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CASE – 1: Where Do We Go from Here?

As one of the many seminars held to discuss the corporate response of family-owned business to liberalisation and globalisation, the keynote Mr Gurcharan Das concluded his speech by saying, “In the end, I would say that the success of …
mers and development of marketing skills have been neglected.”
The valedictory session of the Seminar attempted to bring out the issues clearly. It culminated in an agenda for reform by the family businesses. The points highlighted in the agenda are:
1.    Indian family-owned business organisations need to professionalise management,
2.    they need to curtail the diversified of their business groups and impart a sharper focus to their business activities, and
3.    they need to pay greater attention to the development of human capital.


Question
Suppose you were an observer at the seminar. During tea and lunch breaks you had an occasion to meet several people who were skeptical and felt that the reform process was having only a superficial impact on the corporates. Express your opinion that you form about the issues at the seminar.












CASE – 2   A Healthy Dose of Success

Muhammad Majeed represents a typical Indian who has created success out of sheer hard work and commitment through his education and expertise. At the age of 23 years, Majeed, after graduating in pharmacy from Kerala University, went to pursue higher studies in the US. He completed his masters and PhD in industrial chemistry. Armed with high qualifications, he became a research pharmacist and eventually, as most expatriate Indians do, set up his own company, Sabinsa Corporation. Experiencing difficulties with the long-drawn drug approval process of the US Food and Drug Administration and his own dwindling savings, Majeed focussed on ayurvedic products based on natural extracts. He returned to India in 1991 (incidentally, the year when liberalisation started in India) and set up Sami Chemicals and Extracts Ltd, late renamed as Sami Labs Ltd (SLL), Bangalore.  …
and its commercialisation are some of the strategic actions on the anvil.
SLL looks forward to being a Rs 500-crore company by 2005 when the World Trade Organisation’s patenting regimes comes into force.


Question
How will you define the business of SLL? Comment on the business of SLL and your opinion on the likelihood of its success.











CASE – 3     No Chain, No Gain  

Textile industry is one of the oldest industries in India. Several business houses have their origin in this industry. In the mid-1980s, the powerloom sector in the unorganised sector started hurting badly the interests of the composite textile mills of the sector. Their cost structure, with lower overheads and no duties, was less than half of that of mills for equivalent production. While the powerlooms sold cloth as a commodity, the mills tried to establish their products as brands. The post-liberalisation period has seen a large number of foreign brands enter India. It is in this scenario that the Mayur brand of Rajasthan Spinning and Weaving Mills (RSWM) had to carve out a place for itself.

RSWM is the flagship company of the LNJ Bhilwara group. It has been the largest producer and trader of yarn in the country and caters to the large demands for blended yarns and grey cloth fabric used for children’s school uniform. In 1994, the yarn business faced a severe crunch owing to overcapacity. From 1995 onward, RSWM became a late follower of the industry trend as other competitors already moved up the value chain.

Textile manufacturing is basically constituted of the processes of spinning, weaving, processing, and marketing. More than 50 per cent of the value is concentrated in weaving and processing. Moving up the value chain from spinning involves large investments in machinery and labour. …
of the industry, far behind formidable competitors like Reliance, Grasim, and S. Kumar.


  Question

Suggest how should RSWM manage its value chain effectively. Should it try to imitate the market leaders? If yes, why? If no, why not? What alternatives routes to success do you propose?

CASE – 4         A Very Intriguing Package

It is not quite often that a positive product feature becomes an albatross around the neck of a company. VIP Industries had held sway for over two decades in the organised Indian luggage market on the basis of the durability of its moulded suitcases. Obviously, the customer perceives value-for-money in the long-lasting, reasonably-priced Alfa brand of VIP suitcases which sells 1.5 lakh pieces a month. But this means that having bought one suitcase the customer can do with it for several years. Market research by the company shows that an average Indian family pulls out the suitcase merely for outstation travel a few times a year. Hence, there is no pressing need for continual replacement of the old luggage.

The VIP products are made of virgin polymer as compared to the recycled grade I and II polymers used by the unorganised sector. They are subjected to stringent stress tests for quality control.

VIP has a presence in a wide range of the market segments within a price spectrum of Rs 295 to Rs 6,000 apiece. It is her that the competition from the unorganised sector hurts the company most. VIP’s …

Yet, caught in its self spun web of past successes, VIP is today faced with an uncertain future.


Question

How should the VIP Industries get out of the bind that it finds itself in? Outline the contours of the marketing plans and policies that VIP needs to formulate and implement?




































CASE – 5     Let There be Light

Traditionally, power plants, being …
At one level, the reform of the energy sector is a political action but at another, and perhaps, a more fundamental level, it is a question of managing an organisation strategically through strategic actions designed to turn around a vital public utility.






Question

Analyse the problems of the MPSEB from the strategic management perspective. Do you feel that the actions taken or being contemplated are strategic in nature? Propose what else needs to be done to make the MPSEB a viable organisation.

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Case I

THE STRATEGIC ASPIRATIONS OF THE RESERVE BANK OF INDIA



The Reserve Bank of India (RBI) is India's central bank or 'the bank of the bankers'. It was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Central Office of the RBI, initially set up at Kolkata, is at Mumbai. The RBI is fully owned by the Government of India.

            The history of the RBI is closely aligned with the economic and financial history of India. Most cen­tral banks around the world were established around the beginning of the twentieth century. The Bank was established on the basis of the Hilton Young Commission. It began its operations by tak­ing over from the Government the functions so far being performed by the Controller of Currency and from the Imperial Bank of India, the management of Government accounts and public debt. After inde­pendence, RBI gradually strengthened its institu­tion-building capabilities and evolved in terms of functions from central banking to that of develop­ment. There have been several attempts at reor­ganisation, restructuring and creation of specialised institutions to cater to emerging needs.



            The Preamble of the RBI describes its basic functions like this: '...to regulate the issue of Bank Notes and keeping of reserves with a view to secur­ing monetary stability in India and generally to op­erate the currency and credit system of the country to its advantage.' The vision states that the RBI '...aims to be a leading central bank with credible, transparent, proactive and contemporaneous poli­cies and seeks to be a catalyst for the emergence of a globally competitive financial system that helps deliver a high quality of life to the people in the country.' The mission states that 'RBI seeks to de­velop a sound and efficient financial system with monetary stability conducive to balanced and sus­tained growth of the Indian economy'. The corporate values underlining the mission statement include public interest, integrity, excellence, independence of views and responsiveness and dynamism.



            The three areas in which objectives of the RBI can be stated are as below.

1.         Monetary policy objectives such as containing inflation and promoting economic growth, management of foreign exchange reserves and making currency available.

2.         Objectives set for managing financial sector developments such as supervision of systems and information access and assisting banking and financial institutions to become competitive globally.

3.         Organisational development objectives such as development of economic research facilities, creating information system for supporting economic decision-making, financial management and human resource management.



Strategic actions taken to realise the objectives fall under four categories:

1.                    The thrust area of monetary policy formulation and managing financial sector;

2.         Evolving the legal framework to support the thrust area;

2.                    Customer services for providing support and creation of positive relationship; and

3.                    Organisational support such as structure, systems, human resource development and adoption of modern technology.

The major functions performed by the RBI are:

·                    Acting as the monetary authority

·                    Acting as the regulator and supervisor of the financial system

·                    Discharging responsibilities as the manager of foreign exchange

·                    Issue currency

·                    Play a developmental role

·                    Related functions such as acting as the banker to the government and         scheduled banks



The management of the RBI is the responsibility of the central board of directors headed by the governor and consisting of deputy governors and other directors, all of whom are appointed by the government. There are four local boards based at Chennai, Kolkata, Mumbai and New Delhi. The day-to-day management of RBI is in the hands of the executive directors, managers at various levels and the support staff. There are about 22000 employees at RBI, working in 25 departments and training colleges.



            The RBI identified its strengths and weaknesses as under.

•          Strengths A large body of competent offers and staff; access to key data on the economy; wide organisational network with 22 regional offices; established infrastructure; ability to attract talent; and financial self sufficiency.

•          Weaknesses Structural rigidity, lack of accountability and slow decision-making; eroded specialist know-how; strong employee unions with rigid      industrial relations stance; surplus staff; and weak market intelligence.



Over the years, the RBI has evolved in terms of structure and functions, in response to the role as signed to it. There have been sweeping changes in the economic, social and political environment. The RBI has had to respond to it even in the absence of a systematic strategic plan. In 1992, the RBI, with the assistance of a private consultancy firm, embarked on a massive strategic planning exercise. The objective was to establish a roadmap to redefine RBI's role and to review internal organisational and managerial efficacy, address the changing expectations from external stakeholders and reposition the bank in the global context. The strategic planning exercise was buttressed by departmental position papers and documents on various subjects such as technology, human resources and environmental trends. The strategic plan of the RBI emerged with four sections dealing with the statement of mission, objectives and policy, a review of RBI's strengths and weaknesses and strategic actions required with an implementation plan. The strategic plan reiterates anticipation of evolving external environment in the medium-term; revisiting strengths and weaknesses (evaluation of capabilities); and doing away with the outdated mandates for enhancing efficiency in operations in furtherance of best public interests. The results of these efforts are likely to manifest in attaining a visible focus, reinforced proficiency, realisation of shared sense of purpose, optimising resource use and build-up of momentum to achieve goals.



            Historically, the RBI adopted the time-tested technique of responding to external environment in a pragmatic manner and making piecemeal changes. The dilemma in adoption of a comprehensive strategic plan was the risk of trading off the flexibility of the pragmatic approach to creating rigidity imposed by a set model of planning.



Questions

1.         Consider the vision and mission statements of the Reserve Bank of India.        Comment on the quality of both these statements.



2.         Should the RBI go for a systematic and comprehensive strategic plan in place of its earlier pragmatic approach of responding to environmental events as and when they occur? Why?



Case II

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 mainly food items and groceries—the staple of retailing in India. Customer contact is personal and one-on-one, 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 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 percent being under the control of the unorganised, informal sector of' kirana dukaans. Market research agencies and consultants come up with encouraging forecasts about this segment of the retailing industry. For instance, AT. 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 organised 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 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 increase the awareness of the urban Indian consumer to the convenience of modern shopping. The modern retail formats thus have gained 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 player.



        

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.



Case III

HELPAGE INDIA

          

The developments in medical sciences—the lowering of mortality rates and the increase in life expectancy—have ironically led to a situation where there are increasingly, a larger number of aged people in the society. The situation in most countries of the world is that the number of ageing people is increasing. India too, like other developing countries, experiences a rapid ageing of the population, with estimated 80 million aged people. Almost eight out of ten of these aged people live in rural areas.



            The challenges that the elderly people in society face are many. For instance, a report in the Indian context indicates the following challenges:

§     90% of senior citizens receive no social se­curity or medical care.

§     73% of senior citizens are illiterate and can only earn a livelihood through physical labour, which is possible only if they are healthy in their old age.

§     80% of senior citizens live in rural areas with inadequate or inaccessible medical facilities; many are unable to access the medical facilities because of reduced mobility in the old age.

§     55% of women over the age of 60 are widows with no means of support

 eting card

            The functional approach at HelpAge India consists of developing projects based on the assessment of the needs of its target community rather than on implementing them directly. The implementation takes place through the partner agencies. Rather than outright grants, it supports income generation projects for the elderly people. The success of implementation critically depends on the identification and appointment of partner agencies. The officers of HelpAge India physically inspect the proposed agencies and check on their management to ensure that they are not family-run set-ups established for personal gains. HelpAge India works presently, with nearly 400 partner agencies. These include, for instance, about 150 charitable eye hospitals that act as partner agencies for the ophthalmic care programme.



            HelpAge India with its slogan of 'fighting isolation, poverty and neglect' moves on its mission of providing 'equal rights, dignity for elders'. It foresees its future activities in the area of rights based advocacy for a better life for the elderly people by bringing them into the mainstream of society rather than being marginalised to the fringes.



Questions

1. In your opinion, what is the distinctive competence of HelpAge India?

2. Prepare a strategic advantage profile for HelpAge India.





Case IV

BHARAT HEAVY ELECTRICALS LIMITED CONCENTRATES ON THE EQUIPMENT INDUSTRY



Bharat Heavy Electricals Limited (BHEL) is India's largest engineering and manufacturing enterprise, operating in the energy sector, employing more than 42000 people. Established in 1956, it has established its presence in the heavy electrical equipments industry nationally as well as globally. BHEL is one of the navaratnas (lit. nine gems) among the public sector enterprises in India. Its vision is to be 'a world class enterprise committed to enhancing stakeholder value'. Its mission statement is: 'to be an Indian multinational engineering enterprise providing total business solutions through quality products, systems, and services in the fields of energy, industry, transportation, infrastructure, and other potential areas'.



            BHEL is a huge organisation, manufacturing over 180 products categorised into 30 major product groups, catering to the core sectors of power generation and transmission, industry, transportation, telecommunications and renewable energy. It has 14 manufacturing divisions, four power sector regional centres, over 100 project sites, eight service centres and 18 regional offices. It acquires technology from abroad and develops its own technology at its research and development centres. The operations of BHEL are organised into three business sectors of power, industry and overseas business. Besides the business sector departments, there are the corporate functional departments of engineering and R&D, human resource development, finance and corporate planning and development.

            BHEL's turnover hit an all-time high of Rs. 18,739 crore, registering a growth of 29 per cent, while net profit increased by 44 per cent to touch Rs. 2,415 crore in 2006-07. The company has a comfortable order book position of Rs. 55,000 crore for 2007-8 and beyond. The company booked ex­port orders worth Rs. 1,903 crore in 2006-07. It is looking toward to US$10 billion exports by 2012 from the present US$ 4 billion. The capital investment plan of BHEL for the 11th National Plan period envisages an investment of Rs 3,200 crore, mainly to enhance its manufacturing capacity from 10000 MW to 15000 MW.



            BHEL has formulated a five-year strategic plan with the aim of achieving a sustainable profitable growth, targeting at a turnover of Rs. 45,000 crore by 2012. The strategy is driven by a combination of organic and inorganic growth. Organic growth is planned through capacity and capability enhancement, designed to leverage the company's core are s of power, supported by the industry, transmission, exports and spares and services businesses. For the purpose of inorganic growth, BHEL plans to pursue mergers and acquisition and joint ventures and grow operations both in domestic and export markets.



            BHEL is involved in several strategic business initiatives at present for internationalisation. These include targeting the export markets, positioning itself as a reputed engineering, procurement and construction (EPC) contractor globally, and looking for opportunities for overseas joint ventures.



            An example of a concentration strategy of BHEL in the power sector is the joint venture with another public Enterprise, National Thermal Power Corporation, to perform EPC activities in the power sector. It is to be noted that NTPC as a power generation utility and BHEL as an EPC contractor have worked together on several domestic projects earlier, but without a forma partnership. BHEL also has join1 ventures with GE of the US and Siemens AG of Germany. Other strategic initiatives include management contract for Bharat Pumps and Compressors Ltd. and a proposed takeover of Bharat Heavy Plates and Vessels, both being sister publics enterprises.



            Despite its impressive performance, BHEL is unable to fulfil the requirements for power equipment in the country. The demand for power has been exceeding the growth and availability. There are serious concerns about energy shortages owing to inadequate generation and transmission, as well as inefficiencies in the power sector. Since this sector is a major part of the national infrastructure, problems in the fibwer sector affect the overall economic growth the country as well as its attractiveness as a destination for foreign investments. BHEL also faces stiff competition from international players in the power equipment sector, mainly of Korean; and Chinese origin. There seems to be an undercurrent of conflict between the two governmental ministries of power and heavy industries. BHEL operates administratively under the Ministry of Heavy Industries, but supplies mainly to the power sector that is under the Ministry of Power. There has been talk of establishing another power equipment company as a part of the NTPC for some time, with the purpose of lessening the burden on BHEL.



Questions

1.            BHEL is mainly formulating and implementing concentration strategies nationally as well as globally, in the power equipment sector. Do you think it should broaden the scope of its strategies to include integration or diversification? Why?

2.            Suppose BHEL plans to diversify its business. What areas should it diversify into? Give reasons to justify your choice.



Case V



THE INTERNATIONALISATION OF KALYANI GROUP



            The Kalyani Group is a large family-business group of India, employing more than 10000 employees. It has diverse businesses in engineering, steel, forgings, auto components, non-conventional energy and specialty chemicals. The annual turnover) of the Group is over US$ 2.1 billion. The Group is known for its impressive internationalisation achievements. It has nine manufacturing locations ad over six countries. Over the years, it has established joint ventures with many global companies such as ArvinMeritor, USA, Carpenter Technology Corporation, USA, Hayes Lemmerz, USA and FAW Corporation, China.



            The flagship company of the Group is Bharat Forge Limited that is claimed to be the second largest forging company in the world and the largest nationally, with about 80 per cent share in axle and engine components. The other major companies of the Group are Kalyani Steels, Kalyani Carpenter Special Steels, Kalyani Lemmerz, Automotive Axles Kalyani Thermal Systems, BF Utilities, Hikal Limited, Epicenter and Synise Technologies.



            The emphasis on internationalisation is reflected in the vision statement of the Group where two of the five points relate to the Group trying to be world-class organisation and achieving growth aggressively by accessing global markets. The Group is led by Mr. B.N. Kalyani, who is considered to be the major force behind the Group's aggres­sive internationalisation drive. Mr. Kalyani joined the Group in 1972 when it was a small-scale diesel engine component business.



            The corporate strategy of the Group is a combination of concentration on its core competence in its businesses with efforts at building, nurturing and sustaining mutually beneficial partnerships with alliance partners and customers. The value of these partnerships essentially lies in collaborative product development with the partners who are the original equipment manufacturers. The foreign partners are not intended to provide expansion in capacity, but enable the Kalyani Group to extend its global marketing reach.



            In achieving its successful status, the Kalyani Group has followed the path of integration, extending from the upstream steel making to downstream machining for auto components such as crankshafts, front axle beams, steering knuckles, camshafts, connecting rods and rocker arms. In all these products, the Group has tried to move up the value chain instead of providing just the raw forgings. In the 1990s, it undertook a restructuring exercise to trim its unrelated businesses such as television and video products and concentrate on its core business of auto components

            Four factors are supposed to have influenced the growth of the Group over the years. These are mentioned below:

            •          Focussing on crore businesses to maximize growth potential

            •          Attaining aggressive cost savings

            •          Expanding geographically to build global capacity and establishing leading positions

            •          Achieving external growth through acquisitions



            The Group companies are claimed to be positioned at either number one or two in their respective businesses. For instance, the Group claims to be number one in forging and machined components, axle aggregates, wheels and alloy steel. The technology used by the Group in its mainline business of auto components and other businesses, is claimed to be state-of-the-art. The Group invests in forging technology to enhance efficiency, production quality and design capabilities. The Group's emphasis on technology can be gauged from the fact that in the 1990s, it took the risky decision of investing Rs. 100 crore in the then latest forging technology, when the total Group turnover was barely Rs. 230 crore. Information technology is applied for product development, reducing 3 production and product development time, supply-chain management and marketing of products. The Group lays high emphasis on research and development for providing engineering support, advanced metallurgical analysis and latest testing equipment in tandem with its high-class manufacturing facilities.



            Being a top-driven group, the pattern of strategic decision-making within seems to be entrepreneurial. There was an attempt to formulate a five-year strategic plan in 1997, with the participation of the company executives. But not much is mentioned in the business press about that collaborative strategic decision-making after that.



            Recent strategic moves include Kalyani Steels, a Group company, entering into a joint venture agreement in May 2007, with Gerdau S.A. Brazil for installation of rolling mills. An attempt to move out of the mainstream forging business was made when the Group strengthened its position in the prospective business of wind energy through 100 percent acquisition of RSB consult GmbH (RSB) of Germany. Prior to the acquisition, the Group was just a wind farm, operator and supplier of components.



Questions

1.         What is the motive for internationalization by the Kalyani Group? Discuss.



2.         Which type of international strategy is Kalyani Group adopting?                        Explain.

Case VI

CORPORATE RESTRUCTURING OF THE INDIAN REAILWAYS



            Overall, the Indian Railways have benefited from several managerial initiatives taken over the recent past, such as corporatisation of many of its activities and hiving off, separate companies to perform functions performed in-house earlier. For example, the Indian Railways Catering and Tourism Corporation took over the non-core activities of catering while Rail Tel Corporation was formed to create the optic fibre network for communications. Another subtle manner of change seems to be the creeping nature of privatisation of non-core services and adoption of modern business methods of marketing and human resource management to improve operational efficiency. These seem to be working though critics say that the increase in the general economic activity and overloading of wagons is the cause of this improved short-term performance.



            Certain inherent issues have become a part of the Indian Railways heritage. Among these are: overdependence on freight business, much of freight business arising from a select few commodities, passenger traffic being concentrated in low-yield suburban traffic and high density of traffic in the certain areas coupled with under-utilised assets and facilities in others. The fundamental issues of the dilemma whether Indian Railways is an organisation in the nature of a public utility, designed to discharge social obligations, or is it a commercial orgarnisation for which financial performance and operational efficiency are imperative still remain.



Questions

1.         Comment on the steps taken to reduce the extent of vertical integration at the Indian Railways. Suggest a few more measures that could be taken.



2.         Discuss the measures taken for corporate restructuring of the Indian Railways, in your opinion, are these adequate for dealing with the problems faced? Why?



3.         Propose the basic elements of a corporate turnaround for the Indian Railways.

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All the Questions are Compulsory:-

1. Discuss the various provisions WTO has made for the developing countries? Critically evaluate the impact of WTO on the India.

2. Discuss the present status of technology in India and Indian business organization. Discuss the role of technology in the development of India.

3. Briefly describe the process of formation of company according to the company law? Describe the various modes of winding up of companies.

4. Describe the various approaches to international business. Discuss the reasons why organizations cross borders. Discuss the impact of MNCs on the host country.

5. Explore and explain the cross-culture dimension of international personnel management.

6. Compile stock market data for a few specific countries. Attempt a comparative trend analysis to throw light on nation-specific investment climate.

7. Would you accept the view that economic and non-economic variables interact each other on the domain of business environment? Explain.

8. In what sense, is ‘India going global’? Develop some counter argument to conclude that it is a long way for India to go really global

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Note : Both the sections are compulsory.

Section I

CASE I : BANKING ON RELATIONSHIP

The birth of ABC Bank took place after the RBI issued guidelines for the entry of new private sector banks in January 1993. Subsequently, the promoter of ABC Bank sought permission to establish a commercial bank and retained KPMG, a management consultant of international repute, to prepare the groundwork for establishing a commercial bank. The Reserve Bank of India conveyed its approval in principle to establish ABC Bank on February 11, 1994. Thereafter, the Bank was incorporated under The Companies Act in September 1994. The bank started its operations in November 1995. The ABC Bank was promoted by the tenth largest development bank in the world, which had a magnificent record of promoting world-class institutions in India. The promoter was a strategic investor in a plethora of institutions, which had revolutionized the Indian financial markets.

Keeping in line with its policy of leveraging technology to drive its business, ABC Bank deployed Finacle, the e-age banking solution from Infosys to consolidate its position, meet challenges and quickly seize new business opportunities. The entire Finacle rollout was remarkable, considering the fact that it was implemented across all branches in a record timeframe of 5 months. Finacle provided the critical technology platform to propel the bank’s operations with new thrust and direction. The bank also implemented Kondor – a treasury front office software from Reuters and ITMS – treasury back office software from Synergy Login. The achievement of these significant milestones was consistent with ABC Bank’s continued focus to create customer and shareholder value through deployment of superior technology. Investments in technology were a part of the plan to put in place building blocks for creating the right organizational infrastructure. In future, it would help ABC Bank to consistently deliver superior products, convenient access channels and efficient service to its retail and corporate customers. Large investments had been made in back-end technology to strengthen processes, systems and control. This, in the long run, propelled by a top quality management team, clearly set ABC Bank apart from its competitors.

ABC Bank was a pioneer and an innovator in bringing state-of-the-art services to its customers. It was the first private bank to enter and capture new markets. It was the first Indian Bank to provide – ATM Next (an information portal on ATMs); Instant Account Opening; Talking ATMs; GiftCard (Prepaid Gift Card); EasyFill (Instant Mobile Refill Service) – along with other services. The Bank introduced a SMS alert service, which gave the customers, updated information on any transaction. The Bank had collaboration with other organizations rendering related services –Insurance, National Saving Certificates and Post office Service –providing a platform to interact with potential customers as well as offering other services to its existing customers. It also tried to tap potential rural market segments, which had not been explored by any other private bank. A key achievement for the Bank was that it emerged as the highest distributor for two top Mutual Fund Schemes consistently in the past, thereby demonstrating the strength of the Bank’s distribution channel of TPD business. It had registered huge success as a collecting bank to several market IPOs that consequently leveraged the IPO financing business. It launched a strategic B2B E-Commerce platform with BPCL to facilitate online payments from BPCL to its dealers, thereby enhancing corporate business through new-age technology and offering Supply Chain Financing Solutions. Corporate banking relationships were offered at 20 locations across the country and total Banking Solutions to its corporate customers (Annexure).

The Value Chain Management Group also offered Supply Chain Finance Solutions to various Corporates and special products like loan against credit card receivables. The lifeline of ABC Bank were its people, growing at a very fast pace. The average age of the employee at ABC Bank was 31 years. Approximately 83% of the employee strength was in the junior management category (which included trainees and probationers), while 14% made up the middle level management. The remaining constituted the senior and top management. The various business units comprised of 75%, while support functions made up for 12%, and operations for the remaining 13% of the total manpower strength of the Bank. The bank had rolled-out broad based grant of stock options covering 75% of the employees to align their interests with those of its shareholders. The bank had a stats-of-the-art training centre at Mumbai and every employee received on an average 40 hours of training, annually.

ABC Bank entered Nagpur market in two phases. In the first phase, it started with corporate banking and established itself as the best service provider. Afterwards, it leveraged its strengths by entering into retail banking. Although, relatively a late entrant in the retail banking sector, it acquired easy access in the new segment due to its brand image in corporate banking. In retail banking, ABC Bank opted for selective penetration based on two main factors – volume of business and credibility of the account. This enabled them to create greater satisfaction in the customers’ mind. Initially, it started with the criteria of an average quarterly cash balance of Rs 25,000 focusing on premium segment. Later on, to further penetrate the market, it reduced the average quarterly cash balance to Rs 5,000 and segmented the market on the basis of nature of business, volume and number of transactions per month. In this phase, by reducing the minimum available balance, it tapped other individual customer accounts during the course of its expansion.

ABC had always been particular about the specific needs of the customer and maintaining consistency in the quality of products and services provided. The bank emphasized on dealing with them on a one-to-one basis and providing tailor-made products. In course of penetrating this segment, ABC bank achieved great success due to its deep understanding of the needs and expectations of local customers. On the other hand, some of the competitors who displayed grand success in the beginning could not sustain it because of a mismatch between expectations of the customers and delivery of services. As promotion was mainly through word-of-mouth, the bank operated on the philosophy that 5 satisfied customers bring 5 new customers whereas 5 dissatisfied customers break 25 existing customers. Therefore, they focused about maintaining quality of services and customer satisfaction. The bank was very particular about reducing the turnaround time in extending its services to the customers. It also acted as an investment consultant for their individual customers.

           

Apart from offering ‘tailor-made’ products, the bank maintained a continuous personal relationship with each of its existing customer, based on their business potentials. They took regular feedbacks from the customers and responded sincerely to their suggestions or complaints. They used to call up their premium customers once a week, asking for their views on the services offered by the bank and suggestions to improve the same. To enable an impartial communication system, the bank created a dedicated e-mail ID for customers’ queries and complaints, which established a direct link between them and corporate office. The complaints and queries received from the customers were then forwarded to the concerned branch offices for immediate redressal and branch heads were asked to confirm the same. These complaint redressals formed an important component in performance evaluation of the branch as well as the concerned employee.

Even though a large group promoted ABC Bank, its independent asset base was limited, which posed a problem to finance large organizations. The limited asset base of the bank created hurdles in the expansion of its business. In view of having just two branches, RBI guidelines did not permit ABC to have its own currency chest at Nagpur, thereby affecting smooth management of hard cash. The bank had an insurance cover for a given amount of cash it could hold. When the cash inflow increased over the given limit, keeping additional hard cash with the bank increased risk. Therefore, it became necessary to transfer it to the right place. In the city of Nagpur, ABC had only two branches, though its customer base was very large and continuously increasing. The changing economic scenario was expanding business opportunities for the Bank. Butibori, a place 30 kms from Nagpur, was expected to be declared as a Special Economic Zone, which would attract more industries and accelerate the related business activities in the region.

            An increasing number of private and foreign banks had begun entering Nagpur. The promotional activities of these multinational banks increased awareness about private banking amongst the people in the region. ABC Bank also planned to expand its services in credit cards and other value added services. With the entry of foreign and private banks in Nagpur, the scenario was becoming more competitive and complex. As the new players tried to grab experienced employees at higher salaries, the employee turnover at ABC Bank increased. Looking at the changing business scenario, the Branch Head, Nagpur, was wondering about the strategies and measures to be taken for sustenance and growth of the bank.

QUESTIONS FOR DISCUSSION

1.    Analyze the case, using SWOT.

2.    Comment on the strategies used by the bank for penetrating the Nagpur market.

3.    Suggest strategies for sustenance and growth of the bank in view of the changing scenario of the Nagpur region.

Section II                                                                                                      

Answer Any six :

1.    Explain buyers credit and suppliers credit by giving examples of each type of credit. Also explain with a case study.

2.    What is correspondent banking? Explain briefly the services offered by correspondent banking? Explain briefly the services offered by correspondent banks to the banks having account relationship with them? Give some examples?

3.    Explain in brief, the role of Reserve bank of India in Indian Exchange control. Explain the role of EXIM bank in promotion exports, and describe briefly facilities given by EXIM bank? Give examples.

4.    The organizational career is a responsibility of the organization and the individual. Discuss.

5.    Explain the general architecture of an integrated banking system. How is it useful? Explain with examples.

6.    What do you understand by MICR? How does it help in clearing of instructions? Explain the field structure of MICR cheque.

7.    Explain how a digital signature is generated? Explain its use with examples.

8.    How can Indian banks use legal recognition of digital signature for development of business.

9.    What is market segmentation? Why is it important to advertisers? How is it useful for banking.