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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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