ICMIND EMBA ANSWER SHEETS - If there is one thing William H. Pickney, Managing Director and CEO, Amway India has mastered during his seven year stay in India, it’s the art of breaking the coconut in one go
ICMIND EMBA ANSWER SHEETS - If there is one thing William H. Pickney, Managing Director and CEO, Amway India has mastered during his seven year stay in India, it’s the art of breaking the coconut in one go
ICMIND EMBA ANSWER SHEETS - If there is one thing William H. Pickney, Managing Director and CEO, Amway India has mastered during his seven year stay in India, it’s the art of breaking the coconut in one go
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1. Note:
Attend any Four Case studies. Each case carry equal Marks.
Case
I: SEVENTH
HEAVEN
If there is one thing
William H. Pickney, Managing Director and CEO, Amway India has mastered during
his seven year stay in India, it’s the art of breaking the coconut in one go.
He has had enough practice at the opening of every new branch office, and during
the annual Diwali puja in office, which is an Indian followed religiously at
Amway.
From
wearing a kurta pyjama to eating local food, Pickney has taken to India and
things Indian. Even his office has shades of Indian influence, including a
bronze Ganesh statue. “My wife and I had always talked about an adventure, and
to us, India was the ultimate adventure, “says Pickney.
The
Pickney affair with India started in late 1997, when Amway sent them for a
typical look-see, to decide whether they could contemplate living here for some
two-odd years. They spent a week in Delhi just ‘getting a feel for living in
the capital city’.
“Before
I came here, I had heard a lot of stories, and none of them were good.” What
didn’t help matters was the number of vaccinations he had to take before coming
to India; “I had never had as many shorts I my life before,” says the only
expat on the rols of the Rs. 600-crore Indian operations of Amway.
Cleanliness
and health were two issues the Pickneys were concerned about. But, to their
immense relief, it turned out be far better. “We have not taken any malaria
pills in the last five years.”
People
were the first thing Pickney noticed on his arrival in India. “In Sydney, you
don’t find people on the roads just outside the city. Here, they are
everywhere.” What’s impressed him most about Indian is the level of education,
dedication and commitment, which he says is ‘the best and the highest in the
world’.
Professionally, the HR
aspect of working in India has been most interesting, ‘a learning curve’ for
him. “Coming out of the West, one used to giving direct feedback. But in India
you have to be very careful about that. Constructive criticism has to be applied
very carefully.”
Another
interesting observation he made was regarding performance appraisal. “People
here equate hard work with high performance. Just because you spent as many
hours, it does not make you a high achiever.”
Pickney
himself works almost every Sunday, if he is in town, and dislikes taking work
home to his lovely house in the plush Sainik Farms locality in the outskirts of
Delhi. While both husband and wife tend to stay in more, dining out with
friends is one entertainment options available in India. He has got more Indian
friends than expats, mostly people he met through business, like Kanwar Bhutani
of Tupperware.
Both,
however, try to find time to play golf at the ITC Golf Course in Gurgaon. It’s
a game Mrs. Pickney took up in India, since she found free time on hr hands for
the first time in her life. A certified chartered accountant, Mrs. Pickney used
to run her own business in Australia. Some of that time has been used to learn
to cook typical Indian fare, butter chicken, also palak Rogan josh and dal
makhani.
It’s
no wonder then that half their meals are Indian. They’ve adjusted to the spice
factor in Indian food. What was hot when they first came is nothing compared to
hot today. “When was hot when they first came is nothing compared to hot today.
“When we travel abroad, we really miss the spice.”
After
all this in India, they still find it striking that irrespective of which part
of the country they are in, ‘there’s a positive spirit about people of India.’
“People have hope, optimism, and are generally happy.” The respect Indians have
for their culture and beliefs is another factor that the Pickneys appreciate.
“Family
ties are much stronger here, as is respect for elders and their wisdom. For
instance, girls in our office who talk and dress in a Western way, have no
problems accepting arranged marriages,” says Pickney, whose daughter is getting
married in Australia in November this year. Papa Pickney is planning to throw
an Indian reception after the Autralian wedding, including traditional attire
for the bride and the groom.
“Yet
another occasion to break a coconut, Mr. Pickney?” we wonder.
Questions:
1. How could William H.
Pickney acculturate himself in India?
2. What lessons can
Pickney convey to similar other expatriates?
CASE II: A GLOBAL PLAYER?
This is one game that India has
permanently lost to its arch-rival Pakistan - manufacturing and exporting
sports goods. Historically, when India and Pakistan were one before 1947,
Sialkot, now in Pakistan, used to be the world's largest production centre for
badminton, hockey, football, volleyball, basketball, and cricket equipment.
After the creation of Pakistan, Jalandhar became the second centre after Hindus
in the trade migrated to India. Soon Jalandhar overtook Sialkot and till the
early 1980s it remained so. However when the face of the trade began to change
in the 1980s and import of quality leather and manufacturing equipment became a
necessity for quality production, Pakistan wrested the initiative as India
clung it its policies of discouraging imports through high duties and
restrictions. As it was, the availability of labor and skills was a common
factor in both Sialkot and Jalandhar, but with Sialkot having the advantage of
easier entry, most of the world's top sports manufactures and procedures
developed an association with local industry in Sialkot that continues even
today. Ten years later, in the early 1990s, when Manmohan Singh liberalised the
norms for importing equipment and raw material required for producing sports
goods, it was too late as majority of the global majors had already shifted
base to Sialkot.
In 1961 the late Narinder Mayor started
the first large scale sports goods manufacturing unit, Mayor & Company,
thereby laying the foundation of an organized industry. Even today, more than
70 percent of the industry functions in an unorganized manner. Starting with
soccer balls, Mayor expanded to produce inflatable balls like volleyballs,
basketballs, and rugby balls. Today his two sons Rajan& Rajesh have built
it up into five companies engaged in a wide array of businesses, though sports
goods remain the group's core business. While the parent trading company, Mayor
& Company, remains the leading revenue-earner to the tune of Rs. 55 crore
annually out of a total group turnover of Rs. 85 crore-plus, Mayor's second
venture, the Indo-Australian Mayor International Limited, is spinning another
Rs. 15 crore. Mayor International is a 100 per cent export-oriented unit (EOU)
exclusively manufacturing and exporting golf and tennis balls.The product
portfolio of the company comprises the following:
Inflatable Balls
· Soccer balls and
footballs (Professional, Indoor, Match and Training, leisure toy)
· Volley balls, rugby
balls (Volley balls and Beach Volley Balls)
· Australian rugby, hand
balls (English League, Union and touch) (Australian rules, Australian Rugby
League balls with laces)
Boxing Equipment
· Boxing and punching
balls (Boxing and Punching Balls, Head Gear, Gloves, Punching Mitts and Kits
Punching Bags & Bag Sets)
· Gloves
· Goal keeper's gloves
(Football / Soccer)
· Boxing gloves
Cricket Equipment
· Worldwide distributor
for Spading Cricket Bats, Balls and Protective equipment.
HOCKEY EQUIPMENT
· Worldwide distributor
for Spading Hokey Sticks, Balls & Protective equipment
Based in Delhi, Rajan Mayor, 41 is the
CMD of the group, which also comprises an IT division working on B2B and B2C
solutions; Voyaguer World Travels in the tourism sector; a houseware exports
division specializing in stainless steel kitchenware, ceramics, and textiles;
and a high school. Younger brother Rajesh, 34, is the executive director and
looks after all the divisions operating in Jalandhar. Technical director Katz
Nowaskowski divides his time equally between India and Australia, where he
looks after the group’s interests. “While inflatable balls are our prime
competence in our core business, we are presently focusing on golf balls, for
which we are the sole producers in South Asia. Out of a total Rs. 300 crore of
sports goods business generated in domestic market, most of which is supplied
by the unorganized players, golf balls constitute a miniscule amount and
therefore we came up with a 100 per cent EOU for producing golf balls. Later
the same facility was utilized with little moderation for tennis balls too,”
says Nowaskowaski.
Clarifying that the sports good industry
in India only includes playing equipment and not apparels or shoes, D K Mittal,
chairman of the Sports Goods Export Promotion Council and joint secretary in
the Ministry of Commerce, has certified Mayor group as the number one exporter
since 1993 till date, barring 1996. However, SGEPC secretary Tarun Dewan points
out that being the number one exporter does not mean that Mayor is the number
one brand being exported. “Actually we have tie ups Dunlop, Arnold Palmer, and
Fila for manufacturing golf balls. For footballs and volleyballs we have
association with Adidas, Mitre, Puma, Umbro, and Dunlop. We manufacture soccer
World Cup and European Cup replicas for Adidas, which is a huge market. Only
400 balls used for actual play in the World Cup are manufactured in Europe
& that too only for sentimental reason, otherwise we are capable of
delivering products of the same, if not better quality. Now since we
manufacture balls for them, we cannot antimonies them by producing balls of
similar quality with our own brand name. Secondly, I agree that competing with
such big quaint in the world market in terms of branding is a task that is well
beyond our reach at the moment. However, we are trying to brand ourselves in
the domestic market and that is one of the prime focus in the coming year,”
says Rajan.
Coca-Cola, Unilever, McDonald’s,
American Airlines, Disney club, and other such big brands come up with huge
orders at tines for golf balls with their logos for promotional schemes.
However, there is no mention of the producing country since these companies do
not want to show that balls they deliver in the US are being produced in Asia,
“Not only is our quality good enough; labour in India is cheap enough to churn
out a much less expensive product in the end. Yet, the main threat to our
industry comes from countries like Taiwan and China, who have already cornered
a chunk of world markets in tennis, badminton, and squash rackets. This is
primarily because of two reasons – slow response to our needs in tune with the
market requirements from the government and lack of infrastructure. And most
importantly, tags ‘Made in China’ or ‘Made in Taiwan’ are more acceptable in
the West than ‘Made in India’ or ‘Made in Pakistan’. One of the mottos of the
Mayor group has been to make ‘Made in India’ an acceptable label in the West.
For that we stress quality, timely delivery, and competent rates. Yet, a lot
depends on perception value, which in our case is sadly on the negative side,
much owing to our government’s stance over the years. Things might be
improving, but the pace is very slow and as our economy drifts towards a free
market scenario supinely, it might just prove to be too little too late in the
end,” says Rajesh.
With nearly 2000 skilled workforce;
quality certification from ISO 9001:2000 and ISO 14001: 2004; and having spread
to more than 40 countries, Mayor and Company is obviously sitting pretty.
Questions:
What routes of
globalization has the Mayor group chosen to go global? What other routes could
it have taken?
2. What impediments are
coming in the Mayor group’s way becoming a major and active player in international
business?
3. Why is ‘Made in India’
not liked in foreign markets? What can be done to erase the perception?
CASE III: ARROW AND
THE APPAREL INDUSTRY
Ten years ago, Arvind
Clothing Ltd., a subsidery of Arvind Brands Ltd., a member of the Ahmedabad
based Lalbhai Group, signed up with the 150-year old Arrow Company, a division
of Cutlet Peabody & Co. Inc., US, for licensed manufacture of Arrow
shirts in India. What this brought to India was not just another premium dress
shirt brand but new manufacturing philosophy to its garment industry which
combined high productivity, stringent in-line quality control, and a conducive
factory ambience.
Arrow’s
first plant, with a 55,000 sq. ft. area and capacity to make 3,000 to 4,000
shirts a day, was established at Bangalore in 1993 with an investment of Rs. 18
crore. The conditions inside – with good lighting on the workbenches, high
ceilings, ample elbow room for each worker, and plenty of ventilation, were a
decided contrast to the poky, crowded, and confined sweatshops characterizing
the usual Indian apparel factory in those days. It employed a computer system
for translating the designed shirt’s dimensions to automatically mark the
master pattern for initial cutting of the fabric layers. This was installed,
not to save labour but to ensure cutting accuracy and low wastage of cloth.
The
over two-dozen quality checkpoints during the conversion of fabric to finished
shirt was unique to the industry. It is among the very few plants in the world
that makes shirts with 2 ply 140s and 3 ply 100s cotton fabrics using 16 to 18
stitches per inch. In March 2003, the Bangalore plant could produce stain-repellant
shirts based on nanotechnology.
The
reputation of this plant has spread far and wide and now it is loaded mostly
with export orders from renowed global brands such as GAR, Next, Espiri, and
the like. Recently the plant was identified by Tommy Hilfiger to make its brand
of shirts for the Indian market. As a result, Arvind Brands has had to take
over four other factories in Bangalore on wet lease to make the Arrow brand of
garments for the domestic market.
In
fact, the demand pressure from global brands which want to out outscore from
Arvind Brands, is so great that the company has had to set up another large for
export jobs on the outskirts of Bangalore. The new unit of 75,000 sq. ft. has
cost Rs. 16 crore and can turn out 8,000 to 9,000 shirts per day. The technical
collaborates are the renowned C&F Italia of Italy.
Among
the cutting edge technologies deployed here are a Gerber make CNC fabric
cutting machine, automatic collar and cuff stitching machines, pneumatic
holding for tasks like shoulder joining, threat trimming and bottom hemming, a
special machine to attach and edge stitch the back yoke, foam finishers which
use air and steam to remove creases in the finished garment, and many others.
The stitching machines in this plant can deliver up to 25 stitches per inch. A
continuous monitoring of the production process in the entire factory is done
through a computerized apparel production management system, which is hooked to
every machine. Because of the use of such technology, this plant will need only
800 persons for a capacity which is three that of the first plant which employs
580 persons.
Exports
of garments made for global brands fetched Arvind Brands over Rs. 60 crore in 2002,
and this can double in the next few years, when the new factory goes on full
stream. In fact, with the lifting of the country-wise quota regime in 2005,
there will be a surge in demand for high quality garments from India and Arvind
is already considering setting up two more such high tech export-oriented
factories.
It
is not just in the area of manufacture but also retailing that the arrow brand
brought a wind of change on the Indian scene. Prior to its coming, the usual
Indian shirt shop used to be a clutter of racks with little by way of display.
What Arvind Brands did was to set up exclusive showrooms for Arrow shirts in
which the functional was combined with the aesthetic. Stuffed racks and clutter
were eschewed. The products were displayed in such a manner that the customer
could spot their qualities from a distance. Of course, today this has become
standard practice with many other brands in the country, but Arrow showed the
way. Arrow today has the largest network of 64 exclusive outlets across India.
It is also present in 30 retail chains. It branched into multi-brand outlets in
2001, and is present in over 200 select outlets.
From
just formal dress shirts in the beginning, the product range of Arvind Brands
has expanded in the last ten years to include casual shirts, T-shirts, and
trousers. In the pipeline are light jackets and jeans engineered for the middle
age paunch. Arrow also tied up with the renowed Italian designer, Renato
Grande, who has worked with names like Versace and Marlboro, to design its
Spring / Summer Collection 2003. The company has also announced its intention
to license the Arrow brand for other lifestyle accessories like footwear,
watches, undergarments, fragrances, and leather goods. According to Darshan
Mehta, President, Arvind Brands Ltd., the current turnover at retail price of
the Arrow brand in India is about Rs. 85 crore. He expects the turnover to
cross Rs. 100 crore in the next few years, of which about 15 per cent will be
from the licensed non-clothing products.
In
2005, Arvind Brands launched a major retail initiative fir all its brands.
Arvind Brands licensed brands (Arrow, Lee and Wrangler) had grown at a healthy
35 per cent rate in 2004 and the company planned to sustain the growth by
increasing their retail presence. Arvind Brands also widened the geographical
presence of its home-grown brands, such as Newport and Ruf-n-Tuf, targeting
small towns across India. The company planned to increase the number of outlets
where its domestic brands would be available, and draw in new customers for
readymades. To improve its presence in the high – end market, the firm started
negotiating with an international brand and is likely to launch the brand.
The
company has plans to expand its retail presence of Newport Jeans, from 1200
outlets across 480 towns to 3000 outlets covering 800 towns.
For
a company ranked as one of the world’s largest manufacturers of denim cloth and
owners of world famous brands, the future looks bright certain for Arvind
Brands Ltd.
Company Profile
Name of the Company
|
:
|
Arvind Mills
|
Year of Establishments
|
:
|
1931
|
Promoters
|
:
|
Three brothers – Katurbhai, Narottam
Bhai and Chimnabhai
|
Divisions
|
:
|
Arvind Mills was spilt in 1993 into
three units – textiles, telecom and garments. Arvind Brands Ltd. (textile
unit) is 100 per cent subsidiary of Arvind Mills.
|
Growth Strategy
|
:
|
Arvind Mills has grown through buying
– up of sick units, going global and acquisition of Germanand US brand names.
|
Questions:
1. Why did Arvind Mills
choose globalization as major route to achieve growth when domestic market was
huge?
2. Hoe does lifting of
Country-wise quota regime’ help Arvind Mills?
3. What lessons can other
Indain business learn from the experience of Arvind Mills?
CASE IV: AT THE RECEIVING END…!
Spread over 121 countries with 30,000
restaurants, and serving 46 million customers each day with the help of more
than 400,000 employees, the reach of McDonald’s is amazing. It all started in
1948 when two brothers, Richard and Maurice ‘Mac’ McDonald, built several
hamburger stands, with golden arches in southern California. One day a
traveling salesman, Ray Kroc, came to sell milkshake mixers. The popularity of
their $O. 15 hamburgers impressed him, so he bought the world franchise rights
from them and spread the golden arches around the globe.
McDonald’s depends on its overseas
restaurants for revenue. In fact, 60 percent of its revenues are generated
outside of the United States. The key to the company’s success is its ability
to standardize the formula of quality, service, cleanliness and value, and apply
it everywhere.
The company, well known for its golden
arches, is not the world’s largest company. Its system wide sales are only
about one-fifth of Exxon Mobil or Wal-Mart stores. However, it owns one of the
world’s best known brands, and the golden arches are familiar to more people
than the Christian cross. This prominence, and its conquest of global markets,
makes the company a focal point for inquiry and criticism.
McDonald is a frequent target of
criticism by anti-globalization protesters. In France, a pipe-smoking sheep
farmer named Jose Bove shot to fame by leading a campaign against the fast food
chain. McDonald’s is a symbol of American trade hegemony and economic
globalization. Jose Bove organized fellow sheep farmers in France, and the group
led by him drove tractors to the construction site of a new McDonald’s
restaurants and ransacked it. Bove was jailed for 20 days, and almost overnight
an international anti-globalisation star was borne. Bove, who resembles the
irrelevant French comic book hero Asterix, traveled to Seattle in 1999, as part
of the French delegation to lead the protest against commercialization of food
crops promoted by the WTO. Food, according to him, is too vital a part of life
to be trusted to the vagaries of the world trade. In Seattle, he led a
demonstration in which some ski-masked protestors transhed at McDonald’s/ As
Bove explained, his movement was for small farmers against industrial farming,
brought about by globalization. For them, McDonald’s was a symbol of globalization,
implying the standardization of food through industrial farming. If this was
allowed to go on, he said, there would no longer be need for farmers. “For us”,
he declared, “McDonald’s is a symbol of what WTO and the big companies want to
do with the world”. Ironically, for all of Bove’s fulminations against
McDonald’s, the fast food chain counts its French operations among its most
profitable in 121 countries. As employer of about 35,000 workers, in 2006,
McDonald’s was also one of France’s biggest foreign employers.
Bove’s and his followers are not the
only critics of McDonald’s. Leftists, anarchists, nationalists, farmers, labor
unions, environmentalists, consumer advocates, protectors of animal rights,
religious orders and intellectuals are equally critical of the fast food chain.
For these and others, McDonald’s represents an evil America. Within hours after
US bombers began to pound Afghanistan in 2001, angry Pakistanis damaged
McDonald’s restaurants in Islamabad and an Indonesian mob burned an American
flag.
McDonald entered India in the late
1990s. On its entry, the company encountered a unique situation. Majority
of the Indians did not eat beef but the company’s preparations contained cow’s
meat nor could the company use pork as Muslims were against eating
it. This left chicken and mutton. McDonald’s came out
with ‘Maharaja Mac’, which is made from mutton and ‘McAlooTikki Burger’ with
chicken potato as the main input. Food items were segregated into
vegetarian and non-vegetarian categories.
Though it worked for sometimes, this
arrangement did not last long. In 2001, three Indian businessmen
settled in Seattle sued McDonald’s for fraudulently concealing the existence of
beef in its French fries. The company admitted its guilt of mixing
miniscule quantity of beef extract in the oil. The company settled the suit for
$10 million and tendered an apology too. Further, the company
pledged to label the ingredients of its food items, and to find a substitute
for the beef extract used in its oil.
McDonald’s succeeded in spreading
American culture in the East Asian countries. In Hong Kong and
Taiwan, the company’s clean restrooms and kitchens set a new standard that
elevated expectations throughout those countries. In Hong Kong,
children’s birthdays had traditionally gone unrecognized, but McDonald’s
introduced the practice of birthday parties in its restaurants, and now such
parties have become popular among the public. A journalist set
forth a ‘Golden Arches Theory of Conflict Prevention’ based on the notion that
countries with McDonald’s restaurants do not go to war with each other. A
British magazine, The Economist, paints an yearly ‘Big Mac Index’ that uses the
price of a Big Mac in different foreign currencies to access exchange rate
distortions.
 |
| ICMIND EMBA ANSWER SHEETS - If there is one thing William H. Pickney, Managing Director and CEO, Amway India has mastered during his seven year stay in India, it’s the art of breaking the coconut in one go |
Questions:
1. What lessons can other
MNCs learn from the experience of McDonald’s?
2. Aware of the food
habits of Indians, why did McDonald’s err in mixing beef extract in the oil
used for fries?
3. How far has McDonald’s
succeeded in strategizing and meeting local cultures and needs?
CASE V: BPO-BANE OR BOON?
Several MNCs are increasingly unbundling
or vertical disintegrating their activities. Put in simple language, they have
begun outsourcing (also called business process outsourcing) activities
formerly performed in-house and concentrating their energies on a few
functions. Outsourcing involves withdrawing from certain stages/activities and
relaying on outside vendors to supply the needed products, support services, or
functional activities.
Take Infosys, its 250 engineers develop
IT applications for BO/FA (Bank of America). Elsewhere, Infosys staffers
process home loans for green point mortgage of Novato, California. At Wipro,
five radiologists interpret 30 CT scans a day for Massachusetts General
Hospital.
2500 college educated men and women are
buzzing at midnight at Wipro Spectramind at Delhi. They are busy processing
claims for a major US insurance company and providing help-desk support for a
big US Internet service provider – all at a cost upto 60 percent lower than in
the US. Seven Wipro Spectramind staff with Ph.Ds in molecular biology sift
through scientific research for western pharmaceutical companies.
Another activist in BPO is Evalueserve,
headquartered in Bermuda and having main operations near Delhi. It also has a
US subsidiary based in New York and a marketing office in Australia to cover
the European market. As Alok Aggarwal (co-founder and chairman) says, his
company supplies a range of value – added services to clients that include a
dozen Fortune 500 companies and seven global consulting firms, besides market
research and venture capital firms. Much of its work involves dealing with
CEOs, CFOs, CTOs, CLOs and other so-called C-level executives.
Evalueserve provides services like
patent writing, evaluation and assessment of their commercialization potential
for law firms and entrepreneurs. Its market research services are aimed at
top-rung financial service firms, to which it provides analysis of
investment opportunities and business plans. Another major offering is
multilingual services. Evalueserve trains and qualifies employees to
communicate in Chinese, Spanish, German, Japanese and Italian, among other
languages. That skill set has opened market opportunities in Europe and
elsewhere, especially with global corporations.
ICICI Infotech Services in Edison, New
Jersey, is another BPO services provider that is offering marketing software
products and diversifying into markets outside the US. The firm has been
promoted by $2-billion ICICI Bank, a large financial institution in Mumbai that
is listed on the New York Stock Exchange.
In its first year after setting up shop
in March 1999, ICICI Infotech spent $33 million acquiring two information
technology services firms in New Jersy – Object Experts and lvory Consulting –
and Command Systems in Connecticut. These acquisitions were to help ICICI
Infotech hit the ground in the US with a ready book of contracts. But it soon
found US companies increasingly outsourcing their requirements to offshore
locations, instead of hiring foreign employees to work onsite at their offices.
The company found other native modes for growth. It has started marketing its
products in banking, insurance and enterprise source planning among others. It
has ear------- $10 million for its next US market offensive, which would go
towards R & D and back-end infrastructure support, and creating new
versions of its products to comply with US market requirements. It also has a
joint venture – Semantik Solutions GmbH in Berlin, Germany with the Fraunhofer
Institute for Software and Systems Engineering, which is based in Berlin,
Germany with the Fraunhofer Institute for Software and Systems Engineering,
which is based in Berlin and Dortmund, Germany, Fraunhofer is a leading
institute in applied research and development with 200 experts in software
engineering and evolutionary information.
A relatively late entrant to the US
market, ICICI Infotech started out with plain vanilla IT services, including
operating call centers. As the market for traditional IT services started
weakening around mid-2000, ICICI Infotech repositioned itself as a “Solutions”
firm offering both products and services. Today, it offers bundled packages of
products and services in corporate and retail banking and insurance, among
other areas. The new offerings include data center and disaster recovery
management and value chain management services.
ICICI Infotech’s expansion into new
overseas markets has paid off. Its $50 million revenue for its latest financial
year ending March 2003 has the US operations generating some $15 million, while
the Middle East and Far East markets brought in another $9 million. It now
boasts more than 700 customers in 30 countries, including Dow
Jones, Glaxo – Smithkline, Panasonic and American Insurance Group.
The outsourcing industry is indeed
growing from strength. Though technical support and financial services have
dominated India’s outsourcing industry, newer fields are emerging which are
expected to boost the industry many times over.
Outsourcing of human resource services
or HR BPO is emerging as big opportunity for Indian BPOs with global market in
this segment estimated at $40-60 billion per annum. HR BPO comes to about 33
percent of the outsourcing revenue and India has immense potential as more than
80 percent of Fortune 1000 companies discuss offshore BPO as a way toout costs
and increase productivity.
Another potential area is ITES/BPO
industry. According to a NASSCOM Survey, the global ITES/BPO industry was
valued at around $773 billion during 2002 and it is expected to grow at a
compounded annual growth rate of nine percent during the period 2002-06.
NASSCOM lists the major indicators of the high growth potential of ITES/BPO
industry in India as the following :
During 2003-04, The ITES/BPO segment is
estimated to have achieved a 54 percent growth in revenues as compared to the
previous year. ITES exports accounted for $3.6 billion in revenues, up from
$2.5 billion in 2002-03. The ITES-BPO segment also proved to be a major
opportunity for job seekers, creating employment for around 74,400 additional
personnel in India during 2003-04. The number of Indians working for this
sector jumped to 245,500 by March 2004. By the year 2008, the segment is
expected to employ over 1.1 million Indians, according to studies conducted by
NASSCOM and McKinsey & Co. Market research shows that in terms of job
creation, the ITES-BPO industry is growing at over 50 percent.
Legal outsourcing sector is another area
India can look for Legal transcription involves conversion of interviews with
clients or witnesses by lawyers into documents which can be presented in
courts. It is no different from any other transcription work carried out in
India. The bottom-line here is again cheap service. There is a strong reason
why India can prove to be a big legal outsourcing industry.
India, like the US, is a common-law
jurisdiction rooted in the British legal tradition. Indian legal training is
conducted solely in English. Appellate and Supreme Court proceedings in India
take place exclusively in English. Indian legal opinions are written
exclusively in English. Due to the time-zone differences, night time in the US
is daytime in India which means that clients get 24 hour attention, and some
projects can be completed overnight. Small and mid-sized business offices can
solve staff problems as the outsourced lawyers from India take on the time
consuming labour intensive legal research and writing projects. Large law firms
also can solve problems of overstaffing by using the on-call lawyers.
Research firms such as Forrester
Research, predict that by 2015, more than 489,000 US lawyer jobs, nearly eight
percent of the field, will shift abroad.
Many more new avenues are opening up for
BPO services providers. Patent writing and evaluation services are markets set
to boom. Some 200,000 patent applications are written in the western world
annually, making for a market size of between $5 billion and $7 billion.
Outsourcing patent writing service could significantly lower the cost of each
patent application, now anywhere between $12,000 and $15,000 apiece – which
help expand the
market.
Offshoring of equity research is another
major growth area. Translation services are also becoming a big Indian plus.
India produces some 3,000 graduates in German each year, which is more than in
Switzerland.
Though going is good, the Indian BPO
services providers cannot afford to be complacent, Phillippines, Mexico and
Hungary are emerging as potential offshore locations. Likely competitor is
Russia, although the absence of English speaking people there holds the country
back. But the dark horse could be South Africa and even China.
BPO is based on sound economic reasons.
Outsourcing helps gain cost advantage. If an activity can be performed better
or more cheaply by an outside supplier, why not outsource it ? Many PC makers,
for example, have shifted from in-house assembly to utilizing contract
assemblers to make their PCs. CISCO outsources all productions and assembly of
its routers and switching equipment to contract manufacturers that operate 37
factories, all linked via the Internet.
Secondly, the activity (outsourced) is
not crucial to the firm’s ability to gain sustainable competitive advantage and
won’t hollow out its core competence, capabilities, or technical knowhow.
Outsourcing of maintenance services, data processing, accounting, and other
administrative support activities to companies specializing in these services
has become common place. Thirdly, outsourcing reduces the company’s risk
exposure to changing technology and / or changing buyer preferences.
Fourthly, BPO streamlines company
operations in ways that improve organizational flexibility, cut cycle time,
speedup decision making and reduce coordination costs. Finally, outsourcing
allows a company to concentrate on its crore business and do what it does best.
Are Indian companies listening? If they listen, BPO is a boon them and not a
bane.
Questions:
1. Which of the theories
of International trade can help Indian services providers gain competitive edge
over their competitors?
2. Pick up some Indian
services providers. With the help of Michael Porter’s diamond, analyze their
strengths and weaknesses as active players in BPO.
CASE VI: THE SAGA CONTINUES:
It was the talk of the town in Bangalore
during the late 1970s and early 1980s. The plant was coming up on the Bangalore
– Yelahanka Road, about 20 km from the city. Everything the people over three
did became a folklore. The buildings were huge with wonderful architecture,
beautifully built with wide roads and huge spaces. Should a situation demand,
the entire plant could be dismantled, bundled up, loaded into trucks and
ferried to other places. Lighting inside the building had to be seen to be
believed. Interiors had to be seen to be believed. Washrooms, stores,
reception, canteen, healthcare, had to be seen to be believed. It had never
happened elsewhere. It was amazing, the boss was not addressed as Sir, he was
called Mr. ---- and so ! The yellow painted buses on the city roads made a
delightful sight. Legends were fold about the two gentlemen who founded the
company.
An interesting story is told about how
one of the surviving founders (Larsen who lived till 2003) visited the
Bangalore plant once a year, he stayed in a hotel on his own, hired his own
cab, went to the plant and greeted every employee, from the top brass down to
the last person in the hierarchy. Story is also told about how, on one such
visit Larsen went to the reception and asked for permission to enter the plant.
Not knowing who he was, the young lass in reception room made him wait for
half-an-hour. By luck, someone recognized him.
A budding author captured all these and
many more in his first book, which became a big hit with all the teachers and
students in different colleges buying and reading it.
If cannot be anything other than L &
T, the huge engineering and construction multi-plant organization, founded in
1938 by two Danish engineers, Henning Holck – Larsen and Soren Kristin Toubro.
Henning Holck – Larsen and Soren Kristin
Toubro, school – mates in Denmark, would not have dreamt, as they were learning
about India in history classes that they would, one day, create history in that
land. In 1938, the two friends decided to forgo the comforts of working in
Europe and started their own operation in India. All they had was a dream. And
the courage to dare. Their first office in Mumbai (Bombay) was so small that
only one of the partners could use the office at a time! Today, L & T is
one of India’s biggest and best known industrial organizations with reputation
for technological excellence, high quality of products and services and strong
customer orientation.
As on today, L & T is a 62 business
conglomerate with turnover of Rs. 18,363 crore (2006-07), with the script
commanding Rs. 2400 in the bourses.
No, L & T is not sitting pretty. It
want to hit Rs. 30,000 crore turnover mark by 2010 and is busy restructuring,
sniffing new pastures, grooming new talent and projecting the new company credo
– “It’s all about Imagineering.” With the sole idea of creating several MNCs
within, with footprints across nations, L & T is shedding the old economy
and embracing the emergent opportunities and challenges.
Stagnant Revenues and Low Margins Not
everything went the L & T way.
In the late nineties, the macro
environment was ----- inspiring with stagnant revenues and low margins, and L
& T’s core strength, its engineers, were being constantly weaned away by
the fast-growing software sector. So, the general comment around the bourses
was about the credibility of the company, ‘L & T is a, good company but its
stock price, for some reason or the other, is fixed at the Rs. 140-210 band. So
the company had to change by keeping its core intact. As s senior executive
remarks. “L & T was perceived to be un –sexy and we had to create a new
buzz around the campuses.” The metamorphosis must echo through a whimper, not a
bang. Even before the company divested its cement business in 2003, which
accounted for 25% of its total sales, there were years of incremental and low visibility
organizational moves towards a new L & T.
At a 52-week high of Rs. 2400, the L
& T scrip today looks dapper, a far cry from the nineties when the stock
price was in a state of flux. Much of the change started as a ripple way back
in 1999 when Naik took over as the CEO. He visited employees at all levels
across the organization and asked them what it took to transform the company.
The insights were mapped and implemented. “None of our employees thought that
we build shareholder value. They thought we build monuments,” the chairman
reminisces. The focus on people became stronger and formed the basis of
restructuring. It became the first old economy company to provide stock options
to its employees.
When Naik came to the helm, he set upon
himself a 90 – day transformational agenda. Portfolios were reviewed and a
vision clearly chalked out. He drew up a simple, brief, “L& T has to be a
multinational company and it has to deliver shareholder value at any cost. At
the end of 90 days, between July 22 and July 24, 1999, the company launched
Project Blue Chip, which essentially fast – tracked projects. The moot point
was to complete all projects by February of the new millennium. Strategy
formation teams were formed, portfolios reviewed and structures were optimized.
Young leadership was brought to the fore and the business streamlining process
kicked in.
Hiving off from 1999-2001, L & T
went about debottle- necking its cement plants. They were modernized and
capitalized were raised from 12 million tones to 16 million tones annually,
with minimum costs. The mantra really was to grow the business and then divest
it as cement fell in the non-core category.
So, in September 2003, L & T sold
its cement business to the Aditya Birla Group, which resulted in the company’s
Economic Value Add…
SUMMARY
Technological environment wields
considerable influence on international business. Technology is systematic
application of knowledge to practical tasks.
Three features of technology are
conspicuous, change, widespread effects and self-reinforcement.
Technology may be structured into
different categories, for example, state of art, proprietary, supporting, and
the like.
Technology management involves its
awareness, acquisition, adaption, advancement and abandonment phases.
Impact of technology can be studied
under three heads - impact on society, impact on economy and plant level
implications. Major aspect of plant level implications relates to the
management of technology transfers.
QUESTIONS:
1. What is technology?
How does it differ from science?
2. Describe the different
phases of technology management?
3. Bring out the impact
of technology on: (a) Society, (b) Economy, and
(c) A plant.
(c) A plant.
4. What is technology
transfer? What are the directions of such transfers?
5. Bring out the stages
in technology transfer.
6. Explain the issues
involved in international technology transfers.
For answersheets contact
info.answersheets@gmail.com
+91 95030-94040
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