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Business
Administration management
Case study 1
Hindustan Unilever Strategically.
Uniliever is one of the worlds oldest
multinational companies. Its origin goes back to the 19th century
when a group of companies operating independently, produced soaps &
margarine. In 1930, the companies merged to form Unilever that diversified in
to food products in 1940s. Through the next 5 decades, it emerged as a major
fast-moving consumer goods multinational operating in several business. In
2004, the unilever 2010 strategic plan was put in to action with the mission to
bring vitality to life & to meet everyday needs for nutrition, hygiene
& personal care with brands that help people feel good, look good & get
more out of life. The corporate strategy is of focusing on core businesses of
food, home care & personal care Unliver operates in more than 100
countries, has a turnovers of $ 39.6 billion & net profit of $3.685 billion
in 2006 & derives 41 percent of its income from the developing &
emerging economies around the world. It has 179,000 employees & is a culturally-diverse
organization with its top management coming from 24 nations,
internationalization is based on the principle of local roots with global scale
aimed at becoming a multi-local multinational.
The genesis of Hindustan Unliver in india, goes
back to 1888. When unliver exported sunlight soap to India. Three Indian
Subsidiaries came in to existence in the period 1931-1935 that merged to form
Hindustan Lever in 1956. Mergers & acquisitions of Lipton (1972), Brooke
Bond (1984) , Ponds (1986) , TOMCO (1993), Lakme (1998) & modern Foods
(2002) have resulted in an organization 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 & net profit of 1855
crore in 2006.There are over 15000 employees, including more than 1300
managers.The present corporate strategy of HUL is to focus on core
businesses.These core businesses are in home & personal care &
food.There are 20 different consumer categories in these two businesses. For
instance, home & personal care is made up of personal wash, laundry , skin
care, hair care, oral care, odorants, color cosmetics &
ayurvedic personal & health care, while food businesses have tea, coffee,
ice –creams & processed food brands. A part from the two product divisions,
there are separate departments for specialty exports & new ventures.
Strategic management at HUL is the responsibility
of the board of directors headed by a chair-man. There are five independent
& five whole-time directors. The operational management is looked after by
a management committee comprising the vice chairman, CEO & managing
director & executive directors of the 2 business divisions & functional
areas.The divisions have a lot of autonomy with dedicated assets &
resources. A divisional committee having the excutive director & heads of
functions of sales, commercial & 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 tem of brand
managers looking after the individual brands. Besides the decentralized
divisional structure, HUL has centralized some functions such as finance, human
resource management, research, technology, information technology &
corporate & legal affairs.
Unliver globally & HUL nationally , operate
in the highly competitive FMCG markets.The consumer markets for FMCG products
are finicky, its difficult to create customers & 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
& distribution are critical functions organizationally. HUL operates in
such a milieu.It has strong competitors such as the multinationals proctor
& gamble, Nivea or L’Oreal & formidable local companies such as Amul.
Nirma or the Tata FMCG companies to contend with. Rivals have copied HULS
strategies & tactics, especially in the area of marketing &
distribution. Its innovation such as new style packaging or distribution
through women entrepreneurs are much valued but also copied relentlessely,
hurting its competitive advantage.
HUL is identified closely with
India.There is a ring truth to its vision statement, to earn the love &
respect of India to its vision statement, to earn the love & 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 nostaligia
associated with brands like lifebuoy & 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 experienced with new ideas suited to the
local context. For instance HUL is known for a capabilities in rural marketing,
effective distribution systems & 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 recogination that Indian markets have matured to the
extent that they can be dealt with by the gobal strategies of Unliver . At the
corporate level, it could also be an attempt to the corporate level, it could
also be an attempt to leverage global scale while retaining local
responsiveness to some extent.
In the line with the shift in corporate strategy,
the locus of strategic decision-making seems to have moved from the subsidiary
to the headquarters. Unliver has formulated a new global realignment under
which it will develop brands & streamline product offerings across the
world & the subsidiaries will sell 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 Indians CEOS, the changes focus on a
limited number of international brands rather than alarge range of local brands
developed over the years & the name-change from Hindustan Liver to
Hindustan Unilever.
The shift in the strategic
decision –making power from the subsidiary to head quarters could how ever,
prove to be double- edged sword. An example could be of HUL adopting Unlivers
gobal strategy of focusing on a limited number of products, called the 30 power
brands in 2002. That seemed a perfectly sensible strategic decision aimed at
focusing managerial attention to a limited set of high-potential products. But
one consequence of that was the HULs strong position in the niche soap &
detergent markets suffering owing to neglect & the competitors were quick
to take advantage of the opportunity. Then there are the statistics to deal
with HUL has nearly 80 % of sales & 85 % of net profits from the home &
personal care businesses. Globally Unliver derives half its revenues from food
business. HUL does not have a strong position in the food processing industry
remains quite attractive both in terms of local consumption as well as export
markets. HULs own strategy of offering low- price, competitive products may
also suffer at the cost of Unlivers emphasis on premium priced, high end
products sold through modern retail out-lets.
There are some dark clouds on the horizon. HULs
latest financials are not satisfactory.Net profit is down, sales are sluggish,
input costs, have been rising & new food products introduced in the market
have yet to pick up. All the while, inone market segment after another, a
competitor pushes ahead. In a company of such a big size & over- powering
presence , these might still be minor events or developments in along history
that needs to be taken in stride. But pessimistically, they colud also be
pointers to what may come.
Q1) Define
historical back ground of HUL?
Q2) Define the
corporate strategy of HUL?
Q3) Explain
the financial status of HUL in the year 2006?
Q4) What is
the core business of HUL? Explain in detail?
Case Study : 2
Dabur India Limited.
Cholera, malaria and plague have been killer
diseases in India. In 1884, Dr. S.K. Burman embarked 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. Burman 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
Dabur is 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
•
Synthesizing
knowledge of ayurveda and herbs with modern science to develop natural
solutions for meeting the health and personal care needs
•
Providing superior
returns to shareholders relative to rivals in industry
•
Being a responsible
corporate citizen committed 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
development, 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 individual 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 distinction 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. Dabur follows a
four-year time horizon strategic planning. The 2002-2006 strategic plan
envisaged Dabur becoming a Rs. 2000 core-company by the period 2006-2007. It
has been successful in realizing 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 International Operations from the present 12 percent to 20 percent.
The business model of dabur is based on pushing
through high growth parameters, in the range of 10 to 15 % annually in the core
domestic FMCG business I the consumer care division & even higher growth
rates of 25 to 30 % annually from businesses outside consumer care.
The strategies adopted are a combination of
internal growth & external growth through acquisition that it terms as
organic & inorganic growth respectively.
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.
Dadurs strategy for the next few years seems to
be growth through domestic & international acquisitions, launching new
products & penetrating deeper in to rural Indian markets.
In the near future , dabur wiil have to decisde
whether it wishes to be pure herbal brand or a leading FMCG player neither of
which it can claim to be with conviction today.
Question:
Q1) Discuss
the history of dabur?
Q2) Explain
the various SBUs of dabur in detail?
Q 3) Define
the mission statement of the dabur ?
Q 4) Explain
the business model of dabur ?
Case Study 3
Environmental issues in the food processing Industry of India.
The food processing industry is one of the
sunrise industries in India whose potential has been well-recognized, but not
satisfactorily realized. It could easily be described as one of India’s
higher-potential but under-exploited industry. India’s food processing sector
covers a wide range of raw, intermediate and finished products. These include
cereals, fish and other sea foods, fruits and vegetables, processed grains,
meat and poultry, milk and milk derivatives, plantation and consumer products
such as Confectionery, chocolates and cocoa products, soya-based products,
mineral water, etc.
The Ministry of Food Processing Industries, set
up in 1988, i.e. the nodal agency in India responsible for developing the food
processing industry. For the Government of India, the food processing industry
is a priority sector thus ensuring that policies support investment and attract
more foreign direct investment.
Little reliable statistics related to the food
processing industry in India are available. The size of the food processing
industry in India in 2006 was estimated to be Rs 6300 billion (US$
140 billion), likely to grow at
over 10%, on the basis of an expected GDP growth rate of 6-S% per annum. Annual
food exports by India, are around US$ 6 billion where as the world total is
about US$ 700 billion. This dismal situation exists even while the industry in
India is one of the largest in terms of production. Consumption, exports and
growth prospects. India is the third largest producer of food in the world,
having the largest livestock population and is the largest milk producer in the
world. Yet, the value addition to food processed in India is a meagre 7% and
India’s share in international food trade is insignificant at less than 1%.
A ‘Vision 2015’ study, carried
out by Rabo Bank, an international consultant, envisages an investment of Rs
1,10,000crore over ten years to enhance farmers’ income, generate employment
opportunities, provide wider choice to consumer at affordable prices and
contribute to overall national growth.
The major market players in Indian food processing
industry include local companies such as Agro Tech Foods, Dabur, Gits, Godrej,
Haldiram, Milkfood, MTR and Parle and formidable foreign companies such as
Cadbury, Nestle, Pepsico and Unilever.
The business environment in which the food
processing industry exists could be explained in terms of the opportunities and
threats.
Opportunities are supported by factors like:
•
High demand
potential: average Indian spends 52 per cent of his income on food.
•
Low output from
organized sector: less than 2 per cent of the total production of fruits and
vegetables is processed.
•
Exports of
agricultural and processed food have been rising steadily. APEDA figures put
exports at 14184 crore (2003-4), 16828 crore (2004-5) and 17918 crore (2005-6).
•
Low cost Indian labour
can be used to set up large, cost-effective manufacturing units for domestic
and export markets.
-. Diverse agro-climatic conditions in India
provide a wide-ranging and large raw material base suitable for the food
processing industry. Great potential for semi-processed and read-to-eat
packaged food segments.
•
Surplus food
production
•
Younger population,
increasing urbanization, changing lifestyles, emergence of nuclear
families, increasing personal incomes, improving
standards of living, rising number of working women, convenience needs of dual
income families.
•
Deep inroads by the
spread of television as an advertising medium and emergence of retailing
culture
•
Projected shift in
Indian eating habits to mass-based basic foods like atta (wheat flour),
chicken, milk, etc.
•
Increasing
preference for Indian foods abroad
•
Government has been
developing agrizones and mega food parks to promote the food processing
industry in India
a The advent of the WTO regime and the
possibility of reduced subsidies in developed countries can add to India’s
strengths in food production arid processing industry
Threats arise owing to factors
like:
•
Conservative
government policies:
reservation of several items for the small- scale
sector and overregulation with multifarious legislations governing the
industry. There are a number of licensing and regulatory authorities overseeing
agro food processing units in the country. Till 2006, there were 16 separate
central laws and 9 ministries dealing with the food processing industry. Sought
to be replaced by a single act, Food Safety and Standards bill 2006.
•
Inadequate
infrastructure for distribution and preservation: long and fragmented
supply-chain retail structure, inadequate infrastructure, including cold chain
storage refrigerated vehicles for logistics & transportation, special
handling facilities at airports and inadequate post harvest management.
•
Limited access to
appropriate technology for processing and packaging, low investment
in research and development by industry and high
cost of production.
•
Losses of Rs.
50,000 crore from the wastage of fruits and vegetables for want of processing
and value addition
•
High taxation on
packaged items
•
Resistance from
civil right groups
besides these threats, there
are some interesting myths related to processed food and the industry in India.
For instance, it is perceived that Indians are largely vegetarian; white the
fact is that 75 percent are non-vegetarians. Or that the food processing industry
is a high-risk industry dominated by the MNCs. The reality is that it is not a
high-risk industry and worldwide, it is dominated by local companies.
Q1) Explain
the features of ministry of food processing in India ?
Q 2) What is
the vision 2015 ? Explain its features ?
Q 3) Explain
the features of food processing industry ?
Q 4) Explain
opportunities & threats of food processing in India
Case Study 4
State
bank Of India on its capabilities.
State Bank of India (SBI) is India’s
largest bank, faster transfer of funds are in place to protect its with an
extensive network of more than 9000 dominant position in the government
business. branches and 6000 ATMs. Its Organizational capability profile offers
an interesting study in to the strengths & weakness, competencies &
capabilities of India’s prime public sector bank.
Financial capability factors: SBI enjoys a
comfortable capital position as it is adequately capitalized, designed to deal
with asset side risks and support the business growth. Its funding profile is
strong, underpinned 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
& significant surplus statutory liquidity ratio-related investments. SBI is
estimated to have a good earnings profile with diverse income streams. The
banks core fee income bolsters its revenue profile though there is likelihood
of a slow down owing to the opening of government business like tax collection
to other banks & increased competition.
The banks cost structure is rigid as the fixed
employee cost accounted for 74 % of the operating expenditure in 2004-05. The
banks operating costs will remain high in the medium term.
Marketing capability factors: SBI has been losing
market share over decades. There is a consistent gap between deposit &
credit growth. As a leading public sector bank, it is obliged to shoulder
social responsibilities such as investing in priority sectors. SBI has been
trying to unlock its brand equity though unsuccessfully. It has a strong retail
base & wide geographical reach. The bank fund based & fee income
earnings are diversified across industries, regions, asset classes &
customer segments.
Marketing initiatives such as
on – line tax returns filling & faster transfer of funds are in place to
protect its dominant position in the government business. The bank has entered the
market of term lending to the corporate sector & infrastructure financing,
traditionally the domain of financial institutions. It has increased its thrust
in retail assets & has built a strong market position in housing loans.
Operations capability factors:
SBI, through its non-banking subsidiaries, offers a host of financial services,
Viz, Merchant banking, fund management, factoring, primary dealership, broking,
investment banking & credit cards. SBI has commenced its life insurance
business by setting up a subsidiary, SBI life insurance business by setting up
a subsidiary, SBI life Insurance company Ltd. SBI along with its associate
banks, offers a wide range of banking products & 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-performance assets, a bane of the banking
industry any where
it faces challenges to develop
effective credit appraisal & 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 & 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 &
improve operating efficiency to counter the threat of competition effectively.
Personal capability factors: Being the largest
bank in the country has its downsides. It faces the dual problems of
overstaffing & understaffing in certain other critical areas. There is a
need to reduce and redeploy the workforce but this is a sensitive industrial
relations issue in a country 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, customize and implement
the centralized 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 SRI Group will seek to develop using the core banking
solution, include personalized customer service, 24X7 banking through diverse
types of delivery channels, fast product launch and customer relationship
management.
General management capability factors: The general management of the bank is quite
competent. It has leveraged its corporate relationships pursued business
growth selectively and ties judiciously not competed on the basis of interest
rate.
The performance indicators used by the SRI are:
capital adequacy ratio, business per employee, profit per employee, return on
assets, net NPA 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.
Questions:
Q1) Define
financial capabilities factors of SBI ?
Q2 ) Explain
Marketing of capabilities factors of SBI ?
Q3) Explain
operations of capabilities factors of SBI ?
Q4) Define
performance indicators of SBI?
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