Complied by Pioneer Institute of Professional Studies, Indore
MANAGING HINDUSTAN UNILEVER
STRATEGICALLY*
Unilever is one of the world's oldest
multinational companies. Its origin goes back
to the 19lh century when a group of companies
operating independently, produced soaps and
margarine. In 1930, the companies merged to
form Unilever that diversified into food
products in 1940s. Through the next five
decades, it emerged as a major fast-moving
consumer goods (FMCG) multinational
operating in several businesses- In 2004, the
Unilever 2010 strategic plan was put into
action with the missio'n to 'bring vitality to life'
and 'to meet everyday needs for nutrition,
hygiene and personal care with brands that
help,people feel good, look good and get more
out of life'. The corporate strategy is of
focusing on core businesses of food, home care
and personal care. Unilever operates in more
than 100 countries, has a" turnover of €39.6
billion and net profit of €3.685 billion in 2006
and derives 41 per cent of its income from the
developing and emerging economies around
the world. It has 179,000 employees and is a
culturally-diverse organisation with its top
management coming from 24 nations.
Internation-alisation is based on the principle of
local roots with global scale aimed at becoming
a 'multi-local multinational'.
The genesis of Hindustan Unilever (HUL)
in India, goes back to 1888 when Unilever
exported Sunlight soap to India. Three Indian
subsidiaries came into existence in the period
1931-1935 that merged to form Hindustan
Lever in 1956. Mergers and acquisitions of
Lipton (1972), Brooke Bond (1984), Ponds
(1986), TOMCO (1993), Lakme (1998) and
Modern Foods (2002) have resulted in an
organisation that is a conglomerate of several
businesses that have been continually
restructured over the years.
HUL is one of the largest FMCG
company in India with total sales of Rs.
12,295 crore and net profit of 1855 crore in
2006. There are over 15000 employees,
including more than 1300 managers.
Complied by Pioneer Institute of Professional Studies, Indore
The present corporate strategy of HUL is
to focus on core businesses. These core
businesses are in home and personal care and
food. There are 20 different consumer
categories in these two businesses. For
instance, home and personal care is made up
of personal wash, laundry, skin care, hair care,
oral care, deodorants, colour cosmetics and
ayurvedic personal and health care, while
food businesses have tea, coffee, ice creams
and processed food brands. Apart from the two
product divisions, there are separate
departments for specialty exports and new
ventures.
Strategic management at HUL is the
responsibility of the board of directors headed
by a chairman. There are five independent
and five whole-time directors. The operational
management is looked after by a management
committee comprising the Vice Chairman,
CEO and managing director and executive
directors of the two business divisions and
functional areas. The divisions have a lot of
autonomy with dedicated assets and re-
sources. A divisional committee having the
executive director and heads of functions of
sales, commercial and manufacturing looks
after the business level decision-making. The
functional-level management is the
responsibility of the functional head. For
instance, a marketing manager has a team of
brand managers looking after the individual
brands. Besides the decentralised divisional
structure, HUL has centralised some functions
such as finance, human resource management,
research, technology, information technology
and corporate and legal affairs.
Unilever globally and HUL nationally,
operate in the highly competitive FMCG
markets. The consumer markets for FMCG
products are finicky: it's difficult to create
customers and much more difficult to retain
them. Price is often the central concern in a
consumer purchase decision requiring
producers to be on continual guard against cost
increases. Sales and distribution are critical
functions organisationally. HUL operates in
such a milieu. It has strong competitors such as
the multinationals
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Complied by Pioneer Institute of Professional Studies, Indore
Proctor & Gamble, Nivea or L'Oreal and
formidable local companies such as, Amul,
Nirma or the Tata FMCG companies to
contend with. Rivals have copied HUL's
strategies and tactics, especially in the area of
marketing and distribution. Its innovations
such as new style packaging or distribution
through women entrepreneurs are much valued
but also copied relentlessly, hurting its
competitive advantage.
HUL is identified closely with India.
There is a ring of truth to its vision statement:
'to earn the love and respect of India by making
a real difference to every Indian'. It has an
impeccable record in corporate social
responsibility. There is an element of nostalgia
associated with brands like Lifebuoy (in-
troduced in 1895) and Dalda (1937) for senior
citizens in India. Consequently, Indians have
always perceived HUL as an Indian company
rather than a multinational. HUL has attempted
to align its strategies in the past to the special
needs of the Indian business environment. Be
it marketing or human resource management,
HUL has experimented with new ideas suited to
the local context. For instance, HUL is known
for its capabilities in rural marketing, effective
distribution systems and human resource
development. But this focus on India seems to
be changing. This might indicate a change in
the strategic posture as well as a recognition
that Indian markets have matured to the extent
that they can be dealt with by the global
strategies of Unilever. At the corporate level, it
could also be an attempt to leverage global
scale while retaining local responsiveness to
some extent.
In line with the shift in corporate strategy,
the locus of strategic decision-making seems
to have moved from the subsidiary to the
headquarters. Unilever has formulated a new
global realignment under which it will develop
brands and streamline product offerings across
the world and the subsidiaries will sell the
products. Other subtle indications of the shift
of decision-making authority could be the
appointment of a British CEO after nearly forty
years during which there were Indian CEOs,
the changed focus on a limited number of
international brands rather than a large range of
local brands developed over the years and the
name-change from Hindustan Lever to
Hindustan Unilever.
Complied by Pioneer Institute of Professional Studies, Indore
The shift in the strategic decision-making
power from the subsidiary to headquarters
could however, prove to be double-edged
sword. An example could be of HUL adopting
Unilever's global strategy of focussing on a
limited number of products, called the 30
power brands in 2002. That seemed a per-
fectly sensible strategic decision aimed at
focusing managerial attention to a limited set
of high-potential products. But one
consequence of that was the HUL's strong
position in the niche soap and detergent
markets suffering owing to neglect and the
competitors were quick to take advantage of the
opportunity. Then there are the statistics to deal
with: HUU has nearly 80 per cent of sales and
85 per cent of net profits from the home and
personal care businesses. Globally, Unilever
derives half its revenues from food business.
HUL does not have a strong position in the
food business in India though the food
processing industry remains quite attractive
both in terms of local consumption as well as
export markets. HUL's own strategy of offering
low-price, competitive products may also
suffer at the cost of Unilever's emphasis on
premium priced, high end products sold
through modern retail outlets.
- There are some dark clouds on the horizon.
HUL's latest fmancials are not satisfactory.
Net profit is down, sales are sluggish, input
costs have been rising and new food products
introduced in the market have yet to pick up.
All this while, in one market segment after
another, a competitor pushes ahead. In a
company of such a big size and overpowering
presence, these might still be minor events or
developments in a long history that needs to be
taken in stride. But, pessimistically, they could
also be pointers to what may come.34
Questions
1. State the strategy of Hindustan Unilever
in your own words.
2. At what different levels is strategy
formu lated at HUL?
3. Comment on the strategic decision-
making at HUL.
4. Give your opinion on whether the
shift in strategic decision-making
from India to Unilever's headquarters
could prove to be advantageous to HUL or
not
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Complied by Pioneer Institute of Professional Studies, Indore
PUTTING TOGETHER THE
STRATEGIC INTENT AT
DABUR INDIA LIMITED*
Cholera, malaria and plague have been killer dis-
eases in India. In 1884, Dr. S.K. Burman em-
barked on a mission to provide nature-based,
effective and affordable treatment for these
killer diseases for ordinary people in far-flung
villages of Bengal. He adopted ayurveda, the
traditional Indian system of medicine. Dr.
Burfnan established a pharmacy that set up a
manufacturing plant in 1896 and research
laboratories in 1919, becoming a full-fledged
private company in 1936 that 50 years later, in
1986, became a public limited company. He
came to be known as Daktar {Indian
pronunciation of 'doctor') Burman. The or-
ganisation he founded came to be known as
Dabur.
Dabuivis a leading consumer goods company
in India, having three subsidiary companies and
13 manufacturing plants. It operates in nearly 50
countries, making it an Indian multinational
company. Within the company, there are two
strategic, business units (SBUs): Consumer Care
Division (CCD) and Consumer Health Division
(CHD). CCD deals with consumer products in
personal care and health care. CHD deals with
classical ayurvedic medicines. It markets its
products through an extensive wholesale and
retail network of 47 agents, 5000 distributors and
1.5 million retail outlets.
The vision of Dabur is stated as: 'Dedicated to
the health and well being of every household.'
There is no specifically-stated mission statement
but a statement of strategic intent having several
elements such as:
• Developing a platform to become a global
ayurvedic leader
• Synthesising knowledge of ayurveda and
herbs with modern science to develop natural
solutions for meeting the health and per
sonal care needs
Complied by Pioneer Institute of Professional Studies, Indore
• Providing superior returns to shareholders
relative to rivals in industry
• Being a responsible corporate citizen com
mitted to environmental protection
• Nurturing core brands across categories
within India and outside
• Being a professionally managed employer
attracting, developing and retaining quality
personnel
• Improving operational efficiency by
leveraging technology
There are six core values that Dabur practices:
ownership, passion for winning, people develop-
ment, consumer focus, team work and innovation.
Its- corporate positioning statement is 'celebrate
life' that goes with its bright green and brown
coloured logo depicting a banyan tree.
The brand name 'Dabur' is claimed to mean
different things to different people. It operates at
three distinct levels: as the company's corporate
brand identity, the mother brand for a whole range
of products and it also percolates down to indi-
vidual product names.
Dabur has tried to alter the product concept of
ayurveda medicines as consumer products sold
over the counter. For instance, it has the distinc-
tion of changing the product concept of
chyavanprash from being a traditional compound
of herbs and plant extracts having anti-oxidant
properties, to a branded consumer product sold
over the counter for general health upkeep of the
whole family.1
Dabur follows a four-year time horizon strate-
gic planning. The 2002-2006 strategic plan
envisaged Dabur becoming a Rs. 2000 crore-
company by the period 2006-2007. It has been
successful in realising that objective. In the next
four-year strategic plan, its objectives are to
continue the growth momentum at a similar
pace. It aspires to be a global FMCG company
where more revenues come from outside India.
In the next strategic plan, it aims to raise the
revenue share from
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Complied by Pioneer Institute of Professional Studies, Indore
international operations from the present 12
per cent to 20 per cent.
The business model of Dabur is based on
pushing through high growth parameters, in
the range of 10 to 15 per cent annually, in the
core domestic FMCG businesses in the
consumer care division and even higher growth
rates of 25 to 30 per cent annually from
businesses outside consumer care.
The strategies adopted are a combination of
internal growth and external growth through
acquisition that it terms as organic and
inorganic growth respectively.
Complied by Pioneer Institute of Professional Studies, Indore
Generally, Dabur haS performed well
except in cases where it had to deal with tough
competition in the intensely competitive
consumer goods in India. Analysts say that the
company has perhaps been eyeing too many
divergent new product categories over the
years.
Dabur's strategy for the nextfew years
seems to be: growth through domestic and
international acquisitions, launching new
products and penetrating deeper into rural
Indian markets.
In the near future, Dabur will have to
decide whether it wishes to be a pure herba
brand or a leading FMCG player, neither of
which it can claim to be with conviction today.'
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Complied by Pioneer Institute of Professional Studies, Indore
WHAT LIES IN STORE FOR
THE RETAILING INDUSTRY
IN INDIA?*
India is not known/ as the 'nation of
shopkeepers', yet it has as many as 5 -million
retail outlets of all shapes and sizes. Some
other optimistic estimates place the number at
as high as 12 million. Whatever be the
number, India can claim to have the highest
number of retail outlets per capita in the world.
But almost all of these are small outfits
occupying an average of 500 square feet in
size, managed by family members, having
negligible investment in land and assets, paying
little or no tax and known as the kirana
dukaan ('mom and pop' stores in the U.S. or
the corner grocery stores in the U.K.). These
outlets offer mainfy food items and groceries -
the staple of retailing in India. Customer
contact is personal and one-on-sne, often
running through generations, There are a
limited number of items offered often sold on
credit—the payment to be collected at the end
of the month. The quality of items is standard,
with moderate pricing.
There is great hype about the growth and
prospects of organised retailing industry in
India. It must be noted, however, that
organised retailing constitutes barely 2 per
cent of the total retailing industry in India, the
rest 98 per cent being under the control of the
unorganised, informal sector of kirana
dukaans. Market research agencies and
consultants come up with encouraging
forecasts retailing industry in many
developing countries around the world. In the
post-liberalisation period, there is more
openness and awareness of the international
developments among, Indians. The ease of
travel abroad and the exposure through
television and Internet have increased the
awareness of the urban Indian consumer to
the convenience of modern shopping. The
modern retail formats thus have gained
Complied by Pioneer Institute of Professional Studies, Indore
about this segment of the retailing industry. For
instance, A.T. Kearney's Global Retail
Development Index ranks 30 emerging countries
on a 100- point scale. Its 2007-ranking places
India at number one for the third consecutive
year, with 92 points, followed by Russia and
China. The size of the organ-ised retailing
industry is estimated at US $8 billion and
projected to grow at a compound annual
growth rate of 40 per cent to US $22 billion by
2010. Overall, the Indian retailing industry is
expected to grow from the current US $350
billion to US $427 billion by 2010 and US $635
billion by 2015.
The economic environment in the post-
liberalisation period after 1991, has created
several factors that have made this high
growth of the organised retailing industry
possible, India's impressive economic growth
rate of 9 per cent is the prime driver of
increasing disposable incomes in the hands of
the consumer. The growing size of the
consuming class in India, in tandem with the
entry and expansion of the organised sector
players in recent years, has set the pace for
corporate investment in retail business.
Practically, every major Indian business group is
looking for opportunities in the growing
retailing industry. Among them are the big
names in the Indian corporate sector such as the
AV Birla group, Bharti, Godrej, ITC group,
Mahindras, Reliance, Tatas and the Wadia group.
The international environment presently is
replete with examples of the fast-paced growth of
the a clear trend of low prices being the
determining factor in purchase decisions by the
cost-conscious Indian consumer. But, lower
prices may not be a major issue with the higher-
income groups that may place greater emphasis
on the quality of products and retail service,
store ambience and convenience of shopping. For
the majority of Indian consumers however,
price is likely to remain a significantly
important issue in the purchase decision.
Competition
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Complied by Pioneer Institute of Professional Studies, Indore
acceptance in India. Carrefour, Tesco and
Wal-Mart are the international players already
operating in India, with several others like
Euroset, Supervalue and Starbucks having
plans to enter soon. These international
companies bring to India the latest
developments in the retailing industry and
help(to set up a benchmark for the domestic
players.
The market environment is one of the
most significant in terms of the growth and
prospects of the retailing industry in India. !n
terms of geography, the reach of the organised
retailing industry has been growing. In addition
to the mega-cities of Mumbai and Delhi, cities
sueh as Bangalore, Pune, -Hyderabad, Kolkata
and Chennai are also witnessing a boom in
organised retail activity. Retailers are now trying
to focus on smaller cities such as Nagpur,
Indore, Chandigarh, Lucknow or Cochin. There
are interesting possibilities regarding the retail
formats. Traditionally, street carts, pavement
shops, kirana stores, public distribution systems,
kiosks, weekly markets and such other formats
unique to India, have been in existence for a
long time. At present, most organised retail
formats are imitations of those used abroad.
These include hyper and supermarkets,
convenience stores, department stores and
specialty chains. Among these formats, a notable
trend has been the development of integrated
retail-cum-entertainment centres and malls as
opposed to stand-alone developments. Besides
these, there are some attempts at indigenous
formats aimed at the rural markets such as those
by ITC's Choupal Sagar, DSCL's Hairyali
Kisaan Bazaarand Godrej group's Godrej
Aadhar. Pricing is an important issue in the
retailing industry. Generally, the bulk buying
yield lower costs of procurement for the big
retailers—a part of which they pass on to the
customer in the form of . lower prices. In food
retailing, for instance, there is
The socio-cultural environment offers
many interesting insights into the changing
tastes and preferences of the urban and semi-
urban Indian consumer. There is a large rural
market consisting of nearly 720 million
consumers, spread over more than 600,000
villages. India's consumers are young: 70
percent of the country's citizens are below the
Complied by Pioneer Institute of Professional Studies, Indore
the purchase decision. Competition has already
accelerated with many Indian business groups
having entered or likely to enter this booming
industry.
The political environment in India is
ambiguous in terms of its support to the
organised retailing industry. This is obvious as
the unorganised sector/ ^employs nearly 8 per
cent of the Indian population and is widely
spread geographically. The overwhelming
presence in terms of 98 per cent of the total
retailing industry also is a significant political
issue. In a democracy, the politics of numbers
makes it imperative for the political class to
adopt an ambiguous stand. In some cases,
politicians have acted in favour of the
unorganised sector by disallowing the setting up
of large retail outlets in some states. Overall,
however, there is ambiguity as there are several
environmental trends in favour of the
development of the organised retailing industry.
In the regulatory environment, there has been
a gradual easing of the restrictions albeit at a
slow pace, in view of the ambiguous political
stance as indicated above. Interestingly, the
retailing industry is still not recognised as an
industry in India. Foreign direct investment of
up to 100 per cent is not permitted though it is
possible for foreign players to enter through the
routes of franchise agreements, cash-and-carry
wholesale trading and strategic licensing
agreements. Another problem area is of the real
estate laws at the level of state governments that
are yet to be clear on the issue of allowing large
stores. Restructuring of the tax structure for the
retailing industry is another regulatory issue
requiring governmental action. However, tariffs
on imported consumer items have been gradually
aligned to meet the prescribed WTO norms and
reduction of import restrictions are likely to help
the growing organised retailing industry.
apparel retailers are establishing
collaborations with their vendors. Another area of
concern is the severe shortage of skills in
retailing. Human resource development for the
retailing industry has picked up lately but may
take time to fill the gap caused due to the
shortage of personnel.
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Complied by Pioneer Institute of Professional Studies, Indore
age of 36 and half of those are under 18 years of
age. These people have deep roots in the local
culture and traditions, yet are eager to get
connected with and know the outside world.
According to a DSP Merrill Lynch report, the
key; factor providing a thrust to the retail boom
in India is the changing age profile of spenders.
A group of seven million young Indians in their
mid-twenties, earning over US$ 5000 per year, is
emerging every year. This group constitutes
people who are enthusiastic spenders and like
to visit the new ' format retail outlets for the
convenience and time-saving they offer, Malls
are also being perceived as not just places -for
shopping, but for spending leisure time and as
meeting places. There has been an emergence of
a combination of the retail outlet and
entertainment centres having multiplexes, with
food courts and video game parlours.
But there are some pitfalls too. For
instance, organised retailing in India has had to
deal with the misconception among middle-
class consumers that the modern retail formats
being air conditioned, sophisticated places are
bound to be more expensive.
The supplier environment probably offers
the biggest constraint on the growth of the
retailing industry in India. Reaching India's
consumers cost effectively is a distribution
nightmare, owing to the sheer geographical size
of the country and the presence of traditional,
fragmented distribution and retailing networks
and erratic logistics. For instance, the apparel
segment that is one of the two top segments, the
other being food, have had to invest in back-end
processes to support supply chains. Supply
chain management and merchandising practices
are increasingly converging and
Complied by Pioneer Institute of Professional Studies, Indore
The technological environment for the
organised retailing industry straddles many areas
such as IT support to supply chain
management, logistics, transportation and store
operations. Some global retailers have
demonstrated that an innovative use of
technology can provide a substantial strategic
Advantage. The large number of store Kerns,
the diversity-of sourcing and the gigantic effort
required to coordinate actions in a large retail
context is ideal for using IT as a support
function. For instance, an innovative use of IT
can help in a wide variety of functions such as
quick information processing and timely
decision-making, reduction in processing costs,
real-time monitoring and control of operations,
security of transactions and operations inte-
gration. The availability of supply chain
management, customer relationship
management and merchandising software can
help much while performing activities such as
ordering and tracking inventory items,
warehousing, transportation and customer
profiling.
Overall, the Indian scenario offers an
interesting mix of possibilities and challenges.
A successful model of large-scale retailing
appropriate for the Indian context is yet to
emerge. The modern retail formats accepted
globally are in the process of implementation
and their acceptability is yet to be established.25
Questions
1. Identify the opportunities and threats that
the
retailing industry in India offers to local
and
foreign companies.
2. Prepare an ETOP for a company
interested
in entering the retailing industry in India.
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Complied by Pioneer Institute of Professional Studies, Indore
STATE BANK OF INDIA BANKS ON ITS
CAPABILITIES*
State Bank of India (SBl) is Ihdia's largest bank,
with an extensive network of more than 9000
branches and 6000 ATMs, its organisational
capability profile offers an interesting study into
the strengths and weaknesses, competencies and
capabilities of india’s prime public sector bank
Financial capability factors: SBl enjoys
a comfortable capital position as it is
adequately capitalised, designed to deai with
asset side risks and support the business
growth, fts funding profile is strong,
underpirvned by its strong retail deposit base/
SBI's strong franchise gives it access to a
steady source of stable retail funds. Its cost of
deposits is optimum.
The bank.maintains a healthy liquidity
position owing to a continual accretion to
deposits, large limits in the call market and
significant surplus statutoryjiquiciity ratio-
related investments. SBl is estimated to have a
good earnings profile with diverse income
streams. The bank's core fee income bolsters its
revenue profile though there is a likelihood of a
slow down owing to the opening of government
business like tax collection to other banks and
increased competition.
The bank's cost structure is rigid as the fixed
employee cost accounted for 74%. of .the
operating expenditure in 2004-05. The bank's
operating costs wifl remain high in the medium
term.
Marketing capability factors; SBl has been
losing market share over decades. There is a
consistent gap between deposit and credit
growth. As a leading public sector bank, it is
obliged to shoulder social responsibilities such
as investing in priority sectors. SBf has been
trying to unlock its brand equity though
unsuccessfully. It has a strong retail base and
wide geographical reach. The bank's fund based
and fee income earnings certain other critical
areas. There is a need to reduce and redeploy
Complied by Pioneer Institute of Professional Studies, Indore
the workforce but this is a sensitive industrial
relations issue in a country
are diversified across industries, regions, asset
classes and customer segments. Marketing
initiatives such as on-line tax returns filing and
faster transfer of funds are in placebo protect its
dominant position in the government business.
The bank has entered the market of term lending
to the corporate sector and infrastructure
financing, traditionally the domain of the
financial institutions. It has increased its
thrusUn retail assets and has built a strong
market position in Housing loans.
Operations capability factors: SBl, through
its non-banking subsidiaries, offers a host of
financial services, viz., merchant banking, fund
management, factoring, primary dealership,
broking, investment banking and credit cards. SBl
has commenced its life 'insurance business by
setting up a subsidiary, .SBl Life Insurance
Company Limited. SBl, along with its associate
banks, offers a wide range of banking products
and services across its different client markets.
The asset quality of the bank, a vital
performance indicator in the banking industry is
of average level. It has a high level of gross non-
performing assets, a bane of the banking industry
anywhere. It faces challenges to develop effective
credit appraisal and collection systems in order to
contain the non-performing assets in retail
finance.
The bank also has a clear
technology strategy that will enable it to
compete with the new generation private
sector banks in customer service and
operational efficiency. The increasing focus on
upgrading the technology back-bone of the bank
will enable it to leverage its reach better, improve
service levels, provide new delivery platforms
and improve operating efficiency to counter
the threat of competition effectively. Personnel
capability factors: Being the -largest bank in
the country has its downsides. It faces the dual
problems of overstaffing and understaffing in
General management capability factors: The
general management of the bank is quite
competent. It has leveraged its corporate
lationships pursued business growth
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selectively and has judiciously not competed
on the basis of interest rate.
where bank unions are strong.. Information
management capability factors: The SBI
commissioned Tata Consultancy Services, the
global software solutions and consulting
services company, to supply, customise and
implement the centralised core banking system.
The project is claimed to be one of the largest
projects of its kind in the world in terms of
the number of branches, customers and
transaction volume when completed. The,
information- management capabilities, which
SBI Group will seek to develop using the core
banking solution, include personalised
customer service, 24X7 banking through
diverse types of delivery channels, fast
product launch and customer relationship
management.
Complied by Pioneer Institute of Professional Studies, Indore
The performance indicators used by the SBI
are: capital adequacy ratio, -business per
employee, profit per employee, return on assets,
net IMPA ratio and deposits and advances.
The banking industry in India is currently
under an intense phase of change. The public
sector banks are trying to consolidate on the''''
basis of their large network and customer
base. The ' private sector banks are adopting
mergers and acquisitions to increase their size.
The trend is towards consolidation around well-
identified core competencies.1
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Complied by Pioneer Institute of Professional Studies, Indore
STRATEGIC MOVES BY THE
MAHINDRA GROUP*
The corporate journey of the Mahindra Group
started in 1945 when-one of the two brothers, K.C.
Mahindra—the other being J.C. Mahindra—was
on a visit to the U.S. Both brothers were
professionals working with Tata Steel and Martin
Burns respectively. K.C. Mahindra visualised
manufacturing jeeps for the rugged Indian roads.
A franchisee for assembling Willys jeep was set
up as Mahindra & Mohammad in association
with Ghuiam Mohammad, who later became a
finance minister in post-independence Pakistan.
In 1948, Mahindra & Mahindra came into
being. Keshub Mahindra is the Chairman of the
Group ^and Anand G. Mahindra is the managing
director at present. The first diversification came
in 1953 when Otis Elevator (India) was formed.
In 1956, the shares of the Mahindra Group were
listed on the Bombay Stock Exchange.
The decade of 1953-63 saw diversification
mainly through collaborations and joint
ventures with foreign companies. The Group
entered varnishes, and resins, machine tools,
sintered products, alloy and special steel, and
finally tractors in 1963. Tractors remain a core
business at the Mahindra Group and it is a market
leader in the industry and a global player now.
In 1965 came a major thrust into the
automobile industry with the commencement of
production of light commercial vehicles. The
first international foray in the form of exports of
utility vehicles and spare parts started in 1969,
making it the first attempt at geographical
diversification for.the Group.
The next two decades, till 1985, were
interspersed with strategic actions aimed at
expansion in its mainline business of tractors. A
major diversification occurred in 1986 with the
Group entering the information technology
sector. The milestone of India's second
liberalisation in 1991, coincided with the
Mahindra Group's diversifying into financial
services.
A reorganisation exercise was carried out in
1994 to create six strategic business units
Complied by Pioneer Institute of Professional Studies, Indore
automotive, farm equipment, infrastructure, trade
and financial services, information technology
and Systech (systems and technologies). The
next five years, till the dawn of 2000, were
marked by several related and unreteted
diversification moves into realty and
infrastructure, passenger cars, holiday resorts,
consultancy and education.
By 2001, the Mahindra Group was not really in a
good shape financially, with revenues of Rs
4352 crore, net profit of Rs 12f crore, and return
on capital employed at 6.9 per cent. That made
it embark on a financial reengineering plan,
codenamed, Operation Blue Chip, involving debt
restructuring, defining the financial criteria that
each business in the Group had to meet, etc
In the post-2001 period, the Group has been
focusing on internationalisation through mergers
and acquisitions and joint ventures. The Group
has been operating in several markets around the
world in Europe, Africa, South America, South
Asia, South-East Asia and the Middle East. Its
earlier experience of having a joint venture with
Ford was not happy. Now it is to be seen whether
its joint ventures with Renault of France and
International Truck and Engine Corporation of
the U.S. prove to be successful. Going by the
popularity of its vehicles like Scorpio, it may
well look forward to success.
The Mahindra Group today is a 60-year old,
widely diversified, US$4-bil!ion-group with 58
subsidiaries, 4 joint ventures and 9 associate
companies. It businesses span a wide range of
sectors, industries and markets, including trade
and financial sen/ices, automotive technology,
information technology, infrastructure
development and defence systems. Yet, tractors
and utility vehicles of its automotive and farm
equipment are its core businesses. The logic
behind some of the diversifications may not be
apparent—at least in the short-run—but Anand
Mahindra, managing director, defends the
strategic posture by saying 'I see myself as a
venture capitalist and we have to constantly
reallocate resources to newer ventures.7'
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Complied by Pioneer Institute of Professional Studies, Indore
18. What is meant by being a first mover in an
indus try? a late mover?
19. What are the advantages and disadvantages
in
Being a first mover in an industry? a late mover
20. What is meant by the market location
tactics of business strategy?
21. Explain these market location tactics of
business strategy: (a) market leadership
(b) market chal lenger fc) market follower
(d) market nicher.
22. What are the characteristics of business
strate gies in a growth industry?
23. How can organisations leverage home-
country advantages for their international
business strate gies?
24. How can digitalisation help an organisation
attain cost leadership?
Discussion/Application Questions
1. Build up an argument to demonstrate
how most competitive interaction occurs at
the level of busi ness strategy, which is
where competitive advan tage in an
industry is won or lost by a company,
2. Based on the idea of business definition,
of a com pany of your choice, identify the
business strafe gies that company could
adopt.
3. Discuss Michael Porter's approach to
defining generic competitive (or business)
strategies.
4. Select a company which is a market
leader in a competitive industry in India
(you could, for in stance, take Hindustan
Levers in the FMCG in dustry). Identify
the sources of competitive advan tage of
your chosen company.
5. For each of these business strategies,
describe how they are used, under which
conditions are they used and the associated
benefits and risks: (a) cost leadership (b)
differentiation (c) focus.
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6. Discuss the conditions under which
an organisation can attain cost
leadership and differentiation
simultaneously. How is this achieved?
7. Is your business school a first
mover/late mover in the management
education industry in India? What are
the advantages and disadvantages in
either case?
8. Write a convincing argumentative note on
the topic: 'Good timing is crucial for a
successful business strategy'.
9. Describe the market location tactics
employed by organisations. Highlight
the approaches to be used in each of
the different types of such tactics.
10. Identify the features of business
strategies that would be appropriate
under the following industry conditions
(a) embryonic {b} growth (c) maturity
and (d) decline.
11. Discuss the manner in which
organisations can leverage India's
home-country advantages and theirown
advantages in adopting business strate-
gies internationally.
12. Build up arguments in favour of the
proposition that digitalisation itself
does not create competitive advantage
for an organisation. The way that an
organisation can use and manage
digitalisation creates competitive
advantage.
13. Describe the different ways in which
digitalisation can help organisations in
achieving cost leadership,
differentiation arid focus.
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COOL COMPETITIVE STRATEGIES
WHIRLPOOL INDIA*
Whirlpool India is a part of the multinational
company, Whirlpool Corporation that is a
global manufacturer and marketer of home
appliances, with its headquarters at Michigan in
the U.S.A. It is claimed to be the world's
largest white goods company, a status it
reached in 2006. Whirlpool Corporation has
annual sales of more than $18 billion, more
than 73,000 employees and more than 70
manufacturing and technology research centres
around India Limited was acquired to
facilitate entry into the refrigerator market in
India. A majority ownership in the joint
venture with TVS led to the emergence of
Whirlpool of India Limited in 1996.
The vision of Whirlpool India articulated in
1998 is stated as: 'Every home, everywhere,
with pride, passion and performance'. The
mission statement enunciated in 2003 is
'Everybody creating loyal customers for life'.
The objectives of innovation, operational
excellence, customer-centric approach and
diversified talent are claimed to be embedded
within business goals, processes and work
culture. In 2002, the company launched an
initiative called 'Whirlpool Strategic
Architecture' as the implemenv tation
framework to achieve its vision and mission.
Whirlpool India is one of the popular
brands of home appliances in India. The
business portfolio of the company consists of
four lines: air treatment, fabric care, food
preparation and foodstream solutions. The
product portfolio includes air conditioners,
microwave ovens, refrigerators and washing
machines. The company claims to hold a
market share of 25 per cent in the refrigerator
market, 10 per cent in the microwave oven
market and 16 per cent in the'washing
machines market in 2006. There are three
manufacturing units situated at Faridabad,
Pondicherry and Pune.
Whirlpool has transformed itself from an
accomplished manufacturer to a consummate
marketer— a process that is said to be
achieved through a brand building framework
that aimed at building excellent brands and
Complied by Pioneer Institute of Professional Studies, Indore
engendering customer loyalty. In doing so, the
company claims to have relied on one of its
the world in 2007. Among its eleven major
brands are Whirlpool, jMaytag and KitchenAid
that are produced in 13 countries and marketed to
consumers in over 170 countries around the
world. The initial internationalisation of
Whirlpool Corporation began in 1958 when it
entered Brazil. Serious efforts came in the 1980s
when it started adopting an aggressive strategy to
be a world-class company. India was identified
as a growth market sometime in the iate-1980s.
Entry into India was made through a joint
venture wi'.h TVS Group to produce automatic
washers at Pondicherry. In 1995, Kelvinator
of facilities have ISO certification and have
also adopted the six-sigma quality technique
for quality management in 1-999. Care has
been taken to create adequate capacity for the
long-run, along with eco-friendly technology.
Regional Technology Centres at Pune and
Pondicherry are involved in design
engineering aimed at continual upgrades of
features and styling and customisation of
products. There is also a global consumer
design centre for Asia based at Delhi,
indicating the*company's commitment to using
India as a technology base for its Asian
operations. The Pune-based design centre has
online connectivity with other Whirlpool
design centres around the world, enabling
optjpium utilisation of modelling and
analysis software. Digitalisation is a
progressive process at Whirlpool India. For
instance, it has incorporated digital
manufacturing technology into its washing
machine manufacturing operations. The
software connects Computer Assisted Design
data with assembly times and the cost of
materials, simplifying the planning and
ordering phase, resulting in the application of a
customer-centric marketing strategy. The
company website was re-launched in 2006 and
was made more interactive, providing a forurn
not only for information but also for
performing the sales functions.
Whirlpool India is a recognised export
house with an export-oriented unit based at
Pondicherry, to produce KitchenAid
appliances for the export markets in the U.S. It
is also exporting refrigerators and washing
machines to South Asia, Asia-Pacific, Latin
America and West Asia, Russia and East Eu-
ropean countries and claims to be the largest
exporter of home appliances from India.
Exports constitute 13 per cent of the turnover
of the company and reached Rs. 200 crore in
2006-2007.
The market positioning of Whirlpool India
is based on the theme: 'your partner in
homemaking'. Customer focus drives
innovations in product design and changes.
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Product differentiation is built on customer

responsiveness for the demanding Indian
consumer. An example of such responsiveness
is its realisation that the Indian climate
core competence of 'customer excellence', facturing units in the pipeline. Whirlpool
the other two being innovation and opera- India had sales of Rs. 1592 crore for the
tional excellence. The transformation process year ending March 2007 and a net loss of
has five elements of: market leadership Rs. 5.32 crore, an improvement over the
through customer loyally, innovation past year's loss of Rs, 38.1 crore. It
diversity with inclusion and core expects to turn around by 2008 through
competence, passion for customer excel- sustained productivity improvements and
lence and operational excellence. The end cost reduction.21
result is a customer-centred organisation.
These five elements form the core of the Questions
company's strategy and guides strategic
planning and implementation. 1. Analyse the case to identify the type of
The manufacturing facilities of Whirlpool ge neric business strategy or strategies
India at Faridabad and at Ranjangaon Whirl pool India is adopting.
near Pune, are dedicated to making 2. In your opinion, what is the stage of
refrigerators and at Pondicherry, to industry development in the consumer
washing machines. All production quite durables in dustry in India? Depending
successful, along with an advertising cam- on your answer, comment on whether
paign based on the theme, 'Ice, Ice Baby'. Whirlpool India's ge neric business
Other special features like movable trays, strategies are appropriate.
space for large bottles and strong body to 3. What aspects of internationalisation of
withstand the heavy toads a typical Indian Whirl- pool India can you identify in
home subjects its appliances to, have driven its the case? Dis-cuss briefly.
product changes and design. 4. What aspects of digitisation of
The consumer durables or the white goods Whirlpool India can you identify in
industry in India is a growing industry, albeit at the case? Discuss briefly.
a slow rate. There are strong competitors such
as the multinationals LG or Samsung and
strong domestic players such as Godrej and
Voltas. It's a tough market for the best of
marketers. The Indian consumer is hard-to-
convince and demands value for money and is
not swayed easily by the hype built, around
products through advertising campaigns.
Future plans of Whirlpool are mostly to
concentrate on the existing businesses, except
a related diversification into water purifiers
where it plans to leverage its retail distribution
strength. Whirlpool products are available
across 11000 retail outlets in over 150 cities
and towhs in India. There are no new manu-

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Notes and References

1. K. Gopalan, "Mariwala's shopping spree", Z. Rahman & S. K. Bhattacharya,
Busi ness Today, Apr 9, 2006, p. 44; P. "Sources of first- mover advantages in
Mukherjee, "Marico to roll out new emerging markets—an Indian perspective",
products, plans acquisitions", rediff.com, European Business Review, Vol. 15, No. 6,
Jan 16, 2007; Marico—-infor 2003, pp. 359-369.
mation update, April 26, 2007, available at 1) P. Kotler, Marketing Management,
Com-pany website at Prentice-Hall of India, New
http://www.maricoindia.com /, Retrieved Delhi,.1999, pp. 231-247.
june 25, 2007 2) T. L. Wheelen & D. Hunger, Strategic
2. C. A. Montgomery and M. E. Porter, Management and Business Policy, 10lh
Strategy:Seeking and Securing ed., Upper Saddle River, NJ, Prentice
Competitive Advantage,Harvard Hall, 2006.
Business School Publishing, 3) M.A. Carpenter & W.G. Sanders,
Boston,1991, p. xiv. Strategic Management: A Dynamic
3. Shafer, Scott M. & Smith, H. Jeff & Perspective, Upper Saddle River, NJ,
Under, Jane C., 2005, "The power of Prentice Hall, 2007, pp. 142-144;
business models," Business Horizons, C.W.L. Hill & G.R. Jones, Strategic
Elsevier, vol. 48(3), pages 199-207. Management: An Inte grated
4. C.W.L. Hill & G.R. Jones, Strategic
Management: An Integrated 4) Approach, Boston, Houghton Miffiin,
Approach, Boston, Houghton Miffiin, 2007, pp. 201-204.
2007, p. 6.
5. The major writings of Michael E. Porter 5) Website of Board of Industrial and
that explain his theory, principles and Financial Reconstruction
techniques of strategy and allied issues http://www.bifr.nic.in/geninfo.htm.
are in the form of three books: mpetitive Re
Strategy Techniques for Analyzing trieved June 24, 2007.
Industries and Competitors, 6) Website of India Brand Equity
(1980) Competitive Advantage: Creating Foundation at http://www.ibef.org/,
and Sustaining Superior Performance Retrieved June 25, 2007.3.
(1985) and The Competitive Advantage 7) Willcoxson & R. Chatham, "Progress
of Nations, (1990). in the IT business relationship: a
6. J.D. Hunger & T.L. Wheelen, Strategic longitudinal assessment", Journal of
Manage-ment, Addison Wesley, Reading, Information Technology, London,
Mass., 1999,p 121 Mar. 2004, Vol.19, Issue 1; pp. 71-80

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Complied by Pioneer Institute of Professional Studies, Indore
MADHYA PRADESH RURAL
LIVELIHOOD PROJECT HELPS
CREATE A BETTER LIFE FOR THE
RURAL POOR*
More than two-thirds of India's billion-plus
population lives in rural areas and over 300
million of them are classified as poor people,
earning, less than US$ 1 per day. Rural
poverty is a scourge that afflicts three out of
four people living in the rural areas. Poverty is
most prevalent among the scheduled caste and
tribes living in the states of Bihar, Jharkhand,
Chhattisgarh, Madhya Pradesh, Orissa,
Rajasthan and West Bengal. A major cause of
poverty among rural people in India 1s lack of
access for both individuals and communities,
to productive assets and financial resources.
Among the several organisations working
in the government and non-governrnental
sectors is the Macihya Pradesh Society for
Rural Livelihoods Promotion that is an
autonomous organisation registered under the
Madhya Pradesh Societies Act created to
implement the Madhya Pradesh Rural
Livelihoods Project (MPRLP). The MPRLP
project is being implemented In two phases,
based on time periods of 2004-2007 for 822
villages and 2007-2012 for 3000 villages in
eight tribal dominated districts of Madhya
Pradesh. These districts are: Anupur, Barwani,
Dhar, Dindori, Jhabua, Mandla, Shahdol and
Sheopur.
The strategy of MPRLP is to address the struc-
tural causes of rural poverty and develop
entrepreneurial skills to promote self-
employment, aided by an effort to change the
perception of the rural poor to accept poverty
not as destiny but as a temporary status that
can be changed. There are two components of
the strategy; strengthening the resource base
that generates livelihood and fostering micro-
enterprises that provide employment and
income opportunities to the rural people. The
strategy focuses on seven areas of Pradesh,
Orissa and West Bengal. The project receives
funds from the State government for un-
dertaking various activities, which are
reimbursed by the DF1D through the
Government of India. The major task of the
MPRLP is to channel resources and funds to
where they are needed. In doing so, the
panchayat institutions play a central role in a
bottoms-up approach, in sharp contrast to the
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top-down resource allocation process in
government financing. The funds are
channelled from the Zila Panchayat to the
Gram Kosh (lit, village fund) of the Gram
Sabha (lit. village assembly).
watershed and agricultural development,
community forest management, micro-
enterprises, livestock, fisheries and poultry,
support to migrant labour and improving
access to information.
In keeping with its nature as a bureaucratic
creation, there is an elaborate organisational
setup designed to formulate and implement
the project. The Minister of Panchayat and
Rural Development is the Chairperson of trie
Society. An executive committee under the
leadership of the Principal Secretary
Panchayat and Rural Development oversees
the project. The policy making is in the
responsibility of an Empowered Committee
headed by the Chief Secretary to the Madhya
Pradesh government, that provides strategic
direction and interdepartmental coordination.
The project coordinator leads the State Project
Management Unit that is responsible for
implementing and monitoring the project. The
project coordinator acts as the secretary of the
steering group that provides directions for the
Livelihoods Forum and development of the
work programme. District-level Project
Management Committees have been formed
that are chaired by the District Collectors. The
heads of the Zila Panchayat (lit. district com-
mittee} acts as the District Project
Coordinator and is supported by the District
Project Support Unit for project
implementation. Villages are grouped into
clusters where multi-disciplinary project
facilitation teams and Gram Vikas Samitis (lit.
village development committees) and other
committees of the Gram Sabha (lit. village
board) organise and support execution at the
individual level.
The funding for the project is provided by
the Department for International Development
(DFID) that is the part of the UK Government
that manages Britain's aid to poor countries
and works to get rid of extreme poverty. The
DFID has provided 16.6 million (Rs. 115
crore) for the first phase. Besides the MPRLP,
the DFID also funds or is a partner in funding
similar projects in Andhra transparency.
Contrary to popular perception, there seems to
a high level of transparency in the MPRLP as
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its website provides a lot'of information and
documents pertaining to the various facets of
the project. There are other alternative sources
on the Internet.such as those of the DFID that
The implementation of the project is based
on community involvement which is a crucial
sub-cess factor. It is important that decisions
about where resources should be invested
originate from within the community and that
the community is involved in their
implementation. The MPRLP acts as a
facilitator to raise the level of understanding
of the people regarding the reasons, for their
poverty arid what^they could do to get out of
the vicious cycle. Once such an understanding
is created, it becomes easier to motivate the
people to adopt measures through joint action
and participation in community activities
designed to create a sustained livelihood.
Examples of the implementation approach are
adoption of measures to conserve soil and
water and use seed more effectively, training
in diamond cutting or making leaf plates.
There is, in general, skepticism in India re-
garding the impact that government schemes
and projects really have. There is also
apprehension •regarding the high level of
corruption and lack of
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corroborate the achievements of the project,
making it a reliable assessment based on
third-party monitoring and evaluation.
Practical measures such as the practice of
writing the Gram Kosh account details on
the watls or display boards in the villages
helps to gain the confidence of the
participants. There have been problems
arising out of the usual inefficiency of state
governments ifi creating the initial
administrative structure. Thqre is also
concern about the,high administrative costs
and delays in sanctions.
During its first phase that ended in July
2007, the project has made a difference to the
lives of many other people. For instance, over
20 per cent of households have seen an
increase in the income they obtain from
farming. This is due, in significant part, to the
agricultural training that they have received.
Also, food supplies are now more reliable,
with 44% of poor households seeing a
reduction in the last two years in the length of
the 'hungry season' when food stocks reach
their annual low. Another welcome feature of
the project is the realisation that experiences
gained in a project of large size and high
complexity can be shared with other
governmental agencies and non-governmental
organisations for knowledge sharing and
transfer of learning.1
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STRUCTURE AND SYSTEMS AT NATIONAL
THERMAL POWER CORPORATION*
National Thermal Power Corporation (NTPC)
established in 1975, is a public sector
company set up to accelerate power
development in India. It is the largest thermal
power generating company in India at present.
Its vision is to be a 'world class integrated
power major, powering India's growth, with
increasing global presence.' The core business
of NTPC is engineering, construction and
operation of power generation plants. It also
provides consultancy in these areas. It has 26
projects based on coal-based and gas-fired
power,generation. NTPC has one-fifth of
India's capacity for power generation and more
than one-fourth of power generated. Its
claimed core competence is to 'develop and
operate world-class powep- stations'. NTPC is
one of the 'nsvaratnas' (lit. nine gems) in the
public sector in India. The major challenges
before the company are continual upgradation
of power technology, non-payment or delayed
payment from the state electricity boards,
timely execution of projects and tackling
environmental issues.
NTPC has a long-term corporate plan for
2002-2017. The corporate and business strate-
gies of NTPC focus on expansion through
integration and internationalisation through
joint ventures, acquisition and strategic
alliances. Integration strategies mean moving
backward to coal mining and forward to power
trading and distribution. Internationalisation
involves the global strategy of leveraging on
its core business of engineering, construction
and operation of power generation plants and
their maintenance around the world. Long-
term plans aim at diversifying its generation
mix to include nuclear power, continuing
integrating along the power value chain and
intensifying internationalisation efforts.
evaluated. The MOU system constitutes an
overarching control system in public sector
enterprises and so is the case with NTPC. The
company has received consistent excellent
awards since the inception of the MOU
system. At the level of the company, there are
two board-level committees to oversee audit
and management controls functions. The
operational performance evaluation of NTPC
basically relates to the reliability of power
supply and economics of power generation.
The typical performance metrics include
capacity utilisation, plant load factor, power
Complied by Pioneer Institute of Professional Studies, Indore
In 2003, NTPC, based on the recommenda-
tions of the consulting firm, AT Kearney, em-
barked on an organisational transformation
exercise named Project Disha (lit. direction).
Among the 14 initiatives recommended were
structural changes, performance management
system, rewards and incentives system and IT
strategy.
The present organisation structure of NTPC
is a hybrid of functional and geographical
forms of structure. The chairman and
managing director heads NTPC with the
directors looking after the functions of
technical, projects, finance, operations, human
resource, commercial and vigilance. Regional
executive directors based at regional
headquarters, oversee the region-based
divisions of west, south, east and the national
capital region that supervise plant-level
operations. A separate hydro division operates
under director-projects. The corporate
headquarter has some staff functions such as
corporate planning, materials management,
legal and secretarial,
NTPC, which recently opted for SAP as its
ERP solution, has engaged BPCL for leading
the change management effort. The project,
named 'Lakhsya' {lit. aim), aims at efficiency,
flexibility of functioning, transparency and
quicker response to internal and external
stakeholders. The SAP solution is expected to
help NTPC achieve a faster exchange of
information, improved productivity and
reduction of costs, better data consistency,
knowledge sharing and unification of
planning and budgeting process.
NTPC has a memorandum of understanding
(MOU) with the Government of India. MOUs
are negotiated agreements between the
government and the central public sector
enterprises. Under the MOU, the public sector
enterprise commits itself to a set of objectives
to be achieved over a period of time, after
which the performance is generation per
employee, availability factor, equipment
downtime and energy conservation.
NTPC has a comprehensive system of re-
wards and incentives that include areas such as
industrial relations, productivity, safety and
environment. Meritorious employees are
awarded the star of the month and employee
of the year awards. The company provides
higher education support to employees desirous
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of enhancing their qualifications. Regarding
compensation, the company has to adopt the
norms set for public sector enterprises.'
INCORPORATING CORPORATE SOCIAL
RESPONSIBILITY INTO STRATEGY AT
THE TATA GROUP*
'In a free enterprise, the community is not just an-
other stakeholder in business, but is in fact, the
very purpose of its existence.' This is a statement
of the founder of the Tata group of companies,
Jamsetji N Tata. The thinking behind the statement
probably drives the corporate social responsibility
initiatives at the Tata group of companies.
The Tata group describes itself as 'India's oldest,
largest and most respected business conglomerates',
a depiction that seems to be quite justified. The
group's businesses operate globally through 98
companies—27 of them publicly-listed—in seven
business sectors. There are nearly 2,90,000
The tradition of CSR is embedded in the history of
the Tata group. The_ J, N. Tata Endowment Scheme
was established in 1892. Over the years, individual
family members have created a constellation of trusts
and endowments that contribute to a wide range of
CSR activities. In the words of J. J. (rani, ex-
managing director of Tata Steel; 'Some people
consider social responsibility as an additional cost;
we don't. We see it as part of an essential cost of
business, as much as land, power, raw materials and
employees.' This is seen in the quantum of funding
that is channelled into CSR. The Tata group
contributes nearly 30 per cent of its profit after tax,
which is an unusually high figure, when other
companies or business groups may take pride in
putting in just one per cent of profits into CSR. The
high social investment come from the Tata trusts that
have a controlling interest in the holding company,
Tata Sons. This ensures that the dividends paid out are
directed to CSR, making the Tata group companies
unique in ensuring that personal wealth is converted
into social capital.
The Tata group has created a formal structure to
direct CSR activities. The Tata Council for Com-
munity Initiatives is a centralised agency consisting of
the Tata companies' CEOs, charged with the re-
sponsibility of directing and coordinating the CSR
activities across the group. It is headed by a member
of the group corporate centre, one of the two top
governance bodies, the other being the group
executive office. This is an indication of the high
priority accorded by the Tata group to CSR. In order
to create accountability, the Tata group has a
distinctive evaluation system called the Tata Index
for Sustainable Human Development. The Index is a
set of guidelines for Tata companies looking to fulfil
their social responsibilities. In the words of Anant
Complied by Pioneer Institute of Professional Studies, Indore
G. Nadkarni, vice president, group corporate
sustainability, 'We have adopted a business model to
drive social responsibility efforts within the group
because that way, you ensure a huge network. The
Index helps structure our efforts and quantify their
effect on the communities and people they are aimed
at.'
Of significance is the fact that the Tata Index for
Sustainable Human Development is built around the
Tata Business Excellence Model that drives business
decisions of the group companies. One of
the several areas of business performance in the
model is of governance and social responsibility,
indicating the strategic priority given to this issue by
the Tata group. Typically, business organisations
have considered social responsibility as far removed
from their mainline business activities. Not so at the
Tata group where CSR is a key element in the
business model. It is the responsibility of every
company in the group to make CSR a component of its
strategic plan.
Despite having a centralised network and structural
arrangements, the individual Tata companies are
autonomous to choose whatever CSR initiatives suit
the requirements of the communities they work'with.
The strategy that each company evolves is required to
be focussed on the needs of the communities in which
the company works in. There is a conscious effort to
match the strengths and competencies of the
company to the developmental needs of the
communities being served. Thus, the company is left
free to determine the scope of its CSR initiatives, be
it in the area of arts and culture, civic amenities,
education, environment, health or infrastructure. For
instance, the Tata Steel Rural Development Society
works at Tata Steel for the rural communities around
the operational units, while the Tata Chemicals
Society for Rural Development does similar work
for Tata Chemicals. Voltas for Women is an
exclusively female society consisting of female
employees and wives of employees, who work on
health and education issues for women. The Tata
family trusts consist of the Sir Dorabji Trust and Sir
Ratan Tata Trust besides the J. N, Tata Endowment.
Some of the prominent Tata-funded institutions are
the Indian Institute of Science, Tata Institute for
Fundamental Research and Tata Institute of Social
Sciences.10'
Questions
1. Collect evidence from the case to support the
argument that social responsiveness at the
Tata group is closely aligned with its strate
gic management.
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Complied by Pioneer Institute of Professional Studies, Indore
2. How would you respond to a critic who says
that the Tata group engages in CSR activi
ties to enhance the reputation of the Tata
brand and thereby, benefit economically
from its social responsibility initiatives?
STRATEGIC EVALUATION AND
CONTROL AT THE APOLLO
HOSPITALS NETWORK*
Apollo Hospitals Enterprise Limited (AHEL)
has the distinction of being the first and the
largest corporate hospital network in India,
modelled on the Hospital Corporation of
America, the world's largest private healthcare
providers. Pioneered by Dr. Prathap C. Reddy,
it was incorporated as a public limited
company in 1979. Its 2007 turnover is Rs- 957
crore and net profit is Rs. 95.4 crore. It has ISO
9002 and the coveted Joint Commission
international (JCI) accreditations of the US,
enabling it to provide healthcare to Americans
who can.then claim healthcare insurance
reimbursements.
AHEL is basically a family-owned and
family-managed organisation with Dr. Reddy
as the executive chairman and his three
daughters holding the positions of managing
director and executive directors of finance and
operations. Dr. Reddy is a visionary medical
doctor-entrepreneur and the driving force
behind the Apollo network. Professionals
manage the individual hospitals. A case in point
is of hiring Anne Marie Moncure, who was
then executive director at one of the Hospital
Corporation of America's hospitals, for the
Delhi-based Indraprastha Medical Corporation.
But the motive in this case seems to be related
to the hospital trying to secure the JCI
accreditation rather than a genuine search for
top management talent.
The corporate strategy is of expansion
through organic as well as inorganic routes,
to grow through acquisitions, strategic
alliances, interna-tionalisation and
digitalisation. The business strategy is of
differentiation based on high-quality
healthcare at premium price. Focus is created
through niches such as medical tourism,
offering specialised healthcare facilities for
foreigners and non-resident Indians,
Complied by Pioneer Institute of Professional Studies, Indore
particularly from the U.S.
and global nursing staffing by education and
training of nurses. Several business models are
used simultaneously, in line with whatever
opportunity arises for establishing strategic
alliances with prospective partners.
The Apollo network owns and manages
more than 40 hospitals in India and some
neighbouring countries. It serves 7.4 million
customers and aims at increasing bed capacity
by around 30% every year. The business
portfolio of AHEL has speciality hospitals and
clinics, a chain of pharmacy retail outlets and
consultancy services for commissioning and
managing hospitals.
There are more than 50 clinical departments
for patient care, manned by about 7000
medical professionals. The technological
capability of AHEL is seen In the state-of-the-
art equipments for diagnostic and therapeutic
purposes and in cases of using advanced
medical procedures such as cardiac surgery
using beating heart technique, of high quality,
at a comparatively lower cost internationally.
The level of innovation seems to be high as
observed in AHEL's introduction of new
services such as medical insurance,
telemedicine, healthcare business process
outsourcing and coming up with new ideas in
medical research and treatment.
The strategic control appears to be
centralised in the executive team led by Dr.
Reddy. From the tactical actions of AHEL
reported frequently in the media, it emerges
that the growth trajectory being charted is
based more on entrepreneurial feats and
business opportunism rather than conscious
planning. A plethora of business models used
eclectically creates a hazy picture of the
AHEL's strategic intent. It is possible
therefore, that there are instances where the
premises of plans may turn out to be faulty,
strategic rethinking may be delayed, there
might be missed opportunities as well as the
existence of risk of choosing options that
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Complied by Pioneer Institute of Professional Studies, Indore
might not be advisable. On the operational
side, however, things seem to be in hand.
EXERCISING STRATEGIC AND
OPERATIONAL CONTROLS AT iGATE
GLOBAL SOLUTIONS*
The Bangalore-based iGATE Global
Solutions is the flagship company of iGATE
Corporation, a NASDAQ-listed, US-based
corporation. Known earlier as Mascot
Systems, it was set up in India in 1993, to offer
IT staffing services. It acquired business
process outsourcing (BPO) and contact
cen- .institutional and public investors. The
revenues for 2006-2007 are over Rs. 805 crore
and net profits, Rs. 49.6 crore
The corporate strategies of iGATE are
offering integrated IT services and divesting
the legacy IT staffing business snci possibly
making acquisitions in the domain expertise for
financial services businesses. The business
strategy is focused differentiation based on the
focal points of testing, infrastructure
management and enterprise solutions- The
competitive tactic is avoiding head-on
competition with the formidable larger players
in the industry by carving out a niche. The
business definition is serving large customers
and staying away from sub-contracting work.
iGATE adopts a differentiation business
model based on an integrated technology and
operations model which it calls as the iTOPS
model. This is an advancement over the
prevalent model in the ITES industry based on
low-cost arbitrage model. iTOPS is based on
transaction-based pricing for services and
supporting the clients by providing the
platform, processes'and services.
The strategic evaluation dnd control has
both the elements of strategic ss well as
operational controls.
The functional and operational
implementation is aimed at achieving four sets
of objectives:
(a) Shifting from small customers to large
cus tomer (Fortune 1000 companies)
(b) Shifting away from stocking to project-
con sulting assignments
(c) Working directly with clients rather than
with system integrators
(d) Moving from a local to international
markets Some illustrations of the
performance indicators
that reflect these objectives are:
Complied by Pioneer Institute of Professional Studies, Indore
1. On-shore versus off-shore mix of
business revenues: In 2004, this ratio
was 55:45 and
in 2007, it has improved to 27:73,
indicating a much higher revenue
generation from off
shore business.
alisations from billing have to be higher.
The industry norms for ITES are USS18-
25 per hour for off-shore and US$ 55-65
per hour for on-shore assignments.
3. The number of large clients from
Fortune 1000 companies: Presently,
iGATE has nearly half of its more than
100 clients from Fortune 1000 companies,
of which the top 10
account for 70 per cent of its business.
4. Controlling employee costs: This is an
area where concerted effort is required
from the HR and finance functions. Hiring
less experienced employees lowers the
compensation bill. In the IT and ITES
industry, attracting and retaining well-
qualified and experienced employees is a
critical success factor. The
performance indicator for this objective is
the cost per employee.
5. Human resource metrics such as the
hiring and attrition rates: In the IT and
ITES industry, the human resource
metrics such as hir-ing and attrition rates
are critical indicators. Increasing the
number of employees, and lowering the
attrition rate by retaining the ployees is a
big challenge. There are presently about
5800 employees, likely to 8500 in the
next two years. The attrition
20 per cent presently at iGATE is on
the higher side. But such attrition is
common in the industry where employee
mobiiity is high and employee pinching a
widespread trend.
The human resource management function
being critical in an industry where so many
challenges exist, needs a strong emphasis on
training and development, motivation,
autonomy and attractive incentives. iGATE
has an integrated people management model
focusing on developing technical, behavioural
and leadership competencies. The three metrics
by which the HR function is assessed are:
human capital index, work culture and em-
ployee affective commitment. The reward
system at iGATE consists of meritorious
employees across all levels being granted
restricted stock options, thus providing an
incentive to remain with the company till they
become due. The company, though, is an
average paymaster, which disadvantage it tries
to trade-off by offering a more challenging
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Complied by Pioneer Institute of Professional Studies, Indore

work 2. Billing rates: Revenue charged from

clients on assignments. With project
consulting as signments from off-shore
clients, where the revenues are typically
higher, with lower costs and higher
productivity in India, the re

environment, quicker promotions and chances

for practising innovation.
Critics say that that iGATE lacks the big-
brand appeal of the larger players such as
Infosys and Wipro, cannot compete on scale
and is still under the shadow of its original
business of body-shopping IT personnel.32

Questions

1. Analyse the iGATE case to highlight

how it could apply some of the strategic
controls

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Complied by Pioneer Institute of Professional Studies, Indore

such as premise control,

implementation control, strategic
surveillance and special alert control.
2. Analyse and describe the process of
setting
of standards at iGATE. ,
3. Give your opinion on the effectiveness
of the role of reward system in
exercising HR performance
management at iGATE and suggest
what improvements are possible, given
the environmental conditions in the
IT/ITES industry in India at present.

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