STRATEGIC MANAGEMENT
Note: Solve any 8 out
of 10.
1. Write
a descriptive note on the historical evolution of strategic management and
business policy of India
2. Describe
some of the important characteristics of environment and demonstrate how a
strategist can be understand it better by dividing into external and internal
components and general and relevant environment.
3. Select
a high-profile industry such as the IT or entertainment industry. Identify the
major competitors and analyse these reports to identify the types of
corporate-level strategies being used by these firms.
4. Which
types of regionalisation strategies are adopted by firms? Explain and state
your opinion on whether Indian companies should adopt regionalisation
strategies.
5. Describe
the different ways in which digitalisation can help organisations in achieving
cost leadership, differentiation and focus.
6. Critically
comment on the use of corporate portfolio analysis for examining the objective
factors involved in exercising a strategic choice.
7. Describe
the manner in which an organisation can align its resource allocation with its
strategies.
8. Discuss
the need for stakeholder relationship management. Also describe the technique
of stakeholders’ analysis.
9. Assume
that there is a company which operates in a competitive industry in India
10. Which
individuals and groups participate in the process of evaluation, what
difficulties do they face and how do they overcome them?
1. How would operations strategy for a
service industry be different if any from that for a manufacturing industry
? (Its an example & explain)
2. Consider the following two mutually
exclusive projects. The net cash flows
are given below :
|
YEAR
|
NET CASH FLOWS FROM PROJECT A
|
NET CASH FLOWS FROM PROJECT B
|
|
0
|
- Rs.
1,00,000
|
- Rs. 1,00,000/-
|
|
1
|
+ Rs. 30,000
|
+ Rs. 15,000/-
|
|
2
|
+ Rs. 35,000
|
+ Rs. 17,500/-
|
|
3
|
+ Rs. 40,000
|
+ Rs. 20,000/-
|
|
4
|
+ Rs. 45,000
|
+ Rs. 22,500/-
|
|
5
|
|
+ Rs. 25,000/-
|
|
6
|
|
+ Rs. 27,500/-
|
|
7
|
|
+ Rs. 30,000/-
|
|
8
|
|
+ Rs. 32,500/-
|
If the desired rate of return is
10% which project should be chosen ?
3. What are the levels of aggregation in
forecasting for a manufacturing organization?
How should this hierarchy of forecasts be linked and used ?
4. How would forecasting be useful for
operations in a BPO (Business processes outsourcing) unit ? What factors may be important for this
industry ? Discuss .
5. A good work study should be followed by
good supervision for getting good results.
Explain with an example.
6. What is job evaluation ? Can it be alternatively used as job ranking
? How does one ensure that job
evaluation evaluates the job and not the man ?
Explain with examples ?
7. What is the impact of technology on
jobs ? What are the similarities between
job enlargement & job rotation
? Discuss the importance of training in
the content of job redesign ? Explain
with examples ?
8.
What is an internet connectivity
? How is it important in to days
business would with respect to materials requirement planning &
purchasing. Explain with examples ?
9. Would a project management organization
be different from an organization for regular manufacturing in what ways. Examples.
10. How project evaluation different from
project appraisal? Explain with
examples.
MARKETING MANAGEMENT
Attempt
Only Four
NO.
1
MARKETING SPOTLIGHT- NIKE
Nike
hit the ground running in 1962. Originally known as Blue Ribbon Sports, the
company focused on providing high-quality running shoes designed especially for
athletes by athletes. Founder Philip Knight believer that high-tech shoes for
runners could be manufactured at competitive prices if imported from abroad.
The company’s commitment to designing innovative footwear for serious athletes
helped it build a cult following among American consumers. By 1980, Nike had
become the number-one athletic shoe company in the United States.
From the start, Nike’s marketing
campaigns featured winning athletes as spokespeople. The company signed on its
first spokesperson, runner Steve Prefontaine, in 1973. Prefontaine’s irreverent
attitude matched Nike’s spirit. Marketing campaigns featuring winning athletes
made sense. Nike saw a `pyramid of influence’’ – it saw that product and brand
choices are influenced by the preferences and behavior of a small percentage of
top athletes. Using professional athletes in its advertising campaigns was both
efficient and effective for Nike.
In 1985, Nike signed up then-rookie
guard Michael Jordan as a spokesperson. Jordan was still an up-and-comer, but
he personified superior performance. Nike’s bet paid off: The Air Jordan line
of basketball shoes flew off the shelves, with revenues of over $100 million in
the first year alone. Jordan also helped build the psychological image of the
Nike brand. Phil Knight said. ``Sports are at the heart of American culture, so
a lot of emotion already exists around it. Emotions are always hard to explain,
but there’s something inspirational about watching athletes push the limits of
performance. You can’t explain much in 60 seconds, but when you show Michael
Jordan, you don’t have to.’’
In 1988, Nike aired its first ads in
the ``Just Do It’’ ad campaign. The $20 million month-long blitz-subtly
encouraging Americans to participate more actively in sports-featured 12 TV
spots in all. The campaign challenged a generation of athletic enthusiasts to
chase their goals; it was a natural manifestation of Nike’s attitude of
self-empowerment through sports. The campaign featured celebrities and
noncelebrities. One noncelebrity and featured Walt Stack, an 80-year-old
long-distance nunnery, running across the Golden Gate bridge as part of his
morning routine. The ``Just Do It’’ trailer appeared on the screen as the
shirtless Stack ran on a chilly morning. Talking to the camera as it zoomed in,
and while still running. Stack remarked, ``People ask me how I keep my teeth
from chattering when it’s cold.’’ Pausing, Stack matter-of-factly replied, ‘’I
leave them in my locker.’’
As Nike began expanding overseas to
Europe, it found that its American style ads were seen as too aggressive. The
brand image was perceived as too fashion-oriented. Nike realized that it had to
``authenticate’’ its brand in Europe the way it had in America. That meant
building credibility and relevance in European sports, especially soccer. Nike
became actively involved as a sponsor of soccer youth leagues, local clubs, and
national teams. Authenticity required that consumers see the product being used
by athletes, especially by athletes who win. The big break came in 1994, when
the Brazilian team (the only national team fro which Nike had any real
sponsorships) won the World Cup. The victory led Nike to sign other winning
teams, and by 2003 overseas revenues surpassed U.S. revenues for the first
time. Nike also topped $10 billion in sales for the first time in the year as
well.
Today, Nike dominates the athletic
footwear market. Nine of the 10 top-selling basketball shoes, for example, are
Nikes. Nike introduces hundreds of shoes each year for 30 sports – averaging
one new shoe style every day of the year. Swooshes abound on everything from
wristwatches to golf clubs to swimming caps.
Discussion Questions
1. What
have been the key success factors for Nike?
2. Where
is Nike vulnerable? What should it watch out for?
3. What recommendations would you make to
senior marketing executives going forward? What should they be sure to do with
its marketing?
NO. 2
MARKETING SPOTLIGHT-
DISNEY
The
Walt Disney Company, a $27 billion-a-year global entertainment giant,
recognizes what its customer’s value in the Disney brand: a fun experience and
homespun entertainment based on old-fashioned family values. Disney responds to
these consumer markets. Say a family goes to see a Disney movie together. They
have a great time. They want to continue the experience. Disney Consumer
Products, a division of the Walt Disney Company, lets them do just that through
product lines aimed at specific age groups.
Take the 2004 Home on the Range movie.
In addition to the movie, Disney created an accompanying soundtrack album, a
line of toys and kid’s clothing featuring the heroine, a theme park attraction,
and a series of books. Similarly, Disney’s 2003 Pirates of the Caribbean had a
theme park ride, merchandising program, video game, TV series, and comic books.
Disney’s strategy is to build consumer segment around each of its characters,
from classics like Mickey Mouse and Snow White to new hits like Kim Possible.
Each brand is created for a special age group and distribution channel. Baby
Mickey & Co. and Disney Babies both target infants, but the former is sold
through department stores and specialty gift stores whereas the latter is a
lower-priced option sold through mass-market channels. Disney’s Mickey’s Stuff
for Kids targets boys and girls, while Mickey Unlimited targets teens and
adults.
On TV, the Disney Channel is the top
primetime destination for kids age 6 to 14, and Playhouse Disney is Disney’s
preschool programming targeting kids age 2 to 6. Other products, like Disney’s
co-branded Visa card, target adults. Cardholders earn one Disney ``dollar’’ for
every $ 100 charged to the card, up to the card, up to $75,000 annually, then
redeem the earnings for Disney merchandise or services, including Disney’s
theme parks and resorts, Disney Stores, Walt Disney Studios, and Disney stage
productions. Disney is even in Home Depot, with a line of licensed kid’s room
paint colors with paint swatches in the signature mouse-and-ears shape.
Disney also has licensed food products
with character brand tie-ins. For example, Disney Yo-Pals Yogurt features
Winnie the Pooh and Friends. The four-ounce yogurt cups are aimed at
preschoolers and have an illustrated short story under each lid that encourages
reading and discovery. Keebler Disney Holiday Magic Middles are vanilla sandwich
cookies that have an individual image of Mickey, Donald Duck, and Goofy
imprinted in each cookie.
The integration of all the consumer
product lines can be seen with Disney’s ``Kim Possible’’ TV program. The series
follows the action-adventures of a typical high school girl who, in her spare
time, saves the world from evil villains. The number-one-rated cable program in
its time slot has spawned a variety of merchandise offered by the seven Disney
Consumer Product divisions. The merchandise includes:
- Disney Hardlines – stationery,
lunchboxes, food products, room décor.
- Disney Softlines – sportswear,
sleepwear, daywear, accessories.
- Disney Toys – action figures,
wigglers, beanbags, plush, fashion dolls, poseables.
- Disney Publishing – diaries, junior
novels, comic books.
- Walt Disney Records – Kim Possible
soundtrack.
- Buena Vista Home Entertainment –
DVD/video.
- Buena Vista Games – Game Boy Advance.
``The
success of Kim Possible is driven by action – packed storylines which translate
well into merchandise in many categories,’’ said Andy Mooney, chairman, Disney
Consumer Products Worldwide. Rich Ross, president of entertainment, Disney
Channel, added: ``Today’s kids want a deeper experience with their favorite
television characters, like Kim Possible. This line of products extends our
viewer’s experience with Kim, Rufus, Ron and other show characters, allowing
(kids) to touch, see and live the Kim Possible experience.
Walt Disney created Mickey Mouse in
1928 (Walt wanted to call his creation Mortimer until his wife convinced him
Mickey Mouse was better). Disney’s first feature-length musical animation, Snow
White and the Seven Dwarfs, debuted in 1973. Today, the pervasiveness of Disney
product offerings is staggering – all in all, there are over 3 billion entertainment-based
impressions of Mickey Mouse received by children every year. But as Walt Disney
said. ``I only hope that we don’t lose sight of one thing – that it was all
started by a mouse.’’
Discussion Questions
1. What
have been the key success factors for Disney?
2. Where
is Disney vulnerable? What should it watch out for?
3. What recommendations would you make to
their senior marketing executives going forward? What should it be sure to do
with its marketing?
NO.
3 MARKETING SPOTLIGHT- HSBC
HSBC
is known as the ``world’s local bank.’’ Originally called the Hong Kong and
Shanghai Banking Corporation Limited, HSBC was established in 1865 to finance
the growing trade between China and the United Kingdom. HSBC is now the
second-largest bank in the world, serving 100 million customers through 9,500
branches in 79 countries. The company is organized by business line (personal
financial services; consumer finance; commercial banking; corporate investment
banking and markets; private banking), as well as by geographic segment
(Asia-Pacific, U.K./Eurozone, North America/NAFTA, South America, Middle East).
Despite operating in 79 different
countries, the bank works hard to maintain a local feel and local knowledge in
each area. HSBC’s fundamental operating strategy is to remain close to its
customers. As HSBC chairman Sir John Bond said in November 2003, ‘’Our position
as the world’s local bank enables us to approach each country uniquely,
blending local knowledge with a world-wise operating platform.’’
For example, consider HSBC’s local
marketing efforts in New York City. To prove to jaded New Yorkers that the
London-based financial behemoth was ‘’the world’s local bank, ``HSBC held a
‘’New York City’s Most Knowledgeable Cabbie’’ contest. The winning cabbie gets
paid to drive full-time for HSBC for the year and HSBC customers win, too. Any
customer showing an HSBC bankcard, checkbook, or bank statement can get a free
ride in the HSBC-branded Bankcab. The campaign demonstrates HSBC’s local
knowledge. ‘’In order to make New Yorkers believe you’re local, you have to act
local,’’ said Renegade Marketing Group’s CEO Drew Neisser.
Across the world in Hong Kong, HSBC
undertook a different campaign. In the region hit hard by the Severe Acute
Respiratory Syndrome, (SARS) outbreak, HSBC launched a program to revitalize
the local economy. HSBC’’ plowed back interest payments’’ to customers who
worked in industries most affected SARS (cinemas, hotels, restaurants, and
travel agencies). The program eased its customer’s financial burden. The bank
also promoted Hong Kong’s commercial sector by offering discounts and rebates
for customers who use an HSBC credit card when shopping and dining out, to help
businesses affected by the downturn. More than 1, 5000 local merchants
participated in the promotion.
In addition to local marketing, HSBC
does niche marketing. For example, it found a little-known product area that
was growing at 125 percent a year: pet insurance. In December 2003 it announced
that it will distribute nationwide pet insurance through its HSBC Insurance
agency, making the insurance available to its depositors.
HSBC also segments demographically. In
the United States, the bank will target the immigrant population, particularly
Hispanics, now that it has acquired Bital in Mexico, where many migrants to the
United States deposit money.
Overall, the bank has been consciously
pulling together its worldwide businesses under a single global brand with the
‘’world’s local bank’’ slogan. The aim is to link its international size with
close relationships in each of the countries in which it operates. The company
spends $600 million annually on global marketing and will likely consolidate
and use fewer ad agencies. HSBC will decide who gets the account by giving each
agency a ‘’brand-strategy exercise.’’ Agencies will by vying for the account by
improving on HSBC’s number 37 global brand ranking.
Discussion Questions
1. What
have been the key success factors for HSBC?
2. Where
is HSBC vulnerable? What should it watch out for?
3. What recommendations would you make to
senior marketing executives going forward? What should they be sure to do with
its marketing?
NO .4
MARKETING SPOTLIGHT-
KRISPY KREME
Krispy
Kreme makes 2.7 billion donuts a year. But it took more than fresh, hot donuts
to earn Krispy Kreme the title of ‘’hottest brand in America’’ in 2003. Krispy
Kreme’s stock price quadrupled in the three years following its IPO in 2000,
and the entire chain now generates a billion dollars in annual revenues across
more than 300 outlets.
How did Krispy Kreme turn donuts into
dollars? Careful brand positioning and local marketing tell the story. ‘’We
have a humble brand and product,’’ says Krispy Kreme CEO Scott Livengood.
‘’It’s not flashy.’’ The company is not new – it was founded in 1937- and part
of its brand image is an old-fashioned feel. The plain red, green, and white
colors and retro graphics evoke the squeaky-clean Happy Days of the 1950s, as
do the Formica-filled, kid-friendly shops. ‘’We want every customer experience
to be associated with good times and warm memories,’’ Livengood says.
That company’s brand image also rests
on its fresh, hot donuts – a freshness that’s measured in hours. In a world of
processed, prepackaged food, nothing beats a fresh, hot donut. The company’s
marketing is grassroots local. Krispy Kreme has no traditional media
advertising budget. Rather, local ‘’community marketing managers’’ enlist the
aid of local groups and charities. For example, the company helps charities
raise money by selling them donuts at half price which they can re-sell at full
price. Local bake sales become a promotional tool for Krispy Kreme.
Another tactic is giving away free
donuts to TV, newspapers, and radio stations before entering a market. Krsipy
Kreme scored a publicity coup in 1996 when it opened its first store in New
York City. The company delivered boxes of donuts to the Today Show, garnering
millions of dollars worth of national exposure for the price of a few donuts.
Even the day of the IPO relied on the buzz from free Krispy Kreme donuts on the
floor of the stock exchange.
Each local outlet is an emissary for
the brand, and Krispy Kreme’s signature Doughnut Theater defines the brand
image. A multisensory experience, Doughnut Theater occurs several times a day
at each shop. When the store flicks on its ‘’Hot Doughnuts Now’’ sign, the
performance is about to begin. A large plate glass wall lets customers watch
the whole process.
The Doughnut Theater experience works
on three levels. On a direct level, the performance entertains customers and
draws them into the donut-making experience. On an indirect level, it shows
that the products are freshly made in a clean environment. On a subliminal
level, as CEO Livengood describes it, ‘’The movement of the products on the
conveyor through our proofbox has this relaxing, almost mesmerizing effect. The
only other thing like it is standing on the oceanfront and watching the tide
come in. it has that same consistent, relaxing motion that is really positive
to people.’’ People flock to the store to see wave after wave of donuts emerge
hot and deliciously fresh. They happily stand in long lines around newly opened
outlets to get the aroma of the donuts being made, the sight of the vanilla
glaze waterfall, and the warmth of the hot donut that ‘’just melts in your
mouth and tastes so good,’’ Livengood says.
Doughnut Theater is a bit of show
business that draws customers into the baking experience and makes them feel
like they are a part of the process. Another aspect of show business is product
placements on hit shows like. The Sopranos and Will & Grace and movies like
Bruce Almighty. Finally, international expansion is fueled by celebrities like
Dick Clark, Hank Aaron, and Jimmy Buffet, who clamored for Krispy Kreme
franchises of their own. Krispy Kreme doesn’t just grant franchise rights to
anyone.
Krispy Kreme makes 65 percent of its
revenue selling donuts directly to the public through its 106 company-owned
stores. Another 31 percent comes from selling flour mix, donut-making machines,
and donut supplies to its 186 franchised stores. The final 4 percent of revenue
comes from franchisee licenses and fees.
Krispy Kreme is now expanding and
selling donuts through convenience stores. Will this hurt the brand? Stan
Parker, Krispy Kreme’s senior vice president of marketing, says it won’t
because the company continues to emphasize freshness. It replenishes the
packaged donuts daily from the local Krispy kreme store and removes any unsold
packages. The donuts’ presence in convenience stores will help remind people of
the taste of a fresh, hot Krispy Kreme donut, and that brings them back into a
Krispy Kreme shop.
The success of Krispy Kreme has been a
wake-up call for competitor Dunkin’ Donuts, which had become complacent. The
one-two punch of Krispy Kreme in donuts and Starbucks in coffee led Dunkin’
Donuts to revamp its menu and its stores, neither of which had changed in
years. Rather than innovate, Dunkin’ Donuts looked at what customers were already
eating elsewhere. It brought in basic products like bagels, low-fat muffins,
and breakfast sandwiches. Dunkin Donuts still dwarfs Krispy Kreme in size, with
2003 revenues of $3 billion, but it must work to find new ways of creating
excitement that builds customer pride, because one thing is sure: Krispy Kreme
refuses to be dull.
Discussion Questions
1. What
have been the key success factors for Krispy Kreme?
2. Where
is Krispy Kreme vulnerable? What should it watch out for?
3. What recommendations would you make to
senior marketing executives going forward? What should they be sure to do with
its marketing?
NO. 5
MARKETING SPOTLIGHT-
SOUTHWEST AIRLINES
Southwest
Airlines entered the airline industry in 1971 with little money, but lots of
personality. Marketing itself as the LUV airline, the company featured a bright
red heart as its first logo. In the 1970s, flight attendants in red-orange hot
pants served Love Bites (peanuts) and Love Potions (drinks). With little money
for advertising in the early days, Southwest relied on its outrageous antics to
generate word-of-mouth advertising.
Later ads showcased Southwest’s low
fares, frequent flights, on-time arrivals, and top safety record. Throughout
all the advertising, the spirit of fun pervades. For example, one TV spot
showed a small bag of peanuts with the words, ‘’This is what our meals look
like a Southwest Airlines…. It’s also what our fares look like.’’ Southwest
used ads with humor to poke fun at itself and to convey its personality.
Southwest’s fun spirit attracts
customers and employees alike. Although Southwest doesn’t take itself
seriously, it does take its work seriously. Southwest’s strategy is to be the
low-cost carrier. Indeed, the strategy takes on epic proportions. An internal
slogan, ‘’It’s not just a job, it’s a crusade,’’ embodies the company mission
to open up the skies, to give ordinary people a chance to fly by keeping costs
so low that it competes with ground transportation like cars and buses.
Employees see themselves as protecting ‘’small businesses and senior citizens
who count on us for low fares.’’
Southwest can offer low fares because
it streamlines operations. For example, it only flies one type of aircraft,
Boeing 737s, which have all been fitted with identical flight instruments. This
saves time and money by simplifying training pilots, flight attendants, and
mechanics only need to know procedures for a single model of Boeing 737.
Management can substitute aircraft, reschedule flight crews, or transfer
mechanics quickly. The tactic also saves money through lower spare-parts
inventories and better deals when acquiring new planes. Southwest also bucks
the traditional hub-and-spoke system and offers only point-to-point service; it
chooses to fly to smaller airports that have lower gate fees and less
congestion, which speeds aircraft turnaround. Southwest’s 15- to 20- minute
turnaround time (from flight landing to departure) is half the industry
average, giving it better asset utilization (flying more flights and more
passengers per plane per day.) The point is, if the plane and crew aren’t in
the air, they aren’t making money.
Southwest grows by entering new
markets that are overpriced and underserved by current airlines. The company
believes it can bring fares down by one-third to one-half whenever it enters a
new market, and it grows the market a every city it serves by making flying
affordable to people who previously could not afford to fly.
Even though Southwest is a low-cost
airline, it has pioneered many additional services and programs like same-day
freight service, senior discounts, Fun Fares, and Fun Packs. Despite
Southwest’s reputation for low fares and no-frills service, the company wins
the hearts of customers. It has been ranked number one in terms of customer service,
per the Department of Transportation’s rankings, for 12 years in a row, yet the
average price of a flight is $87. Southwest has been ranked by Fortune magazine
as America’s most admired airline since 1997, as America’s third-most-admired
corporation in 2004, and as one of the top five best places to work in America.
Southwest’s financial results also shine: The Company has been profitable for
31 straight years. Following 911, it has been the only airline to report
profits every quarter, and one of the few airlines that has had no layoffs amid
a travel slump created by slow economy and the threat of terrorism.
Although the hot pants are long gone,
the LUVing spirit remains at the heart of Southwest. The company’s stock symbol
on the NYSE is LUV and red hearts can be found everywhere across the company.
These symbols embody the Southwest spirit of employees ‘’caring about
themselves, each other and Southwest’s customers’’, states an employee booklet.
‘’Our fares can be matched; our airplanes and routes can be copied. But we
pride ourselves on our customer service,’’ said Sherry Phelps, director of
corporate employment. That’s why Southwest looks for and hires people who
generate enthusiasm. In fact, having a sense of humor is a selection criteria
it uses for hiring. As one employee explained, ‘’we can train you to do any
job, but we can’t give you the right spirit.’’
Southwest is so confident of its
culture and its employees that in 2004 it allowed itself to be the subject of a
reality TV show called Airline. It’s not worried about competitors copying the
company. ‘’What we do is very simply, but it’s not simplistic,’’ said president
and COO Colleen Barrett. ‘’We really do everything with passion.’’
Discussion Questions
1. What
are the key success factors for Southwest Airlines?
2. Where is Southwest Airlines vulnerable?
What should it watch out for?
3. What recommendations would you make to
senior marketing executives moving forward? What
should they be sure to do with its marketing?
NO. 6
MARKETING SPOTLIGHT-
WAL-MART
Wal-Mart
Stores, Inc., is the largest retailer in the world, with sales of $259 billion
in 2003, 1.5 million employees, and 4,300 facilities. Each week, over 100
million customers visit a Wal-Mart store. Sam Walton founded the company in
1962 with a simple goal: Offer low prices to everyone. His notions of hard work
and thrift continue to permeate Wal-Mart today, although he died in 1992.
Employees see their jobs as a mission ‘’to lower the world’s cost of living.’’
Wall –Mart’s philosophy is to enable people of average means to buy more of the
same products that were previously available only to rich folks. The company
works hard at being efficient and using its buying clout to extract lower
prices from suppliers, and then passes those savings on to customers.
Wal-Mart succeeds in the competitive
American retail market for several reasons. First, its low prices, vast
selection, and superior service keep the customers coming in the door. But one
of Wal-Mart’s biggest strengths is not even inside the store. Its unrivaled
logistics ensure that it can keep prices low while keeping the right goods on
the shelves. As the biggest retailer in the United States. Wal-Mart’s logistics
demands are considerable. The company must coordinate with more than 85,000
suppliers, manage billions in inventory in its warehouses, and bring that
inventory to its retail shelves.
To streamline these tasks, Wal-Mart
set up a ‘’hub-and-spoke’’ network of 103 massive distribution centers (DC).
Strategically spaced across the country, no store location is more than a day’s
drive away from a DC. Wal-Mart is known as ‘’the king of store logistics’’ for
its ability to effectively manage such a vast network.
Sam Walton was something of a
visionary when it came to logistics. He had the foresight to realize, as early
as the 1960s, that his goals for company growth required advanced information
systems to manage high volumes of merchandise. The key to low-cost retail is
knowing what goods would sell and in what quantities – ensuring that store
shelves never have too much or too little of any item. In 1966, Walton hired
the top graduate of an IBM school and assigned him the task of computerizing
Wal-Mart’s operations. As a result of this forward-looking move, Wal-Mart grew
to be the icon of just-in-time inventory control and sophisticated logistics.
By 1998, Wal-Mart’s computer database was second only to the Pentagon’s in
terms of capacity.
Wal-Mart’s logistics success is
astounding considering its size: Over 100 million items per day must get to the
right store at the right time. To accomplish this goal, Wal-Mart developed
several IT systems that work together. It all begins at the cash register or
point-of-sale (POS) terminal. Every time an item is scanned, the information is
relayed to headquarters via satellite data links. Using up-to-the-minute sales
information, Wal-Mart’s Inventory Management System calculates the rate of
sales, factors in seasonal and promotional elements, and automatically places
replenishment orders to distribution centers and vendor partners.
Wal-Mart uses its information systems
for more than just logistics. Suppliers can use its voluminous POS database to
analyze customers’ regional buying habits. For example, Proctor & Gamble
learned that liquid Tide sells better in the North and Northeast while Tide
powder sells better in the South and Southwest. P & G uses information such
as this to tailor its product availability to specific local regions. This
means that it delivers different Tide products to different Wal-Mart locations
based on local customer preferences. Wal-Mart’s may look the same on the
outside, but the company uses its information systems and logistics to
customize the offerings inside each store to suit regional demand.
Wal-Mart continues to grow. Despite
already having 3,200 stores in the united States, Wal-Mart plans to add another
220-230 Super centers, 50-55 discount stores, 35-40 Sam’s Clubs, and 25-30
Neighborhood Markets in the United States alone, and an additional 130 units
internationally. If Wal-Mart maintains the average growth rate of the past 10
years, it could become the world’s first trillion-dollar company.
Discussion Questions
1. What
have been the key success factors for Wal-Mart?
2. Where
is Wal-Mart vulnerable? What should it watch out for?
3. What
recommendations would you make to senior marketing executives going forward? What should the company
be sure to do with its marketing?
MANAGERIAL ECONOMICS
CASE – 1 Power for All: Myth or
Reality?
The power sector in India is
undergoing rapid changes especially for the last few years. The Government has
promised “Power for All” by 2012. The growth of power sector in India has been
consistent. From a humble beginning of 1,700 MW in 1950-51 to 1,18,400 MW in
2004-05, the development of power sector has traveled a long way. There has been
quantum rise in thermal power generation in 1970-71, 1980-81 and 1990-91 and
greater rise in hydro electric power production since 2000-01. The government
is promoting clean source of energy, i.e. hydro electric power. The sectoral
outlay for power in successive five year plans has consistently been
increasing. However, it has increased at a faster rate from sixth five year plan,
i.e., 1980-85 onwards.
The following
table gives the pattern of consumption of electricity on the basis of consumer
segments.
Pattern of Electricity Consumption (Utilities)
(Percentage)
|
year
|
Domestic
|
Commercial
|
Industry
|
traction
|
agriculture
|
others
|
|
1950-51
|
12.6
|
7.5
|
62.6
|
7.4
|
3.9
|
4.0
|
|
2000-01
|
23.9
|
7.1
|
34
|
2.6
|
26.8
|
5.6
|
|
2004-05
|
24.8
|
8.1
|
35.6
|
2.5
|
22.9
|
6.1
|
However,
industry has shown decreasing trend of electricity consumption whereas
irrigation has shown increasing trend, which is a positive sign for our
agriculture. The ‘commercial’ and ‘traction’ sectors have no conspicuous
fluctuation pattern in their electricity consumption.
The State of
Uttar Pradesh is the largest in India. It has a population of over 166 million
(Census 2001). If Uttar Pradesh were to be a country, it would be the 7th
largest country in the world. In some of the social and income indicators, the
State has made rapid progress. It is one of the largest software exporting
states in the country and has led India’s BPO (Business Process Outsourcing)
boom in the last few years. The growth rate in software export of U.P. is the
highest among all States (GOUP Policy 2003). The State has a cross-cultural
milieu of population with diversity of customers, markets and buyers. It has
satellite towns like Noida, Ghaziabad, Greater Noida, etc. that are emerging as
new industrial hubs; therefore there is growing demand for infrastructure
facilities like power, transport, health, education, road, shopping malls,
multiplexes, etc. in these cities.
The power
situation in the State of Uttar Pradesh is that of deficit, i.e., demand
exceeds the supply and generation of power. Uttar Pradesh has electricity
generation capacity of 4000 MW against demand of 6500 MW of power. Recognizing
the demand-supply gap at the national level, the Government of India through
Electricity Act 2003 is implementing a ‘Power-for-All’ plan, under which
1,00,000 MW of new installed generating capacity is to be added by the year
2012.
Even with the
present electrification levels, the additional capacity requirement for
supplying continuous power in the State of Uttar Pradesh is 1,300 MW. For
universal access the capacity requirements would be over 11,250 MW that would
shoot up to over 14,200 MW, if U.P. (Uttar Pradesh) were to attain the national
per capita consumption. Compared to this requirement, the availability in 2009
would be just 8,650 MW as per present estimates, if all planned projects
fructify (Power Policy 2003, GOUP).
The situation
has been further exacerbated due to state reorganization in 2000. Prior to this
U.P.’s hydel capacity was 1497 MW and thermal capacity was 3909 MW. Subsequent
to reorganisation, U.P. retained only 516 MW of low cost hydel power, while the
balance hydel capacity has been allocated to Uttaranchal. The cost due to the
unavailability of cheap hydel power which has since gone to Uttaranchal is Rs
400 crore.
U.P.’s ability
to supply power to its consumers is limited by the financial capacity of State
power utility (UPPCL) to purchase power, especially after the securitisation of
power purchase under the Expert Group recommendations that mandates regular
payment of current dues. There is a vicious cycle of poor recovery, leading to
the poor quality of UPPCL to purchase power and attract investments, leading to
poor quality supply even to the remunerative consumers, resulting in these
consumers moving away from the grid. It has resulted in a further deepening of
the financial crisis and its concomitant result of poorer quality of supply.
Questions
1.
What are the factors responsible for this excess demand
for electricity?
2.
The demand supply gap is reformed by the government
intervention. Explain this phenomenon by a demand supply model.
3.
What do you think will happen to the price of
electricity?
CASE – 2 Automobile Industry in
India: New Production Paradigm
The Industry
The automotive
sector is one of the core industries of the Indian economy, whose prospect is
reflective of the economic resilience of the country. The automobile industry
witnessed a growth of 19.35 percent in April-July 2006 when compared to
April-July 2005. As per Davos Report 2006, India is largest three wheeler
market in the world; 2nd largest two wheeler market; 4th largest tractor market;
5th largest commercial vehicle market and 11th largest passenger car market in
the world and expected to be the seventh largest by 2016. India is among few
countries that are showing a growth rate of 30 per cent in demand for passenger
cars. The industry currently accounts for nearly 4% of the GNP and 17% of the
indirect tax revenue.
The well
developed Indian automotive industry produces a wide variety of vehicles
including passenger cars, light, medium and heavy commercial vehicles,
multi-utility vehicles, scooters, motorcycles, mopeds, three wheelers, tractors
etc. Economic liberalisation over the years has made India as one of the prime
business destination for many global automotive players, including
international giants like Ford, Toyota, GM and Hyundai have also made their
presence with a mark.
As per another
report, every commercial vehicle manufactured, creates 13.31 jobs, while every
passenger car creates 5.31 jobs and every two-wheeler creates 0.49 jobs in the
country. Besides, the automobile industry has an output multiplier of 2.24,
i.e., for every additional rupee of output in the auto industry, the overall
output of the Indian economy increases by Rs. 2.24.
The India
automotive sector has a presence across all vehicle segment and key components.
In terms of volume, two wheelers dominate the sector, with nearly 80 per cent
share, followed by passenger vehicles with 13 per cent. At present, there are
12 manufacturers of passenger cars, 5 manufacturers of multi utility vehicles
(MUVs), 9 manufacturers of commercial vehicles (CVs), 12 of two wheelers and 4
of three wheelers, besides 5 manufacturers of engines.
Table: Vehicle Segment-wise
Market Share (2005-06)
|
Item
|
Percent
Share
|
|
Commercial vehicles
|
3.94
|
|
Passenger vehicles
|
12.83
|
|
Two Wheelers
|
79.19
|
|
Three Wheelers
|
4.04
|
|
Total
|
100.00
|
Source: Report of Society of
Indian Automobile Manufacturers (SIAM), 2006.
Although the automotive industry
in India is nearly six decades old, until 1982, there were only three
manufacturers – M/s Hindustan Motors, M/s Premier Automobiles and M/s Standard
Motors in the motorcar sector. In 1982, Maruti Udyog Ltd. (MUL) came up as a
government initiative in collaboration with Suzuki of Japan to establish volume
production of contemporary models.
The Company
Maruti Udyog Ltd. (MUL) has
become Suzuki Motor Corporation’s R&D hub for Asia outside Japan. Maruti
introduced upgraded versions of the Esteem, Maruti 800 and Omni, completely
designed and styled inhouse. This followed the upgradation of WagonR and Zen
models, done inhouse only a year before. Maruti engineers also worked with
their counterparts in Suzuki Motor Corporation in the design and development of
its new model, Swift.
The company launched superior
Bharat Stage III versions of most of its models, well before the Government
deadline. Maruti also set up a Centre for Excellence with a corpus or Rs. 100
million. This was done in collaboration with suppliers, who contributed an
additional Rs. 50 million. The Centre provides consultancy and training support
to Maruti’s Suppliers and Sales Network to enable them to achieve standards in
Quality, Cost, Service and Technology Orientation.
Maruti has embarked upon this new
project in collaboration with SMC for the manufacture of diesel engines, petrol
engines and transmission assemblies for four wheeled vehicles. The project is
being implemented in the existing Joint Venture Company viz. Suzuki Metal India
Limited (renamed Suzuki Powertrain India Limited).
Questions
1.
Identify the most important factors of production in
case of automobile industry. Also attempt to explain the relative significance
of each of these factors.
2.
What more information would you like to obtain in order
to draw a production function for Maruti Udyog? Explain with logic.
3.
Automobile industry is a good example of capital
augmenting technical progress. Discuss.
CASE – 3 Indian Cement
Industry: Riding the High Tide
India is the second largest
producer of cement in the world, just behind China. Indian cement industry
comprises of 130 large cement plants and 365 mini cement plants with installed
capacity of 172 million tonnes per annum (mtpa); these plants are located in
states like Gujarat, Rajasthan and Madhya Pradesh. The large cement plants
accounts for over 94 percent of the total installed capacity. However two large
groups, viz. the Aditya Birla Group and the Holcim Group; together control more
than 40 per cent of total capacity. This apart, more than 25 per cent of total
capacity is controlled by global majors. These include Lafarge of France,
Holderbank of Switzerland and Cemex of Mexico. The Indian cement industry is
characterised by takeovers and acquisitions, which contributes to gaining
market power and thus enables companies to enjoy pricing power, which is
typically oligopoly.
Cement: Output and Consumption
India accounts for 6.4% of global
production of 2.22 billion tonnes of cement. Indian cement industry has grown
in terms of installed capacity and production. Cement production increased by
over 9 per cent in FY2007, reaching 154.74 mtpa, in comparison to 12.40 per
cent in FY2006, 7.07 in FY2005 and 5.19 per cent in FY2004. Decade-wise, Indian
cement production has increased at 8.2 per cent (CAGR) during FY1996-2006, as
compared to 6.9 per cent during 1986-1996.
Cement
consumption in India has increased by more than 10.53% during FY 2007 to 148.41
mtpa compared to 134.27 in FY 2006. During the decade 1997-2007, the cement
consumption has increased by 8% at 10 yearly compound annual growth rate
(CAGR). The changing face of Indian demography, growth of nuclear families,
higher disposable income, changing pattern of spending, easily available home
loans, increased urbanisation and growth of metro and semi-metro cities are
some of the vital factors behind a tremendous spurt in the housing sector. In
order to keep pace with an optimistic rate of economic growth, there is a
rising demand for commercial and retail space, IT Parks and SEZs. Another
recent trend has been initiated by the Government, with increase investment in
infrastructure, like National Highway Development Projects. It is expected that
a construction opportunity of over Rs. 7.6 trillion will be created over next
five years.
Apart from
meeting the entire domestic demand, the industry is also exporting cement and
clinker. The export of cement during 2001-02 and 2003-04 was 5.14 million
tonnes and 6.92 million tonnes respectively. Export during April-May, 2003 was
1.35 million tonnes. Major exporters were Gujarat Ambuja Cements Ltd. and
L&T Ltd.
Pricing
Cement industry has been
decontrolled from price and distribution on 1st March 1989 and de-licensed on
25th July 1991. During last four years (2003-2007) cement prices have gradually
increased from around Rs 150 per bag to Rs 230 per bag in 2007. Cement
manufacturers control over market can be gauged by the fact that even 20-25%
freight hike was straight passed on to consumers. Average industry ROCE has
reached more than 26% due to the recent burst in cement prices. Encouraged by
such lucrative returns cement manufacturers have decided to increase capacity
by more than 97 million tonnes over next three years of which 43.7 million
tonnes is likely to complete in FY 2009. Thus, the cement supply will increase
by more than 11% in next three years.
Cement
consumption growing at around 10% and production at 11% would naturally create
a situation of over production. As per estimates, cement industry will face
over capacity of 17.7 mtpa in 2008 and 37.7 in 2009. Therefore it is expected
that capacity utilisation will fall significantly. Further new players are
likely to join the industry with huge production capacities.
Questions
1.
Do you think cement industry in India presents a good
explanation of oligopoly? Which characteristics of oligopoly do you find in the
above case?
2.
How has decontrolling of cement prices helped the
growth of this industry?
3.
Do you see possibilities of cartel or implicit
collusion in the above case? How?
CASE – 4 From Wages to
Packages: the Journey of Software
Organisations across all
industries are undergoing a shift in emphasis from tangible resources to
valuable, rare and inimitable human resource in order to attain competitive
advantage. Many leading organisations have started adopting an investment
perspective towards their employees by moving from a traditional wage and
salary system to compensation “packages”. The underlying reasons behind such a
change include ensuring a motivational climate, encouraging efficiency and
productivity for attainment of strategic goals, and gaining control over labour
costs.
Wage and salary
system bears a strong relationship with the performance, satisfaction and
attainment of goals of the employees of a firm. This has prompted companies to
start offering full packages of monetary and non monetary rewards as
compensation or wage/salary to their employees.
Dimensions of Compensation
Compensation affects a person
economically, sociologically and psychologically. It also compensates for the
opportunity cost and real cost occurring to the specific type of human resource
in being in the present context. Proper management of compensation helps a firm
procure, maintain and retain a productive workforce.
A sound
compensation package should encompass factors like adequacy of wages, social
balance, supply and demand, fair comparison, equal pay for equal work and work
measurement. The concept of adequacy can be disintegrated into two components:
internal and external. The internal component can be linked with the concept of
fair wages; it is the money wage adequate for an employee to maintain a decent
standard of living. External adequacy, on the contrary, is in relation to
comparable jobs in the same industry(s) with the same skill-set required.
Besides the
element of adequacy, compensation is instrumental in motivation. An equitable
compensation package may increase employee motivation. Inequity, on the
contrary, may motivate employees to take corrective actions, which may be
harmful to the firm. Firms thus link compensation to performance appraisal to
enhance motivation, and hence productivity. Compensation may also be looked
upon as a controlling device to ensure that employees behave in particular
manner. An organisation may choose to offer a higher package to a particular
employee in order to allure another employee to perform better.
Compensation in Software
Let us now take you to the
software industry, known in corporate history for adding new facets to realms
of wage and salary administration. It is software that has introduced
compensation as a multi-dimensional tool. Differentials in compensation
packages among various levels of software professionals, focus on skill-based
compensation, rewards essentially linked to performance and negotiability have
all added new facades to compensation.
In a recently
conducted countrywide comprehensive survey of salary, Businessworld covered aspects like costs, compensation and benefits
across 12 sectors of the Indian economy. The survey had revealed an arbitrage
between high employee salaries overseas, with the low cost workforce in India.
It has also found human resource contributing the largest component, namely 44
percent of the industry’s total cost. The annual entry-level salary has been
revealed to range from Rs. 3.21 lakhs in the western part of the country to Rs.
5.23 lakhs in the north.
The Businessworld survey has found that the
weakening dollar has hit the margins of the Indian software industry, thus
compelling software firms to rationalize on employee costs. As competition is
intensifying, software organisations must focus on ‘added value’ of their
employees, by encouraging them to increase their efforts and performance on a
continuous basis. This can be achieved by an overhauling of the entire
compensation packages, including basic salary, along with incentive systems
(including increase in salary, performance bonuses, stock options and
retirement packages). Apart from such core components, emphasis must also be
given to redesigning non-monetary incentives like words of praise, special
recognition, job security and autonomy in decision making. On the whole, all
such parameters of compensation strategies should be directed towards providing
the ability to reinforce desired behaviours, and also serve the traditional
functions of attracting and maintaining a qualified workforce.
Questions
1.
Which factors, according to you, are prompting
organisations to adopt a package instead of traditional salary?
2.
Do you think package compensation is more suitable in
modern globalised business? Can you draw some lessons from marginal
productivity theory?
3.
Do you think that the case supports the efficiency wage
theory or bargaining theory? Give arguments in support of your logic.
CASE – 5 India in Search of a
Way to Harness the Inflation “Dragon”
India has seen high rates of
inflation until the early nineties and faces its attendant consequences. Since
mid nineties the priority for policy maker has been to bring inflation to
single digit. Just like appropriate diagnosis is must for proper treatment,
similarly an inquiry into the causes of inflation in the country is necessary.
Today inflation is not merely caused by domestic factors but also by global
factors. And that is natural, as the Indian economy undergoes structural
changes the causes of domestic inflation too have undergone changes. The
economy of India is growing at a satisfactory 8 to 9 percent a year. Therefore
change in purchasing power of people is natural and when we take to national
level, it is a huge amount. Given the size of population of India even a small
increase of Rs. 100 in the per capita income would mean an additional aggregate
demand worth Rs. 110 billion. This has put an extraordinary highly demand on
various commodities.
What has
further compounded the problem is the inflow of foreign investments, which is
the natural fallout of globalisation. The excessive global liquidity has
facilitated buoyant growth of money and credit in 2005-06 and 2006-07. For
instance near-zero interest rate regime in Japan has encouraged people to
borrow in Japan and invest elsewhere for higher returns. Obviously, some of
this money, estimated by experts to be approximately $200 billion, has undoubtedly
found its way into the asset market of other countries in alternative
investments such as commodities, stocks, real estates and other markets across
continents, leverage may times over. And India is emerging as an attractive
destination. The net accretion to the foreign exchange reserves aggregates to
in excess of about Rs. 225,000 crore in 2006-07. Crucially, this incremental
flow of foreign exchange into the country has resulted in increased credit flow
by our banks. Naturally this is another fuel for growth and inflation.
Further, the
sustained flow of foreign money has fuelled the rise of the stock markets and
real estate prices in India to unprecedented levels. This boom has naturally
led to corresponding booms in various related markets as much as the increased
credit flow has in a way resulted in overall inflation. As pointed out in the
Economic Survey 2007-08, the current bout of inflation is caused by a
multiplicity of factors, mostly monetary and global.
To conclude, it
must be understood that growth naturally comes with its attendant costs and
consequences. The government has been aiming at keeping inflation below 5% but
it keeps on deceiving now and then. A stock market boom, a real estate boom and
a benign inflation in consumer goods market in an economically impossible idealism.
These are pointers to a need for a different strategy to handle inflation.
Reserve Bank of
India’s strategy of Market Stabilisation Scheme (MSS) to dealing with excessive
liquidity, the increase in repo rates to make credit over extension costly and
CRR to restrict excessive money supply have limitation with such huge forex
inflows.
While these
policies are usually intertwined and typically compensatory, one has to
understand that the issues with respect to inflation cannot be subjected to
conventional wisdom in the era of globalisation. The Government has to find out
some unconventional methods of controlling inflation besides focusing on timely
implementation of infrastructure projects and improving productivity to fill
demand supply gap. One such measure could be revaluation o Indian rupee against
dollars.
Questions :
1.
What are the major factors contributing to inflation in
India in the recent past? How have they changed since 1991-92?
2.
What measures do you suggest should be taken up by
government of India to handle inflationary pressure?
3.
Evaluate the suggestion of revaluating Indian rupee
against dollars to control inflation.
CASE – 1 Dartmouth
To
transform a wired campus to a wireless one requires lots of money. A computer science
professor who initiated the idea at Dartmouth
As
a pioneer in campuswide wireless, Dartmouth
·
Students are
continuously developing new applications for the Wi-Fi. For example, one
student has applied for a patent on a personal-security device that pinpoints
the location of campus emergency services to one’s mobile device.
·
Students no
longer have to remember campus phone numbers, as their mobile devices have all
the numbers and can be accessed anywhere on campus.
·
Students
primarily use laptop computers in the network. However, an increasing number of
Internet-enabled PDAs and cell phones are used as well. The use of regular cell
phones is on the decline on the campus.
·
An extensive
messaging system is used by the students, who send SMSs (Short Message
Services) to each other. Messages reach the recipients in a split second, any
time, anywhere, as long as they are sent and received within the network’s
coverage area.
·
Usage of the
Wi-Fi system is not confined just to messages. Students can submit their
classwork by using the network, as well as by watching streaming video and
listening to Internet radio.
·
An analysis of
wireless traffic on campus showed how the new network is changing and shaping
campus behaviour patterns. For example, students log on in short burst, about
16 minutes at a time, probably checking their messages. They tend to plant
themselves in a few favorite spots (dorms, TV room, student center, and on a
shaded bench on the green) where they use their computers, and they rarely
connect beyond those places.
·
Some students
invented special complex wireless games that they play online.
·
One student has written a code that calculates
how far away a networked PDA user is from his or her next appointment, and then
automatically adjusts the PDA’s reminder alarm schedule accordingly.
·
Professors are
using wireless-based teaching methods. For example, students can evaluate
material presented in class and can vote online on a multiple-choice
questionnaire relating to the presented material. Tabulated results are shown
in seconds, promoting discussions. According to faculty, the system “makes
students want to give answer,” thus significantly increasing participation.
·
Faculty and
students developed a special voice-over-IP application for PDAs and iPAQs that
uses live two-say voice-over-IP chat
Questions
1.
In what ways is
the Wi-Fi technology changing the life of Dartmouth
2.
Some say that the
wireless system will become part of the background of everybody’s life—that the
mobile devices are just an afterthought. Explain.
3.
Is the system
contributing to improved learning, or just adding entertainment that may reduce
the time available for studying? Debate your point of view with students who
hold a different opinion.
4.
What are the
major benefits of the wireless system over the previous wireline one? Do you
think wireline systems will disappear from campuses one day? (Do some research
on the topic.)
CASE – 2 E-Commerce
Supports Field Employees at
Maybelline
The Business Problem
Maybelline is a leader in
color cosmetics products (eye shadow, mascara, etc.), selling them in more than
70 countries worldwide (maybelline.com). The company uses hundreds of
salespeople (field merchandising representatives, or “reps”), who visit drugstores,
discount stores, supermarkets, and cosmetics specialty stores, in an attempt to
close deals. This method of selling has proved to be fairly effective, and it
is used by hundreds of other manufacturers such as Kodak, Nabisco, and Procter
& Gamble. Sales managers from any company need to know, as quickly as
possible, when a deal is closed or if there is any problem with the customer.
Information
technology has been used extensively to support sales reps and their managers.
Until 2000, Maybelline, as well as many other large consumer product
manufacturers, equipped reps with an interactive voice response (VR) system, by
means of which they were to enter, every evening, information about their daily
activities. This solution required that the reps collect data with paper-based
surveys completed for every store they visited each day. For example, the reps
noted how each product was displayed, how much stock was available, how items
were promoted, etc. In addition to the company’s products the reps surveyed the
competitors’ products as well. In the evening, the reps translated the data
collected into answers to the voice response system which asked them routine
questions. The reps answered by pressing the appropriate telephone keys.
The
IVR system was not the perfect way to transmit sales data. For one thing, the
IVR system consolidated information, delivering it to top management as a hard
copy. However, unfortunately, these reports sometimes reached top management
days or weeks too late, missing important changes in trends and the
opportunities to act on them in time. Frequently, the reps themselves were late
in reporting, thus further delaying the needed information.
Even
if the reps did report on time, information was inflexible, since all reports
were menu-driven. With the voice system the reps answered only the specific
questions that applied to a situation. To do so, they had to wade through over
50 questions, skipping the irrelevant ones. This was a waste of time. In
addition, some of the material that needed to be reported had no matching menu
questions. Considering a success in the 1990s, the system was unable to meet
the needs of the twenty-first century. It was cumbersome to set up and operate
and was also prone to input errors.
The Mobile
Solution
Maybelline replaced the IVR
by equipping its reps with a mobile system, called Merchandising Sales
Portfolio (MSP), from Thinque Corp. (thinque.com, now part of meicpg.com). It
runs on handheld, pen-based PDAs, which have hand-writing recognition capability
(from NEC), powered by Microsoft’s CE operating system. The system enables reps
to enter their information by hand-writing their reports directly at the
clients’ sites. From the handheld device, data can be uploaded to a Microsoft
SQL Server database at headquarters every evening. A secured Internet
connection links to the corporate intranet (a synchronization process). The new
system also enables district managers to electronically send daily schedules
and other important information to each rep.
The
system also replaced some of the functions of the EDI (electronic data
interchange) system, the pride of the 1990s. For example, the reps’ report
include inventory-scanned data from retail stores. These are processed quickly
by an order management system, and passed whenever needed to the shipping
department for inventory replenishment.
In
addition to routine information, the new system is used for decision support.
It is not enough to speed information along the supply chain; managers need to
know the reasons why certain products are selling well, or not so well, in
every location. They need to know what the conditions are at retail stores
affecting the sales of each product, and they need to know it in a timely
manner. The new system offers those capabilities.
The Results
The system provided managers
at Maybelline headquarters with an interactive link with the mobile field
force. Corporate planners and decision makers can now respond much more quickly
to situations that need attention. The solution is helping the company forge
stronger ties with its retailers, and it considerably reduces the amount of
after-hours time that the reps spend on data transfer to headquarters (from
30-50 minutes per day to seconds).
The
new system also performs market analysis that enables managers to optimize
merchandising and customer service efforts. It also enables Maybelline to use a
more sophisticated interactive voice response unit—to capture data for special
situations. Moreover, it provides browser-based reporting tools that enable
managers, regardless of where they are, to view retail information within hours
of its capture. Using the error-checking and validation feature in the MSP
system, reps make significantly fewer data entry errors.
Finally,
the quality of life of Maybelline reps has been greatly improved. Not only do
they save 30 to 40 minutes per day, buy also their stress level has been
significantly reduced. As a result, employee turnover has declined appreciably,
saving money for the company.
Questions
1.
IVR systems are
still popular. What advantages do they have over even older systems in which
the reps mailed or faxed reports?
2.
Summarize the
advantages of the new system over the IVR one.
3.
Draw the flow of
information in the system.
4.
The existing
technology enables transmission of data any time an employee can access the
Internet with a wireline. Technically, the system can be enhanced so that the
data can be sent wirelessly from any location as soon as they are entered.
Would you recommend a wireless system to Maybelline? Why or why not?
CASE – 3 Precision
Buying, Merchandising, and Marketing
At Sears
The Problem
Sears, Roebuck and Company,
the largest department store chain and the third-largest retailer in the United States
Sears
had 18 data centers, one in each of 10 geographical regions as well as one each
for marketing, finance, and other departments. The first problem was created
when the reorganization effort produced only seven geographical regions.
Frequent mismatches between accounting and sales figures and information
scattered among numerous databases users to query multiple systems, even when
they needed an answer to a simple query. Furthermore, users found that data
that were already summarized made it difficult to conduct analysis at the
desired level of detail. Finally, errors were virtually inevitable when
calculations were based on data from several sources.
The Solution
To solve these problems,
Sears constructed a single sales information data warehouse. The replaced the
18 old databases which were packed with redundant, conflicting, and sometimes
obsolete data. The new data warehouse is a simple repository of relevant
decision-making data such as authoritative data for key performance indicators,
sales inventories, and profit margins. Sears, known for embracing IT on a
dramatic scale, completed the data warehouse and its IT reengineering efforts
in under one year—a perfect IT turnaround story.
Using
an NCR enterprise server, the initial 1.7 terabyte (1.7 trillion bytes) data
warehouse is part of a project dubbed the Strategic Performance Reporting
System (SPRS). By 2003, the data warehouse had grown to over 70 terabytes. SPRS
includes comprehensive sales data; information on inventory in stores, in
transit, and at distribution centers; and cost per item. This has enabled Sears
to track sales by individual items (skus) in each of its 1,950 stores
(including 810 mall-based stores) in the United States
SPRS
is open to all authorized employees, who now can view each day’s sales from a
multidimensional perspective (by region, district, store, product line, and
individual item). Users can specify any starting and ending dates for special
sales reports, and all data can be accessed via a highly user-friendly
graphical interface. Sears managers can now monitor the precise impact of
advertising, weather, and other factors on sales of specific items. This means
that Sears merchandise buyers and other specialists can examine and adjust, if
needed inventory quantities, merchandising, and order placement, along with
myriad other variables, almost immediately, so they can respond quickly to
environmental changes. SPRS users can also group together widely divergent
kinds of products, for example, tracking sales of items marked as “gifts under
$25.” Advertising staffers can follow so-called “great items,” drawn from
vastly different departments, that are splashed on the covers of promotional
circulars. SPRS enables extensive data mining, but only on sku- and
location-related analysis.
In
1998 Sears created a large customer database, dubbed LCI (Leveraging Customer
Information), which contained customer-related sale information (which was not
available on SPRS). The LCI enables hourly records of transactions, for
example, guiding hourly promotion (such as 15% discounts for early-bird
shoppers).
In
the holiday season of 2001, Sears decided to replace its regular 10% discount
promotion by offering deep discount during early shopping hours. The new
promotion, which was based on SPRS, failed, and only when LCI was used was the
problem corrected. This motivated Sears to combine LCI and SPRS in a single
platform, which enables sophisticated analysis (in 2002).
By
2001, Sears also had the following Web initiatives: an e-commerce home
improvement center, a B2B supply exchange for the retail industry, a toy
catalog (wishbook.com), an e-procurement system, and much more. All of these
Web-marketing initiatives feed data into the data warehouse, and their planning
and control are based on accessing the data warehouse.
The Result
The ability to monitor sales
by item per store enables Sears to create a sharp local market focus. For
example, Sears keeps different shades of paint colors in different cities to
meet local demands. Therefore, sales and market share have improved. Also,
Web-based data monitoring of sales at LCI helps Sears to plan marketing and Web
advertising.
At
its inception, the data warehouse hand been used daily over 3,000 buyers,
replenishers, marketers, strategic planner, logistics and finance analysts, and
store managers. By 2004, there were over 6,000 users, since users found the
system very beneficial. Response time to queries has dropped from days to
minutes for typical requests. Overall, the strategic impact of the SPRS-LCI
data warehouse is that it offers Sears employees a tool for making better
decisions, and Sears retailing profits have climbed more than 20 percent
annually since SPRS was implemented.
Questions
1.
What were the drivers
of SPRS?
2.
How did the data
warehouse solve Sears’s problems?
3.
Why was it
beneficial to integrate the customers’ data-base with SPRS?
4.
How could RFID
change Sears’s operations?
CASE – 4 Dollar
General Uses Integrated Software
Dollar General
(dollargeneral.com) operates more than 6,000 general stores in the United States
The
IT department was flooded with request to generate long reports on topics
ranging from asset management to general ledgers. It became clear that a better
information system was needed. Dollar General started by evaluating information
requirements that would be able to solve the above and other problems that cut
into the company’s profit.
A
major factor in deciding which software to buy was the integration requirement
among the existing information systems of the various functional areas,
especially the financial applications. This led to the selection of the
Financials suite (from Lawson Software). The company started to implement
applications one at the time. Before 1998, the company installed the suite’s
asset management, payroll, and some HR applications which allow the tens of
thousands of employees to monitor and self-update their benefits, 401k
contributions, and personal data (resulting in big savings to the HR
department). After 1998, the accounts payable and general ledger modules of
Lawson Software were activated. The accounting modules allow employees to
route, extract, and analyze data in the accounting/finance area with little
reliance on IT personnel. During 2001-2003, Dollar General moved into the sales
and procurement areas, thus adding the marketing and operation activities to
the integrated system.
Here
are a few examples of how various parts of the new system work: All sales data
from the point-of-sale scanners of some 6,000 stores are pulled each night,
together with financial data, discounts, etc., into the business intelligence
application for financial and marketing analysis. Employee payroll data, from
each store, are pulled once a week. This provides synergy with the sales audit
system (from STS Software). All sales data are processed nightly by the STS
System, broken into hourly journal entries, processed and summarized, and then
entered into the Lawson’s general ledger module.
The
original infrastructure was mainframe based (IBM AS 400). By 2002, the 800
largest suppliers of Dollar General were submitting their bills on the EDI.
This allowed instantaneous processing in the accounts payable module. By 2003,
service providers, such as utilities, were added to the system. To do all this
the system was migrated in 2001 from the old legacy system to the Unix
operating system, and then to a Web-based infrastructure, mainly in order to
add Web-based functionalities and tools.
A
development tool embedded in Lawson’s Financials allowed users to customize
applications without touching the computer programming code. This included
applications that are not contained in the Lawson system. For example, an
employee-bonus applications was not available at Lawson, but was added to Financial’s
payroll module to accommodate Dollar General’s bonus system. A customized
application that allowed additions and changes in dozens of geographical areas
also solved the organization’s state sales-tax collection and reporting
problem.
The
system is very scalable, so there is not problem in adding stores, vendors,
applications, or functionalities. In 2003, the system was completely converted
to Web-based, enabling authorized vendors, for example, to log on the Internet
and view the status of their invoices by themselves. Also the Internet/EDI
enables small vendors to use the system. (An EDI is too expensive for small
vendors, but the EDI/Internet is affordable.) Also, the employment can update
personal data from any Web-enabled desktop in the store or at home. Future
plans call for adding an e-purchasing (procurement) module using a desktop
purchasing model.
Questions
1.
Explain why the
old, nonintegrated functional system created problems for the company. Be
specific.
2.
The new system
cost several millions dollars. Why, in your opinion, was it necessary to
install it?
3.
Lawson Software
Smart Notification Software (lawson.com) is being considered by Dollar General.
Find information about the software and write an opinion for adopting or
rejection.
4.
Another new product
of Lawson is Service Automation. Would you recommend it to Dollar General? Why
or why not?
CASE – 5 Singapore and Malaysia
System
The problem
Airlines fly around the
globe, mostly with their native crew. Singapore Airlines and Malaysia Airlines
are relatively small airlines, but they serve dozens of different countries. If
a crewmember is ill on route, there is a problem of quickly finding a
replacement. This is just one example why crew scheduling may be complex,
especially when it is subject to regulatory constraints, contract agreements
and crew preferences. Disturbances such as
weather conditions, maintenance problems, etc, also make crew management
difficult.
The Solution
Singapore Airlines uses
Web-based intelligent systems including expert systems and neural computing to
manage the company’s flight crew scheduling and handle disruptions to the crew
rosters. The Integrated Crew Management System (ICMS) project, implemented in Singapore
For
example, crews are rearranged if one member falls ill while in a foreign port;
the system will find a backup in order to prevent understaffing on the
scheduled flight. The intelligent system then determines the best way to
reschedule the different crew members’ rosters to accommodate the sick person.
When a potentially disruptive situation occurs, the intelligent system
automatically draws upon the knowledge stored in the database and advises the
best course of action. This might mean repositioning the crew or calling in
backup staff. The crew tracking system includes a crew disruption handling module
that provides decision support capabilities in real time.
A
similar Web-based system is used by Malaysia Airlines, as of summer 2003, to
optimize flight crew utilization. Also called ICMS, it leverages optimization
software from ilog.com. Its Crew Pairing Optimization (CPO) module utilizes
Ilog Cplex and Ilog Solver optimization components to ensure compliance with
airline regulations, trade union agreements, and company policies, to minimize
the costs associated with crew accommodations and transportation and to
efficiently plan and optimize staff utilization and activities associated with
long-term planning and daily operations. The Crew Duty Assignment (CDA) module
provides automatic assignment of duties to all flight crews. The system
considers work rules, regulatory requirements, and crew requests to produce an optimal
monthly crew roster.
The Results
Despite the difficult economic times, both
airless are competing successfully in the region, and their balance sheets are
better than most other airlines.
Questions
1.
Why do airlines
need optimization systems for crew scheduling?
2.
What role can
experts’ knowledge play in this case?
3.
What are the
similarities between the systems in Singapore
and Malaysia
4.
The airlines use
ADSs for their pricing strategy (pricing and yield optimization). Can they use
an ADS for crew management? Why or why not?
