paymentdecisions. This is quite an improvementover 20.7% explaining capability of theinitial model, as depicted by the R-Squarevalues.

The fitted regression equation is:

DPR = 0.014 + 1.604[PE Ratio] +3.402[LEV] +4.065[ROE]

All the three predictors namely, PERatio, LEV, and ROE are statisticallysignificant, even at 5% level. All the threefactors have positive influence on thedependent variable (DPR).

Conclusions

Firms with higher PE Ratio are highgrowth firms, so it is natural that these firmspay higher dividend. Similarly higherLeverage for firm, results in higher portionof the profit is left for the equity holders.So it is no wonder that, firms with higherLeverage have higher DPR. ROE isintrinsically related, to return of the equity

holders, so higher ROE results in higherDPR. These findings are in line with theexisting literature. This study was doneon a period, when Indian equity marketssaw some of the exciting phases, andtouched new all-time high. This researchcovered the 4 biggest IT servicescompanies in India. This should be animportant addition to the existing literatureon Dividend Payment decisions, especiallyin the context of the Indian capital market.

References:

Al-Twaijry, A.A. (2007).Dividendpolicy and Payout Ratio: Evidence fromthe Kuala Lumpur Stock Exchange. TheJournal of Risk Finance, Vol. 8, No. 4,pp. 349-363.

Al-Kuwari, D. (2009).Determinantsof the Dividend Payout Ratio ofCompanies Listed on Emerging StockExchanges: The Case of the GulfCooperation Council (GCC) Countries.Global Economy & Finance Journal, Vol.2, No. 2, pp. 38-63.

Al-Malkawi, H. (2007).Determinants of Corporate DividendPolicy in Jordan: An Application of theTobit Model. Journal of Economics and

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Administrative Sciences, Vol.23, No.2,pp.44-70.

Asif, Rasool and Kamal(2011).Impact of Financial Leverage onDividend Policy: Empirical Evidence fromKarachi Stock Exchange-ListedCompanies. African Journal of BusinessManagement, Vol. 5, No.4, pp.1312-1324.

Amidu, M. and Abor, J. (2006).Determinants of Dividend Payout Ratiosin Ghana. Journal of Risk Finance, Vol 7,pp.136-145.

Brittain, J. A. (1966). The TaxStructure and Corporate Dividend Policy.American Economic Review, Vol. 54,No.3,pp.1-10,

Husam – A. N. and Al-Malkawi(2007). Determinants ofCorporate Dividend Policy in Jordon: AnApplication of the Tobit Model. Journalof Economic and AdministrativeSciences Vol.23,No.2, pp.44-70.

Kania, S.L. and Bacon,F.W.(2005).What factors motivate thecorporate dividend decision? AmericanSociety of Business and BehavioralSciences E-Journal, Vol. 1, No. 1,pp.97-107.

Kanwal, A. and Kapoor, S.(2008).Determinants of Dividend Payout

Ratios-A Study of Indian InformationTechnology Sector. International ResearchJournal of Finance and Economics, Issue15, pp.63-71.

Mehta, A. (2012). An EmpiricalAnalysis of Determinants of DividendPolicy- Evidence from the UAECompanies. Global Review of Accountingand Finance, Vol.3,No.1,pp.18-31

Miller, M. H. and Modigliani, F.(1961). Dividend Policy, Growth and theValuation of Shares.The Journal ofBusiness, Vol.34, No.4, pp.411-433.

Naceur, S.B., Goaied, M. andBelanes, A.(2006).In the Determinantsand Dynamics of Dividend Policy.International Review of Finance, Vol.6,No.1-2, pp.1-23.

Naeem, S., and Nasr, M. (2007).Dividend Policy of Pakistani Firms: Trendsand Determinants. International Reviewof Business Research Papers, Vol. 3,No.3, pp.242-254.

Pandey, M. (2004) FinancialManagement . Vikas publishing housePrivate Limited.

Ross, S.A., Westerfield, RW andJaffe, J.F. (2009). Corporate FinanceFundamentals, Eighth. Edition, McGrawHill.



Organisational Conflict Literature: A Review

Rabinarayan SamantaraAssociate Professor at Shivaji College, University of Delhi

[email protected]

Nidhi SharmaAssistant Professor at Shivaji College in the University of Delhi

[email protected]

ABSTRACT

The present research involves a review of organisational conflict literature in anintegrated framework. In addition to exploring such basic issues related toorganisational conflict as conceptual meaning and definitions of conflict, antecedentconditions or determinants of conflict, desirability of conflict, etc., the paperspecifically focuses upon the internal dynamics of a conflict episode. Moresignificantly, the paper highlights the fact that conflict can have either functional orpathological effects depending upon its management. The findings of various researchstudies analysed point to the fact that the levels of conflict as well as the styles ofhandling conflict can be suitably varied in different organisational situations witha view to enhancing organisational effectiveness.

Key Words: Conflict, Dynamics, Antecedents, Effects, Management

Introduction

Organisational conflict has been afascinating subject of study for mostresearchers and practitioners. While mostresearchers agree on the inevitability ofconflict in organisations as well as on theneed to manage them constructively, theliterature relevant to organisational conflictis somewhat segmented (Thomas, 1976)and is specialised according toorganisational areas e.g. labour-

management relations (Stagner, 1956;Stagner & Rosen, 1965), line-staffcontroversies (Dalton, 1950; McGregor,1957), superior-subordinate conflicts(Evan, 1965; Burke, 1970; Renwick,1975), inter-departmental disputes(Lawrence & Lorsch, 1967), etc. At thispoint, it must be emphasised, however,that the dynamics underlying conflictbehaviour in one area have immense

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relevance to other areas as well.Moreover, a large volume of researchundertaken outside the boundaries oforganisations (e.g. experimental gaming,small group research, social conflict,international relations etc.) has yieldedconcepts and insights of great potentialrelevance to the study of conflict inorganisational settings. The contribution ofsuch outside research to availableknowledge regarding industrial andorganisational conflict cannot be lost sightof. In view of the aforesaid facts, an attempthas been made in the present paper toprovide a more fundamental and generictreatment of conflict covering allorganisational areas.

Conceptual Meaning of Conflict

In the Behavioural Sciences, the term‘conflict’ has no single, clear referent.According to the psychologists, the termoften denotes incompatible responsetendencies within an individual e.g.“approach-avoidance conflict” (Levinger,1957), “role conflict” (Kahn et.al., 1964),etc. In the sociological parlance, on theother hand, attention is focused on thattype of conflict that occurs between socialunits i.e. between individuals, groups ororganizations. These conflicts are knownas inter-personal, inter-group or inter-departmental (Wall & Callister, 1995) orinter-organisational conflicts respectively.

There is no consensus amongresearchers even on a specific definitionof conflict. It has been variously definedby different authors. In a review of conflict

literature, Fink (1968) found a largenumber of divergent usages, including 14different criteria for simply distinguishingconflict from competition. Within theorganisational conflict literature, Pondy(1967) noted a number of divergentdefinitions ranging over antecedentconditions, emotions, perceptions andconflictful behaviour. Rather thanattempting to agree that one of thesespecific definitions was really conflict,Pondy (1967) recommended that conflictshould be used in a generic sense to includeall these phenomena.

In the absence of any consensus onthe conceptual meaning of conflict, it is butquite natural that the term ‘conflict’ hasbeen variously defined by different socialscientists. Nevertheless, a few commonlygiven definitions of conflict which providesome indications as to the meaning ofconflict may be presented here. Accordingto Robbins (1974), Conflict is a processin which an effort is purposefully made byone person or unit to block another thatresults in frustrating the attainment of theother’s goals or the furthering of his or herinterests. Thomas (1976) views conflict asthe process which begins when one partyperceives that the other has frustrated oris about to frustrate some concern of his.Katz & Kahn (1978) view that twosystems (persons, groups, organisations,nations) are in conflict when they interactdirectly in such a way that the actions ofone tend to prevent or compel someoutcome against the resistance of the other.According to Chung & Megginson (1981),

A Review of Organisational Conflict Literature


conflict refers to the struggle betweenincompatible or opposing needs, wishes,ideas, interests or people; it arises whenindividuals or groups encounter goals thatboth parties cannot obtain satisfactorily.Kabanoff (1986) opines that Conflict isthe result of incongruent or incompatiblerelationships between members of a groupor dyad. According to Roloff (1987),Organisational conflict occurs whenmembers engage in activities that areincompatible with those of colleagueswithin their network, members of othercollectivities, or unaffiliated individuals whoutilize the services or products of theorganisation. Hellreigel, Slocum, &Woodman (1992) define conflict as anysituation in which incompatible goals,attitudes, emotions and behaviours lead todisagreement or opposition between twoor more parties. Steers & Black (1994)define Conflict as the process by whichindividuals or groups react to other entitiesthat have frustrated or are about to frustratetheir plans, goals, beliefs or activities.

Some authors also include theenvironment as a constituent element of theinter-relationship (Applefield, Huber, &Moallem, 2000; Coy & Woehrle, 2000;Demmers, 2006; Lederach, 2000).According to Mayer (2000) conflict is “afeeling, a disagreement, a real or perceivedincompatibility of interests, inconsistentworldviews, or a set of behaviors.” Conflicthas also been referred to as differencesbetween individuals or groups relating tointerests, beliefs, needs and values (DeDreu, Harinck, & Van Vianen, 1999).

Rahim (2002) conceptualizes conflictas “an interactive process manifested inincompatibility, disagreement ordissonance within or between socialentities (i.e. individual, group, organisation,etc.)”. According to Rahim, conflict mayoccur when:

1. A party is required to engage in anactivity that is incongruent with his orher needs or interests.

2. A party holds behavioural preferences,the satisfaction of which is incompatiblewith another person’s implementationof his or her preferences.

3. A party wants some mutually desirableresource that is in short supply, suchthat the wants of everyone may not besatisfied fully.

4. A party possesses attitudes, values,skills, and goals that are salient indirecting his or her behaviour but areperceived to be exclusive of theattitudes, values, skills, and goals heldby the other(s).

5. Two parties have partially exclusivebehavioural preferences regarding theirjoint actions.

6. Two parties are interdependent in theperformance of functions or activities.

Thus, on the whole, it can beconcluded that a conflict situation isprimarily the result of differences onaccount of issues related to a task or inter-personal relationships (Ongori, 2010). Itis “the substantive issue in which the tension

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is rooted” (De Dreu, Harinck, & VanVianen, 1999). Task conflicts result fromdisagreements within the group or amonggroups as to the content of the task orhow it should be performed (procedurefor accomplishing goals) whereasrelationship conflicts are a result ofinterpersonal incompatibilities andmanifest as tension, animosity amonggroup members (Jehn, 1995).

The Dynamics of Conflict

It was observed by Pondy (1967)and Walton and Dutton (1969) that conflictin a dyadic relationship tends to occur incycles. In other words, a conflictrelationship between two individuals orother social units can be analyzed as asequence of conflict episodes. Eachconflict episode is partially shaped by theresults of previous episodes and in turn,leaves an aftermath that affects the courseof succeeding episodes.

Five stages of a conflict episode wereidentified by Pondy (1967) as can be seenfrom Figure 1. These stages are (1) latentconflict (antecedent conditions), (2)perceived conflict (cognition), (3) feltconflict (affective stages e.g. stress, tension,anxiety, hostility, etc.), (4) manifest conflict(conflictful behaviour ranging from passiveresistance to overt aggression), and (5)conflict aftermath (outcomes/consequences). Pondy (1967)concentrated on three basic types of latentconflict: (1) competition for scarce

resources (2) drives for autonomy and (3)divergence of sub-unit goals. The nextimportant stage of a conflict episodeinvolves the cognitive states of individualsi.e. their perception or awareness ofconflictful situations. It may be noted thatconflict may sometimes be perceived whenno conditions of latent conflict exist, andlatent conflict conditions may be presentin a relationship without any of theparticipants perceiving the conflict. Feltconflict refers to the affective state ofindividuals involved in a conflict situation(e.g. stress, tension, hostility, anxiety, etc.).Manifest conflict results when an individualmember of an organization consciouslyengages in behaviour that blocks anothermember’s goal achievement. Manifestconflict may mean any of several varietiesof conflictful behaviour, ranging frompassive resistance to overt aggression.

It may be reemphasized that eachconflict episode is nothing but one of asequence of such episodes that constitutethe relationships among organizationparticipants. If the conflict is genuinelyresolved to the satisfaction of allparticipants, the basis for a morecooperative relationship may be laid. Onthe other hand, if the conflict is merelysuppressed but not resolved, the latentconditions of conflict may be aggravatedand explode in more serious form until theyare rectified or until the relationshipdissolves. This legacy of a conflict episodeis here called “conflict aftermath”.



Figure 1The Dynamics of a Conflict Episode

Source: Pondy, L. R. (1967). Organisational Conflict: Concepts and models.Administrative Science Quarterly, (12), 296-320.

Antecedents to Organizational Conflict

As it was pointed out at the beginning,the literature on organisational conflict hasbeen somewhat compartmentalized,dealing mostly with certain specializedorganisational arenas. So it is but quitenatural that the organisation theorists haveattempted to analyze the determinants oforganisational conflict in the context ofinterest-group conflicts, inter-personalconflict, inter-departmental disputes, andso on. However, such isolated attemptsmade to deal with casual factors relatedonly to a narrow segment of organisationalconflict at one time have only stood in the

way of development of a comprehensivetheory of conflict and conflictmanagement.

Conflict situations in organizationsmay be triggered due to several factors.In the present section, an endeavour hasbeen made to integrate the determinantsof organisational conflict as emphasisedby sociologists and other behaviouralscientists. The various determinants orunderlying sources of conflict discussedare: competition for scarce resources,mutual task dependence, organisationaldifferentiation, identity concerns,performance criteria and rewards, barriers

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to communication, ambiguities, personalityattributes, hierarchical differences inprestige, power and knowledge, roledissatisfaction, drive for autonomy, andneed for tension release.

Competition for Scarce Resources

Conflict potential exists amonginterest groups where there is adiscrepancy between aggregated demandsof the competing parties and the availableresources (Thibaut & Kelley, 1959). Thereis often conflict between labour andmanagement over their respective share ofenterprise profits; departmental units oftencompete for scarce organisationalresources such as physical space,equipment, manpower, capital funds andcentralised services (e.g. typing, draftingetc.); and so on. Walton (1965) describessuch conflicts as complex relationshipswhich involve both integrative(cooperative) and distributive sub-processes. Each party to the conflict hasan interest in making the total resource aslarge as possible, referred to as“expanding the pie” (Pruitt, 1981) or“creating value” (Lax & Sebenius,1986; Olekalns, 1997) but also in securingas large a share of them as possible foritself – a process referred to as “claimingvalue” (Lax & Sebenius, 1986; Olekalns,1997).Conflict due to scarce resources isalso referred to as the Bargaining Modelof conflict due to the dynamics involved(Pondy, 1967). The integrative sub-process is largely concerned with jointproblem solving to maximize outcomes(Pruitt, 1981), and the distributive sub-

process with strategic bargaining.

Mutual Task Dependence

Task dependence is the extent towhich two functional units operating at thesame hierarchical level depend upon eachother for assistance, information,compliance or other coordinative acts inthe performance of their respective tasks.Important types of interdependence matterare: (1) common usage of some serviceor facility, (2) sequence of work orinformation flow prescribed by task orhierarchy, and (3) rules of unanimity orconsensus about joint activity. This typeof conflict occurs mostly among groups orindividuals engaged in a functionalrelationship and is also referred to as theSystems Model of conflict (Pondy, 1967).Dutton & Walton (1966) indicate thattask-dependence not only provides anincentive for collaboration, but alsopresents an occasion for conflict and themeans for bargaining overinterdepartmental issues. As the sub-unitsoften have different sets of active goals(Simon, 1964) or different preferenceorderings for the same sets of goals, amplescope for inter-unit conflict exists.

Organizational Differentiation

It is commonly acknowledged thatuniform tasks require a bureaucratic typeof organization whereas non-uniform tasksrequire a human relations organization. Inthe present day society, most large-scaleorganizations have to deal with bothuniform and non-uniform tasks, and mostcombine these contradictory forms of



social relations into a professional model.Litwak (1961) regards the inclusion ofthese contradictory forms as a source oforganisational conflict.

Lawrence & Lorsch (1967)emphasized the effects of differentiation onorganisational conflict. Where each of thefunctional units (such as production, salesor research) performs a different type oftask and copes with a different segmentof the environment, the units will developsignificant internal differences amongthemselves with respect to their: (a) degreeof structure; (b) interpersonal orientation;(c) time orientation; and (d) goalorientation. Lawrence & Lorsch believethat this four-fold differentiation is largelya response to the degree of uncertainty inthe relevant environments of differentdepartments. They found that suchdifferentiation between organisational unitsposed an obstacle to integration orcoordinative processes, thus yieldingample scope for inter-unit conflict.

Identity Concerns

Identity concerns (Mayer & Louw,2009) of individuals in terms of their selfconcepts such as feelings of beingknowledgeable, confident, experienced,etc. have a profound influence onorganisational conflicts. In his conceptualanalysis of inter-organisational decisionmaking, Walton (1972) views that theidentity concerns of organizations are ofcrucial significance in the choice ofstrategies (to be made for making jointdecisions) as well as their potential

consequences. If the identity needs of twoparties are compatible (i.e. identityreinforcement), the parties are more likelyto resort to problem-solving and exploittheir integrative potential with a view tomaximizing the joint gains available to them.However, when the preferred identities arein conflict (i.e. identity conflict), the partiesare more likely to engage in bargainingbehaviors and obtain sub optimaldecisions.

Performance Criteria and Rewards

Inter-departmental conflict ariseswhen each of the interdependent units hasresponsibility for only one side of adilemma embedded in organisationaltasks. Dutton and Walton (1966) notedthat the preference of production units forlong, economical runs conflicted with thepreference of sales units for quick deliveryto good customers. Dalton (1959)observed that staff units valued changebecause that was one way they couldprove their worth, whereas line units valuedstability because change reflectedunfavorably upon them. While suchdilemmas underlying inter-departmentaldifferences are inherent in the total task,the reward system (Alper, Tjosvold, &Law, 2000)designed by management mayeither increase or dissipate their divisiveeffects. The more the reward systememphasizes the separate performance ofeach department rather than theircombined performance, the greater is thelikelihood of conflict to occur.

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Barriers to Communication

Research findings have indicated thatsemantic differentials can impedecommunication essential for cooperation.This challenge is especially heightened inthe current globalized economicenvironment with diverse interactingcultures (Mayer & Louw, 2009). Straus(1964) observed that differences in thetraining of purchasing agents and engineerscontributed to their conflicts. March &Simon (1958) stated that organisationalchanneling of information introduced bias.In an empirical investigation of the causesof inter-departmental conflicts, Walton andDutton (1969) used three measures ofconflict, typically characteristic of thebargaining type of decision processes (a)distrust; (b) overstatement of departmentalneeds; and (c) lack of consideration ofanother department’s needs. It waspostulated that reducing the levels of theabove three conflict variables wouldpromote problem-solving behaviors. Theresults of the study revealed thatcommunication-inhibiting factors weremost significantly related to the compositemeasure of the conflict variables.

Ambiguities

Ambiguity contributes to inter-departmental conflict in many differentways. Difficulty in assigning credit or blamebetween two departments increases thelikelihood of conflict between units. Dalton(1959) attributed part of the line-staffconflict he observed to the fact thatalthough improvements required

collaboration between line and staff units,it was later difficult to assess thecontribution of each unit. Similarly, Duttonand Walton (1966) found that conflictsarose between production and sales unitswhen it could not be determined as towhich department made a mistake. Lowroutinisation and uncertainty of means togoals increase the potential for inter-unitconflict. This proposition is supported byZald (1962) in his study of inter-unitconflict in five correctional institutions.Ambiguity in the criteria used to evaluatethe performance of a unit may also createtensions, frustration, and conflict (Kahn et.al., 1964).Personality Attributes

A review of experimental studies ledWalton & McKersie (1965) to observethat certain personality attributes such ashigh authoritarianism, high dogmaticism,and low self-esteem increase conflictbehaviour. Kahn et.al. (1964) found thatin objective role conflict, persons whoscored lower on neurotic anxiety scalestended to depart more from “cordial,congenial, trusting, respecting andunderstanding relations”. A person with anarrow range of behavioral skills is lesslikely to exploit the integrative potential fullyin an inter-unit relationship. He may eitherengage in bargaining to the exclusion ofcollaborative problem-solving, orwithdraw or become passive (Walton &McKersie, 1966). Dalton (1959) andThompson (1960) found that personaldissimilarities such as education, socialpatterns, values, background, age, etc.



lowered the probability of inter-personalrapport between departmentalrepresentatives, and in turn, decreased theamount of collaboration between theirrespective units.

Hierarchical Differences in Prestige,Power and Knowledge

Inter-unit conflict is produced bydifferences in the way units are rankedalong various dimensions of organisationalstatus such as direction of initiation ofaction, prestige, power and knowledge.As reported by Seiler (1963), when thesequential pattern of initiation and influencefollowed the status ordering amongdepartments, it was acceptable to all.However, where a lower-status unitneeded to direct a higher-status unit, theresult was break-down in inter-unitrelationships. In his study of correctionalinstitutions, Zald (1962) offered anexplanation of the effects of relative power.With mutual task dependence anddivergent values among the three unitsstudied, conflict occurred as expectedbetween units that are unable to controlthe situation and those perceived as beingin control. Inconsistency between thedistribution of knowledge amongdepartments and the lateral influencepatterns are also a source of conflict.Lawrence & Lorsch (1967) observed thatthe more the influence of each unit isconsistent with key competitive factors, themore effectively will the inter-unit issuesbe resolved.

Role Dissatisfaction

Role dissatisfaction stemming from avariety of sources can be a source ofconflict. Dalton (1959) found that blockingstatus aspirations in staff members led toconflict with other units. In these cases,the professionals felt that they lackedrecognition and opportunities foradvancements. Similarly, where one unitinternally reports on the activities of anotherunit, resentment can occur, as with staffunits reporting to management onproduction irregularities (Dalton, 1959).Argyris (1964) and Dalton (1959) bothhave argued that role dissatisfaction andconflict would follow where one unit withthe same or less status set standards foranother.

Drive for Autonomy

Superior-subordinate conflicts in anorganization usually arise becausesuperiors attempt to control the behaviourof subordinates, and subordinates resistsuch control. The subordinate is likely toperceive conflict when the superiorattempts to exercise control over activitiesoutside the “zone of indifference” (i.e. overactivities perceived to be outside thelatter’s jurisdiction), and the superiorperceives conflict when his attempts atcontrol are thwarted. A typicalbureaucratic reaction to subordinateresistance is the substitution of impersonalrules for personal control. Such impositionof rules defines the authority relation moreclearly and robs the subordinate of theautonomy provided by ambiguity. The

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subordinate, therefore, perceives himselfto be threatened by and in conflict with hissuperiors, who are attempting to decreasehis autonomy.

Need for Tension Release

Another important underlying sourceof organisational conflict is the human needfor tension release (Coser, 1967; Pondy,1967). It has been observed inorganizations that the inconsistent demandsof efficient organisational and individualgrowth often create anxieties within theindividual (Argyris, 1957). Anxiety mayalso result from identity crisis from extra-organisational pressures. Individuals needto ventilate these anxieties in order tomaintain internal equilibrium. In fact, latentconflicts of various types providedefensible excuses to individuals fordisplaying their anxieties against suitabletargets.

Effects of Conflict

The traditional view of conflictassumed that conflict is essentially negativein character and is detrimental to theattainment of organisational objectives.However, the contemporary managementthinkers conceive of conflict as amultidimensional concept, i.e. bothnegative and positive in character(Tjosvold & Chia, 1989). Van de Vliertand colleagues (1999) stated that “conflictcan be handled in either a constructive ordestructive way”. Despite this recentconceptualisation of conflict, few studiesare available in which the researchers havetried to distinguish between constructive

conflict and destructive conflict as well astheir respective effects on organisationaloutcomes. Research studies have showna negative association between“disharmony” and the quality of employeerelationships and between “disharmony”and new product success in terms ofinnovation performance. Conversely,harmonious or cooperative relationshipshave been found to be associated withimproved performance. Dyer and Song(1998) specifically modeled constructiveconflict and found that it leads to innovationsuccess. Menon and colleagues (1996)found indirect linkages betweendysfunctional (destructive) conflict andmarket performance for new productintroductions. Song, Dyer, & Thieme(2006) found a strong positive associationbetween constructive conflict andinnovation performance and a strongnegative association between destructiveconflict and innovation performance.

Guetzkow and Gyr (1954) suggestedtwo dimensions of conflict in theorganisational context – one consisting ofdisagreements relating to task issues andthe other consisting of emotional orinterpersonal issues which lead to conflict.These two dimensions of conflict havebeen given a variety of labels – e.g.substantive and affective conflicts(Guetzkow & Gyr, 1954), task andrelationship conflicts (Pinkley, 1990; Jehn,1997), cognitive and affective conflicts(Amason, 1996), and task and emotionalconflicts (Ross , 1989). In recent years,several researchers have empirically



investigated these two dimensions ofconflict. They suggest that the distinctionbetween these two types of conflict is validand that they have differential effects at theworkplace.

It may be noted that affective conflictrefers to inconsistency in interpersonalrelationships which occurs whenorganisational members become awarethat their feelings and emotions regardingsome of the issues are incompatible.“Summarily stated, relationship conflictsinterfere with task-related effort becausemembers focus on reducing threats,increasing power, and attempting to buildcohesion rather than working ontask…The conflict causes members to benegative, irritable, suspicious, andresentful” (Jehn, 1997).

Research evidence has shown thataffective conflict impedes groupperformance by limiting information –processing ability and cognitive functioningof group members and antagonisticattributions of group members’ behaviour(Amason, 1996; Baron, 1997; Jehn, 1995;Jehn et. al., 1999; Wall and Nolan, 1986).Affective conflicts are detrimental to theperformance of the team as decisions areunlikely to be based on the merits of thecase and backed by solid commitment forimplementation (DeChurch, Hamilton, andHaas, 2007). Such conflicts could resultin dysfunctional teams, and reducedperformance and cohesion (Jehn andChatman, 2000; Sullivan and Feltz, 2001;Wheaton, 1974). Affective conflicts

diminish group loyalty, workgroupcommitment, intent to stay in the presentorganisation, and job satisfaction(Amason, 1996; Jehn, 1995, 1997; Jehnet. al., 1999). These result from higherlevels of stress and anxiety and conflictescalation.

Substantive conflict occurs when twoor more organisational members disagreeon their task or content issues. Substantiveconflict is very similar to issue conflictwhich occurs when two or more socialentities disagree on the recognition of andsolution to a task problem. A studyconducted by Jehn (1995) revealed that amoderate level of substantial conflict isbeneficial as it stimulates discussion anddebate which helps groups to attain higherlevels of performance. As observed byJehn (1997), “Groups with an absence oftask conflict may miss new ways toenhance their performance while vey highlevels of task conflict may interfere withtask completion”.

Evidence indicates that substantiveconflict is positively associated withbeneficial outcomes in organisations.Groups that report substantive conflict areable to make better decisions than thosethat do not (Amason, 1996; Cosier &Rose, 1977; Fiol, 1994; Putnam, 1994,Schweiger, Sandberg, & Raga, 1986).Substantial conflict encourages greaterunderstanding of the issues, which leadsto better decisions. Such conflict promotesfrank and open discussions potentiallyleading to innovative solutions, and also

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reduces possibilities of complacency,status quo and tendency towards “groupthink” (Gero, 1985; Turner & Pratkanis,1997). In addition, it has been noted thatgroups that report substantive conflictgenerally have higher performance levels.Substantial conflict can improve groupperformance through better understandingof various viewpoints and alternativesolutions (Bourgeois, 1985; Eisenhardt &Schoonhoven, 1990; Jehn, 1995, 1997;Jehn et. al., 1999). It should be noted,however, that the beneficial effects ofsubstantial conflict on performance havebeen found only in groups performing non- routine tasks, but not in groupsperforming standardized or routine tasks.

Desirability of Conflict

The human relations movement, withits emphasis upon the personal andorganization costs of conflict, implied thatconflict was to be avoided or eliminated(Kelly, 1970; Litterer, 1966). Thistraditional notion of conflict essentiallyresulted from the misconception thatconflict is inherently distasteful, destructiveand pathological to organisationalobjectives. Although Kahn et.al. (1964)considered some conflict as essential forthe continued development of mature andcompetent human beings; they stated that“common reactions to conflict and itsassociated tensions are often dysfunctionalfor the organization as an ongoing socialsystem and self-defeating for the personin the long run. Similarly, Boulding (1962)recognizes that some optimum level of

conflict and associated personal stress andtension are necessary for progress andproductivity but he portrays conflictprimarily as a personal and social cost.Even the more dispassionate theory oforganization proposed by March & Simon(1958) defines conflict conceptually as a“breakdown in the standard mechanism ofdecision-making”, i.e. as a malfunction ofthe system.

Attitudes towards conflict appear tohave changed over the years. A morebalanced view of conflict has emerged inthe literature, which recognizes its costsand benefits, its dangers and promises.More and more social scientists are comingto realize and to demonstrate that conflictby itself is no evil, but rather aphenomenon which can have constructiveor destructive effects, depending upon itsmanagement. As stated by Thomas(1976), “with the recognition that conflictcan be both useful and destructive, theemphasis has shifted from the eliminationof conflict to the management of conflict”.Now there is a more general recognitionthat inter-personal and inter-group conflict,if managed properly, serves many usefulfunctions in the organization (Coser, 1956;Blake & Mouton, 1964; Deutsch, 1971;Hoffman, Harburg, & Maier, 1962;Pondy, 1967, Thompson, 1960). Theseuseful functions of conflict have beendescribed by Thomas (1976) in a succinctmanner, as given hereunder.

First, a moderate degree of conflictmay not necessarily be viewed as a cost



by the parties involved. It is increasinglyrecognized that too little stimulation ortension may be as unpleasant to a personas an excess of it. Under conditions of lowtension, people may welcome or seek outthe novelty of divergent opinions, thechallenge of competition, and at times,even the excitement of open hostilities.Deutsch (1971) mentions that conflictsstimulate interest and curiosity, and that“conflict is part of the process of testingand assessing oneself and as such, maybe highly enjoyable as one experiences thefull and active use of one’s capacities”.

Second, the confrontation ofdivergent views often produces ideas ofsuperior quality (Pelz, 1956; Hoffman,1959; Hoffman & Maier, 1961; Hall,1971). Divergent views must be basedupon different considerations, differentinsights and different frames of reference.Disagreements may thus lead an individualto take cognizance of factors which he hadpreviously ignored, and help him to arriveat a more comprehensive and balancedview of things.

Third, aggressive behaviour inconflict situations is not necessarilyirrational or destructive. Indeed, theaggressive pursuit of apparently conflictinggoals by two parties may well lead toconstructive outcomes. March & Simon(1958) and Litterer (1966) state that suchconflict tends to initiate a search for waysof reducing the conflict. Since one party’sgains are not necessarily another party’slosses, the parties may succeed in finding

new arrangements which benefit them both(Follett, 1941) as well as the organization.

A few other useful side effects ofconflict have also been noted by the socialscientists. Litterer (1966) noted thatconflict within an organization may callattention to systemic problems whichrequire change. Hostility between groupsalso tends to foster internal cohesivenessand unity of purpose within groups (Coser,1956; Blake & Mouton, 1961). Finally,power struggles often provide themechanism for determining the balance ofpower, and thus adjusting the terms of arelationship according to these realities(Coser, 1956).

Management of Conflict

It has been widely recongised thatconflict by itself should not be regardedas a negative phenomenon withinorganisations. Rather, there is ampleresearch evidence to show that conflict canhave positive or negative effects withinorganisations depending upon itsmanagement. Here, it would be significantto note that studies on the management oforganisational conflict have generallymoved in two directions. Someresearchers have attempted to measure theamount or intensity of conflict at variousorganisational levels in terms of stress,anxiety, hostility, tension, competition, etc.,and also explore the sources of suchconflict. The underlying implication of thesestudies is that a moderate amount ofconflict may be maintained for enhancingorganisational effectiveness by altering the

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sources of conflict. As Brown (1983) hassuggested, “conflict management canrequire intervention to reduce conflict ifthere is too much, or intervention topromote conflict if there is too little”.However, it should be pointed out that therelationship suggested by Brown asmentioned above, seems to be appropriateonly for substantive, but not for affectiveconflict. As discussed previously,Guetzkow & Gyr (1954) havedifferentiated between substantive andaffective conflict, and have suggested thatsubstantial conflict consisting ofdisagreements relating to tasks, policiesand other organisational issues is positivelyassociated with beneficial outcomes inorganisations. On the other hand, affectiveconflict consists of emotional orinterpersonal issues, and it has been foundto impede group performance as well asother measures of organisationaleffectiveness. Thus, while substantialconflict is to be maintained at anappropriate level within organisations,affective conflict should be discouraged asmuch as possible on account of itsdysfunctional effects. The instrumentdeveloped by Jehn (1994) can be used tomeasure affective and substantive conflictsat the group level as well as at theinterpersonal and intergroup levels.

The second approach to themanagement of conflicts has been used byresearchers to relate various styles ofhandling interpersonal conflict and theireffects on organisational objectives. Infact, a number of research studies have

been conducted on the relationshipbetween styles of handling conflict anddifferent dimensions or aspects ofindividual, interpersonal, interdepartmentalor organisational effectiveness. At aconceptual level, Blake and Mouton(1964) suggested that individuals ororganisations placing greater emphasis onconfrontation or problem – solvingbehaviour would have effectiveinterpersonal relations. In an empiricalstudy, Lawrence & Lorsch (1967)examined the use of confrontation, forcingand smoothing in six organisations. Theirresearch findings indicated that whileconfrontation or problem – solvingbehaviour seemed to be clearly related toorganisational effectiveness, it was alsonoted that the absence of smoothing andthe presence of forcing as a back – upmode (to confrontation) were related toeffective organisational functioning.Another study conducted by Burke (1969)involved examining the five methods ofresolving conflicts (as proposed by Blakeand Mouton) in the context of superior –subordinate relations.

It was found that confrontation orproblem – solving emerged as the mosteffective method of conflict resolution, andit was followed by smoothing behaviours.In addition, it was noted that withdrawingand forcing behaviours were negativelyrelated to interpersonal effectiveness whilecompromising was not at all related toeffectiveness. In the context ofinterdepartmental relations, Thomas(1971) found that managers’ satisfaction



with interdepartmental negotiations variedpositively with confrontation and smoothingbehaviour by their counterparts in otherdepartments, and negatively with forcingand withdrawing. Another study conductedby Aram et. al. (1971) within research anddevelopment teams indicated that teamcollaboration was positively related toseveral measures of member self–actualization and well–being. By contrast,Dutton and Walton (1966) observed thatmanagers involved in competitive inter–departmental relations experiencedconsiderable frustration and anxiety.

It must be pointed out that the studiesavailable on the relationship betweenconflict management strategies andorganisational or individual effectivenesshave been mostly conducted in Americanindustrial settings, which may not be sopertinent to Indian industrial situations. Inthe Indian context, a case study conductedby Sharma and Samantara (1994) on therelative effectiveness of conflict resolutionmethods in terms of their effects onorganisational effectiveness aspects (i.e.productivity, adaptability and flexibility) ofa computer–manufacturing organisationrevealed that confrontation or problem–solving was the most effective method ofconflict resolution, and it was followed bysmoothing behaviour. Although thecompromising and withdrawing modelswere somewhat positively related toeffectiveness, their effects seemed to berelatively insignificant. It was also notedthat the forcing mode of resolving conflictsemerged as the ineffective one.

Concluding Observations

In the preceding analysis, thecontributions of leading theoreticians aswell as researchers on the subject oforganisational conflict have been puttogether in an integrated framework. Infact, the present research has beenimmensely revealing in that it focuses oncertain fundamental issues related toorganisational conflict such as its internaldynamics, its antecedent conditions, andthe changing view of conflict and conflictmanagement in recent times. It is hopedthat the ideas and insights gained from thisanalysis will help the practicing managersto take a more pragmatic view of conflictsexisting at various organisational levels andalso seek to realize their potential benefitsto the organization in terms of individualas well as group development,organisational innovation and creativity,higher performance levels, etc., throughbetter management practices.

On the basis of our analysis ofresearch studies conducted on therelationship between conflict managementstrategies and several aspects oforganisational effectiveness, we canconclude that the problem–solving strategyor behaviour may be viewed as the mosteffective way of managing conflicts inorganisations, and it may be supplementedby the use of smoothing behaviour. Thus,there is a need to encourage managers toenhance their utilization of these twoconflict management strategies or methods,especially in the context of the emerging

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scenario of increasing education, skills andhorizon of understanding of industrialemployees. However, the research findingshave also amply demonstrated that forcingbehaviours are rather counter–productivein the management of organisationalconflicts. In view of the emergence ofindustrial democracy, the present–daymanagers can no longer afford to ignorethe needs and aspirations of theirsubordinates, or ignore the latter’ssuggestions and viewpoints on a varietyof organisational issues. In fact, thesubordinate employees do have thenecessary ability to understand and analysethe intricacies related to the work situation,and also get involved in organisationaldecision–making. Thus, the managersshould make a reduction in their utilizationof forcing behaviours in resolving ormanaging conflicts with their subordinates.

In the end, it must be pointed out thatthe above suggestions made regarding therelative efficacy or effectiveness of conflictmanagement strategies may have immensepractical relevance to industrial situationsand conditions. However, still there is aparamount need to conductcomprehensive research studies acrossindustries, especially in the Indian context,with a view to obtaining research findingsthat would have greater validity as well asgeneral applicability to the Indian industrialenvironment. In addition, we should notbe oblivious of the fact that there are alsoseveral situational variables such asemployees’ education and skills, theireconomic conditions, organisational

climate, social norms, etc. which do playa significant role in the choice of conflictmanagement strategies as well as theirattendant consequences on differentaspects of organisational effectiveness.Therefore, the managers must try tounderstand and analyse the situationalvariables before choosing the appropriatestyle of conflict management to be used ina given situation. Although different notablecontingency approaches to conflictmanagement (Thomas, 1972, 1976; Derr,1978; Pareek, 1982; Rahim, 1985; Rahimet. al., 2001; Rahim & Bonoma, 1979)have analysed different sets of situationalvariables affecting the choice of conflictmanagement strategies as well as theirpotential outcomes or effects, there is aspecific need to conduct empirical researchstudies regarding the efficacy oreffectiveness of conflict managementstrategies in the context of variousorganisational as well as psycho–socialvariables.

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Key Processes Adopted For Transportation ManagementSystem In Small Scale Firms

Vipul Chalotra

Assistant Professor, Dept. of CommerceUniversity of Jammu, 182121, Udhampur campus

[email protected]

ABSTRACT

Transportation management system occupies an important place in the contemporaryarena as it assists in the smooth, exact and qualitative movement of goods to theaspired destinations. The present research work highlights some of the key processesadopted for transportation management system in 44 small scale firms operating inDistrict Udhampur of J&K State. The research framework was scrutinized by empiricalanalysis of first hand/primary data collected from the respective small scale firmsmanagers. The variables taken into preview were “Planning & decision”,“Transportation execution”, “Measurement” and “Transportation follow-up”. Theresults of the ranking table revealed that the variable “Planning & decision making”attained rank, “Transportation execution” attained rank second. Third rank isobtained by the variable “Measurement” and rank fourth was gained by the variable“Transportation follow-up”. Further, the results of the linear hierarchal regressionrevealed that proper planning and decision making leads to effective transportationmanagement system in small scale firms.

Key Words: Transportation Management System (TMS), Small Scale Firms,Transportation.

Introduction

Transportation today had madepossible the existence of world markets interms of globalisation, liberalisation. Themarket/marketing world exists because oftransportation which further adds on bytechnically developing physical andelectronic linkages. In present world themajor costs contributing towards the priceof the products are because of thepackaging, warehousing, transportation

which amounts a lot in the overall costs.So transportation assists in transporting theraw materials etc to the place of productionand even transporting the finished goodsto the final consumption point which in lieuassists in exchange of goods and servicesof home and host countries.

A transportation management system(TMS) is basically a compartment ofsupply chain management that is entirely

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concerned with effective transportationmanagement and transport operationswhich in turn is effectual subset of anenterprise resource planning system. ATMS lies between the enterprise resourceplanning and the warehouse/distributionunit. An effective transportationmanagement system offers effectualrouting solutions with the optimal decisionsregarding both procurement and shipping/transportation orders. These solutions offerbest route/mode to be decided by the userwith the lease possible cost. Once the userselects the best provider, an electronic loadtendering is generated in order to trace thetrack for executing the optimizedtransportation/shipment with the carrierselected and further to support settlementprocess. Effective transportationmanagement systems manage four keyprocesses of transportation managementwhich were considered for the presentresearch purpose also:

• Planning and decision making –Under this the transportationmanagement system will provide themost efficient transportation schemeswhich will include low transportationcost, fewer stops in order to ensurequality, short lead-time, flowsregrouping coefficient, etc.

• Transportation Execution – Underthis the transportation managementsystem will execute the transportationplan while taking into considerationfew points such as carrier rateacceptance, chosen carrier availability,carrier dispatching, EDI etc.

• Transport follow-up – Under this thetransportation management system willstart following the transportationoperation: tracing of transport eventtime to time (shipping from A, arrivalat B, customs clearance, etc.), editingof reception, custom clearance,invoicing and booking documents,sending of transport alerts (delay,accident, non-forecast stops…)

• Measurement – Under this thetransportation management system willprescribe a key performance indicator(KPI) which will report every functionfor transport like productivity inmonetary terms, productivity inoperational terms, e.g. shipping units/order or weight/load.

So, Transportation ManagementSystem (TMS) entirely focus on transportlogistics which further facilitate connectionsbetween an Order Management System(OMS) and the Warehouse/ Distributionunit (DU). The various other functionswhich are performed by an effectivetransportation management system are:Planning and optimizing of terrestrialtransport rounds, Inbound and outboundtransportation mode, transportationprovider selection, Arrangement of carrieri.e. rail, air and roadways etc, Real timetransportation tracking, and vehicle loadwith Route optimization etc.

LITERATURE REVIEW

The transportation managementresearch framework eas promotes in theafter the mid-1980s where the firms

Key Processes Adopted For Transportation Management....


enhanced from the traditionaltransportation models to moresophisticated network approaches withthe effectiveness in terms of cost i.e. costeffective movement of goods across spaceand time (Knowles, 1993 and Black, 2001& 2003). A well reputed transportationmanagement system had to abide by manyrules, norms, standards so that goods couldbe effectively sent from the place ofproduction to consumption which isconsidered as the right place in order tomeasure transportation effectivenesswhich in lieu is encompassed with timelysatisfying customers’ demands. The baseof business efficiency and economy lies inthe hands of transportation managementsystem adopted by businesses whichexpands other functions of logistics also.An effective transportation managementsystem even brings in businesscompetitiveness (Giuliano and Narayan,2003).

Effective transportation managementsystem even pertains and includes all thefunctions and sub-functions into a systemof shipment of goods effectively and safelyto the requested destination which includescost minimization, service maximisation tousers and numerous other logistics benefits.The transportation management system,once put in practice or once executed, mustbe successfully managed (Ewing, et al.,2003). The present study takes intoconsideration the various key processesadopted by transpiration managementsystem in 44 small scale firms operating inDistrict Udhampur of J&K State.

HYPOTHESIS FORMULATION

The following was the mainhypothesis of the study:

Hyp1: Proper planning anddecision making leads to effectivetransportation management system insmall scale firms.

Obj1: The objective is to analysethat whether proper planning anddecisions assists in formulating anddeveloping effective transportationmanagement system in small scalefirms..

RESEARCH DESIGN ANDMETHODOLOGY

The research methodology adoptedfor the study is as follows:

Sampling and data collection

The sample for the study was chosenfrom the small scale firms operating inDistrict Udhampur of Jammu & KashmirState. There were registered firms underthe DIC (District Industries Centre)Udhampur that were found operating underthis pursuit. This area was chosen forresearch because of the research scarcityin this area. Proper and first handinformation were collected from these 44small scale units. There were total of 49registered units under DIC out of whichfive of these were found non functional dueto one reason or other. The 44 smallmanufacturing units were furthercategorised into similar ten lines ofoperations which is mentioned as: cement(8), pesticide (3), steel (3), battery/lead/

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alloy (5), menthol (2), guns (2), conduitpipes (2), gates/grills/varnish (5), maize/atta/dal mills (3) and miscellaneous (11).The miscellaneous (not falling in anycategory) category embraced 11 smallscale units namely M/s Supertech Industry,M/s Luxmi Electronics Works, Shaj NathVanaspati Ltd., M/s Aditiya Cables, Polesand Transformers, Shankar Lime Industry,M/s Unique Carbon Industries, M/s B.STraders, M/s Vijay Candles, EverestHealth Care Products, M/s J.K PetroChemicals, M/s Ajay Ice Factory. Theprimary data from these small scale 44units were collected with the help of censusmethod.

Research instrument

Research instrument stands for dataconstruction form. For the present studythe research instrument was self developedwith the assistance of existing literature andits content validity was checked byconsulting the same with proficientacademicians, industrialists, surveyors,research scholars. The research instrumentcontained questions regarding the generalinformation of the respondents and someof transportation management system. Thedata collection form which is named asquestionnaire comprised of rankingquestions, dichotomous questions and five-point Likert scale, where 1 stands forstrongly disagree and 5 for strongly agree.Here in this study, ranking tables and linearregression were used in order to make thestudy elaborative for drawing meaningfulinferences.

Data collection

The data for the present researchwere collected with the assistance of selfdeveloped research instrument namelyquestionnaire. The first hand informationbasically known as primary informationwere collected with the help of thedeveloped instrument. The response wascollected from the small scale firms’managers who stood as respondents of theresearch. The response was gatheredtaking into preview the time feasibility ofthe respondents and duly approachingthem for the research purpose. All ethicalconsiderations were followed whilecollecting response from respectiverespondents. The data was collectedthrough census method. The secondarysource of data was also taken intoconsideration and reliable information wascollected by different sources: internet,books and empirical papers from referredjournals. In the present study only and onlyRanking tables were used for elicitingconsequential inferences.

DATA ANALYSIS AND RESULTSINTERPRETATION

The data so collected from small scalefirms’ managers were portrayed in tabularform to make it more meaningful andunderstandable. Table 1 lays out the meanranking of factors laying down the keyprocesses adopted for transportationmanagement system in these small scaleoperational units functioning in DistrictUdhampur of J&K State. In DistrictUdhampur, under DIC (District Industries



Centre) segregated into two maincategories namely SIDCO & SICOP,there are 44 small manufacturing firmsoperating which had been mainly classifiedinto ten lines of operations i.e. the smallscale manufacturing units having analogoustypes of businesses are categorised intohomogeneous headings namely cement(8), pesticide (3), steel (3), battery/lead/alloy (5), menthol (2), guns (2), conduitpipes (2), gates/grills/varnish (5), maize/atta/dal mills (3) and miscellaneous (11).The factors that were enlisted in order totrack down the key processes adopted fortransportation management system in thesefirms are “Planning & decision”,“Transportation execution”,“Measurement” and “Transportationfollow-up”. Overall, the variable “Planning& decision making” attained rank one

among all the variables as this rank isaccorded by almost all managers of thesesmall scale registered firms.“Transportation execution” attained ranksecond. Third rank is obtained by thevariable “Measurement” and rank fourthwas gained by the variable “Transportationfollow-up”. Overall mean response to thefactors in descending order are 2.1(Planning & decision making), 2.2(Transportation execution), 2.5(Measurement) and 2.9 (Transportationfollow-up) respectively. The variablesconnoted that the processes so adoptedby small scale firms justifiable fortransportation management system. Thefollowing figure represents the variousvariables that determine the key processesfor effective transportation managementsystem:

Figure showing the key processes with its various factors.

The ranking of the key processesadopted for transportation managementsystem in small scale firms is done asfollows:

Cements

The cements sector among the 44small scale firms is the largest sector witheight prominent small scale firms named

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M/s Associated Cements, Zenith CementIndustry, Shivalik Cements, M/sContinental Cement Industry, WullarCements, M/s Shri Nath Industry andUma Cement Industry being found enlistedas small scale firms. As far as mean rankingassociated with the key processes adoptedfor transportation management system inthese small scale firms is concerned: thesesmall scale firms accorded rank one to“Transportation execution” as it acted asthe main factor for transportationmanagement. “Planning & decisionmaking” was accorded rank two byalmost all the small scale units as accruedto be the second important factor to beconsidered if transportation managementneeds to be effective. “Measurement” wasgiven rank three by these small scalecements firms and “Transportation follow-up” was positioned with rank four. Thusthe ranking made by these firms ensuredthat “Transportation execution” is theprominent factor as it acted as the main/key process for effective transportationmanagement.Battery/ Lead/ Alloy

The second category of the industryis given the name Battery/Lead/Alloybecause of the similar or allied productsproduced and sold by this category offirms. The total number of units under thiscategory was five and they wererespectively named as Radha Industries,Pilot Batteries, Durga Batteries, SurakshaBatteries and Avtar Batteries. The meanranking approved by these smallcompetent units firms was: “Measurement”was given rank one by all the small scale

firms operating as it stood as the mainfactor that make transportationmanagement effective. “Transportationexecution” was accorded rank twoamongst all the variables. The variable“Transportation follow-up” was endorsedrank three as it was that factor whichdetermines transportation efficiency of thesmall firms. Accordingly, “Planning &decision making” awakened with rank fouras represented in the table 1.

Pesticides / Insecticides

The third main category encirclingsmall scale firms is Pesticides/Insecticides.The three main well known marketoriented firms operating under this categorywere: M/s Dhanuva Agritech Ltd., SafexChemicals Ltd. and M/s ModernInsecticides. The mean ranking renderedby these small scale industries managersin respect of the key process adopted foreffective transportation management inthese small scale units is that these smallscale firms fixed rank one to“Transportation execution” as it divulgesthat it determines the transportationeffectiveness other areas also. Rank twowas accorded to the factor “Planning &decision making” as it stood as the secondmain factor that assists in makingtransportation strategies effective in nature.Rank three was followed by the variable“Transportation follow-up” as it gives someglimpses of transportation effectiveness.The last and the fourth rank is devoted to“Measurement” which could be their lastreason for adopting transportationprocesses.



Conduit pipes

M/s Pee Kay Products andRukhmani plastics were the two smallscale competitive units under this category.As far as mean ranking associated withthe key processes adopted fortransportation management system in thesesmall scale firms is concerned, the variable“Planning & decision making” attainedrank one amongst all the prominent factorsunder this group periphery.“Transportation execution” applauded withrank two and was given due recognitionby conduit pipes. “Measurement” wasallotted rank three. “Transportation follow-up” was agreed at rank four. The meanrankings of the variables ensured that thesesmall scale operating units puts emphasison Planning & decision making as to bemain variable that seems to be the first stepin deciding transportation management.

Menthol

The menthol group comprised of M/s Harikripa Perfumes Pvt. Ltd. and M/sMahadurga which were again quitecompetent small scale units. The rankingrelated to the process adopted foreffective transportation management ofthese small units is as follows:“Transportation follow-up” was given rankone,

“Measurement” emanated with rank two,

“Transportation execution” was given rankthree, and “Planning & decision making”was accorded rank four.

Guns

This category comprised of only twocompetitors namely M/s Gulab GunFactory and M/s Hunter Gun factory. Thetwo units were in use of effectivetransportation medium. Both of themdispensed rank one to “Transportationfollow-up” followed by “Planning &decision making” with rank two.“Transportation execution” was bestowedwith rank three by both the units and“Measurement” was consigned rank four.The ranking is displayed in table 1.

Steel

M/s Maha Luxmi Steel Fabricators,M/s Faqir Chand Sanak Raj and M/sGupta Furniture were the three small scalecompeting units operating under thisIndustrial category. As far as mean rankingassociated with the key processes adoptedfor transportation management system inthese small scale firms is concerned, thevariable “Planning & decision making” wasassigned rank one as it was declared tobe first step in order to decide for effectivetransportation management.“Transportation execution” ranked two,“Measurement” ranked three and“Transportation follow-up” ranked fourrespectively.

Gates/ Grills/ Varnish/ Paint

This group was found to be theadvanced group and is the main group ofthe research. M/s Balaji Industries, M/sWazir Engineering Works, ISROProducts, Shakti Engineering Works and

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M/s Everest Paints were found operatingunder this category. As far as mean rankingassociated with the key processes adoptedfor transportation management system inthese small scale firms is concerned, rankone by this group of small scale firms wasdevoted to “Planning & decision making”.“Measurement” was given rank two bythese units, “Transportation execution” wasfixed with rank three, and “Transportationfollow-up” was aligned rank fourrespectively (Table 1).

Atta/ Maize/ Dal mills

Shalimar Floor Mills, M/s UdhampurDal Mills and M/s Sharda Enterprises werethe three strong competitors operatingunder this esteemed category. So far asmean ranking associated with the keyprocesses adopted for transportationmanagement system in these small scalefirms is concerned, “Planning & decisionmaking” was consigned rank one by allthe three strong competitors operatingunder the category. “Transportationexecution” was elected for rank two bythese small industrial units. “Measurement”was accorded rank three. “Transportationfollow-up” was mentored rank four. Itimplies that atta/maize/dal mills small scalefirms mainly concentrated on Planning &decision making for effective determinationof transportation management processesas depicted in table 1.

Others (Miscellaneous)

There were eleven small scalecompetitive units operating under thismiscellaneous category. The names of the

units that were operating under this groupwere M/s Supertech Industry, M/s LuxmiElectronics Works, Shaj Nath VanaspatiLtd., M/s Aditiya Cables, M/s UniqueCarbon Industries, M/s B.S Traders, Polesand Transformers, M/s Vijay Candles,Everest Health Care Products, ShankarLime Industry, M/s J.K Petro Chemicalsand M/s Ajay Ice Factory. So far as meanranking associated with the key processesadopted for transportation managementsystem in these small scale firms isconcerned, “Planning & decision making”was accorded rank one by most of thesmall scale units and “Measurement” wasgiven rank two by almost all the small scaleunits operating, “Transportation execution”was appropriated rank three and“Transportation follow-up” was consignedrank four representing the actual figure ofvariables that enlists the key processesadopted for transportation management.

Overall, all the small scale firmsoperating under SIDCO & SICOPrepresents Planning & decision making asthe key process for effective transportationmanagement, followed by Transportationexecution, subsequently after thatMeasurement and at the end byTransportation follow-up (Table 1).

Regression analysis

In order to test the researchhypothesis, regression analysis wasconducted for measuring the impact ofproper planning and decision making ontransportation management system. Thelinear regression model summary table



(Table 2) enticed with the value of R to be.780 which assures 78% alliance betweendependent variable and the independentvariable i.e. between proper planning anddecision making on transportationmanagement system, R2 value of .700denotes that 70% of variation intransportation management system couldbe explained from the independentvariable (proper planning and decisionmaking). Adjusted R2 value .609 connotesthe increase in the value of R2 , if anytimeanother independent variable is added tothe existing independent variable. Furtherbeta value reveals significant relationshipof independent variable with dependentvariable as depicted by its value. Changein R square is also found to be significantwith F-values significant at 5% confidencelevel. Thus the hypothesis “Properplanning and decision making leadsto effective transportationmanagement system in small scalefirms” is accepted as represented by itssignificance level p < .05.

CONCLUSION

Transportation is considered as ofvital importance as it assists in developingdiverse markets, reduces remotenessamong different countries and augmentsInternational trade. It assists in the properdistribution of wealth. The transportnetwork routes are essential in a countryas it assists in the economic progress. Thepresent research connotes the meanranking associated with the key processesadopted for transportation management

system in the small scale. The study takesinto consideration some variables/factorswhich are quite appealing andpraiseworthy as portrayed in the existingliterature. The variable taken for thepresent study in order to identify the keyprocesses adopted for transportationmanagement system are: “Planning &decision making”, “Transportationexecution”, “Measurement” and“Transportation follow-up”.

The present research conducted onthe small scale 44 firms divulges the meanranks accorded to these four variables bythe mangers of these small scale firms. Theranking were related to the key processesthat were adopted by these small scalefirms regarding effective transportationsystem. Overall, the variable “Planning &decision making” is assigned rank one byalmost all managers of small manufacturingfirms. “Transportation execution” attainedrank second. Third rank is acquired by“Measurement” and rank four was stoodby “Transportation follow-up”.

Overall mean response to the factorsin descending order are 2.1 (Planning &decision making), 2.2 (Transportationexecution), 2.5 (Measurement) and 2.9(Transportation follow-up) respectively.Further linear regression model summaryresults exposed that proper planning anddecision making leads to effectivetransportation management system in smallscale firms as contoured by the respectivesignificant values.

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Limitations of the study

The study is conducted in one areai.e. area specific, so the results of this studycannot have universal application as therecould be diversity in other areas accordingto the environment and other factorsassociated.

The results depend upon the responseof the respective respondents. Anyhow allthe efforts were applied to make the studyfree from any sort of biasness but the ruleof subjectivity cannot be avoided.

Future research

Similar type of research could beconducted in large scale firms. Futureresearch can also be conducted by takinginto preview more than four factors thatassists in mentoring the key processesadopted for effective transportationmanagement system. Moreover, the similarstudy could be considered for medium andlarge scale units operating in the other partsof the country.

Table 1: Key Processes Adopted For Transportation ManagementSystem in Small Scale Firms

Units/Factors

Transportation execution

Planning & decision making

Measurement Transportation follow up

Cement 2 (I) 2.2 (II) 2.3 (III) 3.2 (IV) Battery/Lead/Alloy 2.6 (II) 3 (IV) 1.8 (I) 2.7 (III) Pesticides/Insecticides 1 (I) 2.3 (II) 3 (IV) 2.6 (III) Conduit pipes 2 (II) 1 (I) 3 (III) 4 (IV) Menthol 3 (III) 4 (IV) 2 (II) 1 (I) Guns 2.5 (III) 2.5 (II) 3 (IV) 2 (I) Steel 2.6 (II) 1 (I) 2.6 (III) 4 (IV) Gates/Grills/Varnish/Paint 2.6 (III) 2.2 (I) 2.4 (II) 2.8 (IV) Atta/Maize/Dal mills 2 (II) 1 (I) 3.3 (III) 3.6 (IV) Others (Miscellaneous) 2.5 (III) 1.9 (I) 2 (II) 3.2 (IV) Mean & Rank 2.2 (II) 2.1 (I) 2.5 (III) 2.9 (IV)

Note: Where 1 denotes “highest rank” and 4 denotes “lowest rank”

Table 2: Regression Model Summary

Model R R2 AdjustedR2 Std. Error of Estimate

F value ANOVA

Sig. level

β t Sig. level

1. .780 .700 .609 .2001 42.546 .000 .758 9.524 .011

a. Predictors: (Constant), Proper planning and decision makingb. Dependent Variable: Effective Transportation Management System



REFERENCES

Black, W.R. (2001), “An UnpopularEssay on Transportation”, Journal ofTransport Geography, Vol. 9, pp. 1-11.

Black, W.R. (2003), Transportation:A Geographical Analysis, New York,Guilford.

Ewing, R., Pendall, R. and Chen, D.(2003), “Measuring Sprawl and itsTransportation Impacts”, TransportationResearch Record, No. 1831, pp. 175-183.

Field, A.P. (2004), “DiscoveringStatistics Using SPSS for Windows”,London, Sage Publications, pp. 619-672.

Giuliano, G. and Narayan, D. (2003),“Another Look at Travel Patterns andUrban Form: The US and Great Britain”,Urban Studies, Vol. 40, pp. 2295-2312.

Knowles, R. (1993), “ResearchAgendas in Transport Geography for the1990s”, Journal of TransportGeography, Vol. 1, pp. 3-11.

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