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XIMB JOURNAL OF MANAGEMENT
Issue No. 2 September, 2007
Articles Evolution of Citizen Charter led Rural e-Governance: A Livelihood Security Approach to Information Systems Planning in Indian Context Harekrishna Misra & B. N. Hiremath Analysis and Development of A Concept Level Framework on Corporate Social Responsibility Som Sekhar Bhattacharyya Public Expenditure on Health and Health Outcomes: The Experience of the Indian States Biswa Swarup Misra & Akshya K. Panda Internationalization of Indian Pharmaceutical Industry : A study on the determinants of export stimulation Srikant Panigrahy, P.Mishra & B.P.Patra Competencies Necessary for Technology Transfer from Home to Host Country Companies: A Case Study Kiran J. Desai & Harsha Desai Measuring Critical Factors in Safety Management - A Survey Based Approach M.N. Vinodkumar & M. Bhasi Consumer Rights Protection and Regional Co-operation among SAARC Countries Basant Kumar & Brajaraj Mohanty Factors Blocking the Implementation of Retailing Technology A. Veena & H.R. Venkatesha Continuous and Sustainable Improvement through Supply Chain Performance Measurement - A Case Study of an LCV Manufacturing Company Ashwani K. Varma Trade Protection Measures (TPM): Issues and Perspectives Sridhar Panda & Rajiv Arora Perspective Shaping the Moral Foundation for Globalization: Lessons from Indian and Western Philosophy Bibhu Prasan Patra Demand Estimation – Some Empirical Observations and their Implications P.Mishra Management Case Suhas Gopinath Brajaraj Mohanty & Rajeev Roy Rural Women’s Marketing Association (RWMA) Debasis Pradhan A Tale of Two Samitis Niraj Kumar Reliable Iterative Testing Environment (RITE) -a Case of Software Development Model Sanjay Mohapatra Gram Utthan - From Micro Credit to Micro Enterprise S.P. Das & Alok Pattanayak Book Review Outsourcing : the Definitive View, Applications and Implications Shiva Kumar Srinivasan Total Relationship Management Jaydeep Mukherjee
Xavier Institute of Management
Bhubaneswar - 751 013
Brajaraj Mohanty Professor, Xavier Institute of Management Bhubaneswar
John C.Camillus, Donald R.Beall Professor of Strategic Management, University of Pittsburgh, Pittsburgh,U.S.A. S.K. Chakraborty, Founder- Convenor, Management Centre for Human Values, Indian Institute of Management, Kolkata Keith D’Souza, Director (Organizational Effectiveness), Pfizer Limited, Mumbai J.M. Denton, Professor & Head of International Affairs, University of Stellenbosch Business School, Bellville, South Africa Ranjan Ghosh, Director, Goa Institute of Management, Ribandar, Goa M.G. Jomon, Associate Professor, XLRI, Jamshedpur Jerome Joseph, Professor, Indian Institute of Management, Ahmedabad Oswald A. Mascarenhas, s.j., Kellstadt Professor of Marketing, University of Detroit-Mercy, Detroit Sasi Misra, Distinguished Fellow, Entrepreneurship Development Institute of India, Ahmedabad Amar KJR Nayak, Associate Professor, Xavier Institute of Management, Bhubaneswar Gopal Krishna Nayak, Director, International Institute of Information Technology, Bhubaneswar H.K. Pradhan, Professor, XLRI, Jamshedpur V.Ranganathan, Professor, Indian Institute of Management, Bangalore Latha Ravindran, Professor, Xavier Institute of Manavement, Bhubaneswar Subhash Sharma, Dean, Indian Business Academy, Bangalore W.S. William, Professor & Dean (Academic), Xavier Institute of Management, Bhubaneswar For inquiries, subscriptions and contributions, please write to Editor,
ILAKSHAN XIMB Journal of Management Xavier Institute of Management Xavier Square, Bhubaneswar - 751 013, India Ph. : 91-674-3983893 (Direct), 3012345 (Pilot) Fax : 91 674-2300995 E-mail : firstname.lastname@example.org
XIMB JOURNAL OF MANAGEMENT
Volume IV Issue No. 2 September, 2007
Xavier Institute of Management
Bhubaneswar - 751 013
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ISSN 0973-1954 Regd. No. : ORIENG/2006/18251 Publisher Dr E. Abraham s.j. Director Xavier Institute of Management Bhubaneswar
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ARTICLES 1. Evolution of Citizen Charter led Rural e-Governance: A Livelihood Security Approach to Information Systems Planning in Indian Context Analysis and Development of A Concept Level Framework on Corporate Social Responsibility Public Expenditure on Health and Health Outcomes: The Experience of the Indian States Internationalization of Indian Pharmaceutical Industry : A study on the determinants of export stimulation Competencies Necessary for Technology Transfer from Home to Host Country Companies: A Case Study Measuring Critical Factors in Safety Management - A Survey Based Approach Consumer Rights Protection and Regional Co-operation among SAARC Countries Factors Blocking the Implementation of Retailing Technology Continuous and Sustainable Improvement through Supply Chain Performance Measurement - A Case Study of an LCV Manufacturing Company Harekrishna Misra & B. N. Hiremath 01
Som Sekhar Bhattacharyya
Biswa Swarup Misra & Akshya K. Panda Srikant Panigrahy, P.Mishra & B.P.Patra Kiran J. Desai & Harsha Desai
M.N. Vinodkumar & M. Bhasi
Basant Kumar & Brajaraj Mohanty A. Veena & H.R. Venkatesha Ashwani K. Varma
10. Trade Protection Measures (TPM): Issues and perspectives
Sridhar Panda & Rajiv Arora
Das & Alok Pattanayak 233 Jaydeep Mukherjee 249 .From Micro Credit to Micro Enterprise BOOK REVIEW 18. Applications and Implications 19.Mishra 179 S.PERSPECTIVE 11. Demand Estimation – Some Empirical Observations and their Implications MANAGEMENT CASE 13. Suhas Gopinath 14. A Tale of Two Samitis 16. Shaping the Moral Foundation for Globalization: Lessons from Indian and Western Philosophy 12. Gram Utthan . Reliable Iterative Testing Environment (RITE) -a Case of Software Development Model 17. Rural Women’s Marketing Association (RWMA) 15. Total Relationship Management Shiva Kumar Srinivasan 245 Brajaraj Mohanty & Rajeev Roy Debasis Pradhan Niraj Kumar Sanjay Mohapatra 189 203 211 217 Bibhu Prasan Patra 167 P. Outsourcing : the Definitive View.P.
In order to make the interventions successful. A synergic effect is possible when the soft issues are supported by the right kind of infrastructure in the supply- 1. It is often argued that creation of “services on demand” and “stakeholderownership oriented development” initiatives may lead to success. This is not because it involves the rural infrastructure. everything leading to livelihoods prospects matter much. Dahod. in conducting PRA exercises and for providing logistic support. Rural citizens. Institute of Rural Management Anand. who lack basic livelihood opportunities. it is essential that the citizens themselves identify their issues. email: email@example.com . Revised August 22. We illustrate through a case about the utility of participatory rural appraisal (PRA) as a tool to involve rural citizens in planning and elicit their priorities for ICT options. Professor. design process and its effect on ICT planning for e-governance. In this paper we discuss issues related to stakeholder-ownership oriented e-governance. modeling and their automation.in Professor.0 INTRODUCTION Information and communication technology (ICT) projects require proper identification of users’ needs. and manage their infrastructure and services.ac. Received June 23. 2007. communications and power) and the * users do not have any control. Institute of Rural Management Anand. email: BNH@irma.ac. 2007. Nathan and Mr. ICT is a bundle of hard and soft components. 1. Managing the soft issues and technology enabled processes depend on the users’ capability.Evolution of Citizen Charter led Rural e-Governance: A Livelihood Security Approach to Information Systems Planning in Indian Context* Harekrishna Misra1 & B N Hiremath2 Abstract Indian rural e-governance initiatives face many challenges. Authors gratefully acknowledge the assistance provided by Gramin Vikas Trust. where hard components are technology driven (system software. 2. are laden with survival threats and for them. Arun S. Soft issues relate to understanding processes. but the complex process of involving the rural citizens. Kalpesh Soni of GVT for their support. Our special thanks are due to Mr. prioritize their needs.
the projects taken up for intervention may not guarantee success.. prioritize their needs. Evolution precedes revolution and in rural development/ governance initiatives. and manage their infrastructure and services. who lack basic livelihood opportunities. increase in acceptability of e-business. 2003). but the complex process of involving the rural citizens who are expected to be the larger beneficiaries. We consider rural citizens to be the end-users. many projects fail due to its less usability. 2002). egovernment etc. Macredie. Indian rural e-governance initiatives are more complex but face analogous situations. There is a growing concern over evaluating. should monitor the infrastructure set up for the purpose. In order to make the interventions successful. decrease in cost of computing. Bhatnagar. (Prabhu. but also integrate the demand based services for these citizen with focus on livelihoods opportunities. Patel and Paul. While there is phenomenal growth in ICT-enabled processes. This is not because it involves the rural infrastructure. Despite having a good method. XIMB Journal of Management .2 Vilakshan. etc. 2004). e-commerce applications. Various IS metrics are . evolution is possible through citizens’ participation. Identifying the right types of services with users’ perspective is important to make an ICT initiative successful (Jokela. We illustrate the utility of participatory rural appraisal (PRA) as a tool to involve rural citizens in planning IS and elicit the prioritsed demands on ICT options. September. Alike e-business. ICT based governance/development paradigms recognise citizens’ participation to be more important and in Indian context it is very relevant. these projects need to evolve through demand-driven approach. In this paper we discuss the concept and importance of user-led IS planning. ecommerce and m-commerce activities. service oriented opportunities (e-governance. However. Rural citizens. 2004. Unless directed towards creating “services on demand” and “stakeholderownership oriented development” initiatives. 2004. design process and its effect on ICT planning. everything leading to livelihoods prospects matter much. non governmental organizations (NGOs). it is essential that the citizens themselves identify their issues. are laden with survival threats and for them. It is important for the policy makers to direct the ICT initiatives for addressing not only the feasible business practices (e-business. and measuring effectiveness of ICT infrastructure created (Lycett. e-governance rural initiatives need to be citizen-centric. Satyanarayana. 2007 chain. These require a rigorous information system (IS) planning (Ward and Peppard. 2002). failures plague the projects. managing.).). e-commerce etc. The support of government.
Specify the context of Use 5. 2004). These initiatives are critically influenced by poor ICT and related infrastructure such as electricity. Produce solutions User Acceptance Rural ICT initiatives based on various business and governance models. It would ensure an effective solution to the user expectations leading to its effective use. Specify User Requirements 4. Presently the initiatives are conceptualized. Evaluate against User requirements 3. we also discuss how this exercise could bring in the citizens’ perspectives and transform them to action. education. their perception and incorporating them in the product/service delivery. Satyanarayana.Misra et. UCD (Jokela. Citizens’ acceptance is a major concern for success of rural ICT initiatives. 2004. We also narrate how these centres cater to their livelihood security. 3 accentuated to enumerate these ICT options.al.0 CITIZEN-LED ICT INITIATIVES Exhibit 1 UCD Framework 1. Evolution of Citizen . we discuss how migration information centres (MICs) could be planned through the PRA techniques which support the livelihood perspectives of the citizens. UCD practices are aimed at understanding the users. Plan User centered Processes 2. Normally. are still evolving (Bhatnagar. This is possible if users demand their services and make useful contributions during design and development. ICT initiatives for rural development can also therefore. 2004. The exhibit suggests that any ICT application should be user centered and for effective utilization their perspectives need to be mapped. The citizens neither have exposure nor ability to evaluate any attribute described in Exhibit-1. Prabhu. 2.0 CITIZEN-CENTERED DESIGN PROCESS User-centered designs (UCD) is one major area of current research and in this paper the rural citizens are defined to be the end-users.. essential that any rural ICT initiative in Indian context should primarily be led by the rural citizen (the user) with the active support of agencies involved. 2004. purposeful IS plan could be initiated an a simple ICT option could be adopted to help implement the IS planned. We conclude the paper with an analysis of the findings and provide an indicative direction to further research. 3. Through a case. It is therefore. be mapped with this perspective. transport etc. Moreover. Misra and Gachhayat. put as pilots and then .. 2002) practices are described through ISO13407 as shown in Exhibit-1.
2007 used without citizens’ active participation. Exhibit 2 Concept of User Acceptance Individual reactions to use ICT Intention to use ICT Actual use of ICT It is essential to understand citizens’ needs to consider ICT options for income generation and other desired services. Without a strategy to convert these supply-driven projects to demand-driven it is unlikely that such projects would succeed during scalingup. ICT initiatives need careful consideration of the factors responsible for successful scaling-up and one of these is “User Acceptance” (Lamb and Kling. and composite kiosk based services (Misra and Gachhayat. The chosen ICT options should showcase the possibility of scaling up. There are also other models with business perspectives like ITC e-Choupal (Sivakumar. September. 2003). and then evolving initiatives to scale up. Exhibit 3 ICT Projects for Rural Development Citizen-Led IS Projects AgencyLed IT Projects Demand on ICT Services Supply of ICT Services . XIMB Journal of Management . Davis and Davis.4 Vilakshan. moderate acceptance of these models is due to lack of concerted effort to map the citizen priorities rendering these initiatives to remain supply-driven. 2004). 2004. 2004). 2004) with a view to providing citizen centered services. and egovernment perspectives (Satyanarayana. However. The user acceptance model for information technology (Venkatesh. 2003) is presented in Exhibit-2. Indian rural ICT interventions are focused on e-governance. Innovations are necessary for harnessing experiences gathered. Bhatnagar. Presently. Morrish.
Misra et. and usability. generating employment. However. 2004). these ICT initiatives are not free from challenges. and Mishra. e-education etc. 2005). 2005) and National e-governance plan (Kochhar and Dhanjal. Citizen-led IS planning has potential to create a good demand for ICT services (Exhibit-3) as compared to agency-led inititaives. scalable and self-sustaining ICT infrastructure to provide services for income generation. 5 Citizens’ acceptance determines the scope to transform the initiatives to be “demand driven” (Bhatnagar. despite having ICT policies. This will happen only if the projects are citizenled. 2004). are organizing an affordable.0 ICT AND DEVELOPMENT INITIATIVES Rural ICT initiatives. the problem is still mounting and there is no sign of a sustainable solution to the complex problem of rural development (I4D. Hiremath. 5. The digital-divide syndrome. (Prabhu. 2005) recommend active participation of rural citizens with a view to improve the e-government services and their acceptance. The challenge is therefore. 4. In India. e-government.0 C I T I Z E N S ’ PA R T I C I PAT I O N F O R SUSTAINABLE LIVELIHOODS BASED ICT INITIATIVES There have been two distinctive approaches to citizens’ participation in development projects. but by aiding the process . The challenge to garner benefits of ICT as a tool for development process is not by its automaton. ICT projects use . especially through e-governance.al. provide business opportunities and rendering ICT enabled services such as e-health. to revisit the development process in the context of ICT interventions and explore possibility of citizens’ participation (Misra. frontline acceptability. The UN global egovernment readiness survey 2005 (UN. relationship. 2004..since automation might lead to unemployment (Greenberg. community-rootedness. and ebusiness models.. 2006). respectful trust. which was primarily perceived as a problem rather than one of the symptoms led to poor design of the ICT initiatives across the world (Greenberg. Effectiveness of projects/ programmes is determined by responsiveness. Misra and Gachhayat. have hastened the development process (Bhatnagar. There is evidence that ICT can be applied for enhancing opportunities for rural livelihood. Besides. 2005). 2004). deployment of ICT infrastructure in rural areas is not commensurate with the perceived benefits (Bhatnagar. Evolution of Citizen . one is the classical top-down approach where the development agency identifies projects and invites the community to participate and the other is for the citizens to identify projects and invite a development agency to form an equal partnership with it to develop the project. Another set of challenges that Indian ICT initiatives face. e-government and conducting business in a convergent manner. 2005). 2004). thus restricting their usability in the right context (I4D. 2005).
usually for a large number of people. are also reflected in sustainable livelihoods. Sustainable livelihoods . analysis. Community-level institutions and processes have been a prominent feature of approaches to natural resource management and are strongly emphasised in sustainable livelihoods approaches. which have dominated much development thinking since the early 1980s. scope and priorities for development in order to enhance progress in poverty elimination. it is felt that techniques like Participatory Rural Appraisal (PRA) are dependable means of generating data for gaining an understanding of needs. sustainable and dynamic.6 Vilakshan. What is ‘Sustainable Livelihood’? approaches rest on core principles that the activities should be people-centred. In particular. responsive and participatory. Livelihood intervention is more than income enhancement. The sustainable livelihoods approaches aim to help people achieve stable livelihood improvements that they themselves define. and decision-making processes related to the production. It also tries to delineate the causes and symptoms of poverty. though the stress is on understanding and facilitating the link through from the micro to the macro. This aspect is very critical for sustenance of rural citizens and needs some discussion. and efficient use of lessons learned from participatory development experiences. They contribute to improving thinking. rather than working only at community level. preferences and priorities within rural communities (Suresh. It recognises that people have certain rights and responsibilities towards each other and to society. A livelihood intervention is a conscious effort by an agency or an organisation to promote and support livelihood opportunities. as is a core focus on the community. The importance of the policy framework and governance. It is Livelihood security is yet another important issue that is likely to influence the success of rural ICT projects. dissemination. The sustainable livelihoods approaches draw on the changing views of poverty. participatory approaches to development have highlighted great diversity in the goals to which people aspire and in the livelihood strategies they adopt to achieve them. in determining well-being. However. XIMB Journal of Management . 2002). conducted in partnership with both the public and the private sector including civil society/ non-governmental organizations. including social capital. allowing for more effective prioritization of action at an operational level. Sustainable livelihood is a way of thinking about the objectives. 2007 these approaches sparingly. September. Poverty analysis has highlighted the importance of assets. It is a holistic approach that tries to capture and provide a means of understanding the vital causes and dimensions of poverty without narrowing the focus on just a few factors.
al. controls and manages. food security is a subjective concept. livelihood security is multidimensional that encompasses food and nutritional security. This is crucial. various common issues related to village. It is facilitating asset creation. etc.0 PARTICIPATORY RURAL APPRAISAL AND LIVELIHOOD SECURITY Other than food. Social and Cultural Aspects of Livelihood Security several transition stages in the life of an individual or with the transition stages in natural climatic seasons that determine farming operations. financial security.. among others. How do we account for the importance given to dowry/ bride-price often at the cost of other ‘productive investments’ in agriculture or jeopardising their livelihood security? It simply means the cultural and social aspects at times assume far more importance than their concerns for food. capacity building. strength as well as priorities and PRA exercise captures these in a participatory mode as explained in previous section. Food and Livelihood Security Livelihood security has to be understood from the people’s perspective. educational programmes. and access to opportunities. It is building securities. preferences. People’s perception of their food/livelihood security provides a oneto-one correspondence with technology adoption. Evolution of Citizen . as people’s own perception of their food and livelihood security determines their decision-making behaviour. social. participation in community based organisations. and emotional security. 7 about increasing economic power of the people. households have to provide for social and cultural expenditure. defined by an individual farmer’s own perception as to whether he/she has been able to support the family’s food and fodder requirements for a year from all resources he/she owns. household and individuals are listed. In short. health.Misra et. Many of these expenditures are either associated with celebrating Each village and household has its problems. . For most households. These abstracted versions are the metrics and they form as the basic input for measuring the deliverables of the IS planning process. This is seriously eroding families’ ability to make productive investments in many cases and adversely affecting attainment of livelihood security in quite a few cases. 6.. livelihood interventions aim at reducing their vulnerabilities and promote livelihood security. Thus. the food produced on their land does not feed the family for the entire year for many reasons. The magnitude of food shortage varies from family to family in a given year and from year to year for a given family. Marriage is one of the major social events and involves considerable expenditure. Dowry is customary among many social groups while ‘bride-price’ is common among some tribes. Through the PRA exercise. and cultural security. Therefore.
Until recently. measurement criteria are also indicated by citizens. 2007 The metrics are supported by measurement criteria set by the citizen themselves to determine its critical success. The feedback is therefore. Vulnerable populations may actually become more destitute as a result of such poorly informed interventions. questionable accuracy. These techniques are adopted to achieve increased accuracy at low costs both in terms of time and money to identify the citizens’ needs. their needs. A more active type of . ICT enabled services at this stage are selected and provided. household and individuals in a village are studied by agencies involved in addressing the issues gathered through PRA. They attempt to target those who are marginalized and vulnerable to disruptions. 2002). top-down methods were dominant in which most essential decisions were made by “specialists” (as opposed to community members) about what issues to be addressed and how the information will be used. These constraints are high cost. iterative. When organizations base their actions on insufficient or faulty information. an important factor for evaluating the interventions and this needs another possible PRA exercise. the result is a misplaced intervention that has little correspondence to the needs the poor. Agencies involved in development process therefore. XIMB Journal of Management . Projects are designed based on information about the people in question. Metrics developed by the village. While exploring options. time consuming. Responding to a questionnaire is one of the most limited forms of “passive” participation.8 Vilakshan. September. and measuring the possible outcomes. By definition. The local people’s role is generally limited to answering questions that are designed by outsiders. There are several constraints in conventional methods of gathering needs. PRA methods are essentially a process of learning about people’s conditions in an intensive. and concerns. conditions. and expeditious manner (Chambers. are equipped with the required indicators for interventions. PRA exercise is a continuous process (Suresh. Often quantitative information generated does not explain real life situations and the local knowledge is not utilized in information processing. Development projects need relevant and good quality information. and lack of stakeholder participation. the critical success factors are listed for consideration. 1992). Besides. During PRA exercise a series of options are generated for interventions and providing services to citizens as well as augment infrastructure. Such projects may actually have a negative effect on poor as they undermine traditional practices or cause local communities to invest their scarce resources in unviable activities. development interventions are oriented to changing people’s lives. the methods have become more participatory as local people play a greater and more active role in the information gathering process. Today.
then the participatory aspect becomes vitally important. Thus.. They are useful in understanding complexity and multiplicity of peoples’ livelihood strategies. The main concern of participatory approach is to facilitate rural service users identify their needs. among other stakeholders. risk assessments and managerial complexity. But where quality is perceived simply in terms of technical feasibility. caste. Evolution of Citizen . academics. . age. the quality of rural service delivery becomes doubtful. to a great extent. on mapping. If. The process of participatory approach emphasizes the linking of information from communities to broader policy dialogue with community based organizations (CBOs). NGOs. diagramming and public dialogue about community problems and issues.. One of the key expressed goals of such techniques was to make PRA accessible to the illiterate and others who might be left out of traditional information gathering processes. the more they feel a stake in the process. local and national government officers. ignoring direct and serious peoples’ participation in the planning process.Misra et. Competent decisions and accountable performance is required from a range of stakeholders. Both of these types of interaction allow local people to express their own concerns rather than merely responding to outsiders’ questions.al. and assessing social capital of different groups differentiated by gender. and are integrally involved in the analysis and use of the information. ethnicity and literacy. people’s participation is vital requirement in improving the quality of rural service delivery. A still higher level of participation is attained when villagers set the agenda for the study. Participatory approaches address some of the lacunas of the past and assist in eliciting people’s own analysis of their poverty and wellbeing provides a deeper understanding of dimensions of poverty other than mere income and consumption indicators. the objective is getting the local people to become more involved in decision making. barriers to their participation. rank options among competing possibilities. gather the information. the more they will be motivated to take on greater responsibilities in decision making and leadership. and assemble these in the form of community plans for action and thinking through solutions. PRA relies. donors. financial viability. An indepth and situation bound nature of participatory approaches can provide insights for policy and practical actions with high benefits for poor people in their own terms. some of whom have been systematically alienated in the past by conventional approaches to planning. social exclusion. The more that community members are active participants the more likely that they will feel a stake in the process and. 9 participation involves diagramming or participating in more open ended discussions. define the questions.
1 0 Vilakshan, XIMB Journal of Management ; September, 2007
PRA tools and techniques are extensively used by development practitioners and action researchers. In this paper however, we have made use of participatory tools and techniques to make the IS planning process demanddriven (thus evolving). This also has been used for ranking the livelihood security options which helps in assessing the IS metrics.
7.0 CITIZENS’ INFORMATION SYSTEMS PLANNING: THE CAUSAL FRAMEWORK
generated for interventions. This exercise is termed to be evolutionary since the metrics are generated and prioritised by the citizens themselves. As explained in exhibit 4, PRA based IS planning exercise needs to be conducted through the active participation of citizens. Usually in Indian context, villages are taken up for PRA exercise since villages provide common resources for livelihood, agriculture, irrigation, education, communication, power, transport etc to the rural citizen. Besides, each household also owns its resources in the villages for sustenance. Each household and village receives infrastructure oriented benefits and services from the government. All these resources form the basis of support for the village and household. IS planning exercise therefore, is aimed to elicit responses from the citizens for development of these resources, providing access to information and support services available for augmentation of these services and prioritizing them.
Exhibit 4 PRA Based IS Planning Framework
Resource PRA Exercise Citizen Metrics IS Planning
In this paper we consider PRA methodology, with livelihoods security perspective as discussed in previous section, a tool to initiate rural citizen centered design process. A priortised citizen charter at village level is considered as a foundation to IS planning process and this evolves dynamically. Through the PRA exercise we expect involvement of rural citizens in eliciting their view points leading to a metrics based measurement system which is an important stage for ICT acquisition life cycle (Pandian, 2003). The goal-questionmetrics (GQM) methodology (Basili, Caldiera, and Rombach, 1994) strongly fits into the deliverables of PRA exercise since it quantifies appropriate deliverables through metrics and these metrics are related to the long term aspirations of the rural citizens. A framework is presented in Exhibit 4, which discusses the causal flow among various stages of the development process involving stakeholders and eliciting various ICT options that can be
Interventions and Measurement
Misra et.al, Evolution of Citizen ... 11
PRA Tools and Techniques for IS Metrics elicitation
PRA tools as discussed above are used for involving rural citizen to share information on common as well individual resources, their problems, expectations, and limitations in earning their livelihoods which is the most important issue before them. They depend mostly on resources available in
the village, support received from agencies like government, NGOs and CBOs. In most cases these supports are not commensurate with their expectations leading to deprivation in earning a sustainable livelihood. Their expectations are captured through PRA process which attempts to deliver certain meta-measurable indicators the citizens consider to be important.
Exhibit 5 Citizen Metrics Elicitation through PRA Tools
Inputs PRA Process PRA Deliveries Delivery • Village Resources • Individual Resources • Agency Supporto • Governmento • NGOo • CBOs Focus Group • Community Discussions Resource Map Time-Line Analysis • Village Resource Map Metrics • Food Security • Education Security • Health Security • Infrastructure and Service Venn Diagram Problem Tree Social Map Mapping Livelihood Deprivation Causes • Social Security • Emotional Security • Development Metrics Describes prioritization of the social problems and s o c i a l stress.Organizing Development Options and Prioritization Describes p r e s e n t scenario of the community development plan and its impact Remarks
In exhibit 5, we have considered resources available to villages as inputs since these provide a guiding condition to the villagers to determine their livelihood options. Through PRA methods we have adopted various
processes such as focus group discussions, time-series analysis, Venndiagram and problem-tree analysis to elicit various attributes of the management of village resources, social fabric of the village. Mostly these factors
1 2 Vilakshan, XIMB Journal of Management ; September, 2007
contribute to the livelihood security metrics such as food, education, health as well as related infrastructure. Through this table we align livelihood metrics with the deliverables of PRA methods. We then consider all these metrics as a vital input to the IS metrics which can be used in IS planning process. IS are logical reflections of the physical processes and their behaviour (Fenton and Pfleeger, 2002). It also advocates for an ownership. Behavioural analyses are important characteristics of any process and they are mostly measured through agreed attributes. Understanding of the attributes is initiated through certain measurable terms which are identified as metrics. The metrics normally evolve with the process and their maturity brings in a measurable behaviour of the process thus leading to measurable metrics. IS practices with metrics provide an interface between the physical process and information communication technology (ICT) orientated processes (Kan, 2002). Options for ICT interventions need to be carefully chosen on the basis of their strength and weakness. ICT as a technology is seen as a process improvement tool and this is possible through an IS-ICT alignment exercise (Weill and Broadbent, 1998; Lamb and Kling, 2003). The alignment exercise looks for the requirements of a process (process metrics), lists possible deliveries through the systemic approach being made (IS metrics) and provides a scope to leverage the strength of ICT options through an analysis of each
option (ICT metrics) (Pereira and Sousa, 2005). Strategic IS-IT alignment models advocate a metrics based approach for successful alignment among processes and IS; IS and IT (Henderson and Venkatraman, 1993; Luftman, 2003). ICT interventions effectively contribute towards managing transactions, organized process, and bringing an overall improvement in information dissemination (Bergero, Raymond and Rivard, 2004; Pereira and Sousa, 2005). Therefore, it is imperative that prior to organizing ICT resources, information systems with feasible demand driven metrics are developed. In exhibit 6, three metrics driven dimensions of alignment exercise are discussed. We consider livelihood metrics as an important factor in the lives of rural citizens which are very critical for their existence. Any IS-IT alignment exercise that ensures a support to their livelihood prospects would eventually attract their attention leading to acceptance and effective use. In exhibit 6, we have considered the goal of rural citizens to be “sustainable livelihood security” which is influenced by various security metrics to include food, education, health, infrastructure, social and emotional and their overall development. These largely contribute to their quality of life and livelihoods prospect which can be verified through PRA exercise. The metrics thus developed (exhibit-5) are used in exhibit 6. The IS metrics consider
Misra et.al, Evolution of Citizen ... 13
“transactions”, “processes” and “information elicitation” to be major attributes to its success. For example, food security is the most valuable metric for rural citizens. It leads to transactions in “financial” and “labour” markets. The process is “income generation” since it supports the food security. Information required to carry out the process are opportunity, policy, market, agencies involved and cost of access to such information. Thus in all ICT options need to support these IS metrics. Each factor of IS metrics is explained below with respect to ICT metrics.
Transactions and Rural Citizen
In the context of feasible and dynamic rural livelihood options, the rural citizens are subjected to transactions with various markets such as labour, land, water, financial (institutional and noninstitutional), input and output, information etc. These dynamic sets of
transactions make their information systems complex. Two of the major attributes of a transaction are its “lifecycle” and “mode”. These two attributes provide an indication as to how effective the transactions are and therefore, help in considering ICT options. Besides these attributes, the interfaces between the transaction owner (the rural citizen whose literacy level determines appreciation of the technology) and the process(es) through which these transactions are carried out provide challenge to make a transaction successful. Though there are enough ICT tools to make this interface happen, it is difficult for the rural citizen to appreciate if the transactions do not directly benefit their livelihoods. It is therefore, essential that the transactions are demanded by the citizens and served by the agencies as per agreed terms. These demands can be effectively elicited through PRA exercises.
Exhibit 6 Metrics Based IS-IT Alignment Strategy
Demand Driven Citizen Metrics Goal Trans actions
Sustainable Livelihood Security
IS Metrics Process Infor mation Trans actions Modes Time Location
ICT Metrics Process • Quality • Interfaces Infor mation • Access Cost • Agencies • Policies • Market • Cost
• Income • Oppor- • tunities • genera • Policies • tions • Labour • Market • Agencies • Cost • Financial
1 4 Vilakshan, XIMB Journal of Management ; September, 2007
Demand Driven Citizen Metrics
Goal Trans actions
IS Metrics Process Infor mation Trans actions
ICT Metrics Process • Quality • Interfaces Infor mation • Access Cost • Agencies • Policies • Market • Cost • Access Cost • Agencies • Policies • Market • Cost • Agencies • Policies • Market • Cost
• Finan- • Income • Oppor- • Modes tunities • Time cial genera • Policies • Loca• Knowl- tions • Market tion edge • Lit• AgenShareracy cies ing • Cost
• Financial • Expert Services
• Income genera tions • Mortality
• Oppor- • Modes tunities • Time • Policies • Loca• Market tion • Agencies • Cost
• Quality • Interfaces
Infrastructure and Services
• Finan- • Incial come • Utility genera Sertions vices • Convergence
• Oppor- • Modes tunities • Time • Policies • Loca• Market tion • Agencies • Cost
• Quality • Interfaces
Social Security Emotional Security Development Metrics
Subjective Assessment of IS Metrics Obtained Subjective Assessment of IS Metrics Obtained Evaluation of IS Metrics, Options and its Prioritization by Rural
Subjective Assessment of ICT Metrics Obtained Subjective Assessment of ICT Metrics Obtained Citizen Evaluation of ICT Metrics, Options and its Prioritization by Service Providers/ Agencies
Processes and Rural Citizen In order for having effective transactions, processes with certain measurable metrics
need to be in place (Ould, 1995; Weill and Broadbent, 1998). These processes being citizen-centric, need to be well defined
Yet. ICT options can be evaluated depending on the infrastructure available such as communication. locating demand. and evaluation of development projects. etc. If the goal of development is to build sustainable livelihoods. Information on resources. success of income generation process should be evaluated with possible metrics such as income level. and social assets play a vital role in people’s livelihoods. individual households have exploited their resources leading to unsustainable livelihoods. the very people who depleted the resource base have to be involved in problem identification. prioritization. planning. Agriculture is their main .. data access. However. Information and Rural Citizen options with a right context and making it available to the rural citizen in their own understandable terms are easier said than done. physical. analysis.. It is possible to generate these metrics through a PRA exercise as well since it recognizes the role of each identified process through the goal setting exercise. applications such as information portal and maintaining these sources on a sustainable basis. data transfer. Here. For example. Raymond and Rivard. One of the major attributes for such problems is “lack of information”. migration. habitat loss. Accessing information with minimized constraints is a problem that rural citizens encounter. Collating these The natural. deprivation and related socio-economic issues. Dahod district in Gujarat State is inhabited predominantly by the tribal population. power. ICT helps in minimizing these constraints through right sizing the information-processing environment with a proper information structure (Bergero. In rural areas. and reaching these sources. income generating option for supporting livelihood needs a complex and dynamic approach such as tracing various markets. With increasing pressure on land. Climate change.0 LIVEHOOD SECURITY MANAGEMENT THROUGH ICT: A CASE STUDY Rural citizens face myriad of problems associated with poverty. expenditure on education.Misra et. there has been a steady erosion of these assets. socio-cultural events. health. PRA helps in recognizing the demand for information and therefore. This calls for the bottom-up participatory approach. soil erosion. provides a support for preparation of information structure. support services related to livelihood goal and goal related citizen metrics (vide exhibit 5) is essential for the rural citizen.al. water depletion. 15 with their deliveries. energy overuse and species extinctions are all symptoms of economic process that depletes resources. implementation. Evolution of Citizen . monitoring. ecological problems such as deforestation have played havoc in peoples’ livelihoods in many ways. 2004). For example. 8. income generation is a process and various options do exist before the rural citizen.
These measurements indicate the possible IS metrics and ICT metrics as explained in exhibit 6 through transactions. Whatever food they produce. Majority of the farmers belong to the small and marginal category. “migration for supplementing food”. it has not been able to provide food and livelihood security to rural households. The rains are inadequate in two out of five years leading to food insecurity. We analyzed the goal and understood that citizen have their measurable preferences to meet their goal. For example our observation that “food security” is the first priority among the rural citizens followed by “live stock security” and the last in the scale is “health security”. In exhibit 7 we discuss various measurements that citizen attached to each metric to understand the existence of these facilities to verify these metrics. “processes” and “information”. “social security”. XIMB Journal of Management . “health and sanitation facility”. Among these metrics we took two most important metrics as chosen by the citizen which are “food security” and “health security for them as well as their animals”.1 6 Vilakshan. These also explain that e-government applications would carry great deal of acceptance to enhance their livelihood which can facilitate “transactions”. We took a case study based on the framework and explored various ICT options through the PRA exercise conducted by Gramin Vikash Trust (GVT). September. feeds the family for 8-9 months of the year. Further. With increasing population pressure on land and land degradation over time. processes and information. The goal of most of the citizen in the village is “sustainable livelihood security”.12 acres per household. which is extremely low considering the food requirement of a household. During this exercise it was evident that “sustainable livelihood security” is a major concern for the rural citizens in the area. Food security as per the rural citizens is characterized through measurements of “self-sufficiency on food”. “cultural security”. “education facility”. The average land holding is 2. in this district. an NGO. all these measurements are examined with possible ICT options that can be used for interventions so as to measure the metrics identified. Food security as per the rural citizens is characterized through measurements of “selfsufficiency on food”. 2007 source of their livelihoods. Nearly all farmers grow a single crop of maize during Kharif season. “availability of work opportunity locally” and “access . Based on the application of GQM principles on the PRA exercise conducted in the village provided an insight to the preferences of the citizen services. These are termed as the “metrics” and listed as “food security”. “availability of work opportunity locally” and “access to input and output market”. “migration for supplementing food”. “financial security”. Exhibit 7 illustrates our observation that “food security” is the first priority among the rural citizens followed by “live stock security” and the last in the scale is “health security”.
17 to input and output market”. there is very little assurance of employment for they are unskilled workers. processes and information. They undergo interim periods of unemployment during their stay in the urban areas. Further investigations with the people revealed that for majority of the poor who migrate in distress. most of the villagers face very low “income generating opportunities” leading to “migration”. which deplete their meagre savings. It was understood during study that scanty opportunities in the village. Exhibit 7 Identification of PRA Based ICT Options Goal Metrics Measurements Demand on ICT Options Remarks ICT Option Ranking1 Ia Food Security Self sufficiency on food Migration for supplementing food Availability of work opportunity locally Access to input and output market Income Generating Opportunities Demand for Information on employment opportunities Demand for Information on employment opportunities from government and other agencies Opportunity on marketing Kiosk based services for citizen eGovernment applications eGovernment applications Ib Ic e-Business applications and services e-Health Services Nil Id Sustainable Livelihood Security Health Security (Human) Public Health Service Traditional Health Service Health Education Providing opportunities in the village Rendering services to other Villages Creating Opportunities in the Village.Misra et. These measurements indicate the possible IS metrics and ICT metrics as explained in exhibit 6 through transactions.al.. inability of available village resources as well as poor government support. Evolution of Citizen . Migrants faced many hardships including humiliation and loss of self esteem. Maintaining Records IIIa IIIe e-Health Services IIIb ..
September. Migrants lack knowledge about travel routes. access to information on availability Providing facilities in the village. timings and other details of transportation increasing their cost in terms of time. mechanisms of redress and lack of documents of the work in which they were engaged. access to information on marketing inputs. Receiving advice from Doctors Maintaining Health Records Least Demand e-Health Services e-Health Services IIId Livestock Security Clinical Service Self sufficiency on fodder Artificial Insemination e-Health Services Nil IIa IIb Providing facilities in the village. pricing e-Health Services IIc Availability of Medicine e-Health Services IId Dairy Cooperative Dairy Information Kiosk IIe 1 Suffix a.1 8 Vilakshan. … denotes intra-group prioritization The poor migrants are also perceived as thieves in the urban areas and so are they are unnecessarily harassed by the police and others. money. c. modes of travel. XIMB Journal of Management . 2007 Goal Metrics Measurements Demand on ICT Options Remarks ICT Option Ranking1 IIIc Immunization Services Accessibility to Health Infrastructure Providing Information on Immunization details and history Providing Information on Doctors. access to information on availability Providing facilities in the village. b. and effort. The migrants do not have risk compensating mechanisms like insurance and therefore . Frequently the migrants are cheated at the worksite by contractors where and suffer losses of wages due to the lack of awareness of legal recourse. Interaction with Doctors.
Village Jadha: Embracing Feasible ICT option for Migrants It is in this context that the study of GVT found the income through migration constituting 65 percent of the household income in Jadha village in Dahod district.al. prospective migrants with MIC at a nominal fee in order to meet the operation and maintenance expenses. round the clock. Some of the achievements appear in Table-8 through Table-10. . tackling nonpayment cases. GVT conducted exercises for skill identification of migrants and villagers. GVT provided support for housing and operating the centre. a holistic approach is necessary to address this critical issue of migration. easier transfer of funds. information on jobs. It would rather be feasible to look for the opportunities where ICT as an infrastructure could facilitate migrants in terms of establishing a mechanism to provide information and communication services through e-governance networks. Evolution of Citizen . A group of 22 migrants came forward to support idea of GVT to form a “mahamandal” (federation) to address their problems. It started enrolment of migrants. Now. increase the returns from migration by skill training. It may not be feasible to stop the migration entirely because of its critical support to the socio-economic structure of the rural citizens.Misra et.. Therefore.locally known as Palayana Suchana Kendras). Results of MIC: The MIC in Jadha started in the year 2000 and its effect on the Jadha households is noteworthy. identification of contractors and possible locations where migrants work and distributed identity cards to the members. The basic philosophy behind the formation of MIC was to reduce the costs of migration by providing communication services through telephony. In consultation with the people and mahamandal. GVT envisaged the formation of Migration Information Centre (MIC . The land line option was ruled out because of the topography and wireless in local loop (WLL) was procured for the purpose. influence the perceptions of government officials and urban communities about migrant workers. Telephony . 19 they are deprived of the benefits in case of an accident. MIC therefore. had a challenge to establish a telephone link for the MIC.The Link: Jadha village is poorly connected by road and is situated in hilly terrain. GVT therefore. The MIC provides employment to two “jankaars” .. The Ground-Work for MIC: GVT then started a multi-pronged approach to address the problems faced by migrants by organizing and increasing their awareness of their rights. the MIC has added various government related services to its network and provides information on government supported schemes. acted as support for establishing a social and economic safety network for these migrants. loans.
.00 5% of total increased value 10% of recovered amount Rs. links Insurance claim As on 23/01/06 392/3030 461 509 Unit Rate Rs. of Migrants involved 36 40 It is noted that total amount of benefits due to wage negotiations to the migrants is Rs. 5. 250. 3. 15.00 Rs. XIMB Journal of Management .500 Rs. 2007 Exhibit 8 Total Participation and Revenue Generated through MIC Participation in MIC Total Household/ Population Total Registration Total Identity Card Issued Activities Registration Fee Identity Card Message sending / delivery / message through Jankars Telephone Call Negotiation of Wage Wage Realisation Exposure visit Remittance Govt.00 Rs. 2. 2.000 No.80. 5.2 0 Vilakshan.00 2% value remitted (2%) 2% 5% of Value Exhibit 9 Use of Telephony (as on 23/1/06) Description Incoming calls Outgoing calls Total till last month 963 651 In the month of January 2006 23 20 Total 986 671 Exhibit 10 Wage* Recovery from Contractors (Case solved as on 23/1/06) Place of Work Baroda Ahmedabad * Amount Recovered Rs. 15.000 as on date Opportunity Ahead This MIC was introduced and supported by GVT on a pilot basis to understand the effects and its scope for replication.00 every two years Rs. Today it has spread to nearby 10 villages with high success rate. September.
0 CONCLUSION national e-governance plan extends. It is evolutionary since it is based on participation of rural citizens. 9. food and financial security. social.Misra et. better communication. ICT is strongly believed to be a service enabler tool in development process and it is advocated that ICT acts as a medium to poverty alleviation (Greenberg. It is therefore. necessary to balance the system that encourages availability of the supply driven services with active citizens’ participation. cultural. Today it has spread to nearby 10 villages with high success rate. These include reduction in migration costs. Various egovernment applications such as “eGram” are planned for providing support to the villagers through these CRCs. This case describes the benefit of a demanddriven model through which a critical issue like migration could be negotiated and a simple ICT option (WLL connectivity) could provide a better opportunity to the migrants. the projects need to capture priorities of the citizens through PRA MICs have brought in many tangible and socio-economic supports to the prospects of livelihood security to rural households.. resolving conflict with contractors and bringing in overall livelihood security. As discussed in exhibit 3. 2005). networking. social. The success has been noticed by the government of Gujarat and these MICs are now being transformed to cluster resource centers (CRC).. Creating an atmosphere for eliciting the requirements and prioritizing the needs of citizens is a complex phenomenon because of the spatial. employment opportunities.al. As illustrated in exhibit 11. supply driven projects do not generate much demand unless the planning process involves the citizen. It also described how the support structure could be related to the egovernment opportunities that . In Indian context the policies for poverty alleviation are planned with a top-down strategy making it “supply driven”. religious and cultural dynamics. providing emotional. it is sustainable through a transaction cost sharing basis. it is imperative for the policy makers to extensively make use of participatory rural appraisal techniques to understand and prioritize the demands of rural citizens to augment their own livelihood security through a rightly sized ICT architecture. 21 This MIC was introduced and supported by GVT on a pilot basis to understand the effects and its scope for replication. While a supply-driven service through e-government can be made operational because of the obvious support structure provided by the government and various funding agencies. Evolution of Citizen . political. It is evolving through demand generated by rural migrants.
pp. 2005. Rural appraisal: Rapid. Plan Village IS Plan Village ICT Plan REFERENCES Basili.11.R. Software Metrics: A Rigorous & Practical Approach. A Practical Guide with Case Studies”.2 2 Vilakshan.L. Authors plan for further research in this area to substantiate the findings from work done in this area. R. Vol.D.. Louis and Rivard. September. Francois. pp. All the supplies need to meet the demands as elicited through this exercise. N.60-64.. India. 1992. Subhas. and Rombach. Vol. Chambers.New Delhi. 17-19. Ideal Patterns of Strategic Alignment and Business Performance. 2004 in Chennai conducted by Swami Nathan Foundation. Raymond. Fenton. . Bhatnagar. Suzanne. Informtaion and Management. 2002. the demands elicited are illustrative in Exhibit 11 An Assessment Model nature and a detailed study is necessary to fine-tune any such prioritization. Report on Workshop held in November. and Pfleeger. Bergeron. H..E. S. Caldiera. Encyclopaedia of Software Engineering. February. G. XIMB Journal of Management . Goal Question Metrics Paradigm. However. 1003-1020. New Delhi.1. 2004. I4D. Sage Publications. Policy and Schemes PRA House Hold livelihoods Plan Social and natural resource in the village VILLAGE RESOURCES EVALUAT -ION Demand on village resource National EGov. 1994. Programme. Brighton: IDS.528-532. IDS Discussion Paper 311. “e-government: From Vision to Implementation. 2004. Chennai Statement: Up-Scaling Pro-Poor ICT Policies and Practices. 2007 exercises leading to a comprehensive IS and ICT plan for the village. relaxed and participatory. V. Wiley. pp.
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Over the years the interface between business and society has been dynamic and evolving.0 INTRODUCTION The institution of business resides in the broader society and nature. 1. the chaotic situation on definitional aspects of CSR should be settled in firm ground. Since times immemorial business (dominantly traders in ancient time) had economic superiority over other institutions in society. 2007. Gurgaon. business has become a very dominant institution in society (Dicken. this study reviews the various concepts on CSR and synthesizes these to arrive at a simple but holistic framework. The journey of CSR. CSR has won a favourable place in the hearts and minds of management researchers and practitioners. The concept of Corporate Social Responsibility (CSR) captures the various thoughts and action on the equation between business and society. FPM Researcher. But at a very fundamental level. Management Development Institute. There have been numerous examples of business and traders doing social good by involving in charity and philanthropy. 2003). There have been various views on what the concept of CSR stands for.Analysis and Development of A Concept Level Framework on Corporate Social Responsibility* Som Sekhar Bhattacharyya1 Abstract Corporate Social Responsibility (CSR) has become a very popular field of enquiry in management research and an equally celebrated piece of action in management practice over the last few decades.But * Received July 3. 2007 1. So this economically rich section of society has always been expected to take care of the poorer sections of society. For research on CSR to move forward.com . A clear understanding on definitional aspects on CSR is yet to be achieved. in modern day management started in the early 1950s with the protagonist writings of Bowen (1953). In an attempt to do so. email: somdata@gmail. Revised August 31. The concept of Corporate Social Responsibility (CSR) has been extensively discussed from 1950s (Carroll .1999). In the last few centuries because of technological and managerial progress. the very term CSR has raised more dust than it has settled.
. So there are The concept of CSR has been debated and deliberated upon. Frankental (2001) had even argued that because of the intangible and vagueness attached to CSR it is actually devoid of any standard meaning. A look back at the last forty years of CSR literature reveals a fierce contest on the issue of arriving at definition on CSR (Meehan et al.1988) .. September. Mohr et al. 1985. Moir..2005 .. 1991. 2.. antagonistic writings on CSR by none other than Leavitt(1958 )and the noble laureate Friedman(1970) have raised conceptual question on what is CSR.2000 . Munshi. 1998. 2004. Further. One popular way is to use financial performance as a proxy for social performance (using social reports). 2001. 1996). 1987.This lack of tangibility in CSR has posed difficulty in measurement of CSR actions (Munshi. Acutt et al. This paper in the first few sections discusses the state of confusion in CSR terminology. Thus. Bowman and Haire. 2007 since these early days. Graves and Waddock. Munshi . 2006 Leisinger. 2003).. 1985. a singular definition on CSR could be difficult to arrive at (Shrivastava and Venkateswaran... Shrivastava and Venkateswaran . Finally. 2005. Valor.2004. Willums. Hill et al. Windsor. What is CSR as viewed by firm managers might not be . Gavin and Maynard. XIMB Journal of Management . 2006). Each of the measures developed introduces certain biases and hence causes inconsistencies. Pinkston and Carrol. Boel and Perry. there has been rise in literature dwelling upon definitional debates on CSR (Mohr. Keay. The uncertainity regarding what CSR stands for transcends the academic boundary and is even present in the realm of management practice (Altman. 1975. sometimes the definition has been even antagonistic to one another (Hill et al. Frankental. there is a clash between the management practitioners and the academic world on CSR. McGuire et al. Meehan et al. while others suffer from lack of generalization characteristics (Aupperle et al. 2003. 1994. Valor. Pinkston and Carrol (1996) had the opinion that since the belief and attitude differ across societies and further as the relevance of issues in society change in temporal dimension. 2004. Carby. 2002.2001.Hall. McWilliams et al . 2000). Miles. this paper comes up with a simple yet comprehensive conceptual framework on CSR. 1999.. 2006. Thus. 2005. 2004) as well specially in measurement of CSR financial performance (Ullmann. 1996). Ka¨rna et al. 1998). Wood. right from the very beginning of the concept itself (Carroll. Hill et al.. 1979. 2005. 2004. But each of the measures developed by researchers has certain limitations. Zenisenk. 2001.1975.0 UNDERSTANDING CSR seen as a CSR initiative by the researchers (Leisinger.2 6 Vilakshan. 2006 . Waddock . 2003. 1985. 1991). 2005). 2003. Wolfe and Aupperle. In the subsequent sections various concepts on CSR are with multitude of thoughts are reviewed and then synthesized to bring out the core and essential themes on CSR.. Young 2004.
each being little different from one another. Corporate citizenship (CC). In this study only the preeminent term CSR will be reviewed not the other terms. 3.0 ANALYSIS OF THE CONCEPTS ON CSR The lack of a singular universal definition on CSR is further complicated by the fact that the canvas of Business and society is painted with various other terms! (Waddock. These terms like Corporate social responsibility (CSR. Global Business Citizenship (GBC) etc (Waddock.Corporate social responsiveness (CSR2) . Munshi. social ills and environmental challenges facing society (Cooper. This has also created ambiguity in its own way. In the present day scenario the importance of corporate responsibility towards society further increases as national governments are playing an increasingly role towards community problems. Analysis and Development .. Munshi. this study has become relevant. 2004).0 CSR AND MANY OF ITS SIBLINGS (TERMS). This review is done in the next section.CSR1) .Bhattacharyya. The reality is that all these terms attempt to deal with the construct of business and society in their own way. Corporate social performance (CSP) . 1998.Sethi and Steidlmeier. 2004. It has been seen that sometimes the same authors use the term with various meanings in different Business responsibility towards the society is an important theme in the context of business and society. 2004) have flooded business and society literature. 2004). 2004). one can very well conclude that the definitional aspect on CSR still needs to be settled since due to the definitional constraints theoretical progress has been impeded (McWilliams et al... 2004. Thus CSR researchers and practitioners agree on the point that CSR is an extremely difficult concept to measure. and often these terms have been used interchangeably with each other (Acutt et al. Besides. Corporate community relations (CCR). So one can be certain that not only there is no one definition of CSR but there is a presence of many sister terms to define and explain the philosophy CSR attempts to portray. Further. Thus CSR is one of the many terms though it is the preeminent one. 4. Valor 2005). The CSR concepts domain is like a battlefield with many sisters and similar terms posing against each other to grab the sacred piece of land (hearts and minds of researchers). well accepted measures of CSR output (Munshi.The number of terms in this relatively new field is amazing (Valor 2005). Thus. 27 no absolute.. studies or in the same study (Carroll.Business citizenship (BC) . CSR has been equated with terms like CC and sustainability (Young 2004).Corporate community involvement (CCI) . 1998). answers to definitional aspects would also help in developing valid measurement instruments on CSR. authors use these terms often interchangeably. (1994) had viewed a pivotal . 2006). Accordingly.
According to the view of Andrews (1971).Another eminent business and society scholar Prakash Sethi (1979) around the same time had also conceptualized CSR along ethical . Wood (1991) had analyzed CSR at three levels • Institutional social responsibility ( for profit organizations to earn profit as its primary duty) Organizational social responsibility (firms to take responsibility for social and environmental wellbeing). CSR comes at many levels. Individual social responsibility (individual firm managers to act morally). As viewed by Bowen.The philanthropic responsibility can also be seen as a discretionary expectations of the society from business (Schwartz and Carroll 2003).He conceptualized CSR as encompassing four responsibilities economic. One of the big impact conceptualization of CSR came in 1979 from A. but shades of other levels are also present as it is difficult to segregate the three levels entirely because of the associated interdependence amongst the three levels (Wood. Bowen had prescribed that managers of for profit organizations should frame such policies (and decisions). CSR and Ethics One of the earliest thoughts on business and society came from Bowen in 1953. Social responsiveness is the proxy to the philanthropic or discretionary responsibility of Carroll ( 1979). 1953).2 8 Vilakshan. legal and social responsiveness dimensions. 1979). The legal responsibility of businesses expects that firms perform the business activities within the legal and regulatory framework. philanthropic responsibility deals with the expectation that businesses proactively address and solve the problems and challenges faced by society (Carroll. B. 4. The third responsibility of business captures the notion of ethics. Carroll also prescribed to run business within the set of socially allowed set of values and norms(depending upon cultural and religious setting). ethical. and undertake such actions which are within the boundary of the norms and values of the society (Bowen.Carroll in the seminal paper “The Pyramid of Corporate Social Responsibility” .economic progress of society and they had also expected that both business and civil society institutions agree on the social challenges to be addressed and cooperate to attain the same for a better world for tomorrow. social responsibility is demonstrated by corporate action which . • • The level of analysis adapted in this study is primarily at the organizational social responsibility level. The economic responsibility expectation tells businesses to be productive and thus be profitable. September. XIMB Journal of Management . legal. The fourth and the last responsibility. 1991). and philanthropic. one of the first strategy academicians. This aspect will be discussed little later in this study. 2007 role of CSR in the socio. 1.
(2004) viewed corporate responsibility as the extent and nature of firm (ir) responsibility reflected by a firm’s strategies and operations. the firm management should stop the activity or modify the activity in such a manner that the harm impact component is addressed and mitigated. while legal compliance is a necessary though not a .Both Sethi’s (1979) and Carroll’s (1979) conceptualizations on CSR had also indicated that any firm activity (including CSR activities) should comply to legal requirements (law of the land). BSR also in its statement on CSR talks not only of legal compliance but also to promote such practices. Another point which needs to be mentioned here is that from early days in CSR researchers had agreed that CSR activities to be within the boundary of legal requirements (which seems quite obvious) . So ethics has an integral and foundational root in CSR. CSR implies that the negative impacts of business on people and society should be acknowledged and corrected. Sandra Waddock. The moment the firm management comes to know that by a business activity even one stakeholder is injured and harmed. more than just complying with regulatory bindings (Ka¨rna et al. Similarly Business for Social Responsibility (BSR) declares CSR as doing business which is not only linked to social and ethical values but to exceed it (Aaronson 2003). CSR calls for sacrificing profits. 1978). Waddock (2004) is of the view that a firm cannot ignore its responsibilities. CSR represents the very essence of this. So if a firm in the name of even CSR harms any stakeholder it will represent irresponsibility.. 2003). This explanation by Andrews highlights that those corporate activities which are profitable but injures society are not to be tolerated.. The ethical way of conducting business is also echoed by the Prince of Wales Business Leaders Forum which describes CSR as business practices based on ethical values and respect for society and environment (Aaronson. According to them. On similar lines an exhaustive explanation of CSR was provided by Frederick and his colleagues in 1978. Firms have responsibility towards its stakeholders for any of its actions (good or bad). So the normative school can be satisfied if we say that any firm activity should not break a legal framework or should not harm any stakeholder intentionally. Analysis and Development . if the very nature of earning profit injures other stakeholders (Frederick et al. which exceeds beyond legal compliance (Aaronson 2003). 2003)... Thus CSR is something. This ethical dimension of CSR has been a dominant dimension and fundamental feature of CSR. 29 doesn’t harm or hurt others regardless of how profitable that activity can be for the firm. a firm ought to be held responsible for any of its action that affects communities and environment. Thus repeatedly the ethical dimension of CSR has been championed and ethics has been seen as the backbone of CSR activities. not responsibility.Bhattacharyya.
While Wood (1991) had pointed out the fact that society has an expectation that business firms have social performance (emphasis added) like its existential economic performance. 1988). Thus CSR is what a firm assumes to project as CSR. Steiner (1972) had viewed social responsibility of the corporate as a ‘‘social contract’’ (emphasis added) between the business and the broader society.3 0 Vilakshan. Thus CSR is a voluntary. But the direction in which the discretionary/ voluntary CSR activities are directed needs to be explored. had included the aspect of discretionary or responsiveness. Way back in mid 1970s Ackerman and Bauer (1976) had seen CSR as firm decisions and subsequent actions which the firm had thought as its socially responsible activity. Similarly. social welfare of business seeking business attitude towards society. On similar lines Hopkins (2003) wrote of stakeholders of a firm as having concern. Stakeholder’s were defined by Freeman as “any group or individual who can affect or is affected by the achievement of the organization’s objectives” (1984: p-46). interest and power to influence a business organization. Carroll (1979) and Sethi (1979) while conceptualizing CSR. present or future of the firm. In fact Hopkins (2003) grounded his definition of CSR on stakeholder care married to the concept . Steiner (1972) had emphasized the notion of CSR as a positive. 1984). Thus the stakeholder concept made certain segments of the society relevant (emphasis added) for a firm and CSR was directed to take care (emphasis added) of these stakeholders. September. discretionary activity (not an activity done to comply with legal or regulatory demands forced upon the firm). The discretionary nature of the CSR has also been emphasized by Kotler and Lee(2005). So stakeholders were seen as parties who can affect the firm or is affected by the firm activities (Evan and Freeman. This is an important feature of CSR initiatives. XIMB Journal of Management . 4.This broad definition generated a wide range of stakeholders. 2. They opined that it is the stakeholders that firm should be accountable to not just towards the shareholders alone. 2007 sufficient condition for an activity to become a CSR activity. This notion of larger society was getting accommodated as stakeholders in management literature (Freeman. Academic researchers should not necessarily contest the CSR thematic claims made by firm managers.CSR dominant goal to benefit society The foundation of CSR is built upon the legal and ethical building blocks.They described corporations as more than economic institutions.In other words Van Marrewijk(2003) had seen CSR as voluntary business practices for addressing stakeholder concerns. This social expectation or social performance was further advocated upon by Buchholz and Rosenthal( 2002). Clarkson (1995) added a temporal dimension to the stakeholder concept by saying that the stake could be in past.
1997. CSR as practice CSR is not just all words but action. Osborn and Hagedoorn.. Steiner and Steiner. processes. 1991). whereas CSR is viewed as a socio.This was another major concept in CSR literature.. policies and attempts to measure the CSR programme performance (good.Corporate social reporting (CSR) is the process of communicating the social and environmental effects of organizations to particular interest groups and to society at large (Gray et al. CSR reporting structure is a CSR activity communication output mechanism keeping stakeholders in mind. 4. Thus CSR stands for action.. 4.The output side of CSR activities is the CSR reporting dimension .1999.CSP called for business action at the macro-level and micro.Thus the focus of CSP is on outcomes (social impacts) of the social policies and initiatives the firm undertakes(Wood. CSP first integrates organizational CSR principles. CSR and Community Involvement CSR action is being increasingly recognized as a collaboration between business firms and other social institutions (Burke. 4. analysis and last but the most important. 1991). 1991). the responsive action taken. Analysis and Development .This cooperative arrangement has been viewed as beneficial to both business firms as well as the society (Boatright .Sethi. Stakeholder concept generates a wide range of stakeholders and as the expectation that a firm should to cater to the demands and expectations of each of the stakeholders’ leads to the genesis of a wide range of firm CSR activities (Leisinger. 1991). The great management guru Peter Drucker(2001)and later Jones(2005) put forward that firms’ should endeavour to achieve a greater internalization of negative externalities(created by that very firm) and also a greater generation of positive externalities for betterment of the society. 1999.Bhattacharyya. beyond the traditional role of providing a financial account to the owners of capital (shareholders). 2005). 31 of ethics.1979. Pava and Krausz.1987). The notion of Corporate Social Performance (CSP) captures the notion of CSR activity (action) output . Thus. Philanthropy was seen as a top-down (corporate to community) one-way relationship. Buchholz and Rosenthal (2002) also echoed this as they advised profit making firms to put resources and management effort to address the social ills that are prevalent. Wood. 2000.economic collaborative . CSP also entails how business accounts for the changing societal conditions(Carroll . 1997). specially the ones that the firms created because of their business activities. 1979. 3. As such. it involves extending the accountability of business organizations. Garone . Such an extension is predicated upon the assumption that companies do have wider responsibilities than simply to make money for their shareholders.level concerns existing in society by issues identification. bad satisfactory outcomes) (Wood.
trustworthy relationship based on partnerships/ collaboration with stakeholders. This has become a prevalent and preferred way of engagement between business and communities (Brugmann. But these partnerships with communities should not necessarily be mainly driven with an economic agenda in mind (Fig. 2007)). firms are not able to just adopt a top down approach (corporate to community).Similarly. These types of CSR initiatives provide firms the social license to operate in its business interests with the local communities in a better manner. 1999).3 2 Vilakshan. Drucker (2001) among others had proclaimed that if a business organization is not able to earn profit (for stockholder) it can never take care of the society or any other stakeholders.This clash of expectation between the two also change over time. need based and trustworthy relationship (among equals) between the firm and the relevant stakeholders in the society. this can be viewed as a community relations intensive CSR initiative. 1999). 2005). Waddock( 2004) had also talked about Community Relations (CCR) or Involvement (CCI) where firms are expected to move from just one point fragmented interaction between business and the relevant stakeholders to a long term. As the times are changing.Thus CSR as a concept calls for means establishment of a long term (longitudinal) interaction. Firms have to adopt an approach in which the stakeholders’ views are heard and accommodated in the CSR initiatives (Burke. Burke(1999) termed this inclusive approach as Corporate Community Relationship (CCR). Nor does it mean that socially responsible firms cannot be as profitable as other less socially responsible firms. The economic angle to CSR There is no doubt that firms are expected to be profitable first and then think of its social responsibilities. farmers women’s groups etc) and does work to nurture the relationship. Being socially responsible does not mean that a company abandon its primary economic mission (economic responsibility in Carroll’s (1979) pyramid. The longer the duration of this type of CSR the better it is. XIMB Journal of Management . villagers. . It is important to note that CSR proponents never pressed the idea that business has to undo its economic responsibility and overdo its social responsibility. But at one level it does mean that companies need to do a cost benefit analysis for undertaking a CSR initiative. intense. 5. meaningful. Altman( 1998) had also called for a business and stakeholder relationship where the interests of both the company and the local communities are promoted. 1997). 2007 effort between the business firm and the communities (Osborn and Hagedoorn. 4.This feature of CSR is important because the expectations and aspiration of the communities are often different from that of the firms performing the CSR (Burke. Thus if business firm engage in partnership with a stakeholder (like a local community. September. and Prahalad.
Profits. 2002. Bhattacharya et al. Porter and Kramer. Kramer. One can start the discussion on this theme starting with the duo of M. CSO describes those social and environmental projects which have commercial viability. scholars have advocated that CSR should make business sense (Porter and Kramer. Salzmann et al. Craig Smith and Vogel commenting on the international conference. Porter and Kramer. 2004). Ricks .Perrini. Bhattacharya. Thus. Lewis. 2007). 2006). These institutions invariably talk about . 3 P and CS0 bring in the important perspective of corporate benefit and business opportunities from CSR initiatives. (2006) had also laid the blueprint for guiding organizations in this direction by describing how firm CSR initiatives can improve the firm and industry level competitive context and /or add value to the firm business. 2003. Planet. New terms like Corporate Social Opportunity (CS0) (Grayson and Hodges. Meehan et al. 2006. and their articles in Harvard Business Review.Porter and Mark .2002 . 2005. Grayson and Hodges( 2004) commented that only such social and environmental initiatives will be sustainable in the long run. Altman . The case of the sanctity of CSR generating economic and other benefits gets more support if one looks at the interpretation of CSR from Business forums and consultancy firms.1998.R... 2004) also reflect this philosophy. So the convergence of social and environmental goals was emphasized. 1992). Friedman . Ellkington (1994. Stead.Bhattacharyya. Porter and Kramer. held in September 2003 on “Integrating Social Responsibility and Marketing Strategy” wrote that a dominant theme emerging out was that CSR has shifted from being in the outer ring of business activities to being a inner ring (core) business activities (Bhattacharya et al. 2005. environmental and social value.E. 33 This kind of analysis can help both business and society gain from the CSR programme (Frederick et al.2005. 2000. and Stead. Altman (1998) had found that many business firms were discovering benefits to firm and its strategic business objectives because of the firm CSR initiatives. The authors had advised business organizations to align the social goals and objectives and actions with the business economic goal. Crawford and Scaletta. 2006.1970 . so that long term business interests are served (Porter and Kramer.2005. The concepts like TBL. Analysis and Development . 2006 . society and environment (People. 1997) had championed the seminal concept of Triple Bottom Line (TBL). Increasingly.Win –Win situation benefiting business.. 2004). The sanctity of CSR has been redefined. 3 P) (Henriques and Richardson. TBL represents the philosophy and action in which business simultaneously creates the trio of economic. 2000. Waddock...as there is no point for profit organizations to drain its valuable resources. this encompasses Win. Kotler and Lee 2005 Windsor.
None less than Peter Drucker had advised organizations to do related CSR. Unrelated CSR activities undertaken by firms might be ineffective and inefficient (Drucker. Strategic CSR is gathering momentum in practice (Lantos. 2001). 1999). Thus. protection of resource base of raw materials. Thus.2006). The elite league consultancy firm PWC acknowledges that economic. 2007). Porter and Kramer.3 4 Vilakshan.Porter and Kramer.2007). 2001). Here the concept of Strategic CSR makes its way. 2001). value creation.World Business Council for Sustainable Development(WBCSD) a global level non business organization championing CSR has formulated a business agenda for sustainable development in which the dimensions or firm competitiveness and profitability are embedded (Moir. environmental and social value can be generated and sustained only when a firm aligns its products and services with the stakeholder demands (PWC. retention of talent and license to operate and innovation management as business gains from CSR initiatives. By championing Strategic CSR one is not saying that there is no requirement of philanthropy and charity in the society. The concept of strategic CSR brings the CSR initiatives very close to the main business.Business firms solving any unrelated social problem can backfire as the business doesn’t have the expertise to solve these issues and thus the firm can waste shareholder resources and also not solve the social problem Leavitt (1958). So again the discretionary nature of CSR is emphasized. . 2001). Strategic CSR provide the scope of bringing significant socioeconomic good to the society as well as bring significant business benefits to the organization (Bruch. World Bank (which has the mandate to develop the developing countries) views CSR as a tool for both socioeconomic betterment of the society as well as providing business with benefits (World Bank Group.The global economic institution. 2006). philanthropy is noble and is required by society in its own way (Fulda. risk reduction. 2006. September. Werther and Chandler. it is beneficial for both business and society that. 2005. it can be difficult in the context of Strategic CSR to separate a CSR activity from the core business activities (Fukukawa and Moon 2004. This is a pragmatic way of looking at the subject of CSR as the firm is the source of CSR .CSR hinges so much on the firm that researchers should have belief and confidence that what a firm claims as CSR carries noble motives to positively impact the society and a firm has every right to get benefit (economic as well as non economic) out of CSR programmes. 2007 embedding business benefits in the CSR programmes. XIMB Journal of Management . business firms indulge in CSR themes related to its mainstream business. In simple parlance Strategic CSR is those types of CSR initiatives which are good for business as well as good for society (Lantos. It talks about operational efficiency and effectiveness.
Miles and Covin . emboss with golden words that business benefits can be achieved from firm CSR activities. environment. 2003).1 : Corporate Social Responsibility continuum (Johnson 2003) Level Level-1 Illegal/ Exploitative/ Irresponsible Characteristics *Do not adhere to many rules and regulations.2000. *CSR is a moral initiative regardless of the financial consequences. minimal& with mixed motives)CSR may done with profit motive...Bhattacharyya. Scholars believed and proposed that firm CSR activities can be best conceptualized as a continuum (Johnson 2003.*Varied community programs. *Exploits workforce. Table. fragmented rather than strategic and non integrated.Regarding work. *Participation in CSR is occasional. 35 This is the best thing to happen in the entire history of firms (right from 1600s) when the pure business activities are solving social problems. Van Marrewijk.(CSR is piecemeal. but it still seems an utopian statement given the present state of affairs in the present world. But one can on the statue of CSR. CSR represents not one but many themes varying in both colour as well as shade. Green certifications. *Little more than complying with minimum compliance to local. . H. *Registration to ISO 9000. Level-2 Compliant Level-3 Fragmented *Minimum compliance to local. Level-4 Strategic Level-5 Social Advocacy *ISO 9000.*Innovative ways to do CSR. *Does nothing for the society.These CSR continuums capture the wide range of social initiatives in one platform. Analysis and Development . *False advertising. Etc.*Active continual relationship with Community. state laws. 5. CSR AS A CONTINUUM By the new millennium scholars felt that it was extremely difficult to present a single one point definition of CSR (as one could have gathered from the discussion so far).H.Johnson (2003) provided one CSR continuum which has been tabulated in table 1. ISO 14000. *Few or no activities for society. LCA & Recycling programs.* Very good HRD programs. state laws regarding work. *Pollutes Environment. environment.*Belief that companies are not solely to make profit but to take care of societies also. *Misrepresents accounts.
. brings no competitive advantage to the firm. forced CSR a non proactive approach. Day and Wensley . (from Miles and Covin. In the middle are firms which comply to the laws and regulations of the land and do fragmented social and environmental activities here and there. attempting to create superior efficiency in value delivery Could take cost and/or differentiated position to be either more efficient or more effective in creating value propositions for the customer. This CSR Continuum was conceptualized on the basis of Competitive Advantage by the authors.2003. . September. 2000. Strategic CSR brings the two types of competitive advantage. now and then. Compliance based CSR brings only cost based competitive advantage. It becomes apparent from the two continuums that it is strategic CSR that firms should attempt to perform as strategic CSR lies at higher levels in the continuum and represents a desired state of affairs.. 1988 and Hunt. 2000. None Strategic CSR expenditures perceivedas an investment in the ûrm’sset of distinctive competencies Forced CSR expenditures perceived as a”tax” being mandated by NGOsor other external stakeholdersthat will diminish the firm’sability to create value for otherrelevant stakeholders According to this continuum. 2003. 2000.2000). firms’ can pursue either of the two generic strategies of cost leadership and/or product differentiation.3 6 Vilakshan. XIMB Journal of Management . The higher level firms indulge in Strategic CSR as they Table 2.Another continuum was synthesized from the works of Miles and Covin.Karna et al. 2007 At one end of the continuum the bad firms are placed which indulge in unethical and illegal activities (exhibiting no CSR activities).The CSR Continuum proactively engage in social activities to change the society for the better.1988 and Hunt . Karna et al. Table -2 depicts this Continuum. By doing Strategic CSR. Day and Wensley. CSRcontinuum Compliance Source of competitive advantage CSR expenditures perceived as a cost of doing business Form of competitive advantage Typically a cost-based positional advantage.
terms like CC. 3. Hence once the definitional aspects on CSR are better understood further research on CSR can be undertaken.. These are 1. This was done so that a final understanding on the most basic yet vital question on what CSR is doesn’t linger in the minds of researchers for long. Corporate Sustainability. The concept of CSR can be better defined as a continuum rather than as a single state. CSR measurement is also difficult. to stay neutral! The fear and the general concern that the debate over what CSR stands for will not be settled in near future has been indeed a genuine one. business as an institution is growing as are the problems in society and natural environment. The answer to the questions posed has been depicted by two figures (figure 1 & 2). Many sister terms exists . This continuum is conceptualized based upon the varying level of CSR (lower to higher level of CSR). GBC etc 2. This attempt was to evaluate the various explanations and definition on CSR to synthesize the key learnings and find out the basic themes (novelty) projected by each of the different explanations on CSR. CONCLUSIONS No single universal Definition Measurement is Difficult CSR CSR This review story on CSR undertaken right from the Pyramid of Corporate Social Responsibility to the Corporate Social Responsibility continuums helped one to find out the answer to the question asked at the beginning of this paper (on what does the term CSR stand for). CSR the ambiguity Figure -2 p rovides the conceptual underpinnings and the ey features of the concept of CSR which were explored and analyzed in this paper. The continuum can be based upon the extent of interaction in the CSR activity (intensity of CSR) with the stakeholder and the time period of CSR intervention (longitude of interaction) with the stakeholder. Figure -1 portrays the gray areas which CSR has. Analysis and Development .. 37 6. Single point CSR definition is difficult. In modern day. One has to accept that the concept of CSR has many other similar sister Figure -1. For CSR initiative one has to remember that1. so the prospect of CSR as a tool for a better future is promising. A CSR activity if it is not legally correct then that activity however good it might be for a particular Can be best explained as a Continuum This study evaluated various views on CSR without even mentioning any single definition at any point in this paper.Bhattacharyya.
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Public Expenditure on Health and Health Outcomes: The Experience of the Indian States*
Biswa Swarup Misra1 & Akshya K. Panda 2
Abstract Public expenditure on health, working through its effect on the quality of human capital has great potential in raising labour productivity and in shaping the growth trajectory of a nation. the scope for increasing government expenditure on health is also much better in a growing economy. However, given the competing claims on government expenditure, one may not find a linear relationship between higher growth and increase public spending on health. Further, how effective would be this higher public health expenditure in improving the health status of the population is a matter of empirical enquiry. This paper employs a two step approach to study the relationship between SDP; public health expenditure and health outcomes based on panel causality tests for twenty-three states of India for the period 1991 to 2004. The empirical findings suggest that higher growth augurs well for public spending on health and further, the rise in public spending on health contributes to improve the health status in the states of India.
Does growth matter in provision of public health services? It makes sense to hypothesise that to the extent it makes room for additional expenditure on improving health facilities for the population, growth matters. Nonetheless, it may not be uncommon to find that expanding the reach and scope of public health services may not
* 1 2
be on the priority list of expenditures in a growing economy. Even if additional health expenditure is incurred, it may not be well designed to have the optimum impact. Though one of the chief concerns of modern day welfare state is providing healthcare for all, it has all along been a challenging task in India. Many choices are involved to improve the situation. These inter alia include preventive care,
Received August 23, 2007 ; Revised August 30, 2007. The views expressed are personal views of the authors and do not have any bearing with the institutions they work for. Associate Professor, Xavier Institute of Management, Bhubaneswar. e- mail: firstname.lastname@example.org Director. Planning Commission of India, New Delhi. e-mail: email@example.com
4 4 Vilakshan, XIMB Journal of Management ; September, 2007
curative care, alternative systems of medicine and planning for healthcare professionals. The emphasis in India has all along been on curative care. There can be no argument against it especially when people suffer from pain and agony of sickness. It would be more meaningful, however, to give more emphasis on preventive care, especially in a resource constrained economy such as India. Focus on preventive healthcare could be useful for a number of reasons. Preventive health care has the scope for being cost-effective because of its far and wide reach, it prevents illness and thereby avoids loss of man-days and expensive treatment. It would further, save on valuable resources for more quality care for the few. Not withstanding the tilt in favour of curative health care provisioning, the overall public spending on health has also been quite low. A couple of factors were responsible for the low public spending on health. Broadly, it was a consequence of fiscal profligacy coupled with misplaced fiscal priorities in the 1980s and the 1990s. Subsequently, there have been attempts to enforce fiscal discipline both at the level of the Central and State governments through the promulgation of the fiscal responsibility legislation (FRL), in the year 2003, which prescribes outer limits for government’s fiscal deficit. In light of constraints posed by the FRL at one end and government’s committed administrative expenditure at the other, concerns have been expressed
that public spending on health in India may not be able to meet the growing needs of the population not even in the foreseeable future (Panda, 2006). However, in the recent times there has been a surge in growth when the average GDP growth exceeded 8.5 per cent per annum during the period 2004-05 and 2006-07. High growth has made government’s revenue position much comfortable and has given the elbowroom to meet the FRL commitments. Better growth prospects at least in the medium term combined with fiscal correction in the economy raises the possibility of a rise in spending on public health in India. But to what extent the growth performance of the economy would influence public spending on health is a matter of empirical investigation. Studying the historical relation between growth and public spending on health would act as a good pointer in this context. Further, to get an idea of the effectiveness of the public spending it would be instructive to study the impact of such expenditure on some basic health indicators. One obvious and oft used indictor is the Infant Mortality Rate (IMR). This paper attempts to examine the growth dependency of public expenditure on health and whether the health expenditure is really effective in making a dent on the health outcomes measured in terms of IMR at the level of states in India in the post reform period. The rest of the paper is schematised along the following lines. Section II provides a
Misra et.al, Public Expenditure on... 45
brief review of literature on the relationship between economic growth, health care expenditure and health outcomes. Some stylized facts about the behaviour of output, health expenditure and IMR in the Indian States are described in Section-III. The methodology used to study the relation between output and health expenditure and that between health expenditure and IMR is discussed in section IV followed by a description of the data. The results from the empirical estimates are outlined in section V. Concluding observations follow in section VI.
2.0 REVIEW OF LITERATURE
Health status of the population can make a difference to the growth prospects of a nation. This can be seen from a number of dimensions. First, a healthy workforce ensures less absenteeism and thus higher productivity. Second, there are increased incentives to invest in human and physical capital as life expectancy increases. Third, better health status has the potential to augment the savings rates in the economy as workers have an incentive to save for retirement; and lastly, better health status improves labour force participation rate as serious illness forces people to drop out of the labour market. Health is also important from the perspective of ‘demographic transformation’. As health awareness improves, infant morality rate drops, motivating people for smaller families. Seen from another angle, to the extent health expenditure can be treated as an
investment in human capital, it has the scope to act as an engine of growth (Lucas, 1988). When it comes to assess the effect of economic growth on health status of the population, one of the ways is to see what is happening to health care spending. Health expenditure is a function of total resources available (income or wealth) in the system. When incomes are rising, there is scope for a rise in both private and public health expenditure. As we have discussed, a rise in health expenditure makes possible higher labour supply and productivity, eventually leading to higher income. Thus runs the virtuous cycle. Barro (1997) has found that a 10 per cent increase in life expectancy leads to half a per cent increase in income growth for the developed countries. In case of Britain, Fogel (1994) found that 30 per cent of British economic growth over last 200 years could be attributed to improvements in nutrition. Several other longituditional studies also support this conclusion (Almas Heshmati, 2001). Thus, from a policy perspective, health is as much an input to economic development as an outcome. There have been several attempts to study how growth impacts health outcome at the empirical plane. Some prominent ones are Newhouse (1977), Leu (1986), Parkin et al., (1987), Hitris and Posnett (1992), Pritchett and Summers (1996), Hansen and King (1996) and Barro (1998). All the cited studies bring out the consistently strong effect that income has
2004) conclude that understanding the effect of income on mortality presents many puzzles. The interest in health expenditure ultimatately lies in its potentiality to improve the health outcomes of a nation. if poverty and public expenditure are held constant. depending on the estimates used and on whether or not education is held constant. A number of studies including that of Poullier. The estimates based on twostage least squares reduced form equation shows no significant effect of health indicators. there are differences in the evidence depending on whether it is based on microeconomic data on health and income or aggregated data. observed a positive association of health and income but limited evidence of an impact of aggregate income (GDP) on health. This point of view is substantiated by an analysis data on health expenditure and health outcome . September. Deaton and Paxson (2001. Controlling for state ‘fixed effects’. Deaton and Paxson (2004) find no effect of income on mortality in the UK and a small effect in the US. 2007 on health outcomes. Gai and Gottret (2007) bring out the importance of government spending on health in determining health outcomes. Gai and Gottret (2007) find that for developing countries. and between analyses at different levels of aggregation. Bhalotra (2006) found unconditional growth elasticity of ‘under 5’ mortality in India at about (-) 0. The effect is considerably diminished when time dummies and education are built into the model. however. Pritchett and Summers (1996) using panel data for 58 developing countries found a robust impact of aggregate income on health with elasticity estimated to range between (-) 0. raise the elasticity up to (-) 1. while economic growth is an important contributor to health outcomes. Deaton and Paxson (2004) observed that effect of income on health may not find full reflection when mortality risk is concentrated (such as in pockets of poverty) and income distribution very much skewed. Bokhari. it is very much possible that the scope of health expenditure may expand in an economy without significant improvement in health outcomes. Anand and Ravallion (1993) in a cross country analysis of developing country data found no evidence of GDP having effect on health outcomes. Bhalotra (2006).7. Kei and Savedoff (2002) and Bokhari. XIMB Journal of Management .12 and (-) 0. As regards developed countries. such as life expectancy. government spending on health is an equally important factor. Though government spending is important in general. between countries. from a study of macro economic evidence from rich and poor countries.0.3.6. Patricia. Malik (2006) observed that health indicators do not have a significant effect on Gross National Income. Apart from this variation in evidence. IMR and total fertility rates on growth in income.4 6 Vilakshan. But inclusion of ‘year effects’ reduced it to (-) 0.
Like the doctorpopulation ratio.Misra et. First. progress in the provision of important health care infrastructure has also been tardy. additional spending bears little relationship to improvements in health adjusted life expectancy. Just before India’s Independence. public health expenditure and IMR in the post reform period before we study the causality. Roughly there has been 25% deficit in the foreseen requirement in 1991 and availability in 2000 in rural health personnel across categories. Second. 3. Further. In some categories. higher spending have a significant impact on health status. Public Expenditure on. Notwithstanding the deficiency in health care infrastructure. Sir Joseph Bhore Committee (1946) prescribed the norm of one doctor per 1500 population and one nurse per 500 population. Kei and Savedoff (2002) in their study find three broad patterns that explain the relationship between health spending and health outcome. we try to explore the direction of causation. countries that to begin with spent less on health care. Third. there is huge gap in Specialist doctors. the gap is still 18607. Block extension educators. What follows is a discussion on the broad behaviour of output.. 47 for 150 countries including both developed and developing and underdeveloped countries by Poullier. the strength of the relationship between economic growth. To cite an example. . Patricia. Lab. According to RHS Bulletin. This is brought out in Table 1. it would be of interest to examine how public health expenditure. This has been made possible by the health care facilities provided by the private sector and people’s willingness to pay for private medical facilities.al. Poullier. In the light of the cross country empirical findings. Pharmacist. the deficiency in health care infrastructure has been acute in the rural areas. Patricia.techinician. X-Ray technicians etc. As the aggregate picture often conceals more than what it reveals. Instead.0 STYLISED FACTS Health care facilities in India have always lagged behind demand for such services including the availability of health care professionals in the country. Kei and Savedoff (2002) who find that health spending does determine health outcomes but the relationship is not linear. India has made significant strides in health outcomes. public policy makes a difference in the effectiveness of health spending in determining health outcomes in the low spending countries. as against the requirement of 22348 specialist doctors. the doctorpopulation ratio was 1:1800 in as late as the year 2001.. among high spending countries. public health expenditure and health outcomes for India at the disaggregated state level. June 2000 (Ministry of Health and Family Welfare). the gap is less glaring and in others it is more. growth and health outcomes interact in case of India.
50 78.55 16.50 84.19 1991 6. in general. As health is a state subject.20 2.3 60* 64 58 1951 0.89 2000 16. Meghalya. the sharpest decline in the health expenditure between 1991 and 2004 is seen for Manipur. First.07 percent for all the twenty three states.03 1981 8.56 2.7 per cent and the lowest for Haryana in the year 2004 at 0.58 77. Tripura. on an average. XIMB Journal of Management .4 8 Vilakshan. September.65 17. Higher observed spending in the north eastern could be to some extent because of their special status in the scheme of resource transfer from the center to the states.45 Source: National Health Policy-2002 *As of 2003 ** for male This all India picture subsumes the details and regional variations in the health outcomes.63 2004 15. spending on health care as a proportion of SDP has been much higher for the northeastern states of Assam.45 3.57 3. in the period under study. much would depend on the initiative of the state concerned in putting health as a priority in its scheme of resource commitment. Third. Second.52 82. despite the decline. Manipur.57 32. Tripura and Nagaland.75 49.01 2005 15.87 31. & Public) Doctors (Modern System) Nursing Personnel Health Outcome Life Expectancy IMR 36.24 57.93 59. As far as health expenditure in the Indian states is concerned. some broad observations follow.6 68 63.73 2. these states along with other north . Federating states of the Indian Union are in different places of the income spectrum and have varied achievement in social parameters. Mizoram.4 per cent. Nagaland. Sikkim and Himachal Pradesh as compared to the major states of India for most of the years.1: Progress in Health Care Availability in India (1951-2004) (per lakh population) Health Infrastructure Sc/PHC/CHC Hospitals Beds (Pvt. Arunachal Pradesh.66 72.21 5.7 146 54 110 57** 80 64.87 39.57 21. Fourth.08 4. health expenditure as proportion of SDP has seen a sharp decline between the year 1991 and 2004 from 1.58 percent to only 1. Fifth.27 85. the maximum health expenditure as a proportion of SDP was noticed for Sikkim in the year 1999 at 4.47 83. 2007 Table.77 66. The declining trend has been more acute in the post 2000 period.
3 7. Meghalaya.6 1.2 1..4 2.6 -0. the growth in health expenditure vis a vis that of the SDP would indicate whether overall resource availability anyway constrains health care expenditure. However during 2000-04.1 12.4 5.1 17.7 9.4 5. Public Expenditure on. This behaviour of growth in health expenditure and SDP leads one to surmise that perhaps beyond a point states are constrained to increase their health spending in the face of a slowing down in the SDP growth. The more important question is how the health expenditure influences health outcomes? Table-2: Growth in Health Expenditure and Output (Percent) 1991-95 1996-00 2001-04 1991-04 PHE PSDPa POP 9. Health expenditure grew at a higher pace in 19962000 as compared to that in 1991-95 for all states except for Assam.1 2.4 13. Mizoram.4 8.7 11.0 7.0 12.8 9.0 2.1 2.2 7.8 4.3 2.0 7.5 16.2 2.1 3.9 1.5 6.3 2.5 1. Sikkim and Bihar in all the other states SDP grew at a lower pace in 1996-2000 as compared to 1991-95.8 8.Misra et.8 15.8 9.9 12.7 18. In fact in both the sub periods of 1996-2000 and 2001-04 SDP has grown at a slower pace as compared to the 1991-95 period.7 .7 8.7 11.6 14.1 9.3 1.4 15.0 10.1 5.1 9.9 8.8 7. Nagaland.3 2. Nagaland and Orissa all other states also experienced a decline in their growth of SDP during 2000-04 as compared to 1996-2000.5 4.1 10. This would give the impression that most of the states do not want to comprise their commitment towards improving the health status of the population by increasing their health expenditure in the face of a slackening of SDP growth.7 1.0 11.0 6.7 2.0 10. growth in health expenditure declined for all states except for Uttar Pradesh as compared to that in 1996-2000. Karnataka. It is interesting to find that except for Mizoram.9 -0.4 18. Rajasthan and Uttar Pradesh (Table-2). At the same time except for Manipur.2 2.2 2.4 1.3 4..7 PHE PSDP POP PHE PSDP POP PHE PSDP POP Andhra Pradesh Arunachal Pradesh Assam Bihar Gujarat Haryana 13.6 2.7 2.4 10.6 1. 49 eastern states and Himachal Pradesh still incur the maximum health care expenditure compared to rest of the states.7 2.0 8.2 2. Share of health expenditure in the SDP though conveys to some extent the importance attached to health care services in the overall scheme of expenditure budgeting.al.0 10.3 2.9 9.
5 1.9 9.0 7.2 2.7 2.9 -0.3 13.8 11.2 0.1 1.7 16.8 5.2 17.4 -1.4 2.5 1.8 14.0 0.2 12.4 10.7 1.5 3.9 2.0 7.0 15.1 5.0 7.5 2.1 12.8 11.2 1.2 13.6 7.8 9.5 13.0 10.9 9.9 9.1 2.4 2.1 1.2 -1.2 2.4 1.3 9.6 11.8 2.3 12.9 11.5 7. Scatter plot (Chart-1) of the health expenditure and health status proxied .5 1.7 10.0 5.1 2.5 2.3 11.8 12.0 11.0 1.4 4.7 11.8 10.0 -3.3 4.6 1.1 -6.8 8.3 10.2 2.7 4.8 10. Madhya Pradesh and Uttar Pradesh are inclusive of Jharkhnad.0 1.6 7.9 -0.2 1.8 11.1 2.6 5.4 1.8 13.9 9.7 9.2 2.9 3.8 2.6 10.9 9.3 6.2 11.7 14.2 1.1 3.4 6.4 14.0 1.6 13.9 10.2 1.1 1.5 10.9 2.9 1.0 2.7 2.8 PHE PSDP POP PHE PSDP POP PHE PSDP POP Himachal Pradesh Karnataka Kerala Madhya Pradesh Maharastra Manipur Meghalaya Mizoram Nagaland Orissa Punjab Rajasthan Sikkim Tamil nadu Tripura Uttar Pradesh West Bengal 11.9 4.2 11.8 10.5 10.5 2.9 2.1 6.0 2.3 8.7 10.3 4.8 14.4 7.1 7.6 18. Chhatisgarh and Uttaranchal respectively.8 12.8 13.2 7.4 14.5 15.4 8.7 5.3 2.8 7.7 10.2 2.4 22.4 10. September.1 1.1 12.9 9.5 14.9 9.3 9.9 2.5 11.5 1.2 1.5 14.6 15.0 1.0 14.5 10.9 8.4 8.5 2.3 10.0 8.8 9.1 10.6 5. it is also possible that extent of health care expenditures by a state amongst other things is guided by the health status prevailing in the state.7 18.6 Note: Growth rates are compound growth rates computed from a semi log specification.7 10.9 2.1 17.9 1.3 2. PHE=Per capita Health expenditure PSDP = Per capita SDP POP=Population in the States While growth might be having an impact on health care expenditure.7 2.5 13.2 2.5 2.1 9.6 7.4 12.0 10. XIMB Journal of Management .1 9.2 6.2 18.4 1.9 1.5 2.6 0.2 9.6 11.5 9.7 1.0 6.6 1.4 8.7 1.8 8.2 16.6 2.3 2.6 2.7 1.6 4.9 11. 2007 1991-95 1996-00 2001-04 1991-04 PHE PSDPa POP 9.1 7.0 8.3 2.3 11.7 3.8 11.Bihar.3 6.9 14.5 0 Vilakshan.0 7.5 5.
Given this assumption. IPS also propose the use of a group-mean t-bar statistic. This brings out the importance of health expenditure in the states. Their work was finally published. health expenditure and IMR. A study of causality in a panel context would require an examination of the data at hand for stationarity in the first place. Specifically. In contrast to the LLC test. and a standardized statistics is computed as the average of the LM tests for each equation. The ADF regressions are computed for each unit. Further. Adjustment factors (available in their paper) are used to derive a test statistics that is distributed as standard normal under the null hypothesis. Chart-1 Scatter Plot of Health Expenditure and IMR 140 IMR per thousand live births 120 100 80 60 40 20 0 0.0 EMPIRICAL METHODOLOGY To decipher the relationship between output. 3.Misra et. The standard approach to test for causality amongst economic variables is the granger causality. . Im-Pesaran-Shin (IPS) propose an estimation framework which presumes that all series are stationary under the alternative hypothesis. Public Expenditure on. Lin and Chu assume that the individual processes are crosssectionally independent. where the t statistics from each ADF test are averaged across the panel. in 2002. we are interested to test for non-stationarity against the alternative that the variable is trend stationary.50 1. There are several techniques which can be used to test for a unit root in panel data. they derive conditions and correction factors under which the pooled OLS estimate of will have a standard normal distribution under the null hypothesis.00 0.00 2...al. Levin.00 1.50 2. As we have information both in the time series and the cross section dimension. we discuss the appropriate methods that can be employed to study causality. we employ panel FMOLS tests to study the causality between output and health expenditure and also between health expenditure and SDP. adjustment factors are needed to The scatter plot shows negative association between health expenditure and IMR. followed by a test of cointegration in the panel context. test of cointegration in a panel context becomes more useful. One of the first unit root tests to be developed for panel data is that of Levin and Lin.50 Health expenditure as percentage of SDP 4. IPS propose the use of a group-mean Lagrange multiplier statistic to test the null hypothesis. 51 though the IMR reveals a negative association between them 3. in the event of panel cointegration. with Chu as a coauthor. as originally circulated in working paper form in 1992 and 1993. again. Decline in IMR is indicative of improvement in health status.
the residuals are examined with respect to the unit root feature. XIMB Journal of Management . cointegration holds at least for one individual. The adjusted test statistics. Therefore. The . For cointegration analysis in a panel context. In the event the variables are cointegrated. the estimators are asymptotically unbiased. To test for cointegration. the cointegration equation is estimated separately for each panel member. 1997) framework. Pesaran and Shin (1995)] are distributed as N(0. First. the numerator is divided by the denominator prior to the summation. Fully Modified OLS (FMOLS) is applied. giving rise to the panel and group mean statistics (Pedroni. efficient estimation techniques are employed. as the statistics amounts to the average of individual statistics. The appropriate estimation method is so designed that the problems arising from the endogeneity of the regressors and serial correlation in the error term are avoided.5 2 Vilakshan. but the cointegration vector may be different for each cross section. the autoregressive parameter is allowed to vary over the cross section. 2007 translate the distribution of t-bar into a standard normal variate under the null hypothesis. The panel FMOLS estimator is just the average of individual parameters. to get appropriate estimates of the cointegration relationship. [adjusted using the tables in Im. group tests offer an additional source of heterogeneity among the panel members. If the null is rejected.1) under the null of a unit root and large negative values lead to the rejection of a unit root in favor of stationarity. In the former. Second. In the model the asymptotic distribution of the OLS estimator depends on the long run covariance matrix of the residual process. The panel cointegration tests suggested by Pedroni (1999) extend the residual based Engle and Granger (1987) cointegration strategy. Consequently. the residuals are pooled either along the within or the between dimension of the panel. a standard approach is Pedroni’s (1995. while in the latter. If the null of no-cointegration is rejected. which allows for heterogeneous cointegrating vectors. the long run equilibrium exists. September. IPS demonstrate that their test has better finite sample performance than that of LLC. In the group statistics. in the case of the panel statistics the autoregressive parameter is restricted to be the same for all cross sections. Especially. the statistics are constructed by summing both numerator and denominator terms over the individuals separately. 1999). If the null is rejected. Also. The test is based on the average of the augmented DickeyFuller (ADF) test statistics calculated independently for each member of the panel with appropriate lags to adjust for autocorrelation. The estimates needed for the transformations are based on OLS residuals obtained in a preliminary step. the variables in question are cointegrated for all panel members. Due to the corrections. deterministic components are allowed to be individual specific.
However. the variables considered are I(1). t − j + ∑ β1ij ΔYi . We use three alternative tests to study the unit root character of the variables in a panel context. which is the appropriate estimation techniques when there is evidence of panel cointegration amongst the variables under study. While information on SDP and health expenditure for the period 1991 to 2004 is available for twenty three states. Once ascertained that all the three variables are I(1). we have used residuals from the panel FMOLS estimate to construct the ECM term in the test for Granger causality in the panel context. Public Expenditure on. we narrow down the scope of the study to sixteen states to capture the relationship between health expenditure and IMR. Once cointegration is found. We consider per capita SDP.. In no case the null hypothesis that every State has a unit root for the series in log levels is rejected. we have used the full information to study the health expenditure and SDP relation. (1) ΔYit = a1 j + ∑ α 2ij ΔXi . Table-3 reveals the evidence regarding the co-integration property between output and health expenditure and also between health . t − j + ∑ β 2ij ΔYi . Subsequently. Panel FMOLS estimates are employed to decipher the pattern of elasticity amongst the two set of variable. Hence.al. per capita health expenditure and the IMR as the variables of interest for this study. constructing the ECM term based on the residuals from an OLS may not be appropriate as it is FMOLS and not OLS. As such. a moot issue is determination of the direction of causality. we look into the causality k k ΔXit = a1 j + ∑ α 1ij ΔXi .0 RESULTS The results of the panel unit root tests for each of our variables are shown in Table-3. The approach followed by many authors in the panel context is to test for cointegration between the variables under study. 53 group mean FMOLS test performs best when T is larger than N. information on IMR is available for only sixteen states for this period. However. As such. when we find evidence of cointegration. we turn to the question of possible co-integration between them. the series are stationary in their first differences.t − j + λ1iand−1between between LPSDP and LPHE ecmit + μ1it j =1 j =1 LPHE and IMR from the panel data perspective 5.Misra et.. In a panel context. Pedroni’s method has been applied to study cointegrating relationship between log of per capita SDP (LPSDP) and log of per capita health expenditure (LPHE) and also between LPHE and IMR. a panel OLS is performed to obtain the residuals of the parametric relationship between the variables under study.t − j + λ 2iecmit −1 + μ1it j =1 j =1 k k (2) The lag of the residual so obtained constitutes the ECM term in the estimation of (1) and (2).
Fisher Chi square LPSDP Levels First Difference the relation between SDP and health expenditure is performed on twenty three states.Panel unit root test assumes individual intercept and trend in the SDP equation. health expenditure has an impact in reducing IMR. 2007 expenditure and IMR for the Indian States.77(0.Fisher Chi square PP. Further.00) Levels 3.08(0.8643 -4.99) 235. However. Perhaps competing 4 The detailed FMOLS estimates are given in Annex-1 and Annex-2.38723 -0. XIMB Journal of Management .69(0. The panel co-integration tests on Table-3: Panel Unit Root Tests Variable → Statistics ↓ Im Pesaran and Shin (IPS) W-stat ADF. September.41613 -2.52(0.96719 -0.99) Note: Figures in brackets indicate p.84143 -4. the FMOLS tests are performed which suggests that elasticity of output to health expenditure is much higher than elasticity of health expenditure to output.5 4 Vilakshan.09265 4.51(0.72(0.58496 -0.00) 29. which covers all the major states of India.70(0. only intercept on the HE equation and neither intercept nor trend in the IMR equation.00) 15.28(0.49(0.values.96) 113.39) 236.00) 2. .1297 LPHE and IMR 4. LPHE First Difference 1. Having found evidence of panel cointegartion. However.1297 -2.50135 -2.00) 23. This brings out the importance of health expenditure in pushing up the growth trajectory of the states4.19653 -3.00) 30.93) Levels -5.55(0.97) 187.19(0.76(0.99) IMR First Difference -11.65(0.12386 -2.91(0.00) 193.41613 confined to only sixteen states. In general. the cointegration relationship between health expenditure and IMR is Table-4: Panel Cointegration Results Test Statistics Panel v-stat Panel rho-stat Panel pp-stat Panel adf-stat Group rho-stat Group pp-stat Group adf-stat Panel v-stat LPSDP and LPHE -0.84(0.99) 47.45579 -2.47(0.44(0.00) 12. it is intriguing to find that health expenditure declines in the face of rising IMR.15439 -2.00) 160. the Pedroni (1999) tests turn out to reject the null hypothesis of no cointegration between both set of variables under consideration (Table-4).5642 -4.20(0.98) -11. given the lack of consistent information on IMR for a number of states.
Note: Figures in Parenthesis indicate the pvalues of the concerned F-Statistics . Table-5: Panel Causality Tests Short Run SDP → HE HE →SDP HE →IMR IMR→ HE 14. in which growth. if sustained.67 (0. The residuals from the FMOLS estimates are gathered to construct the ECM term for doing the next round of estimation to infer about the direction of causality.217 (0. Rajeev and Johannes Jutting (2003).00) 2. ICRIER Working Paper No.98 (0.005 (0.10) 16.94) 2.00) 1. we find that health expenditure granger causes IMR both in the short run and long run.80 (0. The panel causality tests indicate that output granger causes health expenditure both in the short run as well as in the long run (Table-5).08) 2. REFERENCES Ahuja. First. Further.00) we find evidence of health expenditure granger causes IMR both in the short run and long run whereas IMR granger causes health expenditure only in the long run.0 CONCLUDING OBSERVATIONS This paper was an attempt to test the efficacy of growth in improving health facilities in the Indian States using panel econometric methods.09) 1. creates scope for higher spending on public health and which in turn positively influences health outcome. February. We have adopted a two step approach to test this. which in turn contributes to improving the health status of the population.19) 3. health expenditure granger causes output only in the long run and the causation is rather weak. 55 claims in the health expenditure budget partly explains this kind of behaviour of health expenditure.22 (0..58 (0. Public Expenditure on.27) Long Run 138.82 (0.03) 8. 6. we have studied the causal nexus between SDP and health expenditure and found evidence of SDP granger causing health expenditure. “Design of Incentives in Community Based Health Insurance Schemes”. The results point at an optimistic scenario.00) Short run and Long run 71. the governments acquire greater maneuverability in spending on public health. As far the causality between health expenditure and the IMR is concerned. 95. The emphasis on curative rather than preventive health care expenditure might be responsible for this odd behaviour of health expenditure in Indian States. However.Misra et. which the FMOLS estimates are not able to capture.00) 0. These results indicate that by pursing a high growth strategy..al. It may also be that there are extended lags in response of health expenditure to changes in IMR.27 (0.90 (0.62 (0. The increased spending on health would take output to further higher levels as health expenditure granger causes output in the long run.91 (0.
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723 1. .801 0.043 1. 59 Annex-1 Parametric Relationship Between Health Care Expenditure and SDP (FMOLS Estimates) State Andhra Pradesh Arunachal Pradesh Assam Bihar Gujarat Haryana Himachal Pradesh Karnataka Kerala Madhya Pradesh Maharastra Manipur Meghalaya Mizoram Nagaland Orissa Punjab Rajasthan Sikkim Tamil nadu Tripura Uttar Pradesh West Bengal Response of Health Expenditure to changes in SDP 0.al.217 0.673 0.Misra et.805 1.571 0. Public Expenditure on.202 1.189 0.779 0.890 1.833 1.537 0.185 Note: Bihar.782 0..113 1.243 1.290 1.782 1.274 1.240 1.610 0.876 0.637 0.550 1.188 1..723 1.879 0.791 Response of SDP to changes in Health Expenditure 1.731 0.150 1. Chhatisgarh and Uttaranchal respectively.607 1.373 1.084 0.508 0.147 1.594 0.707 0.565 0. Madhya Pradesh and Uttar Pradesh are inclusive of Jharkhnad.596 0.779 0.078 0.269 1.927 1.600 0.507 0.
085 -0.294 -0.538 -2.310 Response of Health Expenditure to changes in IMR -5.497 -1.219 -0. Chhatisgarh and Uttaranchal respectively.327 -3. Madhya Pradesh and Uttar Pradesh are inclusive of Jharkhnad.6 0 Vilakshan.327 -0.132 1.371 0.982 -2.337 -0. XIMB Journal of Management . 2007 Annex-2 Parametric Relationship Between Health Care Expenditure and IMR (FMOLS Estimates) State Andhra Pradesh Assam Bihar Gujarat Haryana Himachal Pradesh Karnataka Kerala Madhya Pradesh Maharastra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal Response of IMR to changes in Health Expenditure -0.443 -0.224 -2.889 -3.875 -2. September.316 -5. .101 -0.221 -0.091 -2.613 -1.081 -0.039 -2.215 -0.276 -0.864 Note: Bihar.314 -0.247 -4.133 -0.881 -2.533 -2.366 -0.
The paper is based on the thesis of the first author to be submitted to Xavier Institute of Management.0 INTRODUCTION The Indian pharmaceutical industry is one of the most competitive and highly fragmented industries in India that has made significant progress and witnessed consistent growth over the past three decades (Agarwal. Export stimuli of Indian pharma firms were categorized conceptually into five meaningful groups (viz. 1970. It plays an important role for the nation as it directly deals with health of the people. Xavier Institute of Management. Xavier Institute of Management. email: pmishra@ximb. local market push motives. 2004).ac.Internationalization of Indian Pharmaceutical Industry : A study on the determinants of export stimulation* Srikant Panigrahy1 . Scholar. This study might yield valuable lessons to other firms for export decision making and policy makers for appropriate export assistance.ac. 2007. and the most important stimulation was for profit and growth opportunities overseas. following the classification of proactive and reactive motives.com. Bhubaneswar. along with Drug Price Control Order and economic reforms. Professor. 1. 1. 2007. 2. Bhubaneswar. P . and no single company has a market share greater than * eight percent (ORGIMS.P. opportunity utilization and growth motives). product superiority. Xavier Institute of Management.in 3. email: panigrahysrikant@rediffmail. Bhubaneswar. email: bibhu@ximb. academicians and policy makers are discussed. There are more than 20. overseas market pull motives.in . It is found that motives for Indian pharma firms moving to overseas market was proactive (rather than reactive). The Indian Patents Act.Patra3 Abstract In this paper an attempt has been made to study various determinants that have stimulated the Indian pharmaceutical (henceforth pharma) firms to move to overseas market. Revised September 1.000 players. Fellow Program in Management (FPM). Bhubaneswar under the guidance of the second and third authors. have made the pharma industry self sufficient to meet the domestic demands (meets around 95% of local demand) and also establish itself as a Received June 26. with a new set of underlying structure of relationships. 2006). Associate Professor.Mishra2 & B. The implications of the findings for managers.
Firms go for internationalization mainly through exports/imports and FDI. patient welfare. Out of all the entry modes.7 percent (Cygnus. export accounts for 46% of total production of pharmaceuticals in India. foreign direct investments.6 2 Vilakshan. sustainability of organization. growing at a Cumulative Aggregated Growth Rate (CAGR) of 13. researchers have presented various descriptive models of export behaviour but still. and the very . theoretical developments in the area have not matched the development in practice (Dhanaraj C & Beamish W P 2003). Agarwal 2003. firms internationalize to various international markets depending upon risk and control undertaken from exports.3 millions in 1973-74 (Agarwal A 2003) to Rs. At present the industry market size has increased from Rs. Seeing the above figures. 1970). 2005). Although exporting in an era of globalization has been well acknowledged in the academic literature. 2007 major player in exports obtaining a trade surplus during 1990’s and performing consistently (Lalitha. Studies have also been made on TRIPS effect on the industry with respect to various streams like research and development. it is interesting to find out the main determinants which have influenced Indian companies to move to overseas markets. and foreign direct investments (Johanson 1990). 373. At present. Pradhan 2004. exports have been the traditional method and still the most popular route followed by many of the pharma companies. price of medicines. etc. there are relatively few studies which have focused on export behaviour and performance of the industry (Pradhan 2003. However. licensing. access to medicines. It can also be defined as the successive development in a firm’s international engagement in terms of geographical spreading in markets. UK and Japan. the exports of Indian pharmaceutical industry has risen from Rs. Excluding the imports route. joint ventures. Studies on export behaviour have been in limelight for about four decades starting from the pioneer work of Tookey (1964). After India adopted process patents in 1972 (Indian Patents Act. there lacks the theoretical developments. growing at a CAGR of 21% compared with domestic CAGR of 12%(Pradhan 2006). Studies on Indian pharmaceutical industry is very rich and have mainly focused on origin and history of the industry. Chadha A 2005). and changes in management philosophy and organizational behaviour from beginning of process to current situation (Albaum et al 2002). 4 billion in 1970 to Rs.160 billion in 2004-05. For the past four decades. September. R&D activities. 370 billion in 2004-05. India exports to around 200 countries worldwide including highly regulated countries like USA. XIMB Journal of Management . 2002). products and operation forms. Currently. Internationalization has been an important activity carried out by the Indian pharma firms. It is defined as a process in which the firms gradually increase their international involvement.
it categorizes the stimulating determinants into groups that could be conceptually meaningful and help in development of theoretical framework to the ongoing discussion of export stimulants. Firstly. Czinkota and Johnston 1981). uncertainty and imperfect knowledge are important determinants in export behaviour and a firm goes though experimental phase gaining experience in each of the succeeding stages. for example government regulation and policies. creating a question mark on the homogeneity of the data collected. etc. Secondly. The reason attributed for the failure of a specific theoretical development may be the rapid changes which occur in the external and the internal environment for a firm. It may also help policy makers to frame appropriate policies for Indian pharma firms to move to overseas markets. the determinants stimuli for export behaviour. Fourth.0 EXPORT BEHAVIOUR STIMULANTS The nature of export stimulation has been shown to affect the internationalization of a firm (Welch and Wiedersheim Paul 1980).. The second stream deals with identifying determinants which have played an important role for firms moving to overseas markets that is. Export marketing researchers have often classified exporting companies according to their level of internationalization (Bilkey and Tesar 1977. changes in technology. The first stream deals with export behaviour theories for firms moving to overseas market.Panigrahy et. Internationalization of . Risk.. and export decision making. industry competitiveness. 63 reason has attracted a lot of interests on this topic by the researchers. it focuses on a particular sector. India. the pharmaceutical industry in a developing country. Thirdly. Export behaviour theories Export behaviour of firms is defined as the process undergone by a firm while selecting a particular destination and the further process carried out to expand in the foreign markets. it is studied in a changed regulatory environment that is after implementation of TRIPS in 2005 in India. The above studies on the export behaviour have contributed in many ways to the field of exporting. The present study contributes to the ongoing debate of export behaviour in several ways. Export behaviour theories attempt to explain why and how the individual firm is engaged in export activities and how the dynamic nature of such activities be conceptualized (Shoham et al 1995). Cavusgil 1980. Research on export stimuli discipline started in early 1970’s and since .al. 2. However most of the studies have been in the developed countries (Sousa 2004) and have taken all sectors in a particular country into consideration. Literature review Studies on export behaviour have been divided into two streams. it aims at helping managers to know the important determinants for export stimuli.
economies of scale. identify and exploit export market opportunities. Proactive stimuli are defined as those associated with firm’s aggressive behaviour and deliberate search for export opportunities (pull factors). Kaynak and Stevenson 1982. External • • Managerial urge Growth and profit overseas Marketing advantages Economies of scale Unique product/ technology competence Risk diversification Extend sales of a seasonal product Excess capacity of resources Foreign market opportunities Change agents Reactive • • • • • • Unsolicited orders Small home market Stagnant or declining home market Adapted from Albaum et al (2002) . The above issue is taken care by a second stream of export stimulus studies which helps to identify whether or not firms take the initiative to seek. 1998). Majority of the work has been carried out in United States and European countries in comparison to developing countries where these are relatively few (Leonidou. But this classification provides little idea about evidence of behavioural pattern which the firm develops in its approach to export markets and operations (Katsikeas 1996). 1993) to portray effect on export performance. e. or may operate. XIMB Journal of Management . Piercy 1981. 2007 then has grown in an accelerating phase mainly due to rapid globalization of world economies (Douglas and Craig 1992). or the bankruptcy of a competitor.g. A commonly used typology of export stimuli is to regard them as emanating either internal or external from/to the firm (Brooks and Rosson 1982. It is one of the most well researched topic and many studies have been carried out in a very short span of time (Leonidou. Internal stimuli are those derived from influences endogenous to the firm. government exports Table 1: Proactive and Reactive Stimuli Internal Proactive • • • • • promotion programs. for example. These two motivation types reflect different types of attitude and behaviour and are likely to influence export performance. September. Welch and Wiedersheim-Paul 1980). Cavusgil 1980. In this regard. Research on determinants of export stimuli first started in United States.. Reactive stimuli are those associated with firm’s reaction to changing conditions and reflect a passive attitude in seeking export opportunities (push factors).6 4 Vilakshan. 1998). Katsikeas et al. On the other hand. external stimuli arise from the environment in which the firm operates. and then into other countries around the world. export marketing researchers have made a distinction between proactive and reactive exporters (Czinkota and Ronkainen 2004. or particular in-house competencies (see Table 1).
the determinants which played a major role were size of the firm. and trade and FDI liberalization policies of 1990s. profit potential. indirect tax incentives. concessional import from exports. The study showed importance of R&D and fiscal incentives as major motives for entering foreign markets. The determinants for firms’ decision to start exporting were R&D capabilities of the firm. unsolicited foreign orders and physical proximity of a market as the major motivators for a firm to move to overseas markets.Panigrahy et. All the determinants have been measured on perception of managers about each determinant on a scale of one to seven. proximity of market. increase growth rate and smoothing out business cycles. R&D effort. Internationalization of .. tax incentives. Growth and profit opportunity overseas Firms move to international markets for better growth and profits. A list of studies conducted by various researchers on the export stimulants have been provided in Annexure 1. offer by foreign distributor. Management . tax incentives offered by foreign governments to establish manufacturing plants in their countries. government incentives to export. utilize excess capacity.0 METHODOLOGY AND OPERATIONALIZATION OF DETERMINANTS To address the above mentioned objectives. the following methodology has been followed. Agarwal (2004) had done an extensive study on the international competitiveness of knowledge-based industries taking Indian pharma industry as a case study.al. and competition in domestic market. technology collabouration with foreign companies. apparent profit potential.. small domestic markets in the product dealt by firm. equity collaboration with foreign companies. stability through diversification. it is observed that researchers have found mixed results on various determinants influencing export stimulation of the firm. The present study is therefore conducted to identify the important determinants which have stimulated the Indian pharma industry to move to overseas markets and to identify whether the determinants cluster in groups giving rise to a few latent factors. We have divided the determinants into two groups. unsolicited orders. 3. Proactive motives a. Other empirical studies over years have also pointed out factors such as saturated domestic markets. search for stability through market diversification. As for promoting export competitiveness. and import of raw materials were found as major determinants. price control in domestic market. one being less important and seven meaning most important. 65 Barker and Kaynak (1992) study identified size of overseas market. The study listed these motivating factors for initiating overseas markets involvement in order of importance as larger market size. From the literature review and discussions.
and Albaum. Several studies show positive correlation of profit and growth with a firm starting to engage in exports. In India. the pharma firms easily reverse engineer the molecules discovered world wide in a very short span of time and able to launch in domestic markets and other less regulated markets. including cognitive and affective factors. We conceptualize technological advantage as the advantage Indian pharma firms have in terms of technology. 1995). 2004). XIMB Journal of Management . export profits. Managerial urge/ interest/ aspirations Favorable attitudes towards foreign activities are considered an essential prerequisite before firms get into or expand in international markets. and Albaum. drive and enthusiasm of management toward international marketing activities (Czinkota and Ronkainen. explain in certain instances the difference between managers in attitude and behaviour toward foreign activity (Shoham. e. in United States. There is evidence that desire for short term profit is important to many companies who are at initial stages of exporting (Shoham. So we think this determinant plays an important role as an export stimulus for overseas markets. d. So we think pharma firms to avail this tax exemption would have started moving . 2004). September. Exclusive market information It is another proactive stimulus. Indian pharma companies are known to have an advantage over other pharma companies worldwide with respect to know. 2007 may perceive international sales as a potential source of higher profit margins or of more added-on profits. or simply beginning in right place in right time (Czinkota and Ronkainen.why (reverse engineering) technological advantages. Managerial urge is said as a motive that reflects the desire. 2004). 1995). Due to strong chemistry skills of scientists present in India and lack of product patents. market places or market situations that is not widely shared by other firms. Decision-maker characteristics. a tax mechanism called Foreign Sales Corporation(FSC) has been instituted to assist exporters which provides firm with certain tax deferrals thus making international marketing activities more potentially more profitable(Czinkota and Ronkainen. the pharmaceutical industry is known to be one of the most research intensive industries. Tax benefits Tax benefit plays an important role of stimulation to exports. Technological advantage Worldwide. b. It is said that growth and profit motives are linked directly to a firm motivation. For example.6 6 Vilakshan. It includes knowledge about foreign customers. that is profits generated from exports are exempted from income tax by Ministry of Finance Tax (Aradhana 2003). c. This knowledge may result from particular insights based on firm international research. special contact. the higher the better.
Economies of scale and scope By moving to international markets.al. they only have 1% sales turnover. g.. i. Indian pharma companies’ drug prices are known to be one of the lowest prices in the world. facilities. support on knowledge of foreign markets as well as marketing guidelines (Aradhana 2003). National export promotion Policy measures favouring domestic pharma companies for exports may be one of the important stimuli for firms starting exports. a new dosage form. 67 to overseas markets. the more the better profits without tax. So this indicator may act as major stimuli for most of the Indian pharma companies as these depend more on volume generated from unit sales due to low pricing of medicines. it can . few side effects or with right combination of drugs Unique products/ technology/ other resources advantage are a major driving force for moving to international markets. h. Especially in pharmaceutical industry. So due to less profit margins. act as a stimulus for firm to move to international market.. bonded warehouses. replenishment import license. the company incurs less sunk costs to develop for foreign markets due to standardization of the product. subsidized export credit and export credit insurance. It is because a firm producing superior products is more likely to receive inquiries from foreign markets because of perceived competence of its offerings and second due to the unique product. Lower costs of labour. So possession of some competitive advantage acts as stimuli for many firms to cater into international markets. Internationalization of . Possession of special competitive advantage receive huge benefits by moving to international markets. a company can achieve economies of scale and scope by spreading over more units and thereby reducing the fixed costs incurred in administration. j. So this advantage may be one of the determinants for export stimulus. Indian pharma products are also known for cheaper prices with good quality. staff work and R&D. production and energy Lower costs of labour. Although they account for 13% of the volume market all over the world. production and energy help firms price their products lower when compared to other international markets. if a firm has some patented products. subsidies. equipments. Unique product advantage Unique products produced in terms of intensive technology whether a new molecule. economies of scale gives the firms’ more volume turnover although margins are low and thereby achieving capital efficiencies. This may give the pharma firms a better cost leadership advantage (porter strategy) and help compete in terms of price of medicines globally. f. These may be income tax exemption.Panigrahy et.
Also. Favourable exchange rates give firm better profits due to currency advantage in purchase parity (Shoham and Albaum. a firm may fear to lose domestic market share with these companies who would have benefited from effect of economies of scale from international marketing activities. l. This helps firm gain new technologies to create better products and have a competitive advantage. Firm whose mission and vision has a global approach are found to move to overseas market faster and establish themselves as global players rather than being focused only on domestic market. k. pharma firms may look for international markets to explore. Production slack is a stimulus for securing new market opportunities and managerial slack provides those knowledge resources required for collecting.6 8 Vilakshan. Favourable currency movements Favourable exchange rates have been depicted as one of the major stimulus to move to international markets. Reactive motives a. Stagnant or declining home market International expansion for some of firms becomes a feasible strategy if the domestic market is saturated or declining. 1995). due to cheaper prices with good quality of drugs. international marketing activities were curtailed or withdrawn totally (Czinkota and Roakainen. . 1995). R&D and technology collaboration R&D and technology collabouration with foreign players helps a firm to know about new technologies and implement in the firm. September. XIMB Journal of Management . m. These sales were stimulated by short term price cuts and as soon as domestic market demand returned to previous levels. Firm mission and vision Most of the studies have emphasized the importance of mission and vision of company playing an important role in moving to international markets. The reasons maybe like unused productive resources (like production and managerial slack) which act as a stimulus to move to international markets. b. Competitive pressures Due to intense competition from multinationals and foreign companies. 2004) c. Overproduction This strategy was used too often by companies during downturns of business cycles which provided an ideal outlet for inventories that were significantly above desired levels. 2007 helps a firm get motivated to move to overseas market in search of additional growth and profits as well as leverage this advantage. interpreting and using market information (Shoham and Albaum. So this may act as one of the major stimulus for pharma firm to move to international markets.
Price control in domestic markets India has a DPCO policy. and productive capacity more profitably than alternative domestic markets.. f. These were measured. Internationalization of . on a seven-point likert scale. This limits the profit for doing business in the domestic market. The unit of analysis under study was defined as the overall firm-level. Proximity to customer and ports Physical and psychological closeness plays an important role in export activities of firm. proprietary knowledge. firms may well embark on marginal pricing and sell at lower prices on export markets. financial resources.Panigrahy et. as stated earlier. This prevents a firm for free market pricing as all these essential medicines have a price cap and none of the firms can exceed this price cap. In these circumstances. These enquiries may result from advertising in trade journals which have a worldwide circulation through exhibitions and by other means. So firms look for international markets for better growth and profits. seeking only a contribution to their overall costs for their home-based market. Perceptions of managers were asked on the importance of each stimulus affect on reasons for internationalization of their firm. Many of the pharma firms to charge better margins may find the overseas market as an opportunity to sell their products g. price or distribution information is a very common method and found in research as one of the most important stimuli. As the number of pharma firm in India is around 20. Unsolicited foreign orders Unsolicited receipt of exports arising from either inquiry of product. which controls the prices of all essential drugs. Excess capacity of resources Firms may move to international markets to use excess capacity of resources available in the firm with respect to managerial expertise. e.000 the competition is intense. Several steps were followed to take care .al. firms move to international markets in aspiration of more profits. 1 being least important and 7 being most important.. Small domestic market Due to small domestic market. indicating the degree of importance. 69 d. Identification of determinants. These are simply an extension of domestic activities without any particular attention being paid to the fact that some of products are moving abroad. Many of the people in India are unable to have access to medicines (still 35-40% of the population). measurement and tools used We have identified 21 determinants from several studies which emerged as major export stimuli for overseas market. All the indicators were measured in ordinal scale of 1 to 7 in order to facilitate the use of statistical analyses (Katsikeas et al 1996). Many of the firms in countries have looked for international markets to carry business. economies of scale. h.
Personal interviews were carried out using a structured questionnaire in most of the cities where cluster of pharma companies are located such as Mumbai.7 0 Vilakshan. 2007 of question wording. Importantly. the structured questionnaire was mailed. Data was collected using survey method from Indian pharma companies engaged actively in exports. Content validity (face validity). The whole process undertaken helped to discard the ambiguity from the questionnaire and frame the questions in a meaningful manner.10 crores each year for the past three years. questionnaire appearance to make it attractive and maintain better flow with high clarity. mainly because of wrong address. The questionnaire was circulated for a pilot study taking six respondents from the pharma sector dealing with international markets to ensure that questions were relevant and phrased in a meaningful fashion. All the firms were first contacted by telephone to know their interest to participate in the study. Also. To these firms. another draft was prepared citing the objective of the study and the definitions with operationalization measures of each of the independent variables what they . only 62 firms showed real interest in taking part in the study. Bangalore and Delhi. of these 9 firms were excluded. The objective of the study was addressed within the context of indigenous Indian pharma companies actively engaged in exporting. the sensitive issues are more). emphasis was placed on identifying most appropriate individual available in each case to elicit the relevant information. respondents were in managerial level and reported both familiarity with their firm exporting activities and involvement in relevant export marketing policy decision making. Of the remainder. forwarded with a letter from the institution citing the purpose of the study. which assured content validity. concerned persons unavailability as always in overseas tours. Chennai. ceased export operations. XIMB Journal of Management . or closed down due to acquisition. Also. and reluctant to provide outsiders with data due to sensitive issues (being pharma industry. during the process of data collection. PROWESS database was used to identify only indigenous Indian pharma companies who have an export sales turnover averaging more than Rs. question sequence. September. The reason for carrying personal interviews is because in most of the cases we find the top management people passing on the questionnaire to any of their associates to fill the questionnaire. The total number of pharma companies who met the criteria was 87. Hyderabad. for all the personal interviews. is established by asking experts opinion in the field to assess whether a particular measure or question is measuring what the researcher is interested in. There were some firms which could not be interviewed on the above locations as well as some pharma firms which were situated in other locations. Some of the reasons given for non participation were lack of time.
age. sales volume. but we had no other choice as the population size came to be 87 Indian pharma firms actively engaged in exports.Panigrahy et. forward letter from institute and the questionnaire were mailed through institute printed envelopes with a self addressed return envelope for better response. To evaluate possibility of non-response bias in the data. Bartlett’s test of sphericity is used to test whether the variables are . This ensures the reliability of the information collected. a question was added in the last page asking the respondents whether they needed a personal copy of the results of this study carried out. designation was added in the last page of the questionnaire to cross-check. Categorization of stimulating factors: Exploratory Factor Analysis was used to analyze the structure of interrelationships among the 21 export stimuli and identify groups of variables that can be conceptually useful in describing export stimulation (Leonidou 1998. frequency and standard deviation of the respondents for each of the determinants. The draft. they might not find this study useful. Two measures. Bartlett’s test of sphericity and Kaiser-MeyerOlkin measures were used for the measure of sampling adequacy. the name of the person. a comparison was made between participating firms and nonparticipating firms with respect to number of employees. Internationalization of . experience in the firm. it was found that 45 interviewee wanted the results of the study. This implied the importance of the study being carried out.. 71 denote in our present study. A note was written to the firms that only managers with an experience of atleast four years in handling international markets in their organization was eligible to fill the questionnaire. Although the total sample size is small (N=55). Calof 1994). Interestingly it was found that most of the respondents who did not want a personal copy of the results of the study were in the age group of 48-53. Additionally to incentivise the respondents. Appropriate tests have been conducted to test the adequacy of the sample size. Knowingly. as interviewees responded to questions within their domain area (Kotabe and Czinkota 1992). no significant differences between groups were found at 5% level on any of these variables taking care of non-response bias in the study. export ratio and years of exporting.. Out of the 60 responses. The evaluation of responses to the questionnaire was done by using descriptive statistics through examination of average responses (mean). Maybe one of the reasons can be predicted as due to their long experience in handling international markets.al. Using t-test procedure under assumptions of both equal and unequal sample variances. The data collection was spread over a period of four months. Such information could be generated from only 14 firms out of 27 firms that did not participate in the study.
whether the population correlation matrix is an identity matrix (Malhotra.5 cut off value (Hair et al 1998. It is found that seven stimuli were held in relatively high regard by the firms (cutoff X>5). production and energy (x=5.0 ANALYSIS AND FINDINGS The findings related to export stimuli of Indian pharma firms have been presented vide Table 2. Varimax rotation procedure was used over oblique rotation as our objective was to minimize number of variables with high loadings on a factor.07). and lower costs of labour. 4. Small values indicate that factor analysis may not be appropriate. thereby enhancing interpretability of the factors Number of factors was determined using the scree plot and eigenvalues. 2007 correlated or uncorrelated in the population. firm mission and vision (5.62). 2004). the scree test indicates to drop all further components after the one starting the elbow. September. SPSS 11 was used as a data processing tool to analyze the data.7 2 Vilakshan.07). economies of scale (x=5.20). KMO index compares whether the data are likely to factor well. Principal component analysis is used over common factor analysis as we wanted to determine the minimum number of factors which will account for maximum variance in the data for use in subsequent multivariate analysis.11). in other words. Scree plot is a plot of the eigenvalues against the number of factors in order of extraction. As per Albaum’s classification of proactive and reactive stimuli. Malhotra. . A cut off of value of 0. XIMB Journal of Management . based on correlation and partial correlation. The other most important determinants found were managerial urge/ interest/ aspirations (x=5. technological advantage (x=5. This goes in accordance with many other studies (Leonidou 1995a. Depending upon the shape of the plot. we find all the seven stimuli are proactive in nature.09). economies of scope (x=5.42). Katsikeas 1996) which have also found the same determinant playing a major role for firms moving to international markets. Eigenvalues for a factor denotes the total variance attributed to that factor and only factors with eigenvalue greater than 1. mostly when the curve makes an elbow towards less steep decline.6 is used but many of the researchers use a more lenient 0. 2004). The most important determinant for Indian pharma firms to move to overseas markets was found to be attractive profit and growth opportunities (x=6. It is based on the chi-square transformation of the determinants of the correlation matrix and large values of the test statistic show that the variables are correlated in the population. Number of factors determined by a scree plot generally would be one or a few more than that determined by eigenvalue criterion (Malhotra N K 2004).0 are retained while the other factors are not retained in the model.
41 1.04 4.48 1.00 4. Internationalization of .66 1.15 1..20 5.96 5.37 1.13 2. production and energy National export promotion Unique product advantage Favorable currency movements Competitive pressures Overproduction Saturated domestic markets Proximity to customers and ports Unsolicited export orders Price control in domestic market R&D and technology collaboration Firm mission and vision 6.27 4.Panigrahy et.62 5.67 1.67 4.07 1. 1 Attractive profit and growth opportunities overseas Technological advantage Exclusive information about some foreign market Managerial urge/ interest/ aspirations Tax benefit Economies of scale Economies of scope Speed to reach the market Possession of special competitive advantage Lower costs of labour.48 1.47 1.72 1. 73 Table 2: Descriptive statistics Motive to start exports Mean(X) Std Dev.al.84 1.85 4.78 5.45 1.61 1.09 4..29 1.81 0.62 4.07 4.42 1.55 0.33 1.93 3.42 0.07 5.07 1.47 5.93 5.11 4.03 1.55 3.73 3.83 0 0 2 1 3 0 0 1 0 3 3 0 4 4 9 7 6 7 6 1 0 2 0 0 1 0 1 2 0 0 0 0 2 0 1 8 17 12 10 14 7 5 0 3 0 0 5 3 6 4 5 10 5 5 3 3 2 3 11 8 8 7 7 12 0 Frequency 4 2 14 19 1 4 6 7 13 13 2 4 15 7 15 8 6 9 14 8 7 5 5 10 26 17 14 22 20 24 16 23 21 20 23 23 15 8 17 15 10 14 13 29 6 25 12 3 27 19 20 15 11 9 19 20 7 14 7 1 4 5 3 12 13 14 7 18 3 8 9 0 3 4 4 5 5 3 7 4 3 1 1 2 0 1 4 7 .
96). Competitive pressures in domestic market.. Reddys Lab. All of these stimuli are proactive motives which shows that Indian pharma firms moving to international markets was a proactive approach. Lalitha 2002) have found policies framed by government of India have played a favourable role in making the pharma industry a successful one and competitive. These are all reactive motives as classified by Albaum. September.g. Drug price control in domestic markets (x=4. proximity to customers and ports. This reactive motive of firms was found to be one of the important indicators (Bilkey 1978) for stimuli of exports. Leonidou 1988) which have cited national export policies playing limited role in export initiation. national export promotion (x=4. Our study found national export promotion policies as one of the high rated indicators for firms moving to international markets.93). Dr. speed to reach the market first (x=4. One of the reasons may be attributed that not all of the pharma firms have gone for research and technological collaboration to overseas markets. So. this maybe one of the reasons for firms moving to overseas markets. The profits margins of firms are affected as pricing of drugs are fixed by the government. It may be noted that one of the cheapest manufacturer of medicines globally is India and the sales turnover is solely based on volumes of drug sold. tax benefits (4. Glenmark. overproduction. Drug pricing policy of India puts a price cap on free pricing of drugs. So our study goes in accordance with finding of the above studies that national policies have played an effective role in shaping the pharma firms.78). This response contradicts the earlier studies (e. Indian Patents Act 1972 and liberalization policies taken in 1991 have indeed been a boost for pharma firms to be competitive domestically as well as in international markets. Nicholas Piramal have moved to international markets.47) found a mixed response from the respondents for initiating exports. Surprisingly.67). Researchers (Pradhan 2004. unique product advantage (x=5) and favourable currency movements (x=4. Also literature supports that .5). 2007 Stimuli which were also rated highly by the respondents in export decision making were possession of special competitive advantage (x=4.04) also found a mixed response for Indian pharma firms to move to overseas markets. unsolicited export orders were not found as the major stimuli to move to overseas markets.7 4 Vilakshan. an unsolicited order from customers overseas was not found to be an important indicator for moving to overseas markets. 2006. R&D and technology collaboration (x=4. The reason for such a finding may be cited as most of the respondents of the firms would have not been there in the firm while it had started taking decision to export. XIMB Journal of Management . Only a few players like Ranbaxy. saturated domestic markets.
3 percent.732 834.000 . After liberalization in 1991.6. The study also finds R&D and technology collaboration as a stimulant for pharma firms to move to overseas markets.Panigrahy et.001 level which shows that correlations exist among the variables (or non zero correlations).al. as most of the exports in that period were to countries like Russia. 1990). This concept indicates how firms find convenient to export in those countries which are psychologically close with domestic country for having better performance (Johanson and Valhne.485 210 . This variable is based on “psychic distance”. So this motive maybe not rated higher by respondents. To summarize.732. 75 as the export experience of the firm rises.. Bartlet test of sphericity was found to be significant at 0. and Bangladesh. Table 3: KMO and Bartlett’s Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett’s Test of Sphericity Approx. Nepal. ChiSquare df Sig. stating that the variables collectively meet the necessary threshold of sampling adequacy as well as fundamental requirements for factor analysis to be carried out. where barriers have reduced substantially. the psychic distance would not have played a major role due to globalization and liberalization of the economies.. Firm mission and vision to become a global player and managerial interest/ aspirations also were found equally important stimulations to move to overseas markets. the importance of unsolicited orders diminishes (Johnston and Czinkota 1982). The most important stimulant was found to be profit and growth opportunities overseas. Factor analysis results: A visual examination of the correlation matrix was carried out to find those that are statistically significant. 112 were statistically significant at 0. Internationalization of . Proximity to customer ports also did not find much importance in our study. The KMO test (measure of sampling adequacy) (Table 3) was found to be 0. . exceeding the cut off value of 0. our analysis using descriptive statistics finds Indian pharma firms moving to overseas markets was proactive approach rather than reactive. It was found from the correlation matrix that out of the 210 correlations (21 independent variables).05 level showing a percentage of 53. This could be one of the reasons why most of the Indian pharma firms have been a late mover to overseas markets. But some previous studies have cited psychic distance had played an important role for pharma firms who had started exports in 1970s.
620 . Factor 1.798 .722 .7 6 Vilakshan. 2.743 .760 .633 .610 4. All the variables have been grouped under five factors with a cutoff of +/0.813 1.866 . September.167 8. It was found there was no significant overlapping of items among factors. while factor 5 loaded 0. a Rotation converged in 8 iterations.871 .656 .655 1.719 73.813 .605 .475 53. XIMB Journal of Management . Extraction Method: Principal Component Analysis.834 Communality . 2007 Exploratory principal component factor analysis using varimax rotation (Table 4) Table 4: Total Variance Explained.762 .668 .7.601 .642 62.859 1 2 3 4 5 of the 21 export stimuli found five possible factor-solutions can be retained based on percentage of variance and eigenvalues more than one.828 . The five factors together explained 73.740 .859 percentage of the variance (Table 4) of all the variables taken into consideration.636 .762 .277 68.475 22.353 1. Variables Factor 1 PROFIT TECHADV EXCLINFO MGRURGE TAXBENEF ECOSCALE ECOSCOPE SPEEDMAR COMPADVA LOWLABOUR NATEXPO PRODADV .748 Components Factor 2 Factor 3 Factor 4 Factor 5 .495. 3 and 4 loaded a Cronbach alpha of more than 0.854 . Extraction Sums of Squared Loadings Component Total (Eigen value) 6. Rotation Method: Varimax with Kaiser Normalization.442 5. It was found all loadings of the variables gelling together have substantially fallen above the threshold.5 or above.079 % of Variance 31. Extraction Method: Principal Component Analysis.886 .140 Cumulative % 31. Table 5: Rotated Component Matrix.807 .635 6.859 .
777 . distribution. promotion. saturated domestic markets. some kind of competitive advantage. the mission and vision of firm to become a global player reduces or doesn’t gel well with above indicators. 77 Variables Factor 1 FAVCUREN COMPPRES OVERPROD SATDOMES PROXPORT UNSOLICI PRICECON RDCOLLAB MISSVISI Cronbach’s alpha 0.774 ..804 Components Factor 2 Factor 3 Communality Factor 4 Factor 5 .791 .779 . Factor 2 consists of seven significant loadings that are competitive pressures.9137 . It is interesting to find that mission and vision of firm has a negative sign which may indicate when all above variables of the factor emphasis increases. These all are proactive stimuli representing export benefit/ opportunities and can be classified under one category that is market pull motives.718 .548 Factor 1 has five significant loadings that are tax benefits. product advantage indicate uniqueness of product vis-à-vis competition. economies of s c a l e . product advantage and R&D collabouration. unsolicited export orders.Panigrahy et.808 . Internationalization of . all the above determinants are reactive motives which may be looked as domestic market constraints for moving to overseas market.874 -.548). Factor 3 has four significant loadings that is technology advantage.495 .822 . l o w e r c o s t s o f l a b o ur . and . These again represent proactive motive of the firm to move to overseas market.8609 0. The technology advantage would be to achieve better product differentiation. overproduction. Excluding mission and vision (communality loading of 0. vertical integration of the organization.844 . These factors can be named as local market push motives.633 . national export policy and favourable currency movements. price control and mission and vision of the firm. production and energy.793 . proximity to ports.601 0. manufacturing facilities.650 . competitive advantages maybe with respect to pricing.7723 0.9077 0.782 .623 .al..678 .
Factor 4 consists of three significant loadings that is exclusive information about the foreign market. they try to reach their first. Both are proactive stimuli for a firm to move to overseas markets. 2007 R&D collaboration helps to achieve better products. Table 6: Export stimuli factors with variables classified as per proactive and reactive motives Factors Overseas market pull motives Proactive Tax benefitEconomies of scaleLower costs of labour. Competitive pressures Over production Saturated domestic markets Proximity to customer and ports Unsolicited export orders Price control in domestic market Technological advantageUnique product advantageR&D and technology collaboration Exclusive information about some marketManagerial urge/interest/ aspirations Attractive profit and growth opportunitiesEconomies of scope Reactive Local market push motives Product superiority Opportunity utilization Growth Motives . So this factor can be named as growth motives. September.7 8 Vilakshan. These all can be clubbed under one factor that is product superiority. XIMB Journal of Management . managerial urge or inspiration and speed to reach the market first. It is found that firms look actively for overseas markets for profits and growth opportunities and economies of scope. These are again proactive stimuli. Factor 5 consists of two significant loadings that are economies of scope and growth and profit opportunities. production and energy National export promotion Favourable currency movements. The factor explains whenever the managers get exclusive information about some opportunities in the overseas markets. The economies of scope give the firm a better growth opportunity and profits. This factor can be termed as opportunity utilization.
opportunity utilization and growth motives). and lower costs of labour. firm mission and vision. Understanding the firms’ motivation structure provides guidelines for the design and implementation of effective marketing plans and national policy . Technology and R&D collaboration in overseas markets is also important if firms wish to expand globally. Export stimuli of Indian pharma firms were categorized conceptually into five meaningful groups (viz.. Prior studies conducted in the field have found that proactive motives help the firm achieve a better export performance when compared to reactive motives. Internationalization of . 2003). The findings also confirmed the Albaum classification of proactive and reactive stimuli. following the classification of proactive and reactive motives. The main reason was that firms were unable to get higher profit margins as the prices of medicines were fixed by the government. but a number of proactive stimulants. Firms can look upon the factors for export making decisions by following the structure framed.0 CONCLUSIONS AND SUGGESTIONS Our findings and discussions have led to the following conclusions. As pharma industry is highly technological intensive. local market push motives.Panigrahy et. This sort of competency building is important as we found that most of the firms have moved overseas for growth and enhancing profits. 79 5. technological advantage.al. This was one of the major findings from the study. economies of scale and scope. The policy makers should look into this factor and frame appropriate policies to keep a balance between access of medicines to patients and pharma firms’ profit margins. with a new set of underlying structure of relationships. Profit and growth opportunities in overseas markets. It is found that Indian pharma firms moving to overseas markets was a result of not one single stimulating factor. overseas market pull motives. Managers of the firm should take steps to cultivate this spirit among employees for doing business overseas. Liberal pricing policy as well as incentives from government would help pharma firms to get funds to invest in R&D activities for innovation of new molecules. This helps to acquire new technologies and cultivate an innovativeness spirit inside the firm. managerial urge/ interest/ aspirations. product superiority. Drug pricing policy has acted as a proactive motive for Indian pharma firms looking abroad. production and energy specific to domestic conditions were found as the most important stimulants. This paper points the importance of looking at various stimulants that promote exports.. Our findings can be compared with the export figures which show that Indian pharma industry has showed a positive trade surplus over years from 1990s. lot of investments goes towards research and development to produce new molecules ($800 million to produce a new drug as per Tufts Report.
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Leonidou 1995a. Cavusgil & Nevin 1981 Leonidou 1995a Zou S et al (2003) Technological advantage Exclusive information Managerial urge/ inspiration Tax benefits Economies of scale and scope National export promotion Unique product advantage Possession of special competitive advantage Firm mission and vision Lower costs of labour... Czinkota & Ronkainen 2004 Albaum et al. 83 Annexure 1 DETERMINANTS OF PROACTIVE & REACTIVE STIMULI Proactive Stimuli Determinant Attractive profit and growth opportunities overseas Authors who have considered such determinants Kaynak and Kothari. Kaynak and Kothari.. 1982. 1984a. Kothari (1989). Leonidou and Leonidas 1998 Czinkota & Ronkainen 2004 Tesar & Tarleton (1982). 1975. Ramaseshan & Soutar 1996. 1993. 1989. Internationalization of . 1993. 1988. 1979.Panigrahy et. Cavusgil & Nevin 1981 Tesar & Tarleton (1982). Kaynak and Stevenson. Cravens & Wagner 2000. Leonidou.al. Baldauf. Koh 1989. Leonidou and Leonidas 1998. jaffee et al (1988). Leonidou and Leonidas 1998. Katsikeas and Piercy. Diamantopolous et al 1990. Czinkota & Ronkainen 2004 Leonidou and Leonidas 1998. Czinkota & Ronkainen 2004. 1984. Pavord and Bogart. Bilkey. Leonidou 1995a. production and energy . Johnston and Czinkota. Czinkota & Ronkainen 2004 Katsikeas and Piercy. Sullivan and Bauerschmidt (1990). 1982. 1984. 1984 Cavusgil. Cavusgil & Nevin 1981 Weaver & Pak 1990. Czinkota & Ronkainen 2004. 1978.. Kaynak and Kothari. 1988. Sullivan and Bauerschmidt. Cavusgil et al. Kothari (1989). Leonidou and Leonidas 1998. Czinkota & Ronkainen 2004. Leonidou and Leonidas 1998. Tesar & Tarleton (1982) Karafakioglu (1986). Albaum et al 2002. 1984a. Czinkota & Ronkainen 2004 Cavusgil.
Sullivan and Bauerschmidt. Kaynak and Erol. 1983. Czinkota & Ronkainen 2004 Pavord & Bogart (1975). Leonidou and Leonidas 1998. Kothari (1989)Diamantopoulos et al. 1992. 1989. Simpson & Kujawa (1974) Tesar & Tarleton (1982). 1993. 1975.8 4 Vilakshan. Leonidou and Leonidas 1998. Ramaseshan & Soutar 1996. Ogram 1982. Ghauri and Kumar (1989) Declining domestic scales Excess capacity Favorable currency movements Saturated domestic markets Proximity to customers and ports Unsolicited export orders Source : Collected from various research studies and compiled by the author . Czinkota & Ronkainen 2004 Baldauf. September. Czinkota & Ronkainen 1995. Cavusgil & Nevin 1981 Albaum. Piercy. Czinkota & Ronkainen 2004 Barker and Kaynak. Brooks & Rosson 1982. 2007 Reactive Stimuli Determinant Competitive pressures Overproduction Authors who have considered such determinants Karafakioglu (1986) . Leonidou 1988. 1988 Pavord & Bogart (1975). 1990.. 1981a. Karafakioglu (1986). XIMB Journal of Management . Tesar & Tarleton (1982). Leonidou and Leonidas 1998. Kaynak et al 1987. 1983. Czinkota & Ronkainen 2004 Czinkota and Johnston. Czinkota & Ronkainen 2004 Katsikeas and Piercy. Joynt 1982. Kaynak et al 1987 Sullivan and bauerschmidt (1990) . Cravens & Wagner 2000. Pavord and Bogart.
Scott-Kennel (2004) has * 1. small and medium size companies are now seeking advanced appropriate technologies to make them more competitive in the world markets (Grieve. and the technology is “obtained in the best possible manner. product-line complexity. 1989). but also by its culture and a match between the cultures and management processes of both organizations. Revised June 8. 2. email:desai@loyola. Gupta and Lonial. the transfer takes place rather informally. 1998. Maryland 21210. 1. Loyola College in Maryland. 2007. Both authors contributed equally to the paper.Competencies Necessary for Technology Transfer from Home to Host Country Companies: A Case Study* Kiran J. USA Professor. Moreover.” Khosrow and Desai (1982) suggest that a successful technology transfer process Received January 2. McNeese State University. organizational scope and its marketing strategies also affect an organization’s propensity to seek technology (Gupta. there is little government interference. Desai1 & Harsha Desai2 Abstract Effective technology transfer between two organizations is influenced not only by the needs of the receiving organization. USA. similarly suggested that foreign direct investment by the multinational companies into their local partners allows the host country partners and subsidiaries to gain a competitive advantage.0 INTRODUCTION Companies adopt advanced technologies to simultaneously lower costs and improve quality of their products and to deliver them to their customers rapidly (Hottenstein. Baltimore.edu . Kotha and Orne. When the transfer typically takes place between small firms. Louisiana. 2007. Professor. 1991. 2. Lake Charles. Process-structure complexity. 1997). Lonial and Mangold.0 LITERATURE Balachandra (1996) has identified a new paradigm for technology transfer process from a developed to a developing country. 2004).
the macro environmental challenges including government policy for exports and ownership. the question about how the power needs of the new technology will be met and how will the other infrastructure needs (land. licensing arrangements. this is not true. Kiessling and Dabic (2005) describe similar difficulties experienced by the multinational corporations as they attempted to transfer technologies to their Croatian subsidiaries. For example. exchange controls and repatriation issues. the mode of technology transfer including joint ventures. then the timing of the transfer must synchronize with the new product development where it will be used. 2007 across borders involves at least five forces: a set of actors who initiate. The extant literature suggests that for an effective technology transfer to take place between two organizations across borders. several processes including licensing. Unfortunately. process. the management of technology transfer process – It is important to assure that the existing culture and management of the receiving organization is capable of absorbing the new technology. adapt and improve these imported technologies” for maximum benefit. and the micro environment factors that include financing of the venture. borrowing rules and regulations. drawings) and its application must be in sync. And three. For example. accept. the supporting technologies must be available – typically technology transfer requires additional work to bring about the installation of that technology into an existing organization. The local . and foreign exchange requirements. and direct establishment of subsidiary operations. 1997). The managers in a typical company seeking technology transfer think that individuals responsible for this transfer will intuitively think through the challenges confronting transfer. XIMB Journal of Management . Cobb and Barker (1992) have reported that higher the education level and job skills of the parties involved more effective is the technology transfer. Wie (2005) reporting on transfer of technologies into Indonesia has suggested that companies acquiring new technology must “assimilate. and adopt new technology. These authors have suggested the following process for a successful and satisfactory technology transfer: One. Griffith. approve. if the new technology is being used for product development. training requirements to operate the new technology) of the new technology satisfied. a process or methodology for achieving this transfer must exist (Eldred and McGrath. The new product development team has to be ready to accept the technology in the development process. utilities. September. transfer must take place at the right time – the technology being transferred (equipment. Two.8 6 Vilakshan.
Ferdows (2006) discussing appropriate absorptive capacities of host firms receiving new technology from home firms comments that often this transfer of technology is easier if the tacit knowledge of the home firm is somehow codified (drawings. James (2006) has emphasized that “concepts designed for the rich countries may be inappropriate to the conditions prevailing in the majority of poor countries that comprise the Third World. it will be difficult to absorb the new technology. The technology transfer process may face obstacles if the organization is secretive about its business practices and one part of the organization is kept in the dark about the relevant goings on in the other parts of the organization.Desai et. 1991).. manuals. but also its willingness to modify its technology and modify its present tangible and intangible resources and organizational capabilities so as to meet new market challenges (Barney.al. skills training). Technology transfer considerations in this milieu affect both the manufacturing and business-market strategies. Rural Competencies . The managers presumed that these technologies would disrupt their current mode of operations. The businessmarket strategies also guide a company’s manufacturing strategy. In turn these two strategic issues directly affect the scale and the scope of a company’s technology transfer activities. 87 managers were unable to transfer technology effectively because of their lack of skills or unwillingness to accept the new technologies.. The business-market considerations provide a company’s long-term strategy defining not only its current positioning in the market vis-à-vis its competitors. It also partially circumscribes what the company is or is not capable of or willing or not willing to do by way of making changes. If the incoming technology requires cooperation among the company’s subunits. this codification becomes difficult and hence the transfer becomes difficult when the know-how changes frequently. including equipment. The ‘way things are done around here’ may have been the culprit in ineffective transfers. . A company’s current manufacturing strategy defines a company’s inventory management practices as well as the skills of its workers. this is exactly what transpired.” This advice is especially true of technology concepts. it is difficult for a home country to successfully provide and then implement advanced technology to a host country company. Sacchetti (2004) has advocated that unless there is a consistent part of the population in the developing country (like India) that is literate and the domestic development of scientific and technical knowledge is fairly well advanced. that are transferred “as is” from the rich countries to the poor countries! As we will see later in the case study.
there is seldom an attempt made at the producer or the trader level to forecast the demand. For this business-market strategy to succeed the company realized that it needed a new manufacturing strategy and a new method of processing. and received the necessary training on In the worldwide precious and semiprecious stone industry. This company’s business strategy envisioned that the buyer could simply walk into a shop and ask for certain size . September. The equipment was purchased at 10 cents on the dollar. The gemstone business case describes the considerations of a transfer of an automated gemstone manufacturing factory from Europe to India. a company we worked with decided to explore possible changes in its manufacturing strategy. The Gemstone Business of stones with a given quality and in any quantity. this process was also suitable for synthetic stones. with no engineers on the company’s staff and little experience in dealing with an “integrated plant”. However. the newly found European equipment was very expensive in the Indian context. the industry is driven by “current fashions” making it very difficult to anticipate consumer preferences for colour gemstones. An extensive worldwide search led to the highly mechanized process used in Europe. authors had to device a comprehensive technology transfer model. The case involves a unique technology. This practice encourages the seller to pursue a manufacturing strategy of producing to stock – build to inventory . soon an opportunity arose when a German company went bankrupt and its equipment could be bought in an auction. upgraded the automation technology from electronic to programmable logic controller (PLC).and sell from stock. Unfortunately. Recognizing this continuing difficulty of responding with inventory to meet the shifting customer preferences shaped by fashion. 2007 3.0 A CASE STUDY In the following sections we apply our technology transfer ideas to a gemstone business. the current practice is for a buyer to approach a seller to look for what’s available in stock. In order to transfer this equipment to India. XIMB Journal of Management . As luck would have it. The business strategy also envisioned that if the pre-shaped stones were on hand then the business should be able to deliver the requirement within three days. This strategy was thought to increase the company’s market share by providing better value to customers at lower prices that were driven by lower overall manufacturing cost. An engineering team spent six months in Germany. but the lessons of how best to or not “to do technology transfer” apply equally well to other industries and cases.8 8 Vilakshan.
Since the business is quite competitive. Outcome and Conclusions • Will ensure incompetitiveness in producing large quantity of high quality standardized colour stones. there is no maintenance infrastructure available in India for similar machines. Acquisition of this automated technology forced vertical integration knowing and capability of replacing cutting and diamond coating.. Automation will provide an avenue for measuring and recording data and quality. • • Challenges faced by the company Periodically. . and programming and system analysis of PLC. the polishing drum has to be refurbished by either importing the sleeve of coating or importing the chemicals to make the coating. the Indian The German plant was acquired at 10 cents on the dollar. Frequent power failures are a part of life as are the unavailability of locally made repair parts for machinery. as opposed to 850 workers in a manual factory.only 25 people will be needed to work per 8 hour shift. the polishing drums take at least two weeks to clear customs in India.Desai et. the company must send the machinery abroad for a new diamond coating. Transfer of technology benefits for the gemstone business government has to give permission to export the machinery: the cutting and faceting drum takes many months to be repaired. The plant was imported into India and was installed. Processes will become more capital intensive . Rural Competencies . its manufacturing processes need to remain a closely guarded secret. under these conditions. training provided by outside individuals can compromise the business. German technicians were called in for help for a short duration.000 stones in an automated factory.000 to 15. The manufacturing and business strategies were thus coordinated with the technology transfer processes. It took more than a year to impart the skill and knowledge to local engineers and workers.. to produce between 8. The company’s engineers spent six months in Germany to upgrade to new PLC technology as well as learning the basics of using the equipment. this was difficult in manual processing. The plant was transferred to India with the German technicians’ help to their counterparts in India. To get this done.al. polishing surface. and finally. an import license is needed to import the drum back to India. 89 the running and maintaining of the equipment. Moreover.
The home firm was bankrupt and unable to provide help in the transfer of technology. The host firm had a history of failures in high-tech manufacturing. The three columns together give a quick overview of the most up-to-date technology transfer advice and its application.0 TECHNOLOGY TRANSFER ADVICE AND ITS APPLICATION The table-1 is our attempt to summarize the advice technology transfer literature has to offer for small and medium size companies. In the following. 2007 4. XIMB Journal of Management . Both . Khosrow and Desai (1982) Home firm . The host firm had to transfer technology without the benefit of the home firm’s Host firm .9 0 Vilakshan. and the third column is the application we were involved in. Need to understand the infrastructure and technical requirements that follow the new technology. eventually. September. Article advice & Application to case Article Advice Balachandra (1996) Transfer takes place between small firms The host firm has to find and induce the technicians working in it to understand the technology. The second column is the actual advice the article offers. Host firm is the technology ‘receiving’ firm and the Home firm is the technology ‘giving’ firm. And the host firm had insufficient infrastructure to support the transfer of technology.Originator of Technology Need to assure that drawings. Application to the Gemstone Business Table 1 : Authors’ Comments. technical manuals and technical help are available at the home firm for technology transfer. The home firm was bankrupt and could not adequately provide this assistance. the host firm did send a project team to the home firm in Germany to master the technology. The first column shows the various author(s) and a brief review of their comments. The family ownership of the company had little formal / technical education.Receiver of Technology Transfer Process of Technology Mode of transfer of technology must be determined prior to the purchase of technology.
Eldred and McGrath (1997) Transfer must take place at the right time. Indian government liberalized the importation of used factory/machineries. This was timely for the host firm’s acquisition of the new technology. technology and its application must be in sync. Griffith et.. The host firm successfully obtained the license to import the new machinery. Macro environment The home and host firms need to take advantage of new government policies.al. Lack of in-house technical expertise created delays and dependency on outside technician for timely technology transfer. and the host firm could acquire German plant. (2005) Host firm's unwillingness to accept new technology leads to ineffective technology transfer. The host firm recognized a potential threat from China. more effective the transfer. 91 Article Advice the home and the host firms should know how this new technology will transfer! Application to the Gemstone Business help – since the home country firm was no longer in business (the new technology was being obtained via an auction). Both the home and host firms must scan for business opportunity. Cobb and Barker (1992) Higher the education and skills of the workers in the host firm.Desai et. finding a German firm going into bankruptcy was fortuitous.al. Micro environment Both the home and host firms need to take advantage of the prevailing liberal rules for foreign exchange and custom duties. Rural Competencies . The host firm needs to establish the education and skills requirements before committing to the acquisition Lack of in-house technical expertise created delays and dependency from outside technician for technology .. The host firm needs to establish the required education and skills before committing to the acquisition of the new technology.
being able to discuss and participate in decision making regardless of the rank and title. It was difficult for the host firm to obtain the necessary technical assistance. Pantano (2005) Continue to work on the knowledge cycle of research. adaptation and eventually improve the imported technology. Creating an empowered workforce . the host firm should encourage the participation of rank and file in the technology transfer process. and ISO 9K-2K.9 2 Vilakshan. To stay competitive in the world markets. XIMB Journal of Management . Looking at TQM. The host firm had planned for this. The host firm anticipated the threat from China and the shortage of skilled workers. at the same time the host firm needs to prepare the existing workforce to accept the new technology. Six Sigma program. In the medium to long run. development and manufacture. Application to the Gemstone Business transfer in a timely manner. With the nature of ownership at the host firm (family ownership) and its penchant for secrecy this openness will not take place at the host firm. Sacchetti (2004) The host country has population that is literate and has a fairly developed scientific and technical knowledge. no current information is available on its status. adapting. the host firm needs to continuously look for newer technology to adapt to changing business-market conditions. Barney (1991) The business-market considerations and willingness to modify technology. The host firm must plan for assimilation. Wie (2005) The host firm must assimilate. Separate plant was created with few trusted employees to assure success. the host firm needs to look for future expansion and improve on the acquired technology. 2007 Article Advice of the technology. Predetermining the availability of necessary skills and knowledge in the host country. adopting and improving upon the available technology. . adapt and improve the imported technology. September. This advice was followed: an engineer from the host firm was trained in the new technology. hence it looked for an automated plant (also improve the quality of its products) and volume production. design.
Vol. 17. No. Carlile. and transforming: An integrative framework for managing knowledge across boundaries.. Issue. No.” Journal of Manufacturing Technology Management.. 4. continuous improvement. C. (1991) “Firm resources and sustained competitive advantage. pp. R. pp. and Francis.” Organization Science. but due to family ownership of the business and a strict requirement for maintaining secrecy. (1997) “Commercializing new technology. 15. 625-638. Cobb... S. 15.. 1.Desai et. 555–568. J. No.” Journal of Management. 99-120. Vol. J. Vol. the new management processes have to be developed internally within the host organization.. March/ April. 1-9. 29-33. competencies of recipient organization The host firm cannot import ‘management style’. 40. 93 Article Advice Bessant and Francis (2005) Soft technology (management competencies).al.” International Journal of . 15. de Jager. (2005) “Transferring soft technologies: Exploring adaptive theory. and McGrath. B.” International Journal of Technology Management and Sustainable Development. K. Vol. skills and education levels and the sufficiency of the host company’s infrastructure. The most important lesson learned is that the technology transfer from the home to the host firm requires both of these companies to have sufficient understanding of each others management styles. To be able to accept. pp. (2006) “Transfer of changing production know-how. (2004) “Enabling continuous improvement: a case study of implementation. 93-112. de Jager. and Welgemoed. 5.” Production and Operations Management.” Journal of Technology Transfer. E. Eldred. Vol. 5-6. (1992) “A model of crosscultural training in the transfer of technology. pp. International Journal of Technology Management. pp. adopt or adapt the new technology both the home and the host companies must be aware of the nuances of each others’ cultures! REFERENCES Barney. September–October. J. translating. Application to the Gemstone Business The host firm management style needed to be changed to adapt the new technology. (2004) “Appropriate technology in a globalizing world. 1 (Spring). Vol. Minnie. R. 315324. 2. No.” Research Technology Management. Vol. Vol. (1996) “International technology transfer in small business: A new paradigm. p. 4. M. (2004) “Transferring. 8-15. Ferdows. Issue 2. No. 4. No. T. March. P. 17. and Barker. pp. M. Balachandra. it was difficult to adapt the new technology. Grieve. Bessant. D. 12. Rural Competencies . pp.
Wie. S. M. Vol. 11 Issue 10. M. (2005) “The power of knowledge sharing. 743-766. (1982) “An Empirical Model for a Combined Macro-Micro Approach to transfer of technology. Sacchetti. K. pp.. 389-412. Issue 2. Lonial. .” Manufacturing Engineer. and Lonial. “ Proceedings of the European International Business Association. Vol. France. Vol. James. T. Gupta. Vol. pp. 211-232. September. 7. 173-187. (2006) “An institutional critique of recent attempts to measure technological capabilities across countries.” Production and Operations Management. D. 84. 3. 243-264. 39. 2 (May) . XL No. n. 9. S. 3. Vol. No. D. M. 163-181. 3 (September). S.” New Political Economy. No. Y. 8-12. J. 3 (September). S. (1989) “Generic manufacturing strategy: A conceptual synthesis. XIMB Journal of Management . and Desai. Y. J. Kotha. Griffith. and Orne. pp. Fontainebleau. (1998). 3. September-October. Issue 5. T. 16. No. business strategy and organizational strategy. 19-21. 47. Issue. 10. Vol. (2005) “The major channels of international technology transfer to Indonesia: \An assessment. (2004) “Foreign direct investment: A catalyst for local firm development?” European Journal of Development Research. and Casey. Pantano. 3. December. 36-39. pp.” Stratgeic Management Journal.9 4 Vilakshan. F.” Journal of Economic Issues. W. Hottenstein.” Industrial Management. 33-43. 214-236. No. (2004) “Knowledge caps in industrial development. Vol. pp. Vol. Kiessling. (2005) “An exploratory examination into the challenges to technology transfer in the transitional economy of Croatia. pp. 2007 Technology Management and Sustainable Development. Khosrow. pp. V. pp. March-April. 8th Annual Meeting. 3. Scott-Kennel.” Exploring linkage between manufacturing strategy. and Dabic. Vol. INSEAD. Vol. Vol.” Journal of the Asia Pacific Economy. 10. Issue 5 (October-November). pp. pp. September. Gupta. 624-652. (1997) “Facilitation of advanced manufacturing technology: Implementation and transfer. and Mangold. pp. (1991) “An examination of the relationship between manufacturing strategy and marketing objectives” International Journal of Operations & Production Management.” Thunderbird International Business Review.
specially designed to cater to safety of employees in an organization.Measuring Critical Factors in Safety Management . 2006. procedures and instructions etc. Cochin University of Science & Technology. Vinodkumar1 & M. The activities and processes involved in managing safety have come under increasing scrutiny due to development of new approaches for safety management.N. It is the documented and formalized version of the safety management systems that exist as a documented system of policy. This diagnostic tool can be used to identify areas of weakness in safety management programmes and remedial efforts can be designed to improve the safety level in an organization.in . a southern state in India.A Survey Based Approach* M. Bhasi2 Abstract In recent years there has been widespread acknowledgement of the significance of managerial and organizational failures in the causation of accidents. Cochin University of Science & Technology. Safety management can be regarded as a sub-system of the total organizational management.0 INTRODUCTION Investigations of the major industrial disasters in last two decades have pointed out that the events leading to the accidental outcome had their origins in the organization and management of the system. 1998). 2007 Reader. focus has moved away from a technical and human error focus of accident prevention. to the activities or processes that are involved in ‘Safety Management’. email: mnvinodkumar@cusat. The study was conducted in eight chemical industrial units in Kerala.ac. This paper identifies six critical safety management practices that are relevant in Indian scenario and a valid and reliable instrument is developed to measure the level of these management practices in industries. For this reason. effectively * 1. 1. It is an overall system for ensuring that safety activities are properly planned.in Reader. Received July 21.ac. Kochi. Kerala. Revised July 19. 2. Most of these industrial accidents are attributable to factors such as poor management and training and other individual psychological characteristics. email: mbhasi@cusat. Kerala. than to unforeseeable weaknesses in technical components (Kennedy and Kirwan. Kochi.
2. Jacobs and Landy. Different safety management practices are adopted in industries by managements to promote health and safety of workers. covering the various manufacturing activities employed in the company. 2007 implemented. 2000). and that follow up system is arranged. A scientific investigation into this only can reveal what is happening inside the organization so that improvement methods can be suggested. 1980) have identified various factors that influence safety performance in industries. Glendon and Litherland. September. The safety commitment of the management must result in an observable activity on the part of the management and must be demonstrated in their behaviour as well as their words (Hofmann. The primary aim of safety management is to intervene in the causation process that leads to accidents. a few management factors were also reported to be important in these studies. Cox and Cheyne.96 Vilakshan. Every Indian manufacturing organization is supposed to prepare a ‘Safety Manual’ based on ‘The Factories Act. Zohar (1980) found that management’s commitment to safety is a major factor affecting the success of an organization’s safety programmes. equipment and training. In one of the first investigations of safety climate. 2000. Employees’ perceptions will reflect how employees believe that safety is to be valued in the organization (Griffin and Neal. Safety management attained significance in India only after the Bhopal gas tragedy in 1984.0 SAFETY MANAGEMENT PRACTICES Earlier investigations into safety in industries (Cohen and Cleveland. XIMB Journal of Management . The same set of factors were never observed in these studies indicating that the factors are not universally stable and varies with cultural background of the sample and type of industry. Committed managements subsequently adopt various safety management practices to safeguard their employees from work related hazards whereas others try to manage safety of employees by encouraging them to work safely. . To what extent these are practised in reality depends on the commitment of the top management of the organization. 1948’ and state ‘Factory Rules’ to take care of the health and safety of its employees. Enforcement rules and regulations have also been made more stringent with a number of amendments in the Acts and Rules.1995). In high risk environments like chemical industries. Zohar. Vredenburgh. motivational and behavioural factors. 2001. most of the industrial organizations in India have made considerable investments in safety related infrastructure. Learning lessons from Bhopal disaster. 1983. 2002. Along with attitudinal.
Vredenburgh (2002). Since employees close to the work are the bestqualified persons to make suggestions about improvements. where the supervisor makes all decisions. 1983). health and quality systems (Vredenburgh. comprehensive safety and health training programme for new employees. Regular communication about safety issues between management. (1975). The studies of Lee (1998).Vinodkumar et. organizations should institute a systematic. In order for employees to be active participants in a safety programme.al. Cohen et al. Ostrom et al. To improve the level of safety and health for all employees. Cox and Cheyne (2000) and Mearns et al. supervisors and the workforce is an effective management practice to improve safety in workplace. It induces employees to do their best work as individuals and as a team. Safety training provides the means for making accidents more predictable. Glendon . responsibility and accountability for required decisions and ensures that both employees and management are involved in setting goals and objectives. Tinmannsvik (2003). Smith et al. The amount of participation can range from no participation. where everyone connected with. This empowerment of workers provides them with authority.. Flin et al. 2002). while relieving the manager to plan. Cohen (1977). Worker involvement has been reported as a decisive factor in safety management by Lee (1998).(1993). Shannon et al. Rundmo (1994). Well documented safety rules and procedures and its enforcement by supervisors and managers can improve safety behaviour of workers. (1975) and Zohar (1980) have found that those companies with lower accident rates were characterized by good safety training for employees. 1996. Dedobbeleer and Beland (1991). Employee participation is a behaviouraloriented technique that involves individuals or groups in the upward communication flow and decision-making process within the organization. or affected by the decision. especially for those decisions that affect the employees (Vredenburgh. (1996) and Cox and Cheyne (2000). Measuring Critical . 2002).(2003) included communication and feedback as a factor in their surveys using questionnaire among various category of workers and showed that safety performance is influenced by the level of communication in an organization. is involved. to full participation. 97 management commitment has been repeatedly highlighted (Cox and Flin 1998. lead and mentor (Cohen and Cleveland. they can be consulted before making final decisions. Cox and Cheyne 2000). provide a mentor for these employees and use a buddy system to help orient new employees in the safety. they must receive occupational safety training..
4. (2003) included safety rules and procedures as a factor in their offshore safety studies and showed that it has significant correlation with accident rates.. the objectives of this study were to 1. They can add interest to the hazard control programme of an organization and enhance self-protection action on the part of the workforce (Cohen et al. is a management practice adopted in many developed countries. 1979). identify the critical factors of safety management relevant to Indian chemical and process industry. 2007 and Litherland (2001) reported this as a reliable factor after factor analyzing the data collected from construction workers. especially high hazard chemical and process industries. Cox and Cheyne (2000) and Mearns et al.0 METHODOLOGY 4. Eckhardt (1996) and Vredenburgh (2002) found that the consideration of safety performance in the selection of employees is a significant predictor of injury rates. awards and recognition to motivate employees to perform safely is an accepted feature of both organization behaviour management and total quality management models (Accident Prevention Manual for Business and Industry. Hence. The use of incentives. Hence. who are predisposed to displaying safety conscious attitude in their work. September. offering recognition. it has become necessary for the fast growing Indian companies.1 Identification of critical factors of safety management Based on survey of literature and discussion with safety managers in large chemical industrial units. Turner (1991). which can help modify behaviour (Vredenburgh. NSC.0 OBJECTIVES OF THIS STUDY Research in safety all over the world has proved that quality of a product is closely related safety of work environment.98 Vilakshan. 12 ed. A well-designed reward system should be characterized by high level of visibility in the organization. 3. XIMB Journal of Management .. 2. Recruiting new personnel. and design and develop an instrument that is valid and reliable to measure the identified critical factors of safety management. that are competing with reputed multinational companies to implement effective safety management practices to ensure safety of their workforce. Illinois). The level of these safety management practices implemented and their effectiveness along with the safety outcomes need to be measured for possible improvements and corrections. the following six critical safety management practices were identified: . 2002).
a 44-item questionnaire covering areas of management commitment.2. The questionnaire ready for administration consisted of two parts. 4. safety rules and procedures and safety promotion policies was prepared. Subsequently. The experts were requested to scrutinize the questionnaire.al. The respondents were asked to give their preference on a 5 point Likert scale (strongly disagree. accident history. neither disagree nor agree. redundancy level. The content of this draft questionnaire was discussed with senior safety professionals from industries and senior professors in management to ensure validity. consistency and number of items in each variable. give their impressions regarding the . 99 • • • • • • Management Commitment Safety Training Worker Involvement in Safety Communication and Feedback Safety Rules and Procedures and Safety Promotion Policies Hiring practices (recruiting experienced safety conscious employees) that is found in many developed countries is not considered in this study since such a policy is not adopted in industrial units in Kerala. The items included were employees’ perceptions of those safety management policies that are found to discriminate between high versus low accident-rate organizations.. department. A pilot survey was conducted on a selected sample of 100 workers from five industrial units to get the feedback about the clarity of items.. After considering each item in detail. Ten demographic questions about the name of the company.Vinodkumar et. removing and replacing some of them. age. disagree. some of the negatively worded items were changed to positive wording for simplicity. number of years of experience. Measuring Critical . and also give objective feedback and suggestions with regard to comprehensiveness and coverage. necessary changes were made by simplifying. 28 items were phrased positively and 7 items negatively so that strong agreement in the former and strong disagreement in the latter resulted in a higher score in favour of safety for that item. qualification. designation. safety training. sex.1 Instrument From a review of related literature and theory. worker involvement. safety communication and feedback. number of accidents in 2002 while 4.2 Measuring critical management practices safety questionnaire. agree and strongly agree) in order to evaluate the subject’s agreement with each item. rewording. The final questionnaire contained 35 items (Table 1) and it was decided to give the questions in English as well as the local language Malayalam.
To maintain anonymity. Sample size and response rate. September. returned 224 373 243 168 205 171 168 255 1806 Response % 65 73 66 73 73 76 69 76 71 Eight large chemical industrial units in Kerala were selected for questionnaire administration. Out of this. the questionnaire was distributed personally to all workers present in the general shift and the morning shift. XIMB Journal of Management . four The reason behind opting for a large sample like this was that a smaller sample selection from various departments in each industrial unit was looked upon with apprehension by the workers since the matter was related to statutory . No. Org 1 2 3 4 5 6 7 8 Total No.100 Vilakshan. After getting permission from the respective managements. Completed questionnaires were personally collected from the participants in the evening and 1806 completed forms were received. 2007 Table 1. The statements related to safety formed the second part. it was observed that two of them had high accident rates. All factories had a worker population of 400-800 with separate safety departments. From the previous accident records submitted to the government. 4. Table 2.2 Sampling and Data Collection moderate and two low accident rates. of items 9 6 5 5 5 5 working in this company which resulted in at least 2 lost working days as per Indian Factories Act 1948 and number of working days lost due to above accidents in 2002 constituted the first part. 1566 were from workmen category and 240 from supervisory level first line officers.2. Space was provided beside each statement to mark the preference in the 5-point Likert scale. given 342 510 368 231 280 225 245 335 2536 No. The number of questionnaires distributed and returned from the eight industrial units with percentage response rate is shown in Table 2. of items in Critical Safety Management Practices Critical safety management practices Management Commitment Safety Training Worker Involvement in Safety Communication and Feedback Safety Rules and Procedures Safety Promotion Policies No. identity of the respondent was not requested in the questionnaire.
Vinodkumar et. 1998).. The internal consistency is estimated using a reliability coefficient called Cronbach’s alpha (a) with the help of statistical programme SPSS 10. Tatham and Black. 1983).. Validity is defined as the extent to which any measuring instrument measures what it is intended to measure (Carmines and Zeller. 101 requirements of safety of workers. Face validity is also a subjective and logical measure. In the case of content validity. 1990).3.3 Validity. 1993). 4.. The actual reason was identified after discussions with the trade union leaders. have been tested. 4. The three aspects of validity. 1998). rather than statistical.al. 4. content validity.3 Reliability Analysis Reliability of an instrument is defined as the extent to which any measuring instrument yields the same result on repeated trials (Carmines and Zeller. 1990). similar to content validity. Hence. the evidence . and may finally result in victimization or harassment of those employees. The proposed instrument has been tested for validity. Measuring Critical . 1998).2 Face Validity Generally. 4. a measure is considered to have ‘face validity’ if the items are reasonably related to the perceived purpose of the measure (Kaplan and Scauzzo. Content validity can be ensured if the items representing the various constructs of an instrument are substantiated by a comprehensive review of the relevant literature (Bohrnstedt.1 Content Validity Content validity of an instrument refers to the degree to which it provides an adequate depiction of the conceptual domain that it is designed to cover (Hair.3. namely.3. They feared that if the data collected by the researcher is given to the management for any reason. Out of many methods. A first attempt for a smaller sample selection in the first organization met with failure. the internal consistency method is considered to be the most effective method especially in field studies. face validity and convergent validity. Reliability Unidimensionality Analysis and is subjective and logical. it was decided to give the questionnaire to all eligible respondents present during day time. the top management will be able to identify each respondent and his answers that might have gone against the interests of the company. as the workers were reluctant to fill the questionnaire due to these reasons.. Anderson. so that it could be used for meaningful analysis. Face validity is the subjective assessment of the correspondence between the individual items and the concept through rating by expert judges and can be established through review of the instrument by experts in the field (Hair et al.6 or above is considered significant in exploratory research (Hair et al. The Cronbach’s alpha value of above 0.
These means were then correlated with the accident rates and lost working days in the year 2002 in each of these companies. Individual items in the model are investigated using AMOS-4 to see how closely they represent the same construct. H6 : There is significant negative correlation between Safety Promotion Policies and the accident data. 4.4 Convergent Validity The evidence for ‘convergent validity’ is obtained when a measure correlates well with other measures that are believed to measure the same construct (Kaplan and Scauzzo. selfreported accidents and number of working days lost for each of the eight chemical companies were calculated (Table 4). . the following hypotheses were formulated. H7 : There is significant negative correlation between Total Safety Management Score and the accident data. 2001). Using confirmatory factor analysis technique. First..90 or above for the model implies that there is strong evidence of unidimensionality (Byrne. Statistical programme AMOS-4 was used for this purpose. 1998). Given two sites with relatively equal hazard risks. 4. H 5: There is significant negative correlation between Safety Rules and Procedures and the accident data. H4 : There is significant negative correlation between Safety Communication and Feedback and the accident data. the means of the summated scores of each of the six factors of safety management. September.3.4 Predictive Validity H3 : There is significant negative correlation between Worker Involvement in Safety and the accident data. It was found that the reported accident frequency rates submitted by the companies to the state government were not reliable due to To establish the predictive validity of the instrument. the convergent validity of the questionnaire was checked with the help of a coefficient called Tucker-Lewis Index (TLI). 2007 4. the one with the better safety management score should have fewer accidents and lost working days.5 Unidimensionality Analysis Unidimensionality refers to the existence of a single construct/trait underlying a set of measures (Hair et al. A scale with TLI values of 0. XIMB Journal of Management . The above hypotheses were tested by calculating Pearson’s correlation coefficients.90 or above is an indication of strong convergent validity (Bentler and Bonnet. H2 : There is significant negative correlation between Safety Training and the accident data. H1 : There is significant negative correlation between Management Commitment and the accident data. A Comparative Fit Index (CFI) of 0. 1980).102 Vilakshan. 1993).3.
980 0. practitioner and empirical literature.6924 0. It can be seen from the table that all the factors have Cronbach’s alpha value above 0. main source of information was international studies and discussions with safety professionals.al.914 0. Because of this..986 0.. Even though safety management is gaining importance in India.8173 0.963 0.8078 0. Therefore.920 0.6.948 0.998 0. conceptual. Sufficient care and judgement were used to see that the content validity of each scale was not lost while removing items. self-reported accident rates and working days lost computed from the responses to a question asking the participants to give the number of accidents and working days lost in the year 2002 was used for this purpose.953 0. This procedure resulted in removal of 6 items from the instrument. which testifies the reliability of the instrument. 5.0 RESULTS AND DISCUSSION and analysis of the prescriptive. Convergent Validity and Reliability coefficients for safety management practices. Sl.993 0. The reliability of the scale developed was tested by computing Cronbach’s alpha (a) value for all the factors.994 0. The results are presented in Table 3. Results of Confirmatory Factor Analysis (Table 3) show that Convergent validity calculated using Tucker-Lewis Index The objective on the first part was to identify critical safety management practices that influence safety performance in industries. Face validity was assured in the initial stages of questionnaire development itself.7043 0.of items 8 5 4 4 4 4 Comparative Cronbach’s Fit Index Alpha α (CFI) (α) 0. it is yet to completely break free from the shackles of “Traditional Safety Management”. The present instrument has been developed based on a detailed review Table 3. 103 various reasons.948 0.8632 0. so as to ensure the content validity.Vinodkumar et.940 0. Results of Confirmatory Factor Analysis: Unidimensionality.903 Management Commitment (MC) Safety Training (TR) Workers’ Involvement (WI) Communication (CO) Safety Rules & Procedures (SR) Safety Promotion Policies (SP) Overall fit .940 0.6346 Tucker – Lewis Index (TLI) 0. Measuring Critical . No 1 2 3 4 5 6 Safety Management Practices No.
Org. self .70 WI 13.90. Hence.8601 0.8333 1.0298 0.104 Vilakshan. thereby demonstrating strong unidimensionality of the instrument.6295 1.00 -0.42 97.22 85.81* TR 19. Results (Table 3) for each of the constructs as well as the overall CFI are more than 0.72 -0.35 15.90. Communication and Feedback and Safety Rules and Procedures) and the Total Safety Management Score are significantly negatively correlated to mean values of self-reported accidents and working days lost supporting the respective hypotheses. Mean values of safety management practice scores.42 -0.40 12.87 13.44 18.79* -0.78* -0. Unidimensionality of the instrument developed was tested by computing Comparative Fit Index (CFI) for all the factors. When company Table 4.80* -0.6433 0.79 25.96 15.89 31. even though Pearson’s Correlation Coefficients are in the direction consistent with the hypotheses.55 -0. Worker Involvement in Safety is found to have the highest negative correlation with self-reported accident rates and is in tune with the findings reported from advanced countries.2091 0.45 13.98 114.91 15.05 17.86 21.0988 0.18 19.35 13. those two hypotheses are partially supported.79* Correlation with accidents Correlation with days lost * P< 0.63 31.0039 Days lost 0. ** P< 0.1429 0.06 12.29 15.16 23.08 12.0595 0.44 13.0912 0. 2007 (TLI) of each of the constructs as well as the overall instrument are greater than 0.83* SP 12.86 15.01 . September.66 -0. they failed to attain significance.0670 0.0588 MC 27. Pearson’s Correlation Coefficient show that four out of six management practices (Management Commitment.84 109.85** SR 14.91 -0.49 26.36 11.11 12. XIMB Journal of Management .59 -0.23 15.97 11.71 15. Worker Involvement in Safety.reported accidents and days lost in 8 industrial units along with Pearson’s Correlation Coefficients.81* -0.72 12.08 10.0643 0.75 95.46 15.65 14.09 -0.79 12.7598 0.29 23.56 Total 99.32 12. Accidents 1 2 3 4 5 6 7 8 0.74* -0.1422 0. For Safety Training and Safety Promotion Policies.42 11.47 90.64 -0.56 11.22 12.05. Results of investigation of predictive validity of the measuring instrument are presented on Table 4.05 13.99 14.23 26.39 12.56 13.86** CO 13. thereby demonstrating strong convergent validity for the instrument.80 9.77 84.
Management operates an open door policy on safety issues. My company provide sufficient safety equipments for the workers.. There is open communications about safety issues in this work place. Management consults with employees regularly about work place health and safety issues. Management considers safety to be equally important as production. My company doesn’t has a hazards reporting systems where employees can communicate hazard information before incidents occur.al. My company gives comprehensive training to the employees in workplace health and safety issues.Vinodkumar et. Employees do not sincerely participate in identifying safety problems. Safety issues are given high priority in training programmes. I am not adequately trained to respond to emergency situations in my workplace. Members of the management do not attend safety meetings. Management promote employees’ involvement in safety related matters. I feel that management is willing to compromise on safety for increasing production. My company has safety committees consisting of representatives of managements and employees. The targets and goals for safety performance in my organization are not clear to the workers. In my workplace managers/supervisors do not show interest in the safety of workers. . 105 MC1 MC2 MC3 MC4 MC5 MC6 MC7 MC8 MC9 TR1 TR2 TR3 TR4 TR5 TR6 WI1 WI2 WI3 WI4 WI5 CO1 CO2 CO3 CO4 CO5 SP1 Safety is given high priority by the management Safety Rules and procedures are strictly followed by the management Corrective action is always taken when the management is told about unsafe practices. my management acts quickly to solve the problems.. In my company safe conduct is considered as a positive factor for job promotions. Management encourage the workers to attend safety training programmes. When near-miss accidents are reported.. Measuring Critical . There is sufficient opportunity to discuss and deal with safety issues in meetings. Safety training given to me is adequate to enable me to assess hazards in workplace Management always welcome opinion from employees before making final decisions on safety related matters. Newly recruits are trained adequately to learn safety rules and procedures.
There exists very healthy competition among the employees to find out and report unsafe condition and acts. My supervisors and managers always try to enforce safe working procedures. Anderson. 6. G...)..M. Academy Press. Byrne. . Bohrnstedt.M.G. 2001. 1980. The safety procedures and practices in this organization are useful and effective. REFERENCES Bentler. J. Our supervisor becomes very unhappy and angry when employees find out and report unsafe conditions and acts in our section. Psychological Bulletin 88. (eds.. SP4 SP5 SR1 SR2 SR3 SR4 SR5 management encourages worker involvement in safety related activities and decision-making. and Safety management has been identified as a six-construct system and a valid and reliable instrument is designed to measure the important safety management practices in industries.. D. 1983. In Rossi. The safety rules and procedures followed in my company are sufficient to prevent incidents occurring. Structural Equation Modeling with AMOS: basic concepts. Measurement. XIMB Journal of Management . 2007 SP2 SP3 In my company employees are rewarded for reporting safety hazards (thanked. the sense of belongingness and responsibility of workers increase resulting in better safety performance. September. CA. 588-606. Bonett.0 CONCLUSION practitioners can use this instrument to measure the level of safety management in their organization and provide information to the decision-makers for developing their management strategies to enhance their safety standards. San Diego.. applications. recognition in news letter etc) In my company safety week celebration and other safety promotional activities arranged by the management are very effective in creating safety awareness among the workers. B. cash or other rewards. P. Hence. Safety inspections are carried out regularly.106 Vilakshan. It is found that when organizations take proactive measures to protect their employees. A Handbook of Survey Research. A. Wright. The facilities in the Safety department are not adequate to meet the needs of my organization. Significance test and goodness of fit in the analysis of covariance structures. the company derives financial benefits in reduced lost time and workers compensation expenses. P.
. Journal of Occupational Health and Psychology 5. USA. and motivation. 163-172. R. 97-103. Wilhelmsen.. HEW Publication No. M.. Psychological testing: Principles.. safety management practice and safety performance in offshore environments. Work and Stress 12.T. W. A.... 1998. Hair.. 157-188.A. N. A. 1990. 2003.K. 1998. 189-201.Vinodkumar et. Anger.al. Fleming.. Kaplan... A.. Kennedy. B. A safety climate measure for construction sites.A.F. Suffolk. T..E. R. Multivariate Data Analysis. Glendon. Smith. Gordon. 1983.. 1991. 347-358. R. A.. J... A. Landy. S. Pacific Grove. A.. Risk Perceptions and Safety in the Offshore Oil and Gas Industry. Assessing safety culture in offshore environments. Scauzzo.. Cincinnati. M. Assessment of safety culture at a nuclear reprocessing plant. Journal of Safety Research 9. Prentice-Hall International. 1995. 107 programming. R.P. Flin.. Development of a hazard and operability based method for identifying safety management vulnerabilities in high risk systems..C. Mearns.. Journal of Safety Research (11). 1998. Sage Publications. D. Eckhardt.. knowledge. New Jersey.. Neal. 26-33.. Association between safety and contingency measures and occupational . 168178. Safety climate factors. Safety Science 34. 1993. CA. Cohen.. Selfprotective measures against workplace hazards. Reliability and Validity Assessment. Mearns. Practitioner’s influence on safety culture. Hofmann. Ostrom... HSE Books..H. Lawrence Publishers. Cox. Safety Science 30. Journal of Safety Research 26. Professional Safety 28. Rundmo. R.. Safety program practices in record-holding plants.. 1994. Safety Science 41.. R. Measuring Critical . 1996. Flin. Tatham. Professional Safety 7.. F. Jacobs. Cleveland. 1977. and macro organizational influences on safety performance.J. M. F. 111-129. Cheyne. Safety climate. Assessing safety culture.. Cohen... B. Beland. H. Kirwan. (NIOSH) 75-185. M. S. L... W..131-149. Safety Program Practices in High Versus Low Accident Rate Companies. S. Cox. Lee. Kaplan.. H.. OH. micro. Anderson. 1979.H. 2001.L. 217-237. Cohen. K. Journal of Safety Research 22. T. London.I. Cohen. Flin. D. Factors in successful safety programs. (OTII 94454). R. Black. Safety culture: philosopher’s stone or man of straw ? Work and Stress 12 (3).J. E. K.G. 2325. 1975. 641-680. Erlbaum Carmines. R. 249-274. 2000. Zeller. 1993. 1996.. 121131.. Safety Science 39. R. D. High reliability process industries: Individual. Smith.J.. Cohen. Nuclear Safety 34 (2). Litherland. National Institute of Occupational Health and Safety.. R. C. 2000.M. Dedobbeleer. Whitaker.. Griffin. group differences and safety behavior in road construction. Perceptions of safety at work: a framework for linking safety climate to safety performance. USA. R. applications and issues.M. 1998. R..
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In the USA.ac. consumer protection legislations have been passed in many countries to ensure fair trade practices and to prevent consumers from exploitation. right to information and right to be heard. An earlier version of this paper was presented at the Annual Convention of AMDISA held in Dhaka during February 24 & 25. Bhubaneswar. known today as Consumers International (CI). for the first time in 1962. Received August 10. email: brajaraj@ximb. 2007. The * 1. Department of Business Administration. and Africa in the 1970s and 1980s and throughout the former Soviet Union in the 1990s. only in India and Sri Lanka such legislations have shown some teeth in protecting consumers’ interests. email: baghar@rediffmail. Latin America. the consumer’s sovereignty and their rights were constitutionally recognized in the US by US President John F Kennedy who equated the consumer rights with national interest. He provided four basic rights: right to safety. there is a need for addressing the issue of consumer protection in the SAARC forum. right to choose. After thirteen years. Since then. In view of the recent developments of consumer leaders being associated with the achievement of MDGs in the Asian region. 2. president Gerald Ford added the right to education to the existing list. However. Utkal University. Bhubaneswar.in . among the SAARC countries.com. 2007. The Authors are thankful for various suggestions made by the discussants during the convention. the movement extended into Asia. Xavier Institute of Management. Professor. Reader & Placement Officer.Consumer Rights Protection and Regional Co-operation among SAARC Countries* Basant Kumar1 & Brajaraj Mohanty2 Abstract The issue of consumer rights protection has gained importance and received international recognition after the United Nations promulgated the basic guidelines on consumer rights protection in 1985.0 INTRODUCTION The modern approach to consumer movement can be traced to the formation of the Consumer League of New York towards the turn of the 19th century which provided the platform to fight for the protection of consumer rights and sovereignty and gradually the consumer movement grew across the US. 1. Following the establishment of the International Organization of Consumers Unions in 1960.
in some others significant and spectacular progress has been made. 2. these landmark guidelines have opened the eyes of many national governments. Sri Lanka. activists and social scientists resulting in formulation and introduction of progressive legislations in their respective countries. While in many countries. The consumer movement is gaining momentum and public policy is being strengthened. 1999. this paper aims (i) to discuss the trends in consumer movements and relevant legislations to protect consumer interests in the SAARC nations. the United Nations adopted its guidelines for Consumer Protection in April 1985. the power has shifted from sellers to buyers. in the process of economic liberalization and globalization. On the basis of this charter. The other three rights are right to basic needs. The new consumer power has given consumers unprecedented strength to get information. consumers are getting the treatment as kings (Rice. the umbrella body for 250 organizations in over 115 countries. Maldives have enacted their respective consumer protection legislation.1 India ‘Consumerism’ began to dominate the Indian market towards the end of the 20 th century following the economic reforms and various agreements that were signed under the World Trade Organization. The Asia Pacific region has seen a wide diversity in consumer protection legislation. 2003). There has been a surge in public awareness of consumer issues. expanded the charter of consumers rights contained in US bill from five to eight. Pakistan. The Tribune. XIMB Journal of Management . The emerging trends of consumer movements and legislations in these countries are presented in Table-1. 2. September. Nepal.0 CONSUMER PROTECTION LEGISLATIONS IN SAARC COUNTRIES Consumer protection legislation is an integral part of the consumer protection framework in any country. Cunniff. quality and choices. With the global IT revolution. In competitive markets with high transparency with regard to price. 2007 Consumers International (CI). and (ii) to assess the need for regional dialogue on consumer protection in SAARC forum. It meant the realization of the rights of the consumer as envisaged in the Consumer Protection . consumer associations. India. 1998. Among the seven members SAARC countries. right to representation and right to healthy environment. consumer protection law and redressal mechanisms are still rudimentary. Considerable progress has been made in the implementation of the guidelines at the national level and in strengthening cooperation at the regional and international levels.110 Vilakshan. Against this backdrop. Gradually. Bangladesh and Bhutan are yet to enact any legislation.
power etc.Kumar et. This has been further strengthened by the latest additions to the lists of legislations .al. Prior to the enactment of COPRA 1986. Consumer Rights Protection . The enactment of Consumer Protection Act. These measures dealt with only certain aspects of consumer protection and were mainly punitive and preventive in nature. Consumer Protection Act 1979. This is a significant acknowledgement of extreme of the rampant consumer abuses including particularly the public utilities like telephone. Persisted demand for legislation by NGOs and consumer activists is on. transport.1993. manufacturer and service providers. (2006). 111 Table 1 : Consumer Protection Act in SAARC Countries Country India Sri Lanka Relevant Act Consumer Protection Act 1986 Consumer Affairs Authority Act 2003 Year Amended/Repealed/Remarks Amended in 1991. One of the greatest achievements of the Indian consumer movement is the enactment of this dynamic law. & Fair Trading Commission Act 1987 Operational but ineffective due to political instability and poor literacy North Western Frontier Province Consumer activists and NGOs are crying for its implementation Nepal Pakistan Consumer Protection Act 1999 Islambad Consumers Protection Act 1995 (NWFP) Consumer Protection Act 1997Baluchistan Consumer Protection Act 2003 Sindh Consumer Protection Act 2003Punjab Consumer Protection Act 2003 Non-operational Consumer Protection Act 1996 Not yet enacted Maldives Bangladesh Operational with limited scope Obstacles are being created by powerful lobby of vested interests for enactment of specific legislation. ———- Bhutan Not yet enacted Source: Kumar and Mohanty. updated Act 1986 (COPRA 1986) and ensuring right standards for the goods and services. several statutory measures for consumer protection have existed in India for a long time..2003 Repealed Control of Prices Act 1950.. The consumer could not seek remedy or redressal against the offending trader. 1986 by Parliament was a milestone in the history of consumer protection movement in India.
1993 and 2002 to further guarantee safe consumerism. National Commission functions in Delhi. XIMB Journal of Management .06.989 Cases Pending 9117 1. comprehensive and unique piece of legislation.37 73. 2007 Agency Cases filed Cases disposed since inception of since inception 48.11. Till date there are 605 district forums.317 39814 3. At present there are 35 state Commissions. state and district levels.377 24.5 million cases have been disposed of (www. National Consumer Table 2: Performance of Consumer Forums as on September 7. safety.27.ncdrc.in). public hearing and consumer education.931 4. This Act has been regarded as the most progressive. 2005. the right of choice. 2002 and Right to Information Act.305 2.78. In the mean time COPRA 1986 had been amended three times during 1991. Every State Government has a State Commission.009 28. 2007 such as Competition Act.103 25. The apex court.html/10/07/2007 .nic.328 % of Disposal 81.8 million cases.nic.906 3. out of which 569 are reported to be functioning. viz.19.112 Vilakshan. September. A consumer can file his complaint without assistance of any advocate and save unnecessary litigation expenses.48.in/statistics_files/sheet005. The disposal of 88 per cent of the cases is a significant achievement in the prevailing conditions. It can be seen from Table 2 that all these courts have handled nearly 2. A separate Department of Consumer Affairs was also created in the Central and State Governments to exclusively focus on ensuring the rights of consumers as enshrined in the Act. of which about 2.07 90. The other two rights are dealt separately by other Acts. redressal.68. The strengths of the consumer after amendment of COPRA 1986 can be best understood from some of the latest landmark judgments of the Consumer Courts. The special feature of this Act is to provide speedy and inexpensive redressal of the grievance of the consumer and to provide him specific relief or award of compensation wherever appropriate. It recognizes six of the eight rights of the consumer as provided in the UN charter. The most important feature of the Act is the provision for setting up three-tier quasi-judicial machinery popularly known as “consumer courts” at national.ncdrc.53 87.86 National Commission (1) State commission (35) District Forums (570) Total Source: www.02.13. information. The third tier is in each district and is called district forum.072 21.
10 million by a District Court in Delhi in April 2006 for the presence of a foreign object in a Pepsi bottle. Similarly at the same time. not the rural consumers. 1 of 1979. The government presently has identified 54 product varieties to be Sri Lanka’s legal system has protected consumer rights through executive power and various acts. The most important feature of the Act is the creation of a Consumer Affairs Authority (CAA) and a Consumer Affairs Council (CAC). However. 29 of 1950 (ii) The Consumer Protection Act No. inadequate time being given by the judges who are retired judges and adjournments of hearing dates by the lawyer for his pecuniary interest. Sri Lanka Standards Institution. But . and (iii) The Fair Trading Commission Act No. The multinational corporate giant Pepsi was slapped a fine of Rs. 1. another District Court punished Coca Cola with a fine of Rs. But CAA is the only such organization which handles all types of consumer problems.. which brought together the Fair Trading Commission. (i) The Control of Prices Act No. 1 of 1987. Consumer Rights Protection .Kumar et. 09 of 2003.2 Sri Lanka it was only in 1975. April 29. This legislation repealed three basic laws namely. Among several organizations safeguarding the consumers’ interests in the country.000 for the presence of a dead insect floating in a sealed bottle (Indian Express. 20. Department of Weights and Measures and Telecommunications Regulatory Commission play very important roles. in the face of scarcities and queues before government shops that the Government felt the need for a regulation and established the National Prices Commission. pending for adjudication over three years. in which a US citizen of Indian origin sought a whopping Rs. in spite of such examples. Consumer movement in India has also been accused of being elitist and mostly benefiting urban. 113 Disputes Redressal Commission in 2003 allowed for early hearing of a medical negligence case. June 3.al. in general the consumer interests are affected by several weaknesses in our regulating mechanisms due to prolonged process. in some cases for more than five years.770 million compensation-highest in the country’s medical history. 2006).. The new law is intended to promote effective competition and protect consumers’ interests as well as regulate internal trade and anti competitive practices. One of the latest is the Consumer Affairs Authority Act No. Pepsi’s spokesman however said that bottles might have contained spurious products. 2. be it goods or services. Department of Internal Trade and Department of Weights and Measures under one umbrella to facilitate more effective addressing of consumer needs.for the death of his wife (Times of India. CAA. An early legislation goes back to the Food Control Act of 1939. the latter functioning as a higher body with power to review the decisions of the former. 2003).
there is a total absence of consumer representation in the process of decision-making. mosquito coils.dailynews. In this backdrop. Offenders of price violation are subject to trial and fine up to Rs 1 million. In addition. the Consumer Protection machinery in Nepal has failed to deliver the results. 2006) The Consumer Protection Act. disseminating information and conducting studies. sold or supplied. right to be protected.lk/2006/04/06). nepalvista. milk powder. who influence the demand. match boxes and wheat flour are covered in this category.dailynews. recently. In view of this failure. prices. right to choose. The review of Sri Lankan News Papers like ‘Daily News’ (www. Some critics allege that due to the corrupt legal and political system and a lethargic public service due justice can not be given in many cases. XIMB Journal of Management .114 Vilakshan.lk) reveals that the consumers of Sri Lanka lack proper education about their rights and they very often are not provided with correct information regarding products and services. senior officials and experts have asked the government to enact new laws including competition law and to set up new institution to oversee consumer related issues (ekantipur.com/ March 15.2 million (www.000 or imprisonment up to 14 years or both. The Act also regulates the powers given to Inspection Officers to inspect. 2006). It has provided for the establishment of the Consumer Protection Council under the Chairmanship of Minister for Supplies to advise the . investigate or search any place where there are reasonable grounds to believe that consumer goods or services which are not safe. supply and price of any consumer goods or services by unscrupulous means are punished with fine ranging from Rs 30. right to be redress grievances. right to be informed. September.lk) and ‘Sunday Observer’ (www. It recognizes six basic consumer rights viz. The Compensation Committee at district level investigates the complaints and awards compensation in deserving cases. efficacious or of the prescribed standard are being produced. quality and purity of consumer goods and services.3 Nepal government on matters relating to consumer protection. 1998 of Nepal came into force in 13 April 1999. 2007 under retail price marking by CAA. March 22. The political instability of Nepal coupled with very high degree of corruption and massive poverty with common people having no or little access to developmental cake has caused the administration ineffective (www.com/April 26. The offenders. Essential consumer products such as LP gas.sundayobserver. 1998).000 to Rs 500. Appeal against the decision of the Compensation Committee lies with the Appellate Court (Nepal Reporter. right to be heard and compensated and right to consumer education. 2. It is reported that recently CAA has conducted two hundred fifty successful raids and collected fines to the tune of more than Rs.
Baluchistan Consumer Protection Act. NWFP Consumer Protection Act.pakistantimes. Sindh Consumer Protection Ordinance. Its vision and strategies have significant cross linkages with both market practices and issues of governance.com. However. provide for the establishment of consumer protection courts and consumer protection councils in the respective areas of enforcement. consumer concerns are marked by their abuses in the juridical debates. www. Pakistan Standards and Quality Control Authority (PSQCA). 2005 and 2006 on the eve of World consumers’ Day Celebration that many consumers in Pakistan remained disillusioned with the rights and privileges enjoyed by them (www. Consumer protection movement in Pakistan has got a boost with the registration of Consumer Rights Commission of Pakistan (CRCP) in 1998. CRCP has established Consumer Complaint and Redress Forum (CCRF) for handling consumer complaints.net) Consumer protection groups in Pakistan won a small but significant victory in 1995 when the government enacted the Islambad Consumers Protection Act. and non-governmental organization.. It is not supported by any industry or commercial sector. Consumer Rights Protection .al. It largely works through local fund-raising and engaging volunteers. During the past three or four years.jang. 2005. During the last decade similar laws have been enacted in other provinces viz. consumers are also largely unaware of their rights and possible legal remedies. CRCP is an independent.pk/thenews/daily. National Electric Power Regulatory Authority (NEPRA).. CRCP along with different regulatory bodies has been actively engaged in protecting and promoting consumer interests. It is the first national consumer organization in the country. These regulatory bodies include. amongst others. All these laws recognize basic consumer rights.Kumar et. and assert to protect consumers from unfair trade practices with penal provisions of fine or imprisonments or both. 2003. Besides. no effective implementation and enforcement mechanisms of these laws are available. which approaches the issue of consumer protection in comprehensive and holistic terms.4 Pakistan The law in Pakistan provides for partial accommodation of the consumers interest in the legislative scheme. 2004 and Punjab Consumer Protection Act. This is evident from the report in print media in March. Furthermore. non-profit. Pakistan Tariff Commission . 1995 for the federal capital territory. But these laws are not yet operational as the rules of business for their full operationalization have not been framed. who have some grievance against the civic agencies and market practices. 1997. 115 2. The CCRF handles complaints according to the policy devised by CRCP and extends legal advice to its members and citizens.
consumers are not able to free themselves from the vicious circle of adulterated goods. textiles and yarn.000 on the first instance and by an amount between Rf 5000 to Rf. A recent .net). the Consumer Protection Act. Most of the GDP comes from fishing and tourism. XIMB Journal of Management .1. 1996 has attempted to protect the basic rights of the consumer. millions of people in the country are being exploited by a group of unscrupulous and profit-monger businessmen. The expanding tourism industry underpins economic growth and is the Maldives main employer and source of revenue. As a result.5 Maldives between Rf 500 to Rf 1. Hence. 2007 (PTC).6 Bangladesh Maldives with a chain of about 1200 small islands covering 300 sq km and having population of little over a quarter million has a strong central Government. Pakistan Telecommunication Authority (PTA) and Monopoly Control Authority (MCA). Standard of Weights and Measures Ordinance. television.00. 2. cement. This Act mainly focuses on checking of hoarding of goods. control and supervision of the Ministry of Trade and Industry. rice. Due to the dearth of proper and effective implementation of existing laws on consumer rights. None of these are appropriate and applicable in the context of present-day consumers’ society. 1940. However. and Breast Feeding an Alternative to Child Food Ordinance. there is hardly any exploitation of consumers. prefabricated buildings and vegetables worth more than US$ 500 million. Laws enacted during British rule in India and thereafter in Pakistan are still in force. Drugs Control Ordinance.00. Some of these laws include Trade Mark Act. the market is dominated by black money and smuggled goods by beleaguered manufactures or stealthy shopkeepers (SOS-arsenic. 2. 000 where such offence is repeated. The regulatory agencies of the government designed for monitoring product standards and market ethics are ineffective or non-functional. No specific law has been enacted in the country.116 Vilakshan. In effect. cigarettes. engines for boats. except the administration. there is no comprehensive law that can protect the interests of consumers. incorrect weights and measures. Against this socio economic and political background. aircraft parts.261). price manipulation and misleading advertisements for sale of goods and provision of services. 1984. September. The country’s economy is dominated by annual imports of oil. 1961. three is a penal provision in the Act to punish the offender with a fine Consumer protection is virtually nonexistent in Bangladesh. 1959. Hence. Since it is a small and peaceful society under effective central ruling. It has traditionally been a subsistence economy with few resources and low per capita income (GDP per capita US$ 2. 1982. there is no other mechanism to redress the grievances of consumers. Unadulterated Food Ordinance.
net/2006/01/14). are adulterated. workshops. Consumer protection movement in Asian countries has further been strengthened with the economic integration of countries in the region viz. In view of the persistent demand from CAB. nothing has been heard about the fate of the proposed law. since then.thedailystar.Kumar et. seminar. It has been organizing meetings. The main obstacle is a powerful lobby of vested interests which has been active against enactment of this law (www. discussions. and conducting surveys to further consumer movement and pressure the government to come with a comprehensive Act to protect the consumer interests. So it is very easy to guess what people are consuming as food. Selling adulterated food is a punishable offence. Pakistan and other neighboring countries have vastly increased. But there has not been any concrete outcome.net/law/ 2004/03/02). Association of South East Asian Nations (ASEAN).0 CONSUMER MOVEMENT AND REGIOAL COOPERATION With globalization. the cabinet approved in principle the draft law in September.7 Bhutan The awareness on consumer protection in Bhutan is not fully developed and there is no specific legislation for consumer protection. The trade among India. China. 2004. The movement is picking up and the public opinion is growing for enactment of a comprehensive consumer protection Act. workshops and seminars at higher level in the government have been going on since June 1999 to frame simple rules and act to protect consumers’ rights and interests from unfair and unscrupulous trade practices. A beginning has been made by some governments and consumer organizations to evolve such cooperations.. But. 2.al. especially food items.org). Asia Pacific Economic Cooperation (APEC). South Pacific Forum . 117 survey conducted by the Consumers Association of Bangladesh (CAB) has revealed that more than 50 percent products in Bangladesh market. The survey conducted by CAB during 2005 reveals that 53 per cent of the city’s consumers are aware of their rights as consumers (www. but the sad truth is.. 3.consumersbd. Enactment of such law in the neighboring countries has also created pressure on Bangladesh to have a similar law.thedailystar. the civil society members and the media. This has made it essential to have common laws and multilateral agreements in an environment of mutual cooperation. However. Consumer Rights Protection . The CAB being the lone such organization of any significance in the country has been the pioneer in consumer movement and education in Bangladesh since its inception in 1978. there is increased international trade. meetings. those dishonest groups involved in this practice have never been brought to justice (www.
has been replaced by Right to Information Act. They would not be confined to the legal definition of ‘consumer’ defined in many of the Asian Consumer Protection Statutes.uk). UK. is publishing the summary of case studies of consumer involvement from around the globe. the National Consumer Council (NCC).ncc. This work culminated in the Freedom of Information Bill which was finally passed in 2002. with the help of CI and its regional offices. Thus. 2005 and the latter is operational. Pro-Women” into its work programme. Later the Act. education.org. now. 2005 that the people of Asia who account for 63 per cent of the world population are among the most deprived of humanity on this earth (living on less than US$1 a day). Consumer movement world wide. They have also urged to emphasize beneficial outcomes for all consumers particularly in food. . health. Ahmedabad successfully lobbied and promoted consumer rights over a period of 24 years. They would serve the needs of all consumers. 2007 (SPF) and South Asian Association for Regional Cooperation (SAARC). September. XIMB Journal of Management . This allows the consumer movements to educate the consumers. which was not operational. For example. in India the Consumer Education and Research Society (CERS). They show the importance of effective consumer representation and involvement. They have vowed to call on the respective governments to provide them an enabling environment i. democratic. Following World Consumers’ Day 2002. water. they resolved many action plans to address the MDGs which would ultimately further the consumer movements in the region. 2005). remind them about their duties and responsibilities and influence the policy makers to adopt changes in the legislations. and produce leaflets. radio and television programmes to celebrate March 15 as the World Consumer Rights Day. housing. and the variety of methods for ensuring involvement (www. ProRural. including those unable to consume and living below the poverty line as well as consumers who are victimized by the inequality of bargaining power in the marketplace. Consumer organizations including governments around the world hold marches and rallies. if required. has extended its wing to embrace the Millennium Development Goals (MDGs). The cases highlight successful consumer campaigns with an ongoing public impact. seminars and workshops. publications. The Asian consumer leaders have sought for the cooperation of UNCTAD and Consumer International which jointly organized the conference to integrate the MDGs and the theme “Pro-Poor. energy.118 Vilakshan.e right to information. The consumer leaders from Asian countries have recognized in the “Asian Conference on Millennium Development Goals and the Consumer Movement” held in Kuala Lumpur on August 23. legal and judicial space and support to work towards the achievement of the MDGs (Asia Pacific Consumer.
it needs improvements in administrative framework to expedite and deliver timely justice. The good experience in India and Sri Lanka is likely to percolate to other countries also. disabled persons. With the implementation of the Agreement on South Asian Free Trade Area with effect from January 2006. 41 Globalization has brought a greater choice of products and brands in many areas. environment. and intellectual property rights sectors.al.. contribution of youth to environment.Kumar et. shelter. has already dealt with important matters concerning drug abuse and drug trafficking. biodiversity. awareness of TB and HIV/AIDS and tourism. telecommunication. and increased quality consciousness among consumers. needs to be more effective and not merely confining to some raids on the World Consumers Day. REFERENCES Consumer International. which is in place. They have called on all consumer organizations in the region to redesign their national and regional work programme towards the theme and sought for better cooperation. Asia Pacific Consumer: Millennium Development Goals. The consumer organizations like CAB and UBINIG supported by intelligentia and media have toughened their stands through mobilizing and leading a countrywide campaign to get the Consumer Protection Legislation adopted by the Parliament ( Jatiya Sangsad) and it will see the light of the day soon. Vol. participatory governance. poverty eradication. The countries like Pakistan which has Consumer Protection Acts for each province cannot neglect the operation of these Acts any longer. youth. In Bangladesh. literacy.. girl child. Once political stability prevails in Nepal. the Consumer Protection Act may sharpen its teeth to protect consumer interests better. Bhutan may take advantage of the landmark developments in Indian consumer . In this direction the SAARC assembly should actively play a pioneering role for continuous dialogue in association with the Consumers International and UN for formulation and effective implementation of Consumer Protection policies and legislations in its member countries. people mostly suffer from adulterated foods which are matters of serious concern. waste management.0 FUTURE AHEAD movements. These interventions are likely to promote consumer rights. The Sri Lanka Act. a common agenda on consumer protection by the SAARC will undoubtedly help in furthering the movement and setting up a regional consumer protection platform. 4. However. (2005). It has urged consumers to become more demanding. Consumer Rights Protection . India is the leading country among SAARC nations where COPRA is enforced in right perspective. 119 transport. SAARC forum since its birth in 1985. The movement will get its full force if SAARC also considers this issue as a prime theme for deliberation as an agenda in one of its forthcoming Summits.
India Consumer Protection Act.net www. (2003). September. The Consumer is King.net//26.perspectives. 1996. After condom. 1986 (Amended). 1979.nepalvista. “Consumer Protection Legislations in SAARC Countries: The Emerging Trend”. 2007 Consumer Protection Act. (1999). 2003.nic.pakistantimes.4. Consumer is the King.1.lk www.dailynews.org.com/15.jang.2006 www. March 22.2006 www.ekantipur.ncc.com).com). Saturday. www. March 22. (1998).org) Consumer Affairs Authority Act. 1 lakh for ‘Condom’ in cola.org) Consumer Protection Act. (www.3.120 Vilakshan. B and Mohanty. (www.lk www. (www.4.consumersbd. Srilanka. Global Business & Economic Anthology. Pepsi fined for Rs.ciroap.org) Consumer Protection Act. 1998. 1995. India www. Sri Lanka Cunniff John.org) Consumer Protection Act. 1998 Rice Andrea Williams.uk www. April 28 The Tribune.ciroap.org www. it’s insects.sundayobserver. Nepal. December. www. April 29 Kumar. PP 461472 Nepal Reporter. (www.thedailystar.oneworld. Vol. (www.in www.ciroap.com.com/26. New Delhi.bouldernews.net/2006/01/14.pk/thenews/daily. (www. Islamabad. The Consumer is King. Dec 17 Times of India.2006 www.net/law/2004/03/02 . XIMB Journal of Management .ciroap.thedailystar. (2006).ncdrc. Maldives. B (2006). October 18 Indian Express (2006).
PESIT. In this environment. employment and in distribution of goods and services. Bangalore. email: andini30@yahoo. government. it is necessary to increase the efficiency. 2007 1. A1 & H. Venkatesha2 Abstract Retailing has become a pivotal point of discussion due to its role in economy. email: hrvenkatesha@rediffmail. The revolution in Information Technology has immensely contributed to the effective management of supply chain. promotion. 0 INTRODUCTION Today Retailing has become ‘dear’ to Indian corporate houses. Indian corporate houses are showing unprecedented interest in organized retailing. Video Cameras. Retailers have to update their technology. 2006. better. and to create a better shopping atmosphere. which block the implementation of Bar code in apparel retailing. Electronic Article Surveillance. Banglaore. Head of the Department and Professor. and timely information about their operations. Silent Alarms and Tunnel Scanning. technology is not limited to process information. Multinational companies like Wal-Mart and Metro are already in Indian market in different ways. capital. reduce the cost of operation and increase the customer delivered value. if one has to survive and grow in the industry. Department of MBA. Assistant Professor. The important technological tools that have made difference to the retailing are Bar Coding. 1. it is also used to prevent theft. Dayananda Sagar College of Engineering. Electronic Data Interchange.Factors Blocking the Implementation of Retailing Technology* Veena. Organized retailing is an emerging sector in India. margin and customers. WalMart is procuring more than 0. Revised September 12. However. human and managerial resources can be used to make retailing more efficient and consumer friendly. Radio Frequency Identification. multinational companies. This article analyses the factors.In today’s real time retailing world.co.in 2. Technology provides retailers with more. media.R. political parties. Technology.5 billion dollars worth of goods from Indian * Received December 26. and of course to the consumers. Competition intensifies with organized retailing. and Point of sale System.com . Automatic Identification and Data Capture (AIDC) is one of the important technologies for retail management. everyday of lag results in loss of sales. Technology gives competitive edge to retail organizations. Bar Code is one of the important and simplest technologies introduced in retailing.
the Munjals and many others are taking retail as a priority sector.Kearney Inc. Metro are almost on their way. Retailing in the Indian economy. September. Wal Mart.5 million new jobs by 2010’. the Piramals. In India. Tesco.Kumar’s. Multinational retailers are planning to enter Indian retail sector in different ways. thus leaving the huge market potential still untapped (Murali. The UPA Government and its partners have been debating and taking sides on pros and cons of FDI in retailing. compared to 80% in the USA. XIMB Journal of Management .5 outlets per 1000 population). Media being mirror of what is happening around us has been deliberating both in its news and views versions on developments in retailing. Technology gives competitive edge to retail organizations. In this environment.122 Vilakshan. Food World.V. Many Indian companies have diversified into retail sector. a retail research and consulting firm estimates that the average per capita retail space in India is 2 sq. the Tatas. next only to Agriculture. Technology has provided . ITC.ft whereas it is 16 sq ft in US. A. channels is helping in creating more awareness about global products and global retailers to consumers. at around 3 per cent. WalMart is also trying to enter Indian market through its Indian partner. Reliance. nearly 97 per cent of retailing is in unorganized sector. if one has to survive and grow in the industry. the Bharathi. The share of organised retailing in India. Tatas. S. is the second largest employer. India’s retail trade employs four crore people and is the main source of income for over 18 million nonagricultural small and family enterprises. the Rahejas. Reach of satellite T. 2007 market for its world operations. Big Bazar. According to Bhargav and Anand (2005). Metro a German retailer has started its wholesale operations in India. places India in the 6th position on a global retail development index. RPG Enterprises. The retail organizations have to continuously upgrade or adapt to the changing technological environment. 40% in Thailand and 20% in China. Majority of these outlets are very small and are in rural /semi urban area. It is estimated that there are nearly 12 million retail outlets in India. The Reliance. Many of them have already invested or about to invest in a big way. Shoppers Stop have already made their mark in Indian retailing sector. Rapid growth of organized retailing is a clear indication of consumers’ interest in retailing and its different formats. KSA technopak. The country has the highest per capita outlets in the world (5. Organized retailing is a sunrise sector. Bharati. Competition intensifies with organized retailing. hopes are that the modern retail sector will add from ‘1 million to 2. Organized retailing in India has a huge scope because of the vast market and the growing consciousness of the consumer about the product quality and services. With major players making the retail pitch. 2006). it is necessary to increase the efficiency and reduce the cost of operation.T. with its two outlets in Bangalore. is very low.
Bar coding helps to detect shortages or excess of goods supplied by different suppliers. easy billing. RFID tag carries information about the product.. For example. At the point of sale. Retailer is a crucial link in the chain of distribution of goods and services from producers to consumers. Technology adoption is absolutely essential for these retailers to remain competitive. Barcodes are capable of being ‘read’ and decoded by bar code scanners. New technologies like RFID (Radio Frequency Identification). what type of product it is and the expiry date of the product. Technological innovations offer productivity and efficiency benefits to retailers. 2. This immensely helps in warehouse management. bar coding facilitates automated billing.. technology is not limited to increasing information. Even in India. If these outlets have to survive. EDI (Electronic Data Interchange) and host of Information Technological developments have added value to Retailing. it is also used to prevent theft. quick billing service. When retailers like Wal-Mart are entering India.Veena et. Bar coding is not just an identification tool but also an efficiency tool. majority of 12 million outlets in India are very small. better. a software development and financial services . promote the store’s goods. In this fierce competitive era. This information can be regularly updated so that any participant in the supply chain can find out. EDI involves the electronic exchange of business transactions over the internet and other networks among retailers and their customers and suppliers. As estimated by KSA Technopak. speedy accounting procedures. if retailers have to survive and grow they have to implement technology. lot of research and development is going into the retail technology. and more timely information about their operations. In the retail business modern technology has made it possible to use Bar codes. RFID has potential to increase the efficiency throughout the supply chain. and create a better shopping atmosphere. EDI (Electronic Data Interchange) is one of earliest uses of information technology for Supply Chain Management. Tesco opened Hindustan service center. their most important success model would be technology based back and front-end operations. which means faster customer checkouts. structural and functional changes. EDI is a B2B tool. However. better inventory management.al. Barcodes benefit retailers to reduce inventory and other supply related costs.0 LITERATURE REVIEW The retail technology has undergone a phenomenal development over a period of time. which vary in thickness. Bar code (also known as Universal Product Code) is a printed code that consists of a series of vertical bars. not only where product is but also where and when it was manufactured. Bar coding system helps to reduce storage and handling cost. they have to undergo technological. 123 retailers with more. Factors Blocking the .
For instance (www. both individual and organizational factors are important for the success of Technology in retail organizations. apparel industry data indicate that because of the close links between the suppliers and retailers. IT knowledge and innovativeness) and three characteristics of organizations (business size. we can find large chunk of apparel retailers who have not even adopted simple Bar Code Technology in their shops. and company level help retailers reduce inventory levels by substituting information for inventories. XIMB Journal of Management . region. 2007 office in Bangalore. Apparel retailing is a major segment in retailing industry. product handling and price . low investment.up adoption of complimentary information technologies at global level. Trent Ltd. the Hindustan service center performs retail back office operations.retailforward. As per the study of Thong and Yap (1995). Shoppers’ Stop. and demand faster order fulfilment. The Information Technology has immensely changed the potential of retail technologies. Ogden and Ogden (2005) have defined Retail Information System (RIS) as “ a method for systematically gathering and analyzing. and resistance for change (both from consumers and retailers) technology adoption has not happened in a big way in Indian apparel retailing. As per the study of Smith and Weil (2005). It all started in a big way from 1980s. information technologies that provide real time information on specific products at the store. 2005). billing and answering technology related query (Hindu.. Brown (1997) and Aguirregabaria (1999) have shown that. in smaller quantities. Harris and Mills (1981) have shown that.124 Vilakshan. (Fisher and Raman 1996) It is found that. September. As per Achabal and Shelby (1987). the labour cost associated with check out operations. storing and utilizing valuable retail information and data gathered in the market research process”. Implementation of Technology is a very complex issue. on individual and organizational factors within small business in Singapore. Madura Garments have spent huge resources-in enterprise resource planning (ERP) packages to improve inventory management. order more frequently. Even Indian companies are investing heavily in developing retail related technologies. competitiveness of environment.com). This immensely reduces the cost to retailers. and information intensity) were found very significant. advances in Information System and communication technology are significantly enhancing the prospects for retail productivity improvements and promise to change the face of retailing. According to Raymond (1990). such as pay roll. the three characteristics of Chief Executive Officers (attitude towards adoption of IT. Due to small-scale operations. there was a ratchet. retailers who have accurate and timely information on sales. Hence. With a staff of nearly 800.
with a subsequent lowering of production and inventory carrying costs and improved product availability to the consumer. Systems based on UPC codes also provide the manager with the ability to know instantaneously what is selling and what is not. improve inventory management and enhance communication. use of scanners have been a primary focus of efforts to increase productivity. 2001). there are complementarities between the new information technology and frequent deliveries. Some retailers believe that the products available have little relevance to their business. Achabal and Shelby (1987) have shown that. Bar coding has become a key aspect of overall profitability. ordering.. in his study. finds ‘considering how much effort it takes to handwrite information then go back after the fact and manually key the data entry. Since Bar Coding is interdepartmental and inter disciplinary. 125 marking account for more than 50 per cent of store’s total expenses. receiving. and point of sale data gathering”. . This is consistent with the recent move in the retail sector toward higher-frequency delivery schedules. inventory management. all functions in the organization will be affected. There are also concerns about product obsolescence. more error free and lowering labour costs. making it possible to better adjust assortment and inventories to market demand.. The information would allow firms better to react to changes in consumer demand. bar code system can process enormous amount of data to reduce errors. That means better customer satisfaction at a lower cost to the retailer. Therefore. The same study also reveals that the new technology tends to increase store size. it is obvious how much faster the bar coding really is’. increase speed. When used in conjunction with scanning hardware. Lebow (1998). (Lebow. In a study on factors that affects the implementation of barcode (CEST.Veena et. This is consistent with recent increases in store size and the success of the superstore model of retail organization.al. service and success of the wide variety of companies that have implemented it into their quick response system. the main barriers to technology uptake by small retailers include lack of relevant information about the key benefits of retail technology. According to a recent study (Holmes. bar code an automated process referred to as ‘key less data entry’ is one of the most popular and cost effective methods of data entry. or that equipment is too expensive to justify a purchase. The best way to secure this commitment is to identify operation problems that the system will solve and document the benefits the company will receive. According to Bartko (1996). including shipping. 1998) it is found that it is critical to get the commitment of management during the earliest possible stages of the project. According to Crossley (1995). “Bar coding is the basis for automating many functions surrounding the movement of merchandise. Factors Blocking the . 1995). UPC is making check out faster.
company show room (20) and Joint family (10). but responses were received finally from 100 samples which were from Malleshwaram 22. M. the share of organized retailing in apparel segment is also growing day by day. The industry presently employs approximately 5. 21 were ladies wear retailers.Road 17. India is emerging as a world leader in apparel and garment sector. This would helps technology providers. followed by partnership (24). 39 Men’s wear retailers and 37 were retailers in all category of apparel products. Since the main objective of the study is to know the factors that block the implementation of Bar Code in Apparel Retailing.126 Vilakshan. the respondents were apparel retailers. The main objectives of the study are: To study the Bar Code implementation scenario in apparel retailing industry. Domestic market is also important for any industry to grow and stabilize. Such growth would need technology support and Bar code is one of the most important and elementary technology which would be used extensively in the sector. Garment is one of the sectors. retailers and other stakeholders to address this issue. XIMB Journal of Management . (AEPC Report). 2. The objectives of the study are mainly focused on factors blocking the implementation of Bar Code Technology in apparel retailing. Initially. Formulation of Questionnaire The survey questionnaire had seventeen statements for non- . The primary data are collected with the help of a survey conducted in Bangalore. to continue the growth the apparel sector would need a capacity expansion involving Rs 1940 billion (US$ 43 billion) and a workforce support of 14 million people over the next five years. Food and Grocery and Apparel retailing are two major segments in Indian retailing. Questionnaire was administered on the owner or the Manager of the shop.0 OBJECTIVES 1. As in other segments of retailing. However. which can also absorb sizeable portion of such unemployed. To study the factors which block the implementation of Bar code in apparel retailing. Jayanagar 26. The growth rate in this industry during 2005-06 has been approximately 25 percent. Among the respondents. 4. sample size of 150 had been planned.5 million persons directly and indirectly and 35-40 percent of these are women. 03 were kid’s wear retailers. September.0 METHODOLOGY The study required both primary and secondary data.G. Banashankari 19. Ownership profile of respondent retailers is skewed more towards sole traders (46). Branded apparel retailing has high potential for organized retailing. 2007 3. and Rajajinagar 16. government. With phasing out of Multi Fibre Agreement.
173.245.. ‘doesn’t add any value in billing’.60 were considered as significant under each dimension. acceptability.5) for one dimension namely . The reliability test indicates that. The individual percentages of variances for the factors are 27.al.. and 8. it can be concluded that implementation of high-end technologies like RFID in retailing RFID and Tunnel scanning may have to wait for long time in India.1. 5. This dimension includes ‘doesn’t help to avoid theft’. it can be concluded that the percentage of non implementation of Technology by apparel retailers is about fifty-five percent. Bar Coding technology is one of the elementary technologies in Retailing. 127 implementation. When this is the scenario for Bar Coding.0 RESULTS OF ANALYSIS Out of the total respondents. 13. No Value addition and Not Operation friendly and moderately significant (>0. From the above. Results of the exploratory factor analysis revealed 12 significant items in five factors (see table – 2). Five point Likert scale being the simplest and easy to understand. 9.Veena et.849 and their total variance explained by five factors is 71% as in Table.7) for two dimensions (factors) namely. 12. Cronbach á values are as shown in table -3. ‘doesn’t facilitate in fixing accountability’. á values are highly significant (> 0. Factors Blocking the . The Cronbach á values were calculated for logical group of factors with factor loadings > 0. is suitable for this category of respondents. The factors with factor loadings > 0. 55 respondents have not implemented Bar Coding in their shops. The analysis revealed the following dimensions: Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 : : : : : No Value addition Not Operation friendly Less Turnover Acceptability Rigidity Factor 1: No Value addition The factor 1 stands for the common perception of the respondents about the value addition. The responses were collected on a five point Likert Scale ranging from 1 (Strongly Agree) to 5 (Strongly Disagree). This reveals that the apparel retailers who have not implemented Bar Code in their shops .60 in each component.760. and ‘doesn’t facilitate better inventory management’.260. ‘doesn’t facilitate to maintain error free account’. The Eigen values of selected factors were greater than 1. ‘doesn’t enhance the customer satisfaction’. Factor analysis was used as the statistical tool for analysis. The rest have implemented the Bar coding.
337 .435 2. Factor 3: Less Turnover The two significant items in this factor are ‘Our present operation system doesn’t require Bar Coding’ and ‘Willn’t enhance the image of the shop’.372 71.435 2.454 .1 : Total Variance Explained Com ponent Initial Eigenvalues Total 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 5.673 5.236 1. 2007 Table . Factor 2: Not Operation friendly The retailers perceive that the Bar Coding neither enhances the operation efficiency nor enhances the image of the shop.198 64.921 .380 .730 . perceive that the use of Bar code do not add any value in security.390 1.106 .264 62.467 56. September.020 53.873 92.713 1.175 % of CumuVariance lative % 31.559 1.464 1.000 Extraction Sums of Squared Loadings Total 5.286 76.128 Vilakshan.748 99.732 100.291 .175 .914 5.760 13.372 71.827 98.719 2.268 31.959 82. ‘Shop’s Turnover is not sufficient for Bar Code implementation’ is only the significant .467 56.496 9.061 .458 2.371 99.490 97.914 31.654 1.496 9.731 8.198 64.464 1.361 . accounts or in customer perception.970 14.849 27.542 94.668 2. For the third dimension.082 1.157 .046 % of CumuVariance lative % 31.245 9.970 46.964 .877 .286 Rotation Sums of Squared Loadings Total 4.296 3.119 86.731 8.174 6.970 14.760 41.227 .286 Extraction Method: Principal Component Analysis.970 46.415 89.254 2.623 .260 12.778 96.504 % of CumuVariance lative % 27.588 .173 8.437 71.160 4.654 1. XIMB Journal of Management .174 6.390 1.
This item got a negative response.253 .130 .036 Extraction Method: Principal Component Analysis.044 -.833 -.374 -.065 .248 .088 .177 .539 .034 -.007 .134 .038 4 -. item.114 -.129 . Big chunk of retailers feel the other way for implementation of Bar Code Technology in their shop.185 -.583 . Factor 4: Acceptability deal with.038 .331 ..105 .213 -.365 .860 5 .101 . For implementation of Technologies turnover of the shop is a significant deciding factor.057 . which implies that the retailers who have not implemented bar coding have a perception that favours the implementation of Bar Coding.826 .081 .529 .Veena et. They .031 -.088 .045 -.429 -.892 . If any technology is to be acceptable to the retailers it has to result in increased sales and it has to suit the products the retailers This dimension includes the item ‘Bar Coding leads to rigidity in accounting’.556 .362 .227 -.080 -.187 -.647 .028 .872 .766 .358 . Factor 5: Rigidity The Acceptability factor includes ’Doesn’t attract additional customers’ and ‘All my products do not facilitate use of bar coding’ are the two significant items.118 .112 .316 -.172 2 .697 .181 .151 .185 -.159 .140 .295 -.911 .394 -.255 .017 -.063 -..881 .205 -.720 .166 -.123 .187 -.2 : Rotated Component Matrix (a) Component 1 not sufficient turnover operation not enhancing the image attraction of customers inventory management value in billing error in billing reduce no of employees matching ambience avoid theft error free account customer satisfaction fixing accountability better inventory man flexibility in selling price rigidity in accounting do not facilitate bar coding -.023 3 .552 .226 -.071 .438 .058 .220 -.057 -.al. 129 Table . Factors Blocking the .432 -.023 .102 .185 .058 .615 .486 -.074 . Rotation Method: Varimax with Kaiser Normalization.385 . a Rotation converged in 7 iterations.014 .
Doesn’t facilitate to maintain error free account c. the retailers perceive that. This has to be addressed by educating the retailers. Doesn’t add any value in billing d. Doesn’t attract additional customers b. attitude of the individual who takes major decisions.552 a. Our present operation system doesn’t require Cronbach alpha 0.0 DISCUSSION The factors that block the implementation of Bar Code Technology become relevant to address the problem of Technology implementation in retail sector. Thong and Yap (1995). 2007 Table –3 : Factors that Blocks the implementation of Bar Code Sl. September. bar code doesn’t add any value and bar code is not operation friendly.789 Bar Coding b. Again. All these factors are related to the perception of the retailers.130 Vilakshan. Doesn’t facilitate in fixing accountability f. Bar Coding leads to rigidity in accounting 0. technological awareness and innovativeness becomes important in implementation of technology. Retailers also perceive that all products in their shop have to be bar code implementation friendly. As per the findings of this study. 6. All my products do not facilitates use of bar coding 5 Rigidity a.890 opined that Bar coding doesn’t lead to rigidity in accounting. in their study have highlighted that. XIMB Journal of Management . Doesn’t enhance customer satisfaction e. Many of their apprehensions are due to lack of their exposure to bar code product and its benefits. the retailers perceive that. Shop’s Turnover is not sufficient for Bar Code implementation a. Proper exposure and training on the usage and . Will not enhance the image of the shop a. the bar code doesn’t attract additional customers. Doesn’t help to avoid theft. b. No 1 Dimension No Value addition Perception item a. 2 Not Operation friendly 3 4 Less Turnover Acceptability Doesn’t facilitate better inventory management 0.
type of organizations managing retail stores. Factors Blocking the . Apparel Export Promotion Council( AEPC) Report. Shelby H. 7.0 LIMITATIONS OF THE STUDY study covers the factors. According to CEST. and whether retail is organized or not. Hence. Indian retailers are highly dispersed and divergent as their customers. which blocks the implementation of Bar code Technology. On the contrary our study finds that. “The Dynamics of Mark-ups and Inventories in Retailing Firms.” Review of Economic Studies 66(2). (1999). the main barriers to technology uptake by retailers include lack of relevant information about the key benefits of retail technology. Achabal and Shelby (1987) have shown that Bar Code (Universal Product Code) makes check out faster. The study can be done in different regions and different demographic areas. retailers have mental blocks towards bar code technology due to lack of information.Veena et. “IT is reshaping retailing”. which matches the requirement of all retailers. Victor. Dale D. suburban and rural. A simple technology like Bar Code has not been accepted in general. According to acceptability factor from our study. REFERENCES Achabal. Government of India November.0 CONCLUSION Technological implementation is influenced by many factors like scale of operation. 8. In India. and Mclnytyre. Bar Code doesn’t attract any additional customers. Retailers have the perception that bar code doesn’t add much value to their business. 275–308. The study has not covered apparel retailers who operate from make shift arrangements. Aguirregabaria. Proper education. there cannot be any technology. This study is restricted to sample drawn only from Bangalore city. (1987). say urban. This can be addressed by circulating proper literature regarding bar code technology among retailers. Turnover is a factor which blocks the implementation which cannot be addressed..al. This is mainly due to lack of awareness about the benefits of Bar code technology. customers’ technology acceptance level.. to that extent bar code implementation would be limited. unorganized retailers play a major role in retailing as a vast majority of retailers are unorganized. 63(4). Apparel retailing has its presence both in urban and rural markets. This has to be addressed. more error free and helps in lowering the labour cost which leads to better customer satisfaction at a lower cost to the retailer. 2006. 131 benefits of bar code would help to overcome these factors which blocks the implementation of bar code technology. competitive level. training and information would help to overcome the factors which block the implementation of Bar Code Technology. The . Journal of Retailing.
Tarun. “Organizational context and Information System success. 23(4).Bharattextile. Margaret Hwang and David Weil. P. (1990). Regents of the University of California. Ogden. CEST (1995). Brown. “Planning and implementing the successful bar code system: a project primer”. EDI Forum 8 (1). 708-725. “Ratcheting Up: Linked Technology Adoption in Supply Chains”. “Reducing the Cost of Demand Uncertainty Through Accurate Response to Early Sales. (1981). James and Denise T. Jeff.” Operations Research 44(Jan–Feb). OX4 2DQ. The Hindu. Thomas J. The Hindu (Bangalore). series no.Chicago.S. 1-15.com Bhargava. MA..retailforward. 44(3). Center for Exploitation of Science and Technology. Harris. (1998). 6 (4). E world. “Factors affecting the use of Information Technology in Thai Agricultureal Cooperatives: A work in progress”. adoption in small business. (2005). (2001). Journal of Management Information System. New Delhi.google.in the changing marketing environment: New theories and application”. Stephen. Crossley. (2005). Smith. 87–99. www. Narayan. Autumn Chieochan and Lindley and Dunn. (2005). 55-58. 66-69. “Small retailers and technology . retail-specific curriculum with IT edge”. Electronic Journal on Information Systems in Developing countries. (1997). J.com www. Fisher.”The acceptance of Technological change in retailing: The case of scanners and Item Price Removal .W. UK. (1996). 429-443.a research study into the views of small independent retailers”. “CEO characteristics. Mills. 18-28. L. J. A Contingency Approach”. “Revolution at the Checkout Counter: The Explosion of the Bar Code” Harvard University Press. IIE Solutions. Oxford.’Is the left right?’. EDI World. XIMB Journal of Management . “EDI and Bar Coding converging”. and Michael K. Raymond. (2005). 2 (1). Business world.com accessed on 12/06/2006 . www. Business 07th Januaray. Murali. RAND Journal of Economics. July. 40-41. Inc. Winter 2001. Cambridge. June. organizational character and Information Technology. (1996). Anjuli and M. Lebow. Marshall.L and Yap C. “wanted. “Bar codes lead to frequent deliveries and Superstores”. Omega-International Journal of Management Science”. Biztantra.47. (2000).Y.D. 2005 Thong.132 Vilakshan. 2007 Bartko.. 5-20. Integrated Retail Management.(1995). European Retail Digest. (1995).Anand. Published by Blackwell Publishing. 6. September. and Ananth Raman. Holmes. June. “call of the mall”. Ogden R. 32 (4). “Quick responses system: Four essential elements”. 6 (10). (2006). IL: American Marketing Association. Indian Management. Brain F.
email: marshallgoldsmith@rediffmail. though isolated attempts have already been made in the form benchmarking. The primary data for the study has been collected from an LCV manufacturing company 1. 2007. Managers must extend their ‘line of sight’ to understand system-wide performance and the contribution of each firm (Lummus and Vokurka.Continuous and Sustainable Improvement through Supply Chain Performance Measurement . Therefore the success depends on the combined capabilities of integrated firms to achieve a competitive advantage in the market. Varma1 Abstract Supply chain performance measurement system is an entirely new category of applications in the area of supply chain management. it requires holistic methods of measurement. It provides performance monitoring of supply chain processes. balance score card (BSC) and supply chain operating reference model (SCOR).0 INTRODUCTION Firms never survive in isolation and have to rely on other firms to accomplish a complex chain of interdependent activities from source-of-supply to the end-user. 1999). a comprehensive performance measurement system is needed. Government Bikram (PG) College of Commerce. They subsequently need to develop measures for meeting end- * Received June 8.A Case Study of an LCV Manufacturing Company* Ashwani K. At times of growing pressure in terms of e-commerce. Therefore. To address the issues of continuous and sustainable improvement. 2007 1. Patiala. Lecturer. such a system must have the ability to define matrices. The present paper is an attempt in such a direction. just in time and flexible manufacturing and deregulated logistics the traditional methods of performance measurement sometimes are abound with limitations and do not deliver the goods properly. Revised September 12. However. key performance indicators (KPIs) and exception conditions besides updating such definitions when the environment changes.com .
. 2005).134 Vilakshan. and using that information as the basis for establishing a company’s performance targets. A benchmark is a standard of performance. and (3) provides information regarding the results of system efforts to supply chain members and outside stakeholders. In effect. XIMB Journal of Management . Benchmarking helps organizations to identify standards of performance and adopt them successfully. whereas in supply chain management. Developing and maintaining a Supply Chain Performance Measurement system represents one of the most significant challenges faced in SCM initiatives. It allows mangers not only to identify but also to eliminate causes of supply chain operational problems so that relationships with customers are not permanently harmed (Stank and Lackey. An effective performance measurement system (1) provides the basis to understand the system.. Timely and accurate assessment of the whole system and its various elements is very essential. The importance of performance measurement in SCM cannot be exaggerated.1 Benchmarking An increasingly popular approach for establishing performance standards. and identify solutions to improve results (Cook et al. determining how the best-in-class achieve their performance levels. performance measurement is the glue that holds the complex value creating system together. 2007 user requirements and aligning firm behaviour with supply chain objectives (Pohlen. September. It is the continuous measuring of products. activities and practices against the firm’s best-in-class companies. processes. Jenning and Reynolds 1989). and objectives is ‘benchmarking’. A good performance measurement system also is actionable. processes. 1997).2 The Supply Chain Operating Reference Model (SCOR) There is a variety of SCM performance measurement systems prevailing in the business world but some important systems are as follows: SCOR modeling is today the most popular methodology to analyze the SCM performance of an organization. 2. It focused on supply chain process improvement planning. The area of supply chain performance measurement had been neglected for a long time. The SCOR model was developed in November 1996 by Supply Chain Council. 2001). services. 2003). and action plans (Lawrence. (2) influences behaviour throughout the system. directing strategic formulation as well as playing a major role in monitoring the implementation of that strategy (Handfield and Nicholas. measurements.0 CURRENT SUPPLY CHAIN PERFORMANCE MEASUREMENT SYSTEMS 2. set levels of performance. which assists them to target problem areas. 2. strategies. timely and accurate assessment of overall system and its individual components is very important. organized by Pittiglio Rabin Todd and McGrath (PRTM) and AMR research.
• • • • • • • • • • • • Delivery performance Order fulfillment performance Fill rate Order fulfillment lead time Perfect order fulfillment Inventory days of supply Warranty cost or returns processing cost Asset returns Supply chain response time Production flexibility Value added productivity Cash-to-cash cycle time • • These metrics are used in conjunction with performance attributes such as supply chain reliability. Primarily. it has proved to be a cross industry standard in SCM. source. Level 2 (Configuration level) defines the 26 core supply chain process categories established by the supply chain council.. supply chain flexibility. supply chain cost and supply chain asset management.Verma. It also defines a company’s ability to compete successfully in the chosen markets and consists of: • • • Process element definitions Process element information inputs and outputs Process performance metrics The SCOR model adopts the following four-level pyramid. make. it defined common supply chain management processes and benchmarked these processes against available ‘best-practices’. The following is the simple representation of SCOR model: • Capture the “as-is “state of a process and derive the desired “to-be” future state (Business Process Engineering). Thus. Level 3 (Process element level) provides information in planning and goal setting for supply chain process improvement. Continuous and Sustainable . At this level a company makes basic strategic decisions regarding its operations in the following areas: . Level 1 (Top level) gives definition of the five key supply chain process types (plan. which provides guide for integrative process improvement. Quantify the operational performance of similar companies and establish internal targets based on “best-in-class” results (Benchmarking). supply chain responsiveness. deliver and return). Characterize the management practices and software solutions that result in “best-in-class” performance (Best Practices Analysis). 135 implementation and measurement. It has been recognized by the 8000 member companies of the SCC as an effective ‘toolkit’ for companies wanting to upgrade their supply chains for strategic advantage..
performance targets. and managers must be able to sell the value created to senior executives. It not only operates at different levels but also integrates the different levels to meet the objectives of the supply chain. companies can no longer focus on optimizing their own operations and managers across an entire supply chain must collaborate to improve performance and obtain the greatest mutual benefit. strategies. The model is given as follows: Figure 1: The SCOR SCM Model S U P P L I E R S The SCOR Model identifies four Main processes Plan Supply Chain Source Make Deliver C U S T O M E R S level the BSC addresses four key performance areas: (1) financial. Kallio et al. (3) business process. and initiatives to achieve the targets are then developed (Kaplan and Norton. Similarly. The BSC formally integrates overall objectives and the strategies undertaken to meet these objectives with supply chain-wide performance measures. The major benefit of this model is that it provides inter-organizational supply chain partners a basis for integration. 1996).136 Vilakshan. 3.0 BRIEF LITERATURE REVIEW 2. Within each of these areas.3 Balance Scorecard Balance Scorecard (BSC) is an ‘instrument’ to measure the performance of the overall supply chain to meet the requirements of end customer. and performance measures at the supply chain level are linked to the organizational level. specific performance measures associated with the objectives. trading partners. Van Hoek (1998) is also of the view that effective supply chain management requires measures capable of capturing inter-firm performance and integrating the results to depict overall supply chain performance. 2007 • • System capabilities Systems/tools Level 4 (Implementation level) focuses on implementation of supply chain process improvement efforts. This approach. September. In other words objectives. key objectives are identified that are driven by the objectives and strategies of the next higher level in the scorecard hierarchy. feel that SCM affects more than costs. and (4) learning and growth. and shareholders. (1999). The specific measures necessary to manage supply chain performance will vary according to customer type. given by Kaplan and Norton incorporates both financial and operating performance measures to be used at all levels of the supply chain. At each According to Lummus and Vourka et al. XIMB Journal of Management . (2) customer. product line. Ellram and Liu (2002) say that supply chain performance measures must translate non-financial measures into financial terms and shareholder value. since performance measures are critical to the success of the supply chain. Pohlen and . industry and other factors.
f.. e.Verma. g. Backordering is allowed but returns to the factory are not allowed. The focus is on increasing shareholder value for each firm in the supply chain by establishing within company and crosscompany links between actions and profits. The framework can help operations managers achieve supply chain objectives such as ‘increased shareholder value’ and ‘improved customer service’ by providing a concrete roadmap. d. a practical approach is introduced a. 4. Company production Models offered Manufacturing sequence Number of zonal offices Number of dealers Order receipt and shipment that shows the results of applying the methodology by taking into account intangible aspects such as coherence.. c. They discuss the basics of the methodology defining the main elements of performance to be developed. i. trust and visibility. 2-3 days (depending upon the location of zonal office/dealer. which aims to complement the existing frameworks and overcome their loopholes. equity to a collaborative supply chain business process called “Forecast Demand Visibility for Suppliers”. Supply Chain Performance Measurement in Swaraj Mazda limited Supply Chain Performance Measurement in Swaraj Mazda limited (SML) is a combination of various above said performance measures. Juan Jose et al. b. Customer demand is assumed to be normally distributed. (2007) present a methodology for measuring collaborative supply chain business process performance. h. It has been benchmarking with the industry standards.0 BRIEF OVERVIEW OF SML Swaraj Mazda limited (SML) is a light commercial vehicle (LCV) manufacturing company located in Punjab with the size and operating information as follows : 40 vehicles a day 10 models with 79 variants Based upon demand (Flexible manufacturing) 10 130 Firm orders are received from the zonal offices once a week and shipments are made on the same day based on the factory stocks and shipment date schedule. 137 Coleman (2005) have applied a general framework employing a dyadic economic value added (EVA) and activity based costing (ABC) to show how operations performance can be evaluated with a multi-firm supply chain perspective. Finally. The performance measures include not only the financial measures but also the non-financial ones directing towards maximum customer satisfaction. Continuous and Sustainable . Demand variation Backordering Transport lead time .
September. cash and information and some time reverse logistics in the form of returned defect and damaged vehicles. These components in raw material form or sub-assemblies reach the factory stores for assembly. Then zonal offices send the vehicles to the dealers. General Performance Evaluation General Performance Evaluation of SML has been made with reference to the following performance Parameters: 1. The whole supply chain involves the flow of goods. they constitute 1st tier suppliers. After manufacturing/assembly the finished vehicles reach the factory stockyard for dispatches to zonal Figure 2: Supply Chain Model of SML offices. Customers place the orders and get the delivery from the dealers only and not from the zonal offices or the company directly. XIMB Journal of Management . Market share % Physical Flow of Goods Cash Flow F A C T O R Y SWARAJ MAZDA LIMITED Zonal Office Foreign Suppliers Zonal Office D E A L E R S N E T W O R K Local Supplier S T O C K Y A R D Zonal Office C U S T O M E R S Zonal Office Information Flow . Since SML imports various engine components in complete-knocked-down condition (CKD).138 Vilakshan. 2007 The abovesaid information has taken the shape of supply chain in SML as shown in (Figure 2). This supply chain starts with 1st tier suppliers consisting of foreign suppliers and local suppliers.
1 VP/Emp NP/Emp OP/Veh EPS(Rs) (PA) (Rs)ml (RS)ml 6. 8.36 7.Verma.13 16 PBT/ TO% .021 .13 ITR 5.5 1.032 .54 39.21 5.64 1. 4.33 6.025 .13 2.022 .9 6.26 1.0 4. 3.023 .29 2. Continuous and Sustainable .7 10.8 6.13 41.08 1.91 12.42 MH/Veh 34.46 13. Performance and trends in various general performance indicators have been briefly described below: .04 40.02 4.37 21.022 .01 2.7 6.5 11.6 7.37 17. Average daily production (No.04 6.6 8.19 .79 2.7 20.5 5.67 5.02 40.023 .16 6.1 4.98 2.1 13.024 .69 % Mkt.73 1.89 41.56 42.7 3. 6.03 1.57 2.03 23.33 40..035 7.29 41.2 4. 139 Table 1: General Key Performance Indicators of SML Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 % Mkt.74 42.5 14.8 16.70 3.12 4.59 13. Share ADP (No) VP/Emp (PA) NP/Emp (Rs) ml OP/Veh (RS) ml EPS (Rs) PBT/TO (%) ITR MH/Veh Percentage Market share Average Daily Production Vehicle Production per Employee Net Profits per Employee Operating Profit per Employee Earnings per Share in Rs Percentage of Profit before Tax to Turnover Inventory Turnover Ratio Man hours per vehicle 2.018 .41 4.29 .1 : : : : : : : : : ADP (No) 7. of Vehicles) Vehicle Production per Employee per annum Net Profit per Employee (Rs in millions Operating profit per vehicle (Rs in millions) Earnings per Share (Rs) 7. 5.54 13.2 6.9 5.021 .14 1.36 5.21 39.4 5.49 6.34 34.27 41.89 5.7 6.99 2.. Share 3.9 4.026 .75 3.2 27.06 12.49 7. Percentage of Profit before Tax to Turnover Inventory Turnover Ratio Man Hour per vehicle Table 1 depicts some general performance parameters of SML over the years.0 13.7 18.89 6.51 9. 9.89 8.17 6.12 1.21 7.9 8.44 2.07 42.23 40.52 .78 3.28 41.78 6.
29 in 2004.21vehicles in 1995.89 in 1996.8% in 2004. 4. 7. Average Daily Production: Average daily production as shown in Figure 4.5% in 2003. 21.51 in 1997 and 9. Thus there is huge competition in LCV industry. the market share of SML reached double figure i. 6: Trends of Net Profit per Employee Market Share: LCV industry in India has eight active players. As shown in Figure 3 the market share increased from 3. 41.e.9% in 1996.1 in 2006. 5 cater to the higher payload segment and 1 spans all segments. 3: Trends of Market Share Fig.74 in 2003.6% in 2000. and 8. 27. September. In the new millennium. 13. 4: Trends of Avg. XIMB Journal of Management . low rate of industrial growth.2% in 1999. 4.07 in 2005. and 42.34 in 2002. Introduction of new technology and models.37 in 2000. the company has been successful in keeping its market share rising. stagnant freight rates. 6.1% in 1997. While two are almost fully in the below 5 ton segment. which was meagre 7.1% in 2006. 13. Although the demand of light commercial vehicles had reduced in the mid nineties due to volatility of fuel prices. 34.5% in 1998.1% in 2002. 16.59 in 1998 and started galloping in 1999 by touching 13. 5: Trends of Vehicle production per empolyee Fig.140 Vilakshan.7% in 2005 and 18. 8. 14. 2007 Fig.7% in the year 1995 to 3. the company widened its dealers’ and service network across the country. 5. 42. collaboration with vendors and infrastructural development further boosted the production to 17. tapering of import/export activity and lack of infrastructural investment. daily Production Fig.37.0% in 2001.2 in 2001. Vehicle Production per Employee: Vehicle production per employee .
7.08 million in 2001. From the year 2002 it again started picking up due to more demand of products and with the introduction of cost control and inventory control measures. and 6. modvat allowance and devaluation of rupee in the international market.7 in 2001. because of sudden heavy rush of employees due to creation of more infrastructure. Profit per vehicle was Rs.Verma.5 million net profits in 1995. profit per employee reduced to Rs. vehicle production per employee registered a decrease in the coming years. and manufacturing customized vehicles. 2001 showed depression in EPS.0.06 in 2003.52 million in 1999 and Rs.13 in 2005 and Rs.9 in 2000. However. As a result of the efforts.64 million in 2000. 1. After the year 2000.12 in 1997 and 1.0.54 in 2005. the company adopted new business strategies such as getting vehicles financed to its customers.16 in 2006. SML started using information technology. Next four years (As shown in Figure 9) saw this ratio declining due to the economic recession and high .79 in 1998. CPFR and vendor managed inventory resulting into higher profits.14 in 2006.7 in 1996.13 million in 2005 and Rs 2.. Years 1999. Rs 1.20. Rs 2. Later on with the new industrial policy and introduction of new variants. It decreased from Rs.19 million in 2006. In the year 2005 and 2006 it was remarkably high with Rs. Rise in manufacturing costs and industrial recession directly affects the operating profits of SML.9 in 1999.4.5 in 2002.0.032 million and Rs. 141 increased from 6. Profit before Tax to Turnover: This ratio was a meagre .03 in 1996.13.7 in 2003.6.23. and 13.01 million in 2004. EPS rose to Rs.0. it started picking up and increased to 8.5. From the year 1996 to the year 2001 it remained almost constant. 5.2 in 1995 to Rs.29 in 1995 but in the next three years it increased manifold to 4. Rs1.023 million in 1996.98 million in 2003. Realizing a threat to its survival.03 in 2004. Operating Profit per Vehicle: Trends of Operating profit per vehicle have been shown in Figure 7. Net Profit per Employee: Figure 6 depicts the trend of profits earned per employee. It increased to Rs.9 in 1997. Earning per Share: EPS has registered fluctuations (see Figure 8) from the year 1995 to the year 2001.91 in 2004. Rs. 2000. 10. Continuous and Sustainable .35 million. 12.46 in 2002.0 in 1998. Rs.29 in 1998.0. (The trends have been shown in the Figure 5). SML registered Rs 1. Rs. with additional import duty.28..6 in the year 1995 to 7. 11.57 in 1998.7 in 1996. 4.018 million in the year 1995. and the recruitment of more employees.4 in 1997 but again dropped to Rs. thus profit per employee recovered and reached Rs 1. 1.0. Rs 2.6. 12. It was 6. SML broadbased its product range and redressed for a wider market segment.73 million in 2002. Then. SML also obtained more export orders during this period. It increased slightly to Rs.
10: Trends of ITR . the ratio has again gone down to 4. This shows that SML is keeping its inventory low with the use of latest inventory control measures such as CPFR. in 2006. The ratio has increased from 4. However. the productivity of labour is slow during this phase. XIMB Journal of Management .7: Trends of Operating profit per Vehicle Fig. 9: Trends of % of PBT/ TO Fig. it is important to ensure that the level of stock is kept as low as possible. Moreover new skilled labour had to be recruited to meet the requirements. VMI and ABC analysis.142 Vilakshan. September.42 in 2006 due to the introduction of new variants to compete in the national and international market. Inventory Turnover ratio: Since a considerable amount of company’s capital is tied up in the financing of raw materials. Man Hour per vehicle: Figure 11 shows the trends of this ratio. 8: Trends of EPS at SML Fig. With this result. This necessitated the introduction of strict control measures.89 in 1997 to 7. The increase has been more than double the figure of 2001. it reduced to 6. the ratio has seen the rise since 2002.13 because the increase in sales is more than the increase in profits.33 in 2005. work in progress and finished goods. There has been a considerable increase in the ITR over the period 1997 to 2006 as shown in Figure 10. 2007 competition with other LCV manufacturers. In order to compete in the market and the introduction of new variants of vehicles. These factors forced to increase the man-hours resulting in the Fig.
Verma, Continuous and Sustainable ... 143
increase of this ratio. The ratio was only 34.21 in 1995 and the next five years witnessed the increase to 40.54 in 2001. Except in the year 2002, when the ratio was 39.13 it has been constant afterwards from the year 2003 to the year 2006.
the input resources that gives rise to the output performance level. The supply chain performance makes use of the comparisons made between ten years from the year 1997 to the year 2006 along with company standard and the industry average. Performance and trends in various performance indicators are briefly described below: Performance for on-time Deliveries : The company used a control chart for on-time deliveries. The system of calculating Upper control limit (UCL) and Lower control limit (LCL) has been discussed later. The graphic performance chart for such control is shown in Figure - 12.
M an h o u r p e r V e h i
Fig. 11: Trends of Man Hour per Vehicle
Productivity Performance Measures
SML is following a management strategy that helps the organization to optimize their performance in those areas that really matter, achieve preferred LCV status and survive in extremely competitive market. This management philosophy is known as “Operational Excellence”, which means ‘consistently doing the right things well’. It requires new solutions that focus on key business issues, continuously measure performance and drive the organization towards continuous improvement. Some of the measures that are important in supply chain operational excellence are given in Table 2.
O n t i m e d e l i v e r y
Upper Control Limit (.98)
.97 30 .96 .94 .93 .92 0 .91 .90 .89 .88 .87 .86 .85 Process Average (.928)
20 .95 10
Y e ar Lower Control Limit (.88)
Years (1997-2006) Figure 12: Graphic Performance Chart for On-time Deliveries
The productivity report in Table 2 attempts to put activity performance in a relative perspective. In other words, a ratio is formed of output performance to
Freight cost as a % of distribution costs: Freight cost ratios measure the logistical performance of the firm. SML has been continuously engaged in reducing the freight cost of the finished vehicles, because freight paid is added to the cost of the vehicle to the customer. Figure 13
Table 2: Productivity Performance Measures
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Co.Std Ind.Avg 4.25 0.64 0.53 4.89 0.1 24 85% 22.5 74% 2 91% 72% 184 3.50 7±2 100 95% 0.10 96% 0.14 100 100 94% 0.11 6±2 7±2 7±2 100 92% 0.14 NIL 3.80 4.10 3.97 167 145 186 193 4.23 7±2 100 91% 0.12 NIL 75% 79% 76% 81% 79% 189 3.52 6±2 100 93% 0.12 NIL 92% 94% 95% 96% 97% 95% 91% 145 2.98 6±2 100 95% 0.17 NIL 2.1 1.9 2.3 2.4 2.3 2.1 79% 81% 84% 82% 85% 87% 91% 2.7 94% 82% 137 2.14 7±2 100 92% 0.11 NIL 93% 2.4 96% 81% 158 3.12 7±2 100 95% 0.13 NIL 23.4 20.9 18.9 18.3 18.1 17.6 17.2 16.5 89% 91% 94% 96% 95% 93% 96% 95% 94% 15.9 90% 2.5 95% 80% 164 2.15 7±2 100 96% 0.08 NIL 19 23 27 28 26 27 31 29 30 0.12 0.11 0.09 0.14 0.12 0.13 0.11 0.1 0.14 0.1 35 95% 15 90% 2.5 97% 85% 160 2.50 7±2 10±3 100 95% 0.10 NIL 5.21 5.16 6.67 5.89 6.17 6.49 7.36 7.33 6.42 6.5 6.5 0.15 40 94% 15 85% 3 95% 90% 200 2.50 7±2 10±3 100 95% 0.15 NIL 0.51 0.51 0.53 0.52 0.49 0.5 0.47 0.45 0.41 0.4 0.4 0.59 0.63 0.61 0.59 0.57 0.58 0.57 0.54 0.52 0.50% 0.50% 4.01 4.23 4.36 4.01 4.26 4.67 3.49 3.61 3.89 3.75 3.75
Freight cost as a % of distribution costs
Damage and loss claims as a % of freight costs
Freight costs as a % of sales
Obsolete stock to sales
Orders processed per labour hour
% of orders processed within 24 hours
Order processing costs / total number of order processed
% of stockyard utilized
Vehicles handled per labor hour
Stock availability (% of orders filled from primary stock)
% of orders delivered within 24 hours of receipt
144 Vilakshan, XIMB Journal of Management ; September, 2007
Back orders and split deliveries
Percentage of total orders
Total Order cycle time 10±3 10±3 10±3 10±3 10±3 10±3 10±3 10±3 10±3 10±3
Back order split delivery processing (%)
Order filled complete (Percentage)
Line item fill rate
*% of Customer returns
**% of available production time shutdown
NIL NIL NIL * Due to damage, dead stock, order processing errors and late deliveries ** Due to supply out-of- stock
Verma, Continuous and Sustainable ... 145
shows the trends of the ratio. From the year 1997 to the year 2003, the freight cost as a % of the distribution cost was hovering above 4.00 %. But since 2004, the outsourcing of distribution has proved profitable. The ratio has come down to 3.41 in 2004, 3.61 in 2005 and 3.89 in 2006. This has been compatible to the company standard and industry average of 3.75. Damage and loss claims as a % of freight costs: Figure 14 shows the trends of damage and loss claims as a % of freight costs. Outsourcing of distribution has also resulted in decreased damage and loss claims against the firm. It has come down sharply from .64 in 1997
to .54 in 2005. In 2006 again it decreased to .52 and is gradually inching towards the firm standard and the industry average of .50. SML has also been successful in reducing this rate due to the strict total quality management (TQM) introduced in the organization. TQM is not confined to one section of the supply chain rather it has been widely used throughout the supply chain. Freight costs as a % of sales: As shown by the trends in Figure 15, freight costs as a % of sales was .53 in 1997, .51 in 1998 and 1999, but decreased gradually to .49 in 2002. From the year 2004 to 2006, it has been well under control and almost equivalent the firm and industry average of .4.
Fig. 13: Trends of Freight cost as a % of Distribution Cost
Fig. 15: Trends of Freight Cost as a % of Total sales
Fig. 14: Trends of Damage and Loss Claims as a % of Total Freight cost
Fig. 16: Trends of ITR
146 Vilakshan, XIMB Journal of Management ; September, 2007
Inventory Turnover: Since a considerable amount of company’s capital is tied up in the financing of raw materials, work in progress and finished goods, it is important to ensure that the level of stock is kept as low as possible. There has been a considerable increase in the ITR over the period 1997 to 2006 as shown in Figure 16. The ratio has increased from 4.89 in 1997 to 7.33 in 2005. However, it reduced to 6.42 in 2006 due to the introduction of new variants to compete in the national and international market. This shows that SML is keeping its inventory low with the use of latest inventory control measures such as CPFR, VMI and ABC analysis. Obsolete stock to sales: The components and the sub assemblies have very lesser chances of becoming obsolete, except when the technology changes. When ever new variant is introduced it is generally improvised to the old one. Due to this reason, SML has been keeping very low level of obsolete stock. As shown by the trends in Figure 17, the ratio has been around 0.1 in all the ten years from the year 1997 to the year 2006 with marginal changes. Though the industry average is 0.15, SML is maintaining lesser than that. Orders processed per labour hour: The introduction of EDI and Internet has facilitated the receipt of orders from the zonal offices on daily basis. Earlier the orders were consolidated by zonal offices after three days and transmitted through speed post. But now the orders are transmitted instantly. This has increased this
ratio over the years as per trends shown by Figure 18 It was only 24 in the year 1997and 19 in 1998, but it has improved to 30 orders in the year 2006. SML has set the standard of 35 orders per labour hour to benefit from more automation in coming years. The industry average is around 40 orders per labour hour. % of orders processed within 24 hours: SML has the tradition of processing the orders within 24 hours of receipt. But the processing depends upon the inventory kept in stores. The company is maintaining an inventory of five days depending on the lead time. With the introduction of information sharing through CPFR and VMI, it is trying to come closer to JIT concept. As shown by the trends in Figure 19 the ratio was only 85% in 1997, 89% in 1998 and 91% in 1999. The introduction of technology has increased it up to 96% in 2001 and 2004. With this reason, the company has set the target of 95% as compared to an industry average of 94%. Order processing costs/total number of order processed: Leveraging the information technology has reduced the order processing costs in SML. Figure 20 exhibits the trends of this ratio. It was 22.5 in 1997, when the orders were consolidated delivered manually once or twice a week. But gradually, the use of Internet and EDI have reduced this to 17.6 in 2003, 17.2 in 2004, 16.5 in 2005 and 15.9 in 2006. SML is targeting it to 15 at par with the industry average.
Verma, Continuous and Sustainable ... 147
% of stockyard utilized: On the downstream level side of SCM in SML, the efficiency has been measured in terms of % of FSY utilized (Figure 21). SML is following a combination of push-pull based production system. In this system the company does not keep inventory of finished vehicles, rather stock of semi-finished vehicles is kept. This system keeps the stockyard unutilized. Even then the ratio has been closer to the company standard and the industry average of 93% and 90 % respectively. SML has been successful in increasing this ratio from 74% in 1997 to 91% in 2006. An experimental track has also been established for trial purposes in FSY.
Vehicles handled per labour hour: As shown by Figure 22, the ratio has increased close to the company standard of 2.5 and industry average of 3 vehicles handled per labour hour. Though the production of vehicles have increased manifold from 1997 to 2006, at the same time, the number of persons employed has also increased in the same ratio. Stock availability (% of orders filled from primary stock): SML maintains an inventory of 3-5 days of ‘A’ class items. The lead time of ‘B’ and ‘C’ class items is less. This has proved to be profitable for the firm. As shown by the trends in Figure 23, the ratio has always been more than 90%. Because the lower ratio leads
Fig.17: Trends of Obsolete Stock to sales
Fig. 19: Trends of % of Orders processed Within 24 hours
Fig.18: Trends of Orders Processed Per Labour hour
Fig. 20: Orders Processing Costs/ Total Orders Processed
the more are the chances of losing the business to competitors.978 = 0. In the vicinity of the firm.928 + 1.877 = 0. it was repaired to 82% and 81% in 2005 and 80% in 2006. The market recession and the introduction of new variants again increased it to 186. 167 in 1998 and 145 in 1999.928 Practically the company wants at least 90% of the vehicles to be delivered within this time period.0258) = 0.96 (0. Pull system of production and the JIT concept helped SML to achieve 145. daily milk runs of vehicles is maintained to bring the stock to the firm. XIMB Journal of Management . but in 2005 and 2006 it has again recovered and matched with the industry average. In 2004. The inventory policy was changed and gradually it increased to 81% in 2001. Soon SML realized that that in order to compete in the market and to stop back ordering. 79% in 2002 and 91% in 2003. 97% in 2002. As shown in Figure 25. In 2003 and 2004 decreased. SML has set the . 2007 to back orders and lowering of the ratio means losing the business to competitors. In order to increase this ratio SML had to keep excessive inventory.0258) = 0.148 Vilakshan.928(1. LCL) on this process for a z = 1.928)/100 = . The ratio has improved a lot from 91% in 1997 to 96% in the year 2001. 158 and 164 in the year 2003 to 2006. The process can be represented by a p-chart as shown in Figure 23.98 LCLp = p – z (δp) = 0.96 (0. the total number of back orders and split deliveries were 184 in 1997. September. it was essential to execute the orders within 24 hours. % of orders delivered within 24 hours of receipt: Since SML keeps an inventory of 3-5 days.928 – 1.88 Back orders and split deliveries (Total number): it represents those orders which were not accomplished out of current stock. 137..928 The standard deviation of the sampling distribution for a sample size of n = 100 is δp = √ p(1-p)/n = √ . The more the back orders. Total number of on-time deliveries Total number of deliveries = 928/10x100 = 0. A data of last ten years deliveries have been collected. therefore it tries to dispose off the orders received within 24 hours.96 at 95 % confidence are: UCLp = p + z (δp) = 0. As per Figure 24 it was 72% in 1997. which proved detrimental for the profitability of the company. 2001 and 2002 respectively. The process average (p) is found by p = Total number of on-time deliveries Total number of deliveries = 928/10x100 = 0. 193 and 189 in the year 2000.0258 The upper and lower control limits (UCL.
22: Trends of Vehicles Handled Per Labour hour Fig. SML tries to fill the orders immediately or within 24 hours of receipt of orders.50% in 1997. it again went up to 4.10% in 1999. The percentage of such orders as per Figure 26 was 3.5% as per company standards and the industry average.. 23: Trends of % of Orders filled From Primary Stock Fig. . The tolerance limit is 2. Continuous and Sustainable . 149 Fig. the strict inventory control and manufacturing planning and control measures reduced this percentage to 2. Though the percentage of orders filled during 24 hours of receipt may vary. Back orders and split deliveries (Percentage of total orders): the orders received by the dealers and zonal offices are first set off against their own stock. Since lowering of this ratio means losing the business to competitors. 3..15% in 2006. in the year 2001. 24: Trends of % of orders delivered within 24 hours of receipt target of 160 with an industry average of 200 orders. the percentage of orders filled complete has always been 100%. therefore SML will never afford lower this ratio.23%. The balance of orders is sent to the factory stockyard for replenishment. Total Order cycle time Normal processing and Back order split delivery processing are based on the distribution of order cycle times at the 95th percentile. but the completed orders is always cent percent. 21: Trends of % of Stockyard Utilized Fig.80% in 1998 and 4. Order filled complete (Percentage): As per trends shown by Figure 27.Verma. Thereafter.
15%. On time deliveries to customers increase the total revenue because satisfied customers buy more products. 28: Trends of Line Item Fill Rate Line item fill rate: It is the most important component of customer service showing the number of customer orders filled within 24 hours due to the availability of line items. % of available production time shutdown: Strict inventory control.11% in 2004. Returns have always been very less due to manufacturing/ assembly defects due to strict quality control systems. In the year 2000. enhancement of capacity and insignificant component defects. September.10% against the industry average of 0. 0.08% in 2006.150 Vilakshan. The ratio as shown in Figure 29 was 0. XIMB Journal of Management . The company standard has been set at 0. 27: Trends of % Order Fill Rate Fig. later in the year 2005 and 2006 the ratio became equal to the company standard and the industry average of 95%. but again it came down to 0.10% in 1997. 2007 Fig. However. It went up in 2003 due to the introduction of new variants. and 2001.11% in 1998. due to the introduction of new variants.13% in 2005 and 0.25: Trends of Back orders and Split Deliveries Fig. As per Figure 28. 26: Trends of Back Orders and Split Deliveries as % of Total Orders Fig. 0. seating arrangements. the rate was 95% in 1997 and 96% in 1998. manufacturing planning and control and . That is why SML is maintaining an inventory of 3-5 days of line items. the ratio dipped to 92% and 91% respectively. Customer returns: Customer returns in SML usually arise due to the color combinations.
Increased inventory turnover reduces the pressure on working capital by reducing inventories. This model indicates the relationships among various measures. Production and material cost can be reduced through effective supply chain Effective supply chain management has fundamental impact on the financial . 30: Trends of % of Available Production Time Shutdown total quality management measures adhered by SML has kept this ratio as NIL (Figure 30) from the year 1997 to the year 2006. money used in financing ongoing operations. ROA indicates how well each part of the supply chain. Company has never faced any production time shutdown due to the non. Managing the supply chain so as to reduce the aggregate inventory investment will reduce the total asset portion of the firm’s balance sheet.. order fulfillment.. It can be accomplished by improving order placement. The following Figure 31 shows the Strategic Profit Model indicating the calculation of return on assets. 151 Fig. labor unrest.Verma. Increased inventory cost requires increased payments to suppliers. and the entire supply chain itself is using its resources. Consequently reducing aggregate inventory investment will increase ROA. which is net income divided by total assets. Inventory is considered an investment because it is created for future use having opportunity value. The main advantage of this model is that it aggregates many other measures into one common measure of return on assets (ROA). 5. An important measure is return on assets (ROA). 0 STRATEGIC PROFIT MODEL The most popular tool for measuring overall supply chain performance is the Strategic Profit Model (similar to Du Pont’s Chart).availability if raw material. or machine break-downs. Reducing supplier lead times ahs the effect of reducing weeks of supply and increasing inventory turnover. Matching of input and output flows of material is easier because more reliable demand forecasts can be used. Inventory turnover is also reflected in working capital.29: Trends of % Customer Returns Fig. Continuous and Sustainable . Rationale of using ROA as Performance Measurement Tool status of the firm.
0153 Net goods sold difference between the sales and variable profit costs.0171 .0177 .0265 . Net Sales Profits. XIMB Journal of Management .0155 97 98 99 . and quality defect costs. September.0173 .0215 . Inventory Cost of Gross margin Net profit margin The individual figures of Sales.152 Vilakshan. Costs of material are determined through the financial arrangements with suppliers. 2007 Figure 31: Return on Assets Sales management.0297 . and Total Assets may be Accounts Current receivable Other current 01 assets assets Total Fixed 04 assets Asset turnover 2K 02 03 05 06 .0305 .0163 . And production costs are a result of the design and execution of the internal supply chain. In addition. Reducing production and material Sales costs. the percent of defects. internally and externally also affect the cost of operations. Fixed Analysis and Interpretation of ROA: expenses Based on the elements of Figure 31 the following (Table 3) are the results of ROA calculated for the last twelve years. Improvements in these measures are reflected in the cost of goods sold and ultimately in the net income of the firm.0123 96 . increase Variable Total theexpenses contribution margin and produce expenses greater profits.0179 . which is the Table 3: Trends of ROA Year ROA 95 . They also affect contribution margin.
0 CONCLUSION Ellram. “Managing the Demand Chain through Managing the Information Flow: Capturing Moments of Information”. Therefore the profits suffered in 2006. 66(4): 14-21. The Icfai Journal of Supply Chain Management. In the year 1999. Then from the year 2000 to 2005 it has improved a lot and almost doubled. one parameter for one part of the supply chain is not good for the entire supply chain. Handfield. D P (1996. Figure 32: Trends of ROA devaluation of rupee in the international market. Thomson South-western. Previously each company would often focus on measuring its performance in terms of its own objectives without . During 2006. 6(6): 30-37. SAM Advanced Management Journal. The trends given in Figure 32 indicate that ROA has increased from the year 1995 till 1998. B (2002).Measures that drive Performance”. K and Feroleto. India: Pearson Education. Continuous and Sustainable . 70(1): 71-79 Lawrence. A and Raul. but the ultimate effect is to be seen on the ROA. Keeping this in view. Kaplan. R R and Vokurka. Harvard Business Review. dipping the ROA. TQM and introduction of new variants in the competitive market have contributed to the improved ROA. Therefore. Jose. Saiz. ROA decreased sharply due to additional import duty. However. Introduction to Supply Chain Management. A (2001). Rodriguez (2007). Supply Chain Management Review. Due to consistent efforts of the management with strict inventory and production controls. a comprehensive supply chain performance evaluation method has been adopted by SML REFERENCES Cook J S. performance measurement should focus on the entire supply chain. Lummus. modvat allowance and regard to the rest of the supply chain. L M and Liu. From Raw Materials to Customers: Supply Chain Management in the Service Industry”. 153 increasing or decreasing over the period. Juan. “A Performance Measurement Model for Measuring Collaborative Supply Chain Process”. SML had to import the technology and costly components from Japan in CKD (complete knocked down) condition.. R S and Norton. Robert B and Nicholas. IV(1): 49-64.Verma. 6. Production and Inventory Management Journal. a new variant of LCV has been introduced. “The Financial Impact of Supply Management”. DeBree. R J (1999).. Ernest L (2005). Jennings and Reynolds (1989). 40 (1): 16-20.) “The Balanced Scorecard. eDistribution.
Supply Chain Management. Van Hoek. Journal of Transportation Management. “Strategic Supply Chain Planning”. and Performance: A Framework for Logistics Performance”. Structure. “Strategy. . The Logistics and Transportation Review. 2007 Lummus. Pohlen. L. Production and Inventory Management Journal. Stank and Lackey. 39(3): 49-58. 3(4): 187-192. R R. Vokurka. September. “Evaluating Internal Operations and Supply Chain Pperformance using Eva and ABC”. B. SAM Advanced Management Journal. “Measuring the Immeasurable-Measuring and Improving Performance in the Supply Chain”. 31(2): 285-297. R I (1998). T. 14(2): 1-21. XIMB Journal of Management .J (2005). K L (1998).154 Vilakshan. Pohlen. T L and Coleman. 21(2): 45-58. (1997). R J and Alber. (2003) A Framework for evaluating supply chain performance.
thereby adversely impacting the other stakeholders in the value chain.arora@nic..e. The basic objective of promoting and facilitating free and multi-lateral trade therefore remained only a cherished goal. 2007 1.Trade Protection Measures (TPM): Issues and perspectives* Sridhar Panda1 & Rajiv Arora2 Abstract The liberalization. its over and frequent use on the other hand could provide a continued and over protection to Domestic Industry. the issues concerning free and fair trade have been * Received August 6. email: spanda@fiibindia. While tariffs are no doubt getting lowered.in . New Delhi. i. especially of AntiDumping. email: rajiv. The frequent use of AD is also generally counter productive as it erodes efficacy of the measure by encouraging the adversely affected stakeholders to circumvent the applicability of such measures. the authors have examined the rationale and the overall economic impact of such TPMs. privatization and globalization (LPG) wave of early nineties and emergence of World Trade Organization (WTO) in 1995 has changed the dynamics of conduct of international trade across the globe. 2007.0 INTRODUCTION The emergence of World Trade Organization (WTO) in 1995 heralded a new era in the global trading system.com 2. WTO’s cherished objective of ensuring free and fair trade is adversely affected by unfair trade practices including application of non-tariff barriers (NTBs). 1. General Agreement on Tariffs and Trade (GATT) led to non-adherence to the multi-lateral rules enshrined in the GATT Treaty. countervailing (CVD) measures and safeguard (SG) measures provided under the WTO framework. However. Revised September 1. The resultant distortion in “Terms of Trade” is eroding the level playing field for various trading partners. The deficiencies of its predecessor. AD is most widely and frequently used as it is indeed a potent instrument to address unfair trade practice of dumping. to some extent with reference to India. Government of India. Director (PGP & Academics). Director (International Relations). while use of TPM on the one hand is essential for domestic protection. New Delhi. Amongst these three TPMs. Fortune Institute of International Business. Ministry of New and Renewable Energy. In this paper. Today governments are mandated to intervene only to regulate the distorted market by the use of legitimate Trade Protection Measures (TPMs) such as Anti-Dumping (AD) measures. With the emergence of WTO.
however.dumping law.. New Zealand (1905). i. The comparison of the export price and the normal value is carried out on an apple to apple basis. the protectionist lobby in the developed world especially US and Canada became powerful since 1970s especially after the oil shock. It was a civil statute to assess penalty duties to compensate for price differentials. In the Kennedy Round (1963-67).. This went into force in 1968 and was named Agreement on the implementation of Article VI of GATT or in short ‘Antidumping Agreement’. which closely resembled Canada’s anti.0 THE EMERGENCE OF ANTI-DUMPING LEGISLATION Dumping is defined as exports below the normal value of sales in domestic market in ordinary course of trade. either at ex-factory levels or at the consumer price level. In the same year. New Zealand and Australia substantially amended their Acts. 2007 addressed in a much more institutionalised manner especially with the setting up of dispute settlement body (DSB). XIMB Journal of Management .156 Vilakshan. The first AD legislation was adopted by Canada in 1904 and subsequently by other countries viz. 2. This formed the basis for the first European Community anti-dumping . Canada and Australia were using anti-dumping as an important trade instrument. According to Hufbaur (1999) in the United States. with the lowering of tariff wall. Notwithstanding these developments.e. Anti-Dumping (AD) and negotiations for voluntary export restrains (VERs) which were permitted within the GATT and WTO framework. It may please be recalled that tariffs were slashed to unprecedented levels after various rounds of negotiations under the auspices of GATT in its first 25 years of existence. However. While no doubt free trade is the most cherished goal. the UK also adopted its first antidumping legislation while Canada. In 1921. the fairness in conduct of trade on the other hand is also essential for the gains of trade to be equitably distributed. Articles on antidumping in WTO illustrate various methodologies on computation of normal value and comparison of export price with normal value. September. the US adopted an amended Act. In the immediate post-war period only South Africa. regulation of anti-dumping rules was taken up in earnest and an international code on antidumping procedures was adopted. Australia (1906) and USA (1916). the 1916 AntiDumping Act was narrowly aimed at predatory pricing by foreign exporters. Anti-Dumping remained a relatively infrequently used instrument. The anti-dumping law was not regulated under international law until the adoption of GATT 1947. This led to increasing use of administered protection like countervailing duties (CVD). Canada initiated first Anti-Dumping case on steel being imported from US.
the prohibited subsidies include both export subsidies that are contingent on export performance and subsidies that are contingent on use of domestic over imported goods. A category of nonactionable subsidies have since been scrapped. However. Most of the export promotion schemes including Duty Entitlement Pass Book (DEPB).1 Countervailing and Safeguard Measures Besides Anti-Dumping. Some of the countries that are not members of WTO (such as Russia) have also acquired their antidumping legislation. Out of the total of 2675 cases.. viz. It was expected that higher standards of initiations of antidumping cases would restrain its use by member countries by making it more difficult to file complaints and to prove dumping and injury. the use of anti-dumping remained very limited among the contracting parties. Almost all WTO member countries have now adopted or amended their anti-dumping legislation.2003).. there was a dramatic increase in the use of antidumping activity by developing countries in the post Uruguay Round. Prakash (2005) argues that the aim of this agreement is not to restrain unduly the right of Governments to grant subsidies but to prohibit or discourage them for using subsidy that have adverse effect on trade of other countries. The agreement includes two categories of subsidies. 157 legislation adopted in 1968.Panda et. However. Duty Free Replenishment Certificate (DFRC) (now Duty free .dumping measures. which were initiated in the 1990s.al. It is on account of the above principles that countervailing action on exports of products from India has been initiated. The Uruguay Round more precisely defined the rules and procedures of anti.. Trade Protection . Antidumping has now evolved into a global phenomenon with an increasing number of developing countries adopting these laws and making use of them. the other two Trade Protection Measures which could be resorted to are anti-subsidy and safeguard investigations. 2. and particular standards for dispute Settlement Panels to apply in anti-dumping disputes. Trade and the WTO”(2006). 1335 cases were filed in the post WTO period of the late 1990s (Gupta. The new Agreement introduced more detailed procedures for initiating and conducting anti-dumping investigations and reduced discretion with respect to methods used to determine dumping and injury margins. The application of subsidies and countervailing measures is regulated by the SCM agreement under WTO. and by strengthening the dispute settlement system according to Krishna (1997) and Roitinger (2002). contrary to the expectation. prohibited and actionable. According to WTO trade report titled “Exploring Links of Subsidies. sun set clause. Export Promotion Capital Goods (EPCG).
The recent ministerial conference at Hong Kong in 2005 addressed it again which resulted in some modest attempt. deficiency payment – an incentive not to produce. XIMB Journal of Management . Ordinarily. the major gray area of subsidies has been the agriculture policy of developed countries such as the EU. however. ‘safeguard’ measures are targeted against increased imports. 2007 Import Authorization). no anti-subsidy investigation has been initiated by India on imports into India. These obligations can. Domestic support measures were classified on the basis of the extent to which they ‘distort’ product markets. The effort of Government therefore has been to put in place a tax neutralization system. no prohibition or restriction can be maintained on importation and no WTO Member can impose duties or other charges on imports of any product from the territory of other WTO Members.g. According to Panda (2006) the agricultural sector is being protected in developed countries through domestic support and export subsidies. which. is the safeguard measure.158 Vilakshan. into amber box (e. and preferential export credit subsidies have attracted countervailing measures. which has also been used somewhat sparingly in India. However.g. in excess of those set forth and provided in its Schedule of Concessions. resulted in subsidies being shifted from one box to the other. The other Trade Protection Measure. be suspended in whole or in part or the concessions can be withdrawn or modified by way of a safeguard measure. input subsidies and price support). may enter in the domestic market of an importing Member as a result of its commitment to liberalise and are applied on a non discriminatory basis on specified products irrespective of their source of origin. As the modalities are to be established India along with other developing countries cannot take counter actions against such unfair practices of developed countries. While the Indian exports have faced more than 100 CVD investigations on its exports. environmental protection and decoupled income support) and targets to reduce the amber subsidies. which may be . September. tax holidays on exports. These countries had agreed in Uruguay round to reduce the subsidies in their agrisector which was never respected. as a supply side management measure) and green box (e. While the anti-dumping and countervailing measures address unfair practices of dumping and subsidization respectively and are discriminatory measures imposed on company and product specific basis.g. US and Japan. rural infrastructure services. which has the direct nexus between exported products and inputs that go into it so that the Indian exports could be prevented from the application of countervailing measures. blue box (e.
however. It also sets out basic procedural requirements for the conduct of investigation. It may be noted that since safeguard measures are applied under unforeseen situation of flooding of imports and consequential serious injury and are not per se redressal against an unfair trade practice. The Agreement seeks to ensure that such restrictions are applied only for temporary periods by setting a maximum period of eight years for the application of a measure in particular.al. The Agreement lays down the criteria which investigating authorities must consider in determining whether increased imports are causing serious injury to the domestic industry. the safeguard duties were not imposed on account of consideration of public interest. One aim of the procedural requirements is to provide foreign suppliers and governments whose interests may be adversely affected by the proposed safeguard actions with an adequate opportunity to give evidence and to defend their interests. The investigations for the imposition of such measures can be initiated either by the government itself or on the basis of a petition from the affected industry. after investigations carried out by competent authorities. In 4 cases. 159 imposed in the form of either safeguard duties levied over and above the commitment made in the Schedule of Concessions or in the form of import quotas. According to annual report by Directorate General of Anti Dumping and Allied duties (DGAD: 2004-2005). Trade Protection . The primary purpose of providing such temporary increased protection is to give the affected industry time to prepare itself for the increased competition that it will have to face after the restrictions are removed. should normally be applied on an MFN basis to imports from all sources. . It further provides that such measures. which could take the form of an increase in tariffs over bound rates or the imposition of -quantitative restrictions.Panda et. According to Prakash (2005) the Agreement on Safeguard authorizes importing countries to restrict imports for temporary periods if. but which safeguard duties have been imposed in 8 cases only. in India about 12 safeguard investigations have been conducted. it is established that imports are taking place in such increased quantities (either absolute or in relation to domestic production) as to cause serious injury to the domestic industry that produces like or directly competitive products. In practice.. the investigations are generally initiated on the basis of petitions from the affected industry.. their application requires reciprocity in concession to affecting trading partners and restructuring of domestic industry as per a time bound restructuring plan.
This therefore place enormous burden on the usage of AntiDumping measures. September. Their logic is simple: countries that practice protectionism do not need antidumping laws. legal analysis supports that recent expansion of national definitions of dumping. The logic behind this is the usual logic of economic: a trade restriction harms the overall economic interests of the country that applies it. It is only those countries that open their market that find the need for some recourse against unfairly traded imports. XIMB Journal of Management . In addition. who argued that dumping did occur. On the other end of the spectrum are the lawyers. Canada and Australia have been historically the supporters of open trade and the world trading system. subsidization and injury are within the limits of the GATT specification. According to them antidumping laws have helped to support the creation and continued operation of the world trading system. so it is probably safe to assume that the unfair trade cases and actions do not violate the GATT. Therefore. a large number of economists such as Finger (1993) and Bhagwati (1988) have ‘questioned the use of anti dumping laws by the countries. 3. They consider those trade remedy laws as safety valves for recourse against unfairly traded imports and thus a price to be paid for public support for free and open trade system. Further. that it was an economic threat and that national laws to counter dumping were appropriate and desirable. It has been argued that in practice AD duties have been used to give undeserved protection to domestic producers and it ‘has become a threat to the system of free trade and needs to be abolished. trade administration officials and politicians who are supportive of mechanism of trade remedy laws and have ensured their continuance. The case for anti dumping laws was first made authoritatively in 1923 by Jacob Viner (1923). the policy objective that follows from this is straightforward: to convince the user countries to apply antidumping actions less frequently. just as it harms the country which . The most appealing option is to get rid of anti dumping laws and to put nothing in their place.160 Vilakshan. by definition also keep out dumped imports. barriers that keep out imports. They were just ordinary protection in that they served the national economic interest of neither the victim nor the regulator country. However. It is not an accident that most of the frequent users of antidumping laws the US. which are invoked on account of unfair trade practices.0 DESIRABILITY AND EFFICACY OF ANTIDUMPING MEASURES exports. the EU. On account of these aspects the safeguard measures are difficult in terms of relief to domestic producers. 2007 Also addressal of public interest issue is extremely stringent unlike in the other two Trade Protection Measures.
brass sheet and strip and welded steel pipes and tubes. Banik further argued that irrational imposition of AD measures. AD measures though legally mandated by WTO are not good economics. output. subsidization in home market. and authority caving in to the demand of the lobbies. frozen concentrated orange juice. trade diversion. distortion in bilateral trade relations. the non computation of net economic benefits of impact have not highlighted the gains in terms of employment by the imports which were a positive effect and opposes attempts to levy antidumping. lamb meat. strengthens this premise. 161 assurances that imports are fairly traded support a domestic political consensus in favour of open markets. Effects of AD measures viz. The effects like FDI inflows to cope with AD measures. misallocation of resources. Korea. The study also covers the trend analysis of AD/CVD measures since 1980 and their effects on producers and consumers and upstream and downstream linkages. AD measures do not stand the tests of sound economic rationale . have increased use of anti dumping laws coinciding with their plans for liberalization of trade policy.Panda et. pressure by lobbies. Trade Protection . a favourable treatment has been meted out to dominant producers and that there are reasons other than dumping for imposition of AD measures. According to Steele (1996) AD measures are a political balancing of trade liberalization objectives under WTO and member nations concern for a level playing field for their domestic industry. solid urea. The effects of dumping include cost to society and consumers. In a critical evaluation of antidumping measures. etc.al.. EPROMS. trade diversion and limited price increase were reported. effect on exports. revenue and employment. undermining of the spirit and rationale of AD measures from the initial set objective. emergence of aggressive competition. In a case of cut flower industry in Colombia. There exists inherent tension between the AD measures and competition policy. and erosion of country’s image and credibility. India. colour picture tubes. while imports are analyzed with respect to price. A log linear model evaluates negative effect on India’s exports due to AD measures. The domestic market effects are examined with respect to price. export of unemployment and predation in circumstances of sales below cost is reported. Mastel (1998) is of the view that countries like Mexico.. According to Banik (2001) the AD measures are NTBs and it is the loopholes in the AD code which leads to such an use. South Africa. A computable general equilibrium model has been used in a study conducted in USA in 1995 to measure economy wide effects of AD measures in USA in specific sectors/products viz. volume and revenue.
or optimal tariff argument while imposing an AD measure. The ambiguity in WTO articles has in fact led to mushrooming of disputes under WTO. Although EU favours a reform of Anti-Dumping permissions and WTO reform but it also continues to be an user of Anti-Dumping measures especially against China. The author argues that AntiDumping agreement is an exemption to free trade principles enshrined under WTO. Raju (2006) argues by highlighting problems with the Anti-Dumping agreement that such Anti-Dumping duties ignore costs suffered by consumers and protect domestic industry even though they represent monopolies. Li (2006) argues that the treatment of non-market economy during 2016 and lack of adequate legal capacity has led to Anti-Dumping cases against China. The author further elucidates specific aspects of the AntiDumping articles. 4. It has further been argued that in the years to come Anti-Dumping initiations will not be reduced as the political reasons in both developed and developing countries will compel member countries to resort to the Anti-Dumping measures. The methodological and institutional aspects of the AD measures also make the AD regime protectionist and arbitrary. It is concluded that even the political economy argument does not pass the test of Predation. Lindsey and Ikenson (2006) argue through concentrating on the rhetoric and reality of US Anti-Dumping Law that lobbying for ensuring protection to domestic industry plays a vital role. Consumer welfare argument. Erixon (2006) also underlines that the factors of political economy explain much of the use of Anti-Dumping measures.162 Vilakshan. Most of the aforementioned authors have stressed the need to dump the Anti-Dumping measures and that a substitute needs to be found out. 2007 models viz. September. Aggarwal (2003) is of the view that the competition policy is an appropriate substitute to AD measures or use of AD measures be restricted only in situations of Predation with injury test as stringent as antitrust laws Debroy (2006) mentions that free trade is only a myth under WTO/GATT system. which bring in subjectivity and a bias leading to protectionist tendencies and thus providing overprotection to the domestic industry. strategic trade policy argument. Chakraborty (2006) highlights the protectionist bias and loopholes in Anti-Dumping agreement and the incompatibility of Anti-Dumping practices viz-a-viz WTO by various individual countries.0 THE INDIAN EXPERIENCE: ISSUES AND PERSPECTIVES India as a developing country has applied TPM whenever the trade has been distorted by unfair trade practices . Similarly arguing an Indian case. The flaws in the Anti-Dumping Laws also support the cost for protectionism. XIMB Journal of Management .
one notices that the investigations have been more on raw materials and intermediates rather than on consumer goods. Out of the cases which have been appealed before various authorities including Customs. Thus. Thus. between 1992 and 2005. Further the raw materials and intermediates have mostly attracted Anti-Dumping measures. there is no correlation in the two phenomena. India has been both an active user of Anti-Dumping measures and an adversely affected victim of AntiDumping and countervailing measures. more than 120 AntiDumping cases have been initiated against India of which in more than 50% investigations definitive measures have been imposed. High Court and Supreme Court in about 5060% of appeals. Most of the cases have been initiated against steel products. However. As per DGAD’s annual report 2005-06. about 300 Anti-Dumping investigations including reviews have been conducted on imports into India of which only 5% of the cases have been closed without recommendation of any Anti-Dumping duty. About 60% of these investigations have been on imports from China PR. The unfair conduct of trade needs to be regulated by interventionist mechanisms like TPM. 10% on textile fibres.. Dumping of AntiDumping and other Trade Protection measures is certainly not the solution as it would then be an era of free but not fair trade with developing countries having no recourse to safety valves to . and more so by Anti-Dumping in the Indian context. the judgments has been in favour of the designated authority.al. regarding conduct of international trade under the WTO framework is to ensure free and fair trade and not simply the free trade. No doubt some of the disciplines of WTO like evaluation of dumping margin would require tightening so as to reduce ambiguity and to take care of the dynamic structure of relative competitiveness. EU. 163 like dumping. engineering goods. South Africa and Canada. Trade Protection . chemicals and pharmaceuticals. As regards nature of products. 60% of these cases have resulted in definitive measures. As per the DGAD’s statistics as mentioned above. 9% on steel products and raw materials and only 8% on consumer goods.. which could imply retaliation or trade war situation. US. US and South Africa happen to be the major action takers against India. EU and Korea. India’s share in terms of imposition of Anti-Dumping measures on its exports is about 3.Panda et.0 CONCLUSIONS The basic objective. About 45 anti-subsidy cases have been initiated against Indian exports of which 95% are initiated by EU. between 1995 and 2005. 50% have been chemicals and petrochemicals. Excise and Service Tax Appellate Tribunal (CESTAT). No extent of free trade can be equitably beneficial to all stakeholders until and unless trade is also conducted fairly. 5.6%.
with appeals at various national levels and thereafter finally at the Dispute Settlement Body (DSB). However. The study . The tightening of disciplines of AntiDumping could be through relooking into the threshold of 2% dumping margin and 3% dumped imports which do not trigger AD action also termed as de minimis limits of dumping margin and the volume of dumped imports. 2007 vent out unfair trade pressures. no member country can afford to abuse these priorities for long and escape criticism. A Systems Approach for Anti-Dumping Measures in India” Arora (2004) while evaluating overall economic impact of Anti-Dumping measures. Therefore elaborate redressal mechanisms exist for taking care of abuse of Anti-Dumping measures. September. The application of Anti-Dumping duties is subjected to various review mechanisms. In a study titled “Economic Impact of Trade Protection Measures. it is a reasonably good indicator of a fair conduct of investigations by the designated authority in India. There is also a need to harmonize various Anti-Dumping practices in determining the extent of dumping. No doubt cost incurred in such transactions could happen to be a non-tariff barrier and therefore over use and misuse of AntiDumping can be detrimental to the free flow of trade in this context. has concluded that while there has been a positive volume and price effect with enhanced profitability as far as domestic industry is concerned.164 Vilakshan. Also a judicious and rule-bound application of lesser duty rule which prevents levy of Anti-Dumping duties to the full extent of dumping margin can check over compensation to domestic producers due to Anti-Dumping measures. The argument that Anti-Dumping duties affect the export competitiveness is not justified since the taxes/duties on raw materials that go into export production are refunded back to exporters. the high rate of Anti-Dumping duty does not necessarily lead to higher sales realization by the domestic industry as a high level of AntiDumping duty is generally counterproductive and invariably leads to circumvention of Anti-Dumping duties thus severely undermining the efficacy of Anti-Dumping measures. The fact that about 60% of the appeals have been upheld before various appellate/ judicial bodies and some of the findings being modified only partially. The user/consumer industry is a significant and a strong voice to check abuse of such a policy. It is further concluded that even though the application of AntiDumping measures may lead to both trade chilling and trade diversion effect. XIMB Journal of Management . there has not been any adverse impact on export competitiveness of the user industry due to levy of Anti-Dumping duty. The strengthening of causal link determination through a rigorous implementation of non-attribution analysis can further enhance credibility of Anti-Dumping measures.
academic Foundation. Arora. Department of commerce. REFERENCES Aggarwal. Annual Reports. Michigan. New Delhi. Unpublished. academic Foundation. Punjab University. Further. Working paper.M.Panda et. Nilanjan (2001). 2004-2005. Protectionism.). the technical disciplines of the AntiDumping act would also require to be re-engineered and tightened keeping in view such changes. (1993). International trade is a dynamic process and as the cost structure of industries in developed and developing countries would keep changing. Antidumping: How it works and who gets Trust. Finger. Bibek (2006). 2004-2005. Directorate General of Antidumping and Allied Duties (DGAD). strict implementation of non-attribution analysis and adherence to the rules of the game with no intent of protectionist bias could go a long way in checking overuse. uses and misuses of Anti dumping: Provisions in World Trade. Jagdish (1988).. ‘Political Economy of Antidumping’. . “Introduction” in Bibek Debroy and Debashis Chakraborty (eds. 165 also brings out that repeated and renewed Anti-Dumping measures are often affected by circumvention of Anti-Dumping measures. in Bibek Debroy and Debashis Chakraborty (eds. misuse and abuse of the Trade Protection Measures primarily AntiDumping measures. M Phil Dissertion. Erixon (2006). Debashis (2006). ‘Anti Dumping Measures: A critical Evaluation’ India biz news and research services limited. A (2003).). uses and misuses of Anti dumping: Provisions in World Trade. New Delhi. Banik. ICRIER. A cross country Perspective. A cross country Perspective. The need therefore is to strengthen the disciplines of Anti-Dumping measures by eliminating subjectivity in various articles which lead to abuse and misuse of Anti-Dumping measures rather than dumping this agreement as advocated by various authors. Bhagwati. the critics themselves observe that the main driver of usage of Anti-Dumping measures is the political economy and its usage in days ahead is not likely to decline. Trade Protection . Delhi. University of Michigan Press: Ann Arber. J.). ‘Time to Dump certain Anti Dumping Provision: Looking through the Dispute Settlement Mechanism Proceedings’.al. Rajiv (2004). It is therefore felt that harmonization of Anti-Dumping practices. uses and misuses of Anti dumping: Provisions in World Trade. Debroy. academic Foundation. New Delhi. Anti dumping cases in India: Products & Profiles. in Bibek Debroy and Debashis Chakraborty (eds. tightening rules of origin to prevent circumvention. MIT Press: London Chakraborty.. A cross country Perspective. New Delhi. ‘Anti Dumping code: Issues for review in Post negotiations’. “Economic Imapact of Trade Protection Measures: A system Approach for Antidumping Measures in India”.
). (1997) ‘Anti-dumping in Law and Practice’. academic Foundation. Deniel (2006). ‘Antidumping a look at US experience – Lessons for Indonesia’. New Delhi. academic Foundation. Institute of International Economics. in Bibek Debroy and Debashis Chakraborty (eds. World Bank Working Paper. . G. A cross country Perspective. Li. Brink and Ikenson. C. Yuefen (2006). ‘Why is China the world’s number one Anti Dumping Target’. XIMB Journal of Management . 1823 Lindsay. A cross country Perspective. uses and misuses of Anti dumping: Provisions in World Trade.166 Vilakshan. (1999). Washington.). New Delhi. Krishna Raj. 2007 Haufbauer. D. in Bibek Debroy and Debashis Chakraborty (eds. uses and misuses of Anti dumping: Provisions in World Trade. ‘The Rhetoric and Reality of US Anti Dumping Law’. September.C.
It is very closely connected to its sister concepts.ac. The growth and development of global business and its impact on economic. globalization and global capitalism (Dunning. The value system of both the host and home country has to be properly handled and the ethical prospective has to be properly reviewed in order to maintain a moral standard which is rationally acceptable across the cultures. Xavier Institute of Management. social and cultural life need to be based on a moral foundation that not only ensures good business but also contributes towards the development of a socially and economically just world.Perspective Shaping the Moral Foundation for Globalization: Lessons from Indian and Western Philosophy* Bibhu Prasan Patra1 Abstract In this paper an attempt has been made to examine some of the unambiguous universal norms developed by the Indian and western philosophers and the important role these may play in shaping the moral foundation of global business practices. quality and price by the participants of market. which determines quantity. The main contention of the paper is to show that a better living and good life in a global village would be possible if multinational corporations hold on to these values. But diversity of Received August 28. The process of globalization is facilitated through the market system. Bhubaneswar. services. 2003). GB without doubt is the main driver of global economic order. In order to resolve the dilemma of culture specific value system the idea of transcultural ethical universalism has been developed in this paper. 1.0 INTRODUCTION Globalization has been commonly understood as a process of free flow of goods. confined to one nation state. technology and other assets across national boundaries. GB is thought to be the most effective way of creating wealth and enhancing economic growth. 2007 Associate Professor. Two models (i) Kant’s Deontological method (Western philosophy) and (ii) the concept of Dharma (Indian philosophy) and the learning from the Upanishads have been used to resolve the challenges of cultural relativism. email:bibhu@ximb. This new global economic order is mainly facilitated by “Global Business “(henceforth GB). All of us take part (knowingly or unknowingly) in the market exchange system that is no more * 1. Revised September 5. 2007.in .
a sensitive. September. So GB is tantamount to pressure from a triangle of stakeholders. local employees and their organizations. (b) Host country stakeholders. competitors. Understandably then. home country employees.168 Vilakshan. And these two obligations may not be fully compatible with one another. conflicts of values. such as. and differences in normative standards have direct impact on commercial transactions and economic interactions. informed investigation into the range of norms and values involved in commercial transaction as well as a comparative understanding of cultural socio-historical and political fabrics of both host and home countries. suppliers. The problems are of far greater dimension while designing managerial strategies at the global level. this tension cannot be eased merely by adopting a descriptive or non-evaluative measure. 2007 economic and political policy matters. a judicious. Appropriate solution depends on proper understanding of how radically divergent the cultures are and the legal and moral codes of the two countries involved.e. What is necessary. pressure groups. host country government and host country community. the different stages of socio economic progress in host and the . distributors and retailers. is a two fold task: First. (c) Domestic or home country stakeholders. such as. such as. home country customers and the domestic government. imaginative comprehensive and operational normative framework which can effectively deal with problematic issues of GB in the spirit of maintaining a reasonable balance that fulfills the demand of all the stakeholders like (a) Commercial stakeholders. therefore. attending to the demands of the host country stakeholders requires the firm to oblige the cultural values and standards of the host country. there is a triangular tension that GB experiences in its effort to survive and prosper in the global market place. When different countries have different ethical standards relating to business practices. there are two types conflicts that commonly arise. All these problems are understandably there because there are significant differences in culture. Second. i) The level of development. And surely. The major challenges to the organizational system of GB originate from cultural diversities. i. XIMB Journal of Management . shareholders. While safeguarding the interest of home country stakeholders imply obliging the cultural standards and values of the domestic soil. economic equality and social status among the nations and also within a particular nation. Finding out reasonable solutions to satisfy a range of stakeholders sometimes becomes very difficult. No doubt these stakeholders put various pressures on the global firm. which takes no note of the seriousness of the normative dimension of GB.
denying any kind of uniformity of ethical values altogether across humanity.0 WESTERN PHILOSOPHY: KANT’S ETHICAL UNIVERSALISM Kant’s moral theory provides a moral standard. 169 home country. Kant in his “Ground Work of Metaphysics of Moral” expounded that “don’t treat other individuals as means to an end” i. My contention here is that cultural and ethical relativism poses only an apparent conflict for GB. there may still be the ethical dilemma whether compulsory withdrawal of all child labourers from a firm is to be strictly ordered even if that inevitably leads to starvation in a developing nation. Respecting the other person is the most basic thing. Once you care for the human .. all rational beings are members of the kingdom of ends. Between these two extremes. We will now look into both Western and Indian philosophical traditions that reject any form of relativism and give moral support to GB. because of cultural traditions.Patra. The basic freedom of the individual person has to be respected. which could lay down the parameters that make global business practices good. and ii)the conflict of moral standards. gift etc. which can be applied universally across the border. which would categorically govern GB under any particular circumstances anywhere in the world. For example. while very low wages may be considered unethical in developed countries. or to standardize the system of values used in the home country throughout the organization and impose them on the host country operations. Besides. The efficiency requirements of the global market ought to be supported by fairness that is based on universal moral principle of what is just and proper. do as the Romans do”. while child labour may be deemed unethical in a developed country and it may even be condemned by the United Nation’s Charter of Labour Laws. One major differentiating factor is the effect of cultural differences on the acceptability of business practices. employment policy the problem of bribery. These issues require a critical culture-sensitive handling. A common problem for GB is whether to adopt the motto “when in Rome. Admitting the fact that norms and outlook vary from one place to another and all questions of moral differences among cultures can be solved by measuring them against a yardstick of morality has great relevance for stability of GB. Shaping the Moral . developing nations may be said to be acting ethically if they encourage investment and improve living standards by accepting low wages.. The context-relativity of the above kind may be mistaken for full-scale ethical relativism. there may be a reasonable middle path. and for which societal and national boundary is not a hindrance. One can always identify a common set of core value. In what follows we shall examine the philosophical foundations that transcend the narrow issues of cultural and ethical relativism and facilitate smooth progress of the global market.e. 2.
He says that this autonomy or the freedom of the will actually guide all actions and universally govern human conduct. The supreme principle of morality. One must creatively pursue all permissible purposes (including the economic or business pursuit) as fully as possible. principle of autonomy. September. because it enjoins or permits it. The capacity for the ingenious pursuit of purposes and the creative ability. that is. give rise to actions that are unconditionally good (that is the only end-in-itself). he contends that the supreme principle of morality is commitment to doing only what autonomous reason permits us to do. But one must do this because one has a natural inclination to do so. contempt and physical injury are prohibited. And again. the principle of autonomy. selflegislation. which gives man his inherent dignity. Kant unambiguously refer to some principles which are of unconditional worth in human life. This absolute freedom from the pressures of inclination is involved in autonomy. nurture their natural perfection and are willing to perform fully rational action. or even out of it. the controversy that arises between unequal economic development and cultural difference will be resolved. is the only intrinsically worthwhile value. such as. is that which alone has dignity’. XIMB Journal of Management . Because human beings are rational beings and have the capacity to set an end by choice and deliberation (which distinguished them from other animals). which are morally worthy. defame. (independence of all natural desires). for all possible purposes of human endeavour.170 Vilakshan. He writes that ‘morality. Moral perfection is to do one’s duties (to be perfect) from the motive of duty (‘duty for duty’s sake’). having autonomy of will. which can be called good without qualification. the disposition always to do what practical reason enjoins or permits. except the ‘Good Will’. and humanity as capable of it. 2007 dignity and treat others as a member of the kingdom of ends.’ ‘Nothing can possibly be conceived in the world. ‘The cultivation of one’s will [moral attitude] to fulfill every duty as such’ is the duty of moral perfection according to him. Here Kant holds that arrogance. Kant’s conception of treating humanity as an end-in-itself also includes perfect duties to oneself and duties of respect to others. ‘respect for a person is properly only respect for the law …. as contrary to the dignity of others. In the Groundwork. . the principle of being a universal legislator in a kingdom of ends (all ends combined in a systematic whole). He says we are also obligated to acknowledge ‘the dignity of humanity in every other man’. That is why he considered all rational beings as ‘kingdom of end’ or ‘end in themselves’. It is self-evident that a rational being necessarily has insight of what is morally permitted and accordingly set goals and purposes. His argument is that rational beings.
cultural ethical universalism. never merely as means but as ends in themselves. whether in our person or that of any other. In such a society. Hypernorms are second-order moral concepts because they represent norms sufficiently fundamental to serve as a source of evaluation and criticism of community-generated norms. Once we respect the hypernorms we will reject cultural relativism and pave the way for a trans. each entity pursues its interests in accordance with moral maxim(rights and duties) based on the rational free will and distribute the benefits and burdens on mutual cooperation. (what you do not wish to do to yourself do not do to others). The social order is ensured by offering to its members an equal opportunity. John Rawls’ Theory of Justice represents the Kantian conception of morality. 171 It is rather irrelevant to talk of cultural relativism so far as human dignity is concerned. This amounts to recognizing . Donaldson and Dunfee’s (1999) idea of hypernorms is also rooted in Kant’s maxim... This deep-rooted ethical philosophy if cherished will contribute to better living and good life in a boundary less world. Shaping the Moral . race and sex. world view defends the universal character of human ethical experience. It only depends upon one’s attitude to accord equal dignity to each human person. According to him elimination of difference caused by accidents of birth or social condition is the only way to achieve economic justice. strength. Of course while applying the moral theory. one may face some practical difficulties. We must not for instance coerce or deceive others anywhere nor must we fail in our duty of benevolence towards them.e. natural ability. because sometimes it is difficult to grasp complexities of the situation and one’s finite ability to judge the ethical context. Kant’s Categorical Imperative requires us to treat humanity.Patra. Rawls theory of justice focuses on social justice. intelligence. which he regards as a feature of a wellordered society. context complexity will not be a hindrance. which are present everywhere in the world. i. His approach is that a rationally self-interested person harmonizes himself or herself with the society by recognizing the fact that behind a veil of ignorance each individual is equal. Once we realize that all rational beings are free beings and have the capacity to exercise their autonomy of will. This cosmopolitan. universalizability (human beings must be treated with dignity)and reversibility.. Rawls holds that institutions as part of a well-ordered society should choose the principles of justice without knowing any facts about their stations in life. Universal principles are formulated on the foundation of these basic values. This in fact is creating confusion in the present day human society and problems for GB. In the modern world what we lack is a sincere effort to care for human dignity. such as social status. it will give rise to a world order which is more cosmopolitan. But so far as core human values and individual freedom is concerned.
and the environment protection groups) are making significant contribution to improve quality of life in the global society.g. In Indian philosophical system the concept of Dharma (the cosmic moral principle) encompasses the religious and social understanding of the human situation. There are diverse communities.172 Vilakshan. keeping in view the need and requirement) in desa (space) and Kala (time). and kula). Every activity of life is coordinated by dharma. It is the common principles that show the way to people of the time to move on the path of righteousness (dharma).) and public life (social. It is the guiding principle of all action and tells us what ought to be done. creed. . September. civil rights. suppliers. polite behavior. If corporations and other business organizations nurture proper respect for other cultures.0 DHARMA (THE BINDING PRINCIPLE): THE INDIAN TRADITION fish to move about. every aspect personal (personal hygiene. Different global fora (e. religion and socio-economic condition. considerate and gracious ways of dealings etc. that will enable them to accomplish their goals more efficiently. Action of these fora for a have been giving authentication to consensus morality and the concept of ethical universalism or universally accepted ethical norms.). shareholders. employee right. so dharma makes the movement of soul and matter possible. natural environment and the immediate surrounding of their business firms (both in the home and the host country). Secondly dharma guides. and customs that differ from places to place. but at the same time evolving universal principles and values that is common to all people and based on the deepest sources of human ethical experience. Human right.e. Dharma does not refer to some rigid and stagnant principles but is an active power that directs and preserves the interests of the individual and the society irrespective of caste. ‘Just as the water helps the 2. and families to families (desa. and human rationality. policatical. 2007 the diverse communities and rejecting the fact that one -size -fit-all. and spiritual matters etc. Adherence to dharma put emphasis on one’s duty and it entails that each one (which encompasses every thing and being) should be treated with respect irrespective of position and place. civil awareness. customers. employees. religious. 3.2 No doubt the foundation of these ethical standards normally lies in major religious and philosophical precepts. child protection. It is the binding principle and The word ‘dharma’ comes from the root dhr meaning to ‘to support’ or ‘to sustain’.’ The characteristic of Dharma is that of a regulatory principle. XIMB Journal of Management . economic. jati. and the peculiarity too is taken care of by concept of dharma. That is why dharmasastras (ethical treatises) take into account the conditions prevailing (i.
economic . It is above everything.. social. In Canakyasutra it is stated that sukhasya mulam dharmah. Of all the purusarthas. economic.122. So. Shaping the Moral .e. Dharma acts as decision procedure for determining the right action in any particular situation. Only the Carvaka school (the materialist) considered kama (desire) as the only goal of life (kama evaikah purusarthah).251. These maxims declare offences against persons and property to be violations of dharma. political. and ensures good life in the society.Patra. The other three purusarthas artha. Here we can see the similarity between Kant’s principle of universalizability and reversibility and the Mahabharata concept of whatever one desires for oneself one should desire the same for others (yadyadatmani iccheta tatparasyapi cintayeta the 12. moksa (salvation).224). Kama (desire). In the caturvarga classification the four are equally important for leading meaningful life. facilitates its economic growth. 173 universally applicable to the different human activities (i. and do not pose any problem to the society (Manusmriti 2.21). I would like to mention here that those who relinquish the world and decline to take part in worldly transaction set moksa as their ultimate goal (the paramapurusartha).. it provides the self-discipline essential for the beneficial pursuit of artha (wealth).So it asserts that all business enterprises should be unfailingly based on dharma. The Mahabharata 5. political etc. dharma is considered to be of the greatest importance because dharma is the sole means of attaining social and economic justice. dharma (moral principle). are called caturvarga (the four principles of living). but these should be achieved only by adopting the path of dharma. Let us elaborate this moral fibre for the sake of clarity. Dhrma gives direction to artha (creation of wealth). From this standpoint.). viz. The connection between the metaphysical and the material world view of Indian ethical thought is unique. kama and dharma constitute the bed rock of the socio-economic living. treated as both dharma and artha are merely treated as the means and kama as the end. when there is no clash between dharma and artha. Dharma is considered to be the rule of law. Commonly it refers to the codes of duties of social. In Indian value system there are four aims or goals of human life. Prosperity or welfare consists in giving importance to kama and artha.These four purusarthas. It is through dharma the objective of artha and kama should be fulfilled (dharmadarthasaca kamasaca sa kim artho na sevyate. the artha being merely the means of instrument for realizing kama.32).’ It is thus dharma that leads to the behaviour which supports harmony in society. ‘dharma is the root of happiness. The question of moral rightness and wrongness or moral worthiness of an action is embedded in the concept of dharma. artha (wealth).
2007 institutions and individuals.e.174 Vilakshan. ii) Communitarism versus individualism.dharmo raksati raksitah). religion. dharma. It will also provide a philosophical backbone to some recent empirical studies done by Hofstede (1980. In the Rg-Veda dharma is akin with the concept of rta. such as. i) Power Distance.0 THE UPANISHADIC MODEL In the Upanishads Indian thinkers have described the human race as Amritasya Putrah (children of immortality) and the whole world is described as Vasudhiva Kutumbakam (the entire world is one family). they will definitely do well in both the home and in the host country. If organizations accommodate this philosophical thinking and practise such universal value system. . The whole of mankind was considered as the part of the divine (Atmabat Sarva Bhutesu) and the Divine is all pervasive (Ishabasyam Idam Sarvam). ii) MasculinityFemininity. dharma is considered to be stronger than any other power since it is possible for a physically weak. Thus Manusmriti maintains: acarah paramo dharmah: good conduct is the excellent dharma – (Manusmriti 2. v)Achievement versus ascription. When there is a comparison between the Arthasastra and the Dharma-sastra.The basic purpose of this paper is to affirm the positive role dharma plays in regulating human conduct that ultimately helps the individual and society to grow. social.12). 4. and economic goals of life. September. iii) Uncer-tainty Avoidance and iv) Individualism-collectivism to indicate cultural difference among different countries of the worlds. It is the basis of all good practices.1991) and on cultural Trompenaars(1997) 3 dimensions . Deliberately I have not discussed the relation of dharma to moskha. the latter triumph over the former. political. Upanishidic vision envisages that dharma is identical with satya (truth). In Brhadaranayaka Upanishad it is clearly stated that there is nothing greater than 3. Cherishing these values positively contribute towards a better form of life. The reverence for dharma by any individual or society ultimately gets its reward by dharma protecting that individual and society (dharma eva hato hanti. creed. Hofstede has specified four dimensions of culture. but righteous person to defeat a physically strong person. (See Table. XIMB Journal of Management .1 for details). Atmabat Sarva Bhutesu). country etc. The concept of Global society has existed in the Indian Philosophical tradition from the very beginning. Manu clearly states various feature the dharma (duty) for better accomplishment of individual.1983. Trompenaars and Hampden provide a series of bipolar dimensions of culture i) Universalism versus) particularism. lives of animals and plants. iii)Neutral versus emotional. There was equal respect for life of both human and non-humans (i. the Moral Order. iv) Specific versus diffuse. GB will certainly attain the greatest good for the mankind if devoid of prejudice against caste.
Reversibility Every rational being whether yourself or another has strict obligation towards him-self and others. (from personal. lives of animals and plants. we help ourselves. There should be conscious effort to protect human dignity by individuals and political and economic powers. Indian Philosophy Upanishads and Concept of Dharma Dignity and Respect The Upanishads depict all men and women as “children of immortality” (Amritasya Putrah). Dignity and Respect The rational being is “the basis of all maxims of action”. One’s own conscience. no exploitation should take place in the work place (particularly women and children).. Reversibility Do not do on to others which you do not wish to be done to yourself. race. “The rational being. creed. respect others because ‘we are all one’ in helping others.e.. but is the capacity to choose actions on the basis of objective principles of reason. “Do not do it to others which you do not want to do on to yourself”. Freedom There should not be any compulsion. Shaping the Moral .We should do good to others. we hurt none but ourselves. Atmabat Sarva Bhutesu). cast. This should be the binding. 175 Table-1: Universal Human Values Common Understanding Western Philosophy Kant’s Ground work of metaphysics of Morals (1785) Dignity and Respect Every human being must be treated with equal dignity and honor without any distinction of nationality. religious affiliation (faith). language. and must treated in every maxim as an ends. sex.” and “must be treated never as a mere means”. no should act under duress. . social to professional life). unconditional norm for all areas of life. Reversibility There was equal respect for life of both human and non-humans (i. Freedom In the Upanishads Freedom is conceived as internal force that exit in every individual This immutable aspect is manifested by the practice of good work and satisfaction of.251. is an end in itself. and political affiliation. Freedom Freedom of the will is not the capacity of the will to make choices on the basis of subjective feelings. Whatever one desires for oneself one should desire the same for others (yadyadatmaniiccheta tatparasyapi cintayeta the Mahabharata 12. and in hurting them.Patra. age.21).
natural. What Kant is telling us is knowledge of just and unjust. Sarve bhabantu sukhinah sarve santu niramayahSarve bhadrani pasyantu makaschit dukhabhagabhavet. may all be sinless. kill any other human being because these can not be accepted as universal principle. Univesalizability Human beings have a unique capacity called reasoning.’ Univesalizability Act only according to that maxim by which you can also will that it would become a universallaw. unjustified use of resources (human. and financial) by few causes social disharmony in the world.‘May all be at ease. destroy social fabric. No should cheat. and is the “only condition under which a will can never come into conflict with itself…” Univesalizability Indian thinkers have described the human race as Amritasya Putrah (children of immortality) and the whole world is described as Vasudhiva Kutumbakam (the entire world is one family. the summum bonum is not only the well being. Justice The highest goal. may all experience happiness. 2007 Justice What is needed is a socially and economically just society. wcich he calls the ‘positive right’ of an individual. according to which it is performed. All people have a right to life. injure. of human beings but of all the living creatures. but by the principle of volition. “Always act according to that maxim whose universality as a law you can at the same time will”. violate human right. Conflicts should be resolved with non violent means and with the support of justice. torture. All economic and political activity should operate within a global order to enhance peace and harmony. and treat people with due respect to their rights. This is applicable in every human endeavor personal or professional. lie. Upanishads) . XIMB Journal of Management . Unlimited. safety and free to develop their individuality insofar as they do not harm the rights of others. may none experience suffering.” Justice The moral value of an action is determined not by how effective the action is in achieving its object.176 Vilakshan. September. deceive. As Thomas Hobbes said: “life will become nasty brutish and short. We depend on each other and think of the welfare of all.
dignity and respect. presented in both the Indian and western philosophy are perused seriously. universalizability and reversibility are the basic principles of human living. Kant. Thomson Business Press. (1980a) Culture’s consequences: international differences in work-related values. truthfulness should be cultivated in all our relationships. Fall. New York. Vol. If these basic moral principles. (1983) The cultural relativity of organizational practices and theories. Beverly Hills.Patra. John H.(1971)A Theory of Justice. but with giving offence. (1953) The Cultural Heritage of India. MA. (2003). REFERENCES Bhattacharya. freedom. Truthfulness The value of truth out ranks the value of combination of health. Translated with an Introduction by Lewis white Beck. All of us depend on authentic information to make decisions that shapes our lives.. Immanuel (1785) Ground work of the metaphysics of Morals. Reviving the Invisible Hand. Hofstede.. and Dunfee Thomas W. 75-90. Shaping the Moral . Calcutta Donaldson. In the conclusion. G. . although one should never compromise truth for being nice. Thomas. 5. Journal of International Business Studies. Oxford University Press. So. sage. etc. Lowe. The table-1 represents the universal human values that are common in both Indian and western philosophy. These principles determine the moral worth of any action. Hofstede. and act truthfully. justice truthfulness. Lal.0 CONCLUSION Dunning. Everyone should speak the truth. G. pp. Hofstede. (The Philosophies) Rama Krishna Mission Institute of culture. 1959. (ed). Keen Smith and Phil Johnson. Rawls John. wealth... London. 177 Truthfulness All communication should be clear and transparent. Robin (1996) “Ethics in International Business” in Business Ethics and Business Behavior (ed). Haridas ed. this would provide a solid moral foundation to GB. Harvard University Press. New Delhi. Baston. G.. Academic Foundation. I would like to suggest that the universal values like. (1991) Cultures and organizations: software of the mind. I & II. (2006). 243-272. Deepak. CA. The library of Liberal Arts. and happiness. McGraw-Hill. Making Globalization Good. (1999) Ties that Binds. Harvard University Press. Truthfulness satyam bruyat priyam bruyat na bruyat satyam apriyamPryyam ca nanrtambruyat esa dharmah sanatanahOne should speak the truth.
mainly the Isha. Rendered into simple and Rhythmic English (comprising six Upanishads. (1972).Norton. XIMB Journal of Management . F. 2007 Singh Karan. Sri Aurobindo Ashram Trust. Pondichery 1972. New York and London. W. and Hampden-Turner.)Globalization and its Discontent. 21. Joseph E. Sri Aurobindo.178 Vilakshan.1. Katha. 149-159. Prashna and Mundukya). C. Stiglitz. 1997. July. (1995) “Transition to the Global society: Towards a Dharma for the New Millennium” in the Indian Journal of Public Administration.W. . Mundaka. (2002. The Upanishads. Trompenaars. Kena. September. Response to Geert Hofstede. 613-613. pp. International Journal of Intercultural Relations.Sept.
Perspective Demand Estimation – Some Empirical Observations and their Implications* P. The two methods and observations are independent of one another although they are related to demand estimation. The author sincerely thanks an anonymous referee for his valuable comments on an earlier draft. 2007. Bhubaneswar. In the second method.ac. In the present paper two methods viz. Different methods have different assumptions. It may not be out of place here to mention that strategic corporate planning operates in an environment of uncertainty. the sampling type and sample size along with assignment of probability to different responses are given adequate importance and properly articulated as they involve subjectivity.2000.Mishra1 Abstract Demand and sales forecasting have gained importance in the recent time due to their relevance in planning process.1998. 2007. There is a variety of methods for forecasting demand or sales. Professor of Economics. Researchers have studied and experimented with various methods of demand or sales estimation and * 1 forecasting (Hardie et al. limitations and implications. Chen. Hassens. Xavier Institute of Management. Steffens. 1. This information regarding which product Received July 24.in. Revised : September 10. 2002). when cross section data are used in the consumer’s anticipation survey method. the estimates may vary unless the number of options (or price levels). It is observed in the first method that the use of only one strategic variable such as price sometimes does not result in good estimate unless it is associated with other important determinants of demand in short run estimation. Statistical and econometric methods for sales estimation and forecasting attempt to reduce some of these uncertainties by predicting and estimating the volume that will be sold in the market. explanatory method and consumer anticipation survey using probability have been used. .1998.0 INTRODUCTION Estimation and forecasting methods have found importance in the recent times in several fields including sales and demand forecasting and other business related variables since it is believed that educated guesses are more valuable than uneducated guesses for decision making (Hanke. 2001). email: pmishra@ximb.
while using cross section data for demand estimation it will be easy to get the demand or sale . Hassens (1998) has examined the problems of estimation of ‘ongoing factory orders’ and monitoring ‘retail demand’. There are views that. They have considered two types of demand processes. Besides these. Researchers have also put emphasis on the use of moving average methods and more sophisticated autoregressive methods using time series data for short run forecasts. XIMB Journal of Management . different data sources and models could be used to increase prediction accuracy of the estimates or forecasts. one needs to know the impact of its product’s price. explanatory method using the demand and sales determinants have also gained importance in demand and sales estimation and forecasting in the recent time. to whom and to which market segments these are to be sold and when to be sold is a necessary input for planning various functions in a firm. supply chains consisting of a single retailer and a single manufacturer. demand variability increases as one moves up the supply chain. September. 2007 or services to be produced. Ryan & David Simchi . two-stage. The determinants of demand. Similarly. it may be pointed out that one of the difficulties in using the explanatory method is data limitation.. Such studies put emphasis on the use of specific variables in the models for estimation and forecasts.2000).In this context. known as the bullwhip effect. mostly the strategic variables like price. its advertising expenses. They have tried to quantify this effect for simple. marketing mix data for improved retail demand tracking method and use of conjoint measurement data to simulate a product’s utility over time with inclusion of the information in the demand model.180 Vilakshan. have also been suggested. For example. i.e. advertising expenditures. Besides. However. Based on assessment of the relative efficiency of different statistical or econometric models. selling expenses and strategies along with other variables. personnel. a correlated demand process and a demand process with a linear trend. as one moves away from customer demand (Chen. To estimate or forecast company sales or demand. implies that. it is observed that extrapolative method with time series data could be most befitting for such exercises. personal selling expenses and income of the consumers are used in the estimation of demand and forecasting. the most frequently used approaches for forecasting sales and demand are extrapolative methods and probabilistic models. some have advocated that an important phenomenon often observed in supply chain management.
there will be limitation in using the explanatory method for demand estimation since data limitation will be encountered with respect to some of the strategic variables like advertising and personal selling expenses. The specific objectives of the present paper. For the first method. 2. Cuttack. a multiple regression has been used where as for the consumers’ opinion survey a two variable regression has been used. For the second method.0 METHOD For the explanatory method. Therefore. i. and 2. therefore. Rourkela. Paradeep. opinion survey method. This has been done by using secondary data. price of the product. Estimates of Demand using each variable in the equation and combination of variables have been examined and compared using the standard method through errors in the estimates. In view of the above. namely. it is an accepted fact that in the short run there will be hardly any variability in the prices in different markets although there will be comparatively more variability in the demand depending on the influence of some other variables like income of the consumer and other demographic features. To identify issues involved in the consumer’s opinion survey method with assignment of probability to responses for demand estimation using only cross section primary data. advertising expenses and personal selling expenses have been used and demand estimation has been done using the said three variables. 2006) was considered and primary data were collected from six cities/towns namely. in this paper to evaluate two methods of demand estimation – (i) explanatory method using determinants of demand and (ii) probability method using consumer anticipation survey and then discuss the issues and implications.. a live example of Ortel Communication Ltd Bhubaneswar (Mishra. are as follows: 1. but it may not be possible to have a breakup of the advertising expenditure of the product for these markets. an attempt has been made. P. Sambalpur and Balasore with the help . Moreover. Bhubaneswar.. The relative importance of the variables used has been examined from the standardized coefficients and also from the scatter plots. To evaluate the explanatory method with special reference to the selection and use of variables and identify issues involved in estimation and implication of the findings. a demand function using a set of three strategic variables.Mishra. 181 volume of a product and the prices prevailing in different market segments. Demand Estimation –Some .e.
Qx = f(X1X3) 7.0477 (0.0995 (0. The first relates to the use of explanatory method whereas the second relate to the use of consumer’s anticipation survey. XIMB Journal of Management .92 10587 338021 38591 41370 37394 18750 21060 102 581 196 203 193 136 145 R2/Adj R2 MSE S.02) — 0.396 (0. Qx = f(X1) 3.02) — — 0.182 Vilakshan.801 – 1292 – 117. Qx = f(X3) 5.00) — 0.D of Estimates 1. Qx = f(X1 X2 X3) 2.0237 — — -0. Qx = f(X1 X2 ) 6.00) — 0. 2007 of a questionnaire. Qx = f( X2 X3) – 117.88 0. Case I The findings presented in Table 1.137 -0. Fifty prospective customers have been included in the survey for each of the above mentioned places and using probability method for consumers’ anticipation demand has been estimated.296 (0. Qx = f(X2) 4.96 0.02) 0. 2 and 3 and output .00) — 0.60) -0.1 relate to estimation of demand using time series TABLE – 1 : ESTIMATED EQUATIONS FOR DEMAND ESTIMATION & MEAN SQUARE ERROR (MSE) Dependent Variable : Units Sold (Proxy for Quantity Demanded : Qx) Equations Constant Slope Coefficients of Independent Variables Price X1 Advertis.296 (0.0937 (0.0934 (0.01) -0. Issues and implication of the method have also been discussed.0003 0.Selling ing Expenses Expenses X3 X1 -0. Equations for the conventional demand curves as well as marginal revenue curves have been estimated and the revenue maximizing price for the company has been suggested.86 0.0884 (0.93 0. September.88 0. Graphs 1.5 – 270.00) 0.00) — TE : Figures in the parenthesis refer to the significance levels of the slope coefficient .0514 (0.02) -0.0 FINDINGS AND DISCUSSION The findings relate to the empirical observation using two methods of demand estimation (Case I and Case II).5 2096. 3.032 – 706.0929 (0.22 154.296 (0.
183 Graph 1 : Adv. Although. Demand Estimation –Some . price. one each at a time and three different combinations of the variables in order to compare the results and identify the most important one for estimating the demand.. at the same price the units sold are also different Thus. and price see Graph 1.Mishra. An examination of the scatter plots between quantity sold. Estimation has been done taking the three variables at a time.2 and 3) suggests that price does not seem to have a negative relationship with the units sold. Expolr data for three independent variables viz. Graph 2 : Selling Expenses Graph 3 : Price .. It may be mentioned that an examination of the scatter plots is a starting point of exploring a relationship between two variables. proxy for demand. a negative sign precedes the coefficient. The points are scattered on the graph without showing any pattern. Moreover. USA(2001). It may be observed that for lower prices the units sold is less in some cases whereas more in some others. advertising expenses and selling expenses for twelve months of Electronic Data Processing (EDP) Corporation. The insignificant association is confirmed by the low significance level of the slope coefficient and the coefficient of determination (R2) when price alone is considered to be the explanatory variable. Inc. the association between price and units sold cannot be used for estimation of demand and forecasting of demand for a future period.
Case II Consumer’s opinion survey using probability (consumer’s anticipation) Demand estimation of Ortel Communication Ltd has been done using consumers’ anticipation survey. Rourkela. Obviously therefore. It is found that the coefficient of determination (R2) is relatively less but the coefficients of the variables are statistically significant at less than 5 % in all the cases.89. when all the three variables are included in the model all of them are having correct signs. The company is operational in the towns in Orissa viz. it is the only company giving these services to many cities. The economy of Orissa has been growing fast. units sold and the signs are also a priori correct. In a short span of time it has emerged as one of the few companies in the country to provide the “Triple Play of Video.e. Moreover. (interestingly including price) and are statistically significant but price becomes the least important variable looking at the standardized coefficients (see Output 1). it is not advisable to drop a strategic variable like price. However. This is done in order to examine how much the estimates are affected when different combinations of variables are used (i. This warrants us to use other variables in the estimation. This implies that the demand function when all the three variables are used is the most appropriate one. the correlation matrix suggest that advertising expenses and selling expenses are highly collinear with a correlation coefficient of 0. addressing remedial measure for multicollinearity and model misspecification). Sambalpur. Berhampur and Balasore and is providing cable net work (CTV). This may be wrong a priori. Ortel . 2007 it is not statistically significant. The company was founded in 1995.184 Vilakshan. In view of this fast growth. But theoretically. Cuttack. Moreover.e.The estimates. XIMB Journal of Management . September. Therefore. one will be tempted to reason out to drop ‘price’ from the equation. Bhubaneswar. In the present exercise it is observed that the other two variables (advertising expenditure and selling expenses) are having significant relationship with the dependent variable i. The two variables excluding price have also been used in the equations. So far as the state of Orissa is concerned. we have estimated the equations taking price and each of the other two variables individually. It is observed that the mean square error is the least when we are using the three variables in the equation rather than using only price or any other variables or the combination of two out of the three variables. Data Voice”. Paradeep.the mean square errors and the standard deviations for all the equations have been computed (see Table 1). the coefficient of determination is almost zero.
4 (c) 0. This has given the company to compare their market price and with the use of the elasticity coefficients the company may take a decision either to increase or decrease their prices. of buyers 300 275 250 225 200 175 150 125 100 a = definitely no. The expected number of buyers were determined by multiplying the number of responses in each row with the respective probabilities and taking the sum of each row. Thus. Accordingly the company decided to estimate the demand of the services provided by it in different towns in Orissa with respect to the different price levels. f = definitely yes. The prospective consumers were asked to tick the relevant box with respect to their opinion on whether they would go for the services or not at the given prices.. A sample survey was used to quantify the consumer’s anticipation of buying the service provided by the Ortel Communication. c = perhaps (may be). Demand Estimation –Some .e. Probabilities were assigned to each of the responses.0 (f) Expected no. the table provides the expected number of buyers of the service at different prices. The revenue maximizing price has also been included in the table which was derived from the MR Curve. register different options with respect to price (See Table – 2) has been used to quantify the consumer’s anticipation. Different price levels and space to Table No 2 : Please Specify Your Choice In The Following Table Price 0 (a) 0.. b = not likely. Bhubaneswar decided to look into business opportunities with special reference to the growth of demand for the cable connections in the economy of Orissa. Ltd Bhubaneswar. The results have been summarized in Table No 3. d = quite likely.6 (d) 0. Table 3 shows that there are differences in the slopes of the estimated demand curves thus giving rise to differences in the revenue maximizing prices.2 (b) 0. Px=f(Qx) along with the marginal revenue curve (MR) were estimated using the data. It is observed that the revenue maximizing prices for Cuttack and Bhubaneswar are 167 and 174 respectively. But the actual prices which is charged in these two cities are more . e = very likely.8 (e) 1. 185 Communication Ltd. The conventional demand curve (DC) i.Mishra.
186 Vilakshan, XIMB Journal of Management ; September, 2007
Table – 3 : Estimated Demand Equations & Revenue Maximisation Price
Places Bhubaneswar Cuttack Paradeep Rourkela Sambalpur Balasore DC and MR DC MR DC MR DC MR DC MR DC MR DC MR Estimated Demand P = 348.619 – 3.569 X MR = 348.619 – 7.138 X P = 335.308 – 3.550 X MR = 335.308 – 7.100 X P = 282.054 – 2.896 X MR = 282.054 – 5.792 X P = 327.347 – 3.210 X MR = 327.347 – 6.420 X P = 252.470 – 3.498 X MR = 252.470 – 6.996 X P = 341.364 – 3.635 X MR = 341.364 – 7.270 X 170 126 163 141 167 Revenue Maximizing Price 174
which suggest that the company could increase revenue by lowering the prices and thereby widening the customer base in these two cities. But coming to the other towns in the state, it is observed that the company is intervening in these markets and charging a lower price than the revenue maximizing one. The issues which concern the researcher here relates to the number of options to be given to the respondents relating to the price and the assignment of probabilities to different options. The slope of the demand curve will depend on the probabilities to be assigned to the responses on the basis of which the revenue maximizing price is worked out and the elasticities are calculated which in turn may influence the decision making. The assignment of probability to the response category is determined subjectively by the researcher.
4.0 CONCLUDING OBSERVATIONS
The exercises presented here relate to two methods of demand estimation using both time series short run data and cross section data. Using short run analysis (time series) a researcher may estimate or forecast demand by using strategic variables. In the present analysis income of the consumers was not included although it is a strategic variable. However, a caveat is in order here which concerns the explanatory and predictive efficiency of the model used. Theory of demand suggests (and it is a priori correct) that price is considered to be the most important determinant of demand for normal goods, but prices do not change in the short-run in the market nor the income of the consumers particularly when time series data are considered (may be weekly, fortnightly,
Mishra, Demand Estimation –Some ... 187
monthly or quarterly). Therefore, when price is used as the only determining factor for variation in demand and one tries to estimate, he may end up with large errors and will significantly lose predictive efficiency of the model. Therefore, it is better to use the strategic variables including price in the model
for estimation and for the short term forecasting which may be necessary for managerial decision making such as fixing targets for a monthly, quarterly or yearly sale volume. Therefore, a demand function with the relevant determinants may be used in place of a simple demand curve for demand estimation.
Output 1 Regression Variables Entered/Removedb Model 1 Variables Entered SELEX, PRICE, ADVEXa Variables Removed Method1 Enter
a. All requested variables entered. b. Dependent Variable : SOLD Model Summary Model R R Square Adjusted R Square Std. Error 1 .985a .970 .958 123.92241 a. Predictors : (Constant), SELEX, PRICE, ADVEX ANOVAb Model Sum of Squares df Mean Square 1 Regression 3934437.5 3 1311479.183 Residual 122854.12 8 15356.765 Total 4057291.7 11 a. Predictors : (Constant), SELEX, PRICE, ADVEX b. Dependent Variable : SOLD Coefficientsa Unstandardized Standardized Coefficients Coefficients Model B Std. Error Beta 1 (Constant) -117.531 333.526 PRICE -.296 .102 -.200 ADVEX 3.598E-02 .014 .362 SELEX 6.621E-02 .014 .668 b. Dependent Variable : SOLD
of the Estimate
F Sig. 85.401 .000a
t -.352 -2.908 2.579 4.607
Sig. .734 .020 .033 .002
188 Vilakshan, XIMB Journal of Management ; September, 2007
Secondly, when we use cross section data and estimate the consumer demand, particularly for new products, one may use the consumer’s anticipation survey. It can also be used for estimating the demand for a product after product renovation/changes in the quality or any such changes in the product. The issue which needs to be addressed is the number of options (or price levels), the sampling type and sample size and assignment of probability to different response category. More number of options for price levels will increase the degrees of freedom while calculating the coefficients of the demand curve and the representative sample will have more generaligeability. However, the most important aspect is the assignment of probabilities to the answer categories. For example, we have used probabilities of 0.2 difference for the successive answer categories in our exercise reported here (following a conventional usage). But this is quite subjective. For example, one may argue that for an option in the answer category like ‘very likely’ (i.e. the consumer is very likely to buy the product at a particular price), the probability could be 0.9 or o.85 instead of 0.8 (as we have used in our exercise) and for an option like ‘not likely’ the probability could be 0.1 and not 0.2. A subjective assessment of the researcher is involved here to assign the probability. In such cases the expected number of persons willing to buy the product at different prices will vary. This will, in turn, affect the slope of the demand curve as well as the marginal revenue curve which will affect the revenue maximizing price for the
company. Therefore, much caution has to be taken while assigning the probabilities to the different options of the consumers/respondent. A brain storming between the researchers and the experts in the relevant field for assignment of probability could help in such a situation to have a good judgment in assigning probabilities which may result in a reasonable estimate of the demand curve. This will have implications on the revenue maximizing price and price elasticities.
Chen, Frank, Ryan, K. Jennifer and Simchi, David (2000), “The impact of exponential smoothing forecasts on the bullwhip effect”, Naval Research Logistics, USA. Douglas, E.J., (1992) Managerial Economics, Prentice Hall Inc., N.J. Hanke ,J.E. et al Business Forecasting, (2002), Prentice Hall, India, Private Ltd. Seventh Edition, New Delhi Hardie, G.S., Bruce, Fader, Peter, S. and Winneiwski, Michael, (1998), “An empirical comparison of new product trial for forecasting models”, Journal of Forecasting, Vol-17, Issue - 3-4. Hassens, M. Dominique, (1998), “Order forecasts, retail sales and the marketing mix for consumer durables”, Journal of Forecasting, Vol-17, Issue - 3-4 Mishra,P., Business Demand Forecasts and Demand Estimation, (2006) An Unpublished Project Report ,Xavier Institute of Management, Bhubaneswar Paul, Steffens R. (2001), “An aggregate sales model for consumer durables incorporating a time varying mean replacement age” Journal of forecasting, Vol-20
Brajaraj Mohanty1 & Rajeev Roy2
1.0 THE WONDERKID
2.0 HOW IT STARTED
On March 1, 2006, CBS News Agency made the headlines about the Indian wonderkid, Suhas Gopinath. As its Chief Foreign Correspondent Lara Logan reported, six years back, Suhas at the age of 14 had become the World’s youngest Chief Executive. By 2006, he was the boss of a global software company that spanned over 11 countries including the United States. It was a remarkable achievement by any standard. In India, a developing country saddled with the largest number of the world’s poor, it was nothing short of a miracle. Suhas was inspired by none other than Microsoft’s Bill Gates. He had set up his IT Services Company, Global Inc., while simultaneously studying in a school at Bangalore in India. The Company in its fourth year employed 600 persons – the youngest of them was a 10- year old and an advisor on web design. Age was not a barrier for employment in his company. The maximum age of an employee in the company was 32 and the average was around 21.
* 1 2
Suhas wanted to be a veterinarian. A chance visit in mid 1990’s, when he was 12, to an internet café, which opened next door to his house, changed his life. His elder brother Shreyas took him there and he was fascinated at the internet. “He explained me how the internet works and also opened my email id. The next day, I went to school to find that I was the only one in the class to have an email id but I was not satisfied with just that….. Somehow I liked the touch of the mouse and wanted to play with the key board. I used to sit in the cyber centre all the time. I used to get Rs.30 as pocket money at that time and I used the entire money in the cyber café. While an hour at cyber café would cost me Rs.120, I requested the cafe owner to allow me to work for him after my school hours and let me use internet for free. Luckily, he agreed. For the next six months, I learnt how to make web-sites and was introduced to many technologies. I learnt HTML, ASP and every possible software at the Cyber
Received August 20, 2007; Revised September 12, 2007. The case is based on published materials, website information and personal experience of the authors with Mr. Gopinath Professor, Xavier Institute of Management Bhubaneswar. email: firstname.lastname@example.org Assistant Professor, Xavier Institute of Management Bhubaneswar. email: Rajeev@ximb.ac.in
190 Vilakshan, XIMB Journal of Management ; September, 2007
Café. I opted for self- learning instead of going to an institute”, says Suhas. “I had no knowledge of the Internet. But when I was browsing the internet in a cyber café I stumbled on a source code of a web site. I was fascinated and thought long and hard. I soon launched my own website, www.coolhindustan.com,” he adds. That had happened when he was not even 14 years old. The site was launched in May 14 2000 and two friends Clifford Leslie and M.N. Vinay helped him in this effort. “I didn’t have the money to launch the website. So I wrote to Network Solutions Inc. in the US and they readily agreed to host the site free of cost.” Network Solutions also invited Suhas to its headquarters in San Jose, California. It was the first time he had boarded a plane and also the first time that he had gone outside India. In the US, Network Solutions even asked him to maintain their website as Chief Web Developer at $2000 per week with a chauffeur driven car and an apartment. It was quite attractive but Suhas turned down the offer. He wanted to start his own company rather than be employed by a Fortune 500 company. Suhas spent hours at the local cyber café figuring codes, reading books on Bill Gates and Michael Dell and preparing to start an IT company. He had fortunately and accidentally an encounter on an internet discussion board with a US university student in 2003 who was
interested to join Suhas. Two teenage friends from Bangalore from his middle class neighbourhood were also willing to join him. However, his attempt to launch a private limited company ran into difficulty, as the laws in India did not allow a kid of 14 to start a company. Suhas decided to turn to US where such a law did not exist. Thus, Global’s Inc was set up in California and registered online in San Jose. Suhas initially planned that his company should be named Globals Solutions but that name was already taken. He opted for Globals with himself as its founder, CEO and president. Two years later, it had offices in 11 countries and employed over 600 people. In the year 2004 – 05 the company notched up an earning of Indian Rs.2.5 crore. Suhas always thought that he should start his company in Bangalore but was disappointed. In a meeting with President Abdul Kalam he requested for relaxation of this age limit so that other young entrepreneurs could easily set up their companies. The President promised his support. Initially Suhas faced many obstacles. The most important of them being from the potential customers. When they learn that Suhas was barely 14, they cancelled their orders and refused to take him seriously. To overcome this difficulty he started growing a moustache as soon as he began sprouting facial hair, but this also didn’t help much. Soon on the advice of the friends he shaved it off.
2. 6. The portfolio of products and services comprise the following: 1. 3. 4. offered cost effective solutions in web. It was because of his interest that he worked on it and later other friends joined him. Custom Application Development/ Custom Software Development 12. In the words of Suhas “ We aim to bring out robust services within a mouse click and we believe in teamwork. Suhas Gopinath . At the same time their service charges were quite competitive vis a vis others in the business. B2C portals and corporate websites. a number of companies from small and medium sized to fortune 500 companies. As most of them were studying and were interested in the work. Media Streaming 11. At the beginning they went to the extent of offering their services free of cost. Initially it was a team of four. 9. IT strategy. Globals also offered IT consultancy involving practical jargon free advice to clients to cope with first changing and often 10. The company designed and developed B2B portals.. USA Edunar UK Government of India Opalesque.al.Mohanty et. Germany ..com. and as Suhas hired more and more people and opened new offices. Its has as clients. WAP In developing cost effective. Projects are undertaken by Globals to build the skills of the team members. 5. Procurement and partnership Business Process Improvement Information Management Contract Development Web Designing Web Development Content Management System Internet Marketing For Suhas IT was a pastime. they did not mind. Most of the members work from cyber cafes.0 ABOUT BUSINESS complex business. Industry Solutions 13. which turned into an obsession. Every company is treated uniquely. innovative world class solutions and products Globals has made a name for itself and carved out an enviable place for itself in the industry. 7.” By 2005 it had established offices in more than 11 countries and served more than 200 clients world wide. 191 Word gradually spread around about the ability of the Globals Inc.. mobile and multimedia. 4. Globals Inc. 2. 3. taking into account its distinct needs. Verisign Inc. 3. 8. potential customer started coming back to Globals and for Suhas there was no time to look back. software. However gradually they realised that in order to sustain they had to charge the clients. Its clients included the following well-known companies: 1.
Norway. 6. Puri. September.. During a visit to Bhubaneswar for an entrepreneurship seminar. 4. Any candidate can apply online if he is Globals already has a management structure in place. 7.com Jain Group of Institutions. Globals operated on a world wide basis with offices in 11 countries including USA. In order to avoid employment of such young people being termed as ‘child labour’. V.. Their membership to the Globals network is free of cost and based on their skill set and not qualifications. but Manohar says “ I may be older but Suhas is more experienced. Many of these are part timers and the average age in Globals is 21 years. Germany. Suhas says that he does not treat his colleagues as employees. There in a friendly environment just like in a family.0 WORK CULTURE Globals is not only a young organisation but majority of its employees in India and abroad are also young college going students. Chief Information . he explored the possibility of setting up a research and development centre in Bhubaneswar. There is a Chief Operating Officer. Once a candidate is selected he is put on to a project and becomes a member of the Globals family. India. India Deepti Electronics and Electro – Optics Pvt. USA Maso Automotives. 9. VC4G. Enterprise is more important than high academic qualifications. Spain and Australia and in addition there were operations in Singapore. Chilka and several other places of interest to find out that. Globals ensures that such people worked only on part time basis from their home where they are provided with internet connections and PC.N. XIMB Journal of Management .0 ORGANISATION STRUCTURE 10.” During a conversation. UK. Bahrain.D Manohar. They are given instructions through a message board. Greys Exim. Italy. Switzerland. 8.” About the age of Vice President of operations. leisure and relaxation.192 Vilakshan. is open to students in the age group of 17 – 22. India Childern Services Inc. He visited Nandankanan (a zoological park). his employees would get sufficient avenues in and around Bhubaneswar to keep themselves engaged. India convinced that he can bring in some relevant skills to Globals. India. Suhas is also concerned that the employees who work with the company get an excellent environment to work and have adequate opportunities for sports. 2007 5. South Africa etc. Suhas says that he is the oldest member of the team. where he was talking to a young audience. About the age of employees. 5. Suhas says “the upper limit is 25 years and we are basically looking for people in their teens or twenties. Canada. He is the boss. Joining Globals Inc. in the event of a R & D centre coming up. Ltd.
Spain. Vinay M. Narayan Rao . Australia Regional Head – Manama. Germany.R. Globals Inc.. Gopinath Mr.) Executive Director (COO. Finance Chief Technology Officer and Vice President.N. The names of the management team members regional heads and members of Board by Directors are given below: Suhas Gopinath Vinay M.Mohanty et. Bahrain. M. Bahrain Regional Head – Quebec. 193 Officer. Jain Group of institutions). Spain Regional Head – Milan. Italy Regional Head – South Australia. Strategy and Marketing Regional Heads Regional Head – Dulles. Ltd. USA Regional Head – Madrid. Non – Executive Director (CEO Deepti Electronics and Electro-Optics Pvt. other department heads and several regional heads in USA. Chief Technology Officer. Cannada Regional Head. Mr. Globals Inc. Samuel S Carre Vantt Chris Micheal Vaughan Amruta Desai Chief Operating Officer & Senior Vice President.) Executive Director (Legal Counsel. Software Solutions Senior Vice President. Australia. N. Worldwide Human Resources Executive Vice President.N. Canada and Management Team Chief Executive Officer & President Germany.al. R Chenraj Jain Dr. Suhas Gopinath .R.) Non-Executive Director (NASA – Washington DC. Mr. Italy. Paul Samberg Alberto Sanchexz Plaza Giancarlo Ambrosini Abhishek Devraj Titus Varghese Manjesh Muthapa Ehsan Rehman Board of Directors Chairman of the Board (CEO Deepti Marketing Services) Vice Chairman of the Baord (CEO. Globals Inc. e-Commerce & Web Solutions Executive Vice President. Suhas Gopinath Mr. Cologne.. Dr. Sheshadri M. Mr. Joshi D.) Non-Executive Director (Chairman.
15. In case of team programmers Suhas gave the component of cost estimate and efforts required for the typical project as follow: Activity Component Analysis of Architecture and Design Project Management Development & testing Percent of total cost 20 Percent of total effort 15 28 52 20 65 When asked about the general orientation towards profit. 2 lakh we offer it around Rs. Students below 22 can become employees.000 to 25. software.25.000 a month.000/. the programmers were paid a higher salary but the actual cost to the company was much higher. If you want to set up your own site we charge only 300 rupees. This is to some extent explained by the cost competitiveness of Globals.” Infact for a client in Frankfurt.. In the US. The aim as of now is to get more and more students to join. 2007 6. September. On the whole.194 Vilakshan. When Suhas started out. ( approximately equal to US $ 550 to 650) which is considered as a good wage in India but is about one third of what the Globals employees get (approximately . We are aiming at smaller schools. the response was “ the company is not a money making machine. low cost pricing and a focus on small and medium enterprises. “I did not register my company in India as one has to pay taxes and there are other hassles. One of the other cost aspects was related to the setting up of the company.” he said. utility and space cost got added to the overheads. Speaking about the way that Globals keeps its cost down. the same could be completed in about six months in India and at an approximately cost of Rs. It also worked in products like school information management system which has a great potential in the third world countries. In addition to the salary there were statutory payments to each employee. “The rates we charge are very cheap.15 (1/3 rd of a US dollar per hour) which is cheap by the world standards. while a twelve man month project which took approximately a year for a programmer in US and costed about one lakh dollar. XIMB Journal of Management . About the earnings of Globals’ employees it was observed that the employees in India earn between Rs. 20. They work out of cyber cafes in India where they have to pay Indian Rs.0 FINANCE AND COST Globals strategy was to have steady growth.” says Suhas. 000. Suhas mentioned about the salary of talented programmers in the US versus India. the rates at cyber cafes were much higher but since then rates have dropped drastically. “While a competitor offers this products at the cost of Rs. Besides infrastructure cost such as hardware. Globals designed a corporate website and charged only about this much.
Being a Chief Executive at the age of 14. Everyone was amused. “You are a school boy. The atmosphere and the fun are much more important to us. and still not 21. This could have given an earning of $22000 but the contract fell through because he could not sign the contract under the Indian law as he was underaged. could hardly know that this young man in jeans and T shirt. . money isn’t why we work for Globals. at a seminar on “Education System in India” at Indian Institute of Science. a hacker in Pakistan attacked the website and replaced the website logo with “Cool Pakistan”. I wish I could provide employment to all the talent in our country. Suhas Gopinath . he wraps up mega deals. took pictures of him on his cell phones and asked for autographs. The security personnel.coolhindustan. to his embarrassment that his fellow students called him ‘Sir’. Suhas cannot forget one of his bad time after launching of his first website www. 7.Mohanty et. I invest all the profit back into the future of my company. but he couldn’t sign on the dotted line as legally he was not an adult when the Singapore based company. Commenting on this the Head of Finances. looking like a college boy. was a CEO of a Global company. The web site was to provide Indians all over the world with a forum to post public events. Suhas had his share of weird experiences – sometimes amusing and pleasant and at other times painful. Suhas clarified “Now as my company grows. bought out of his earnings.com. In 2004. No wonder many of his classmates are his employees. tips for eating out and other programmes which would be of interest to overseas Indians. That was a terrible experience and Suhas abandoned the project. It bothered him.. Suhas owns a car. this event is for the CEOs. Suhas knew that it was nobody’s fault.al. 195 US $1500) in the western countries. There aren’t any hierarchies here. who has been instructed to allow only the CEOs.0 UNUSUAL EXPERIENCES Suhas also had some experiences at his college and with his classmates. who rushed to the entrance to usher him in.” He picked up his cell phone and called the organisers.” About growth and investment in the company. However. The website became very popular. Bangalore. a Business Process Outsourcing company was offering a contract to set up web sites with e-library capabilities. he was stopped by the security persons at the gate. but doesn’t have a license to drive it around the city as he is too young to get a license! As a CEO.” says Suhas. SingT.. Globals says “For us.
2007 Suhas says that he likes his casual wear. Kala Gopinath. a Scientist with the Defence Ministry. Speaking about the Pakistan IT companies. there were objections from the Commerce Ministry that no Indian company could set up office on Pakistan soil. The objection faded away when it was explained that it was not an Indian Company but a company set up in California. He abandoned the website but he didn’t abandon the idea of opening an office in Pakistan.com’ which was hacked by a hacker in Pakistan and made into ‘coolpakistan. The branch office was to function under the control of Pakistan’s Industry Department and the employees were to be sourced from Pakistan itself. was happy that his son had chosen what he liked and done well during the seven years.” While pursuing the idea of setting up a branch in Pakistan. September. “We were very worried about him earlier. Suhas was also considering Karachi as an alternative location. His parents first thought that he was spending hours just goofing off at cyber cafes and were worried about him. disapproved that he spent every rupee in the internet café. but most of the time he is forced to wear blazers. There is great potential in having a base in Pakistan. In the Board examination he secured poor marks in mathematics. jeans and T.0 PARENTS’ CONCERNS Suhas’ father. it’s important that he gets a degree. “To us. he states “There are only five to eight IT companies in Pakistan. education is the most important thing in India” the father says.R. She lectured him on the importance of doing well in studies.shirts. M. 9. Gopinath. the mother. If his dream of setting up a office in Pakistan comes true it would be one of the rare achievements which many Indians would not dare to dream. 8. She was worried that Suhas had been a good student but after discovering the internet he had become an average student. A lot of the packages for the government and private sector are outsourced to the middle east.” says his mother.196 Vilakshan. There was a discussion with the Pakistan Prime Minister Shri Shaukat Aziz who had promised to allot land near Lahore. He still spends too much time on work and little on studies. At the same time he does not want Suhas to neglect his studies. his luck has changed. Things had changed in the last three to four years. XIMB Journal of Management . He also wanted to be himself – never wanted to be a star. His parents put pressure on .com’ was quite disheartening to Suhas.0 EXPERIENCES WITH PAKISTAN The first experience with his website ‘coolhindustan.
Mohanty et. I get a couple of hours rest and then video conference with clients and staff in the US working till around 3 am”. “My role model is Microsoft . I spend it with my family.. working on his laptop. Ahmedabad.al. Today he lay on the sofa until 4 a. Suhas enjoys the affectionate insistence of his mother. While other kids skip lectures to watch movies. including the Indian Institute of Management. partly for his studies. becomes a Vice President in a company with a good salary. his office is located at a five minutes walking distance. (of course) one should also make time to enjoy other things in life. He is my role model. But his mother was worried that her son ate and slept too little. by around 6 pm. he studies for engineering and works for the growth of his company. Suhas Gopinath . 197 him to finish school and study something practical to get a secure job. She put more of idlis and vegetables on his plate. she complained. I cannot afford to watch movies or go for holidays…. When his mother tells him to study management. studies management and like his elder brother. and mostly as CEO of his multinational company. In this context Suhas mentions. Knowing the importance of his job. “Initially when my mom used to scold me. The mother also insisted that Suhas shall have his office only at a walking distance so that without using car he can come for lunch. the management of the college has waived the attendance requirement for him. Unlike other students who believe partying and spending time in Cafes.” 10. I used to give her Bill Gates’s example. he replies. he replied. When the day’s work in done here. Suhas was asked to deliver talks at several top management institutes in India..” When asked about how he manages his time and what is his inspiration.” “My ambition is to set up another Microsoft” he adds. His mother always wanted that Suhas takes his studies seriously. Suhas uses this waiver to his full advantage. “why study there? I have been invited there as visiting faculty. Then at 8:00 he went into the Office”. Suhas misses lectures to attend seminars and conferences.m. Suhas works for about 18 hours every day. restaurants and multiplexes. TIME MANAGEMENT In the second year of his engineering programme at MS Ramaiah Engineering College in Bangalore. “This can’t be healthy. Later of course the parents reconciled when Suhas was doing well. With work you get too busy to repent. In an interview to Time Magazine he said. “Most of our business comes from the US market. “Whatever little time I get. When asked about leisure and enjoyment Suhas says. Accordingly.
the US based Network Solutions Inc. XIMB Journal of Management . APJ Abdul Kalam at New Delhi and . Suhas also got the recognition of being one of the youngest certified webdevelopers.198 Vilakshan. a company owned by Nasdaq-listed Verisign. He was. Dr. 2007 Promoter–Chairman Bill Gates. In the initial years he had a hard time. not only India but outside.” Gopinath said “Bill Gates is my role model.. Apart from the teething troubles in setting up the company he was too young to run it. the Chief Executive of Globals Inc. he spends some of his spare times with his family and to some extent with his dog names Bushy. LIFE STYLE. He has no time to go to a cinema hall to watch a movie or to watch cricket matches. his response was “When I look around I see a lot of guys of my age hanging out with their girlfriends. But I’ve learnt to divide and manage my time well. Attending college and running a company at the same time is not easy.” Suhas could have a Chauffeured driven car and live in a penthouse or buy a bunglow for his parents in a posh locality of Bangalore.. 11. I want my company to become another Microsoft. Suhas refused. The reason was “Why should I sell my baby”. September. He doesn’t wear designer clothes.” says Gopinath. Apart from Business for which he spends 18 hours a day. Many clients were not keen about the company.com”. many of them came back. He seems to be quite attached to it. I do not feel bad as I have a mission to make my company another Microsoft. and no one else had become Chief Executive of any Company at that age. which develops internet services. acknowledged his ability and certified him as one of the world’s youngest web page developers. When asked about how he got some rest and leisure. COMMITMENT ETC. He also had meetings with the Indian President. at the age of 14. The Limca Book of Records – the Indian Version of the Guinness Book of Records – lists him as the “World’s Youngest Chief Executive”. “coolhindustan. 12. After seven days of his putting up the webpage. but he lives with his parents in a medium size house and drives a small car. Politicians and young professionals have celebrated him as an achiever and as an inspiration. In 2005 when an investment firm from Huston offered 100 million dollars for a majority stake in the company. AWARDS & ACCOLADES Suhas feels happy about his company. But after seeing the quality of work they delivered. Suhas employs about 600 persons around the World and was the youngest Chief Executive of any Company. Ordinary jeans and T-shirts were his favourites. Suhas has been a model for the young men and women.
It has also been accepted by the Kendriya Vidyalaya Sangathan in India for introduction in all its 870 schools across the country and also in Mosco and Dubai. This software was installed in hundred schools in Nigeria and nearly hundred in European countries. Attendance status and marks could also be seen on a For Globals initial teething troubles were almost over. In 2005. Suhas Gopinath .000 and upwards.. . But Suhas felt that though initial interest and dedication had made it successful and he had become the chief executive officer. THE FUTURE Globals Inc. It developed a software product for school that allows teachers to easily enter grades and attendance. Shaukat Aziz in Islamabad. The Indian President Dr. The other Youth Icons for the year 2006 included Indian Tennis player Sania Mirza.. Arjun Singh also felicitated him. also launched three unique software products and the BBC and Washington Post acknowledged him as the ‘world’s youngest CEO’. The system also sent SMS alerts to the parents’ cell phones in case of continued absence or poor performance of a student. Suhas is taking initiatives to develop a GPS based low cost vehicle tracking system which would be tailor made for Indian automobiles and for Indian road conditions.5000 whereas the cheapest available system now in Indian market costs around Rs. which parents could access electronically and know whether their children are showing up to class. etc. Suhas has a grand plan of selling the software to the private schools also in India where there lie a great potential. Suhas Gopinath is also a brand ambassador for the People for Ethical Treatment of Animals (PETA). Kalam and the HRD Minister. Mr. In 2005. has been in a position to identify unfilled market niches. Suhas Gopinath was one of the finalists of the Infosys Education World Young Achievers Award. 2006.al.Mohanty et. Suhas at the age of 20 was selected by the Times of India of Time Group as one of the Youth Icons for the year 2006. 14. This system is also likely to have a big potential in the third world countries. 13. what mattered was the ability to expand the company. Industrialist Sunil Bharti Mittal. He hopes to sell each unit of the tracking system for Rs. he was also the youngest among the 175 recipients of the Karnataka State Government’s Rajyotsava Award. Besides the Student Management System. SOCIAL PROJECTS virtual notice board. In 2004 Gloals Inc.20. The job of managing the company had become easier because he treated his employees as family members and friends than acting like a boss. 199 Pakistan’s Prime Minister. In December. Bollywood Actor Hrithik Roshan.
However on crossing the 18 year age mark.8 crore in the next five years. In places with a high concentration of such educational institutes. XIMB Journal of Management . is likely to become a good hub for Globals in the European markets. Keeping with its plan to expand in Europe. He looks forward to have many more young technical people and expand his business into networking solutions and embedded software. is small but Suhas looks forward to achieve a turnover of Rs. Globals has already opened in Frankfurt an R&D business development sector. At an age when other teenagers are whiling away time in games and other pastimes. he has registered a company in Bangalore as Globals ITES. which entitled him to register company in India. 2007 Suhas was planning to start management consultancy for the industry sector as well and expand services to non-IT areas. mind over machine and unity over uniopinion. The work was more streamlined and solutions were achieved within prescribed time boundary. it was felt easy to find local students to join Globals as part time employees. At a personal level he was planning to go to Stanford University and study artificial intelligence. Globals HR strategy of recruiting skilled local youngsters. There was no question of egoistic thought. Frankfurt being the most important commercial centre in Europe. which had largely remained untapped by Indian IT companies. Everyone worked with lot of enthusiasm. These funds were proposed to be utilized to open market offices and onsite centre in Europe. Domestic expansion for Globals is guided by the concentration of engineering and management colleges. There is also a proposal and talks are in progress in this regard with a London . is key to their expansion plans. Globals Inc. Suhas always thought of having his company as an Indian company and looked forward to shift the headquarters in due course to India. which in due course would be like Microsoft. It is also in the news that he wished to move from service based company into a products based one for which the Company needed funds. The company has some clients in Germany including the prestigious account of Mercedes Benz for whom Globals is executing a web application project.200 Vilakshan. September. Suhas was occupied in drawing a road map for his young company. who would be happy to work part time. Suhas has his own dreams for becoming the Bill Gates in India and setting up a company. The general thrust in the company was placed on quality over quantity.
” REFERENCES Times News Network.000 loss. http://sify. 2003. world’s youngest CEO has big plans”. there were also other reports that Suhas was considering a possible takeover of a Chinese firm to make an entry in the Chinese IT sector. which fulfil the pre-bid qualification norms and Globals more often doesn’t qualify. 2005. “We too will be a CMM level 5 company soon. “20 year old Suhas wants to buy Chinese Firm”. There are a lot of hurdles but the satisfaction of providing opportunities is huge”. Rediff News.al. we need to be down to earth and humble. Tuesday.” On the general approach towards work Suhas makes a cryptic statement “ Irrespective of success or fame. This would give Globals a foothold also in Singapore and Korea. He admits that life has been stressful for him. Even I try and not bunk too many classes. TOWARDS ENTREPRENEURSHIP barely get 65 percent.com/common/ storypage_c_online. Simultaneously. 10. In my Class X exams I scored 80 per cent. Suhas Gopinath . to this financial institution to fuel the expansion plans. “As I got more interested in the company. Balancing work and studies was not an easy job for Suhas. job seekers have to transcend into job creators. November 11. 2007. but in I PUC could . 2006 Suhas Gopinath is a motivator for young entrepreneurs.Mohanty et.. 2006. expansion could be faster. Sify Business. August 30. Dating. 201 based financial institution to sell 20 to 25% stake in Globals Inc. Sometimes people in Government argue that projects can be given only to those companies. 15. I try to encourage them to take up entrepreneurship as an adventure. Suhas is reticent on the approach of Government officials but says.php?leftnm = 11& 6 Key Fla….9. In course of his travelling and lecturing in India and abroad he says “For the economies of third world countries to grow. November. When I have exams. Suhas is also actively exploring the possibility of floating an IPO on the Nasdaq. but clients cannot be given lame excuses. Nov 10. Business Standard “Suhas Gopinath may sell stake to London FI”. I tell them I am unwell….11. And later the company can make public offerings through which funds can be raised and the London based financial institution would then be paid off...business -standard. This could be a merger or an acquisition. my studies went for a toss.php?id = 14328392 http://www.2007 “Gopinath. Whenever I address the youth. If this happens.com/finance/mt/ fullstory. $22.” In India Globals still faces some problems when it comes to Government projects. Friday. September 11. Tuesday posted at 7:16 pm Teen Tradegies: Acne.
Times of India. Indian Express. 2003 “17-year-old tipped to become IT tycoon”. November 6. 2007 “Teenager hopes his firm will become another Microsoft”. single and a CEO !”. 2003 “Indian company loses deal because 17-year-old CEO is too young”. November 10. 2007 “I can’t afford to watch movies”. India. Australia. 2003 . November 15. CIOL.202 Vilakshan. XIMB Journal of Management . Daily Excelsior. November 7. India. what next”. 2003 “Another Gates in the making! Founder at 14. Sydney Morning Herald. Taiwan. 2003 “He’s 17. 2007 “17-year-old CEO a problem”. South Africa. USA. November 3. CEO at 17. Taipei Times. The Hindu. Independent Online. January 13. strives to realise it”.com. January 11. September. 2007 “Dares to dream. November 10.
Management case Rural Women’s Marketing Association (RWMA)* Debasis Pradhan1 Abstract The Rural Women’s Marketing Association (RWMA). She was also thinking about the replicability of this model of distribution in other areas. 2. with the full Received September 5. was registered as a trade union in 1972. Mrs Sujata Mahapatra. Rural Women’s Haat (RWH) was later formed as an apex organisation to help RWMA members in marketing their local produce. an association of 6.000 poor. Rural Women’s Marketing Association (RWMA) is embroiled in a real decisionmaking situation which was first of its kind in her long career so far.00. This has assumed more importance in the wake of expansion plans and plans to scale up the operations of Rural Women’s Haat (RWH).00. Director of RWMA had some important decisions to make regarding the path ahead. RWMA has two main goals. 2007 Assistant Professor.0 R U R A L W O M E N ’ S M A R K E T I N G ASSOCIATION (RWMA) Mrs. In 1999. Revised March 7. She has to consider her future course of actions and its repercussions. locational and infrastructure constraints in the areas where a new system/model in marketing was to be instituted. RWH mainly worked with local producer groups through district level associations. XLRI . self employed women workers of Gujarat was registered as a trade union in 1972.000 poor. distribution channel for various products manufactured by rural producers and marketed by RWH. Sujata Mahapatra. such as. self employed women workers. to organize women for full employment and make them selfreliant. an association of 6. RWMA. e-mail: email@example.com. Director.in . Her major concern has been to find a right * 1. as a marketing organization to facilitate various forms of intervention to strengthen rural producer groups in nine districts of Gujarat. 2006 . She was considering the alternatives keeping in mind the physical.Jamshedpur. She was aware of the fact that consumers were variety seeking and hence they might not accept the limited choice available at the village retail outlet. 1.0 GENESIS OF RWMA AND RWH The Rural Women’s Marketing Association (RWMA).
are the Self-Help Groups (SHGs) comprising of women producers. whose core activity is to market the produce by procuring through the district associations. (Backward linkages refer to connections with rural . handloom (napkins. and international marketplaces. 15% in handicrafts. Together. train them and assist them when required.500 groups. potato katri.000 members in about 3. XIMB Journal of Management .0 CURRENT ACTIVITIES producers whereas forward linkages refer to connections with the market place). RWH has a three-tier structure. One member from each district level group is an executive member of RWH. Moreover. Rural Women’s Haat (RWH) mainly works with local producer groups through district level associations. (3) to enable the rural producers to earn a regular minimum income of Rs. and 1% in gum. (4) to facilitate the producers to become owner managers of their collective enterprises. RWH has worked in nine districts with approximately 55. as a marketing organization to facilitate various forms of intervention to strengthen rural producer groups in nine districts of Gujarat. there is potential to expand to other product categories in the future. At the village level. these four sectors account for more than 85% of RWH members. The apex body is RWH. In its first three years. salt. All the members of RWMA are primary members of RWH . isabgol.204 Vilakshan. RWH focuses on these sectors as these have been identified as the ones in which backward and forward linkages are extremely critical. 5% in salt. Specifically. RWH is into the marketing of cereals (wheat and bajra). 65% of RWMA’s members are employed in the agriculture sector. 3.000 per month and finally. Its main objectives have been: (1) to provide marketing facilities and services to the district associations. RWH identified these abovementioned sectors as the ones in which rural producers were experiencing substantial difficulties in connecting with local. Producers of these products constitute a large proportion of RWMA’s membership. established Rural Women’s Haat (RWH) as an apex organization for marketing various local produce. September. (2) to provide managerial and technical support services to the district associations. national. white gum. Currently. At the middle level are the district associations which monitor the work of SHGs. mustard. 3. 2007 cooperation and support of the Rural Development Committee of the Government of Gujarat. towels and bed sheets) and handicraft items (cane basket and foot mats). While RWH has focused on these four product categories in its first three years. cumin. spices (chilli. sesame).
secondly.0 IN PURSUIT OF THE OBJECTIVES To achieve these objectives.to the RWMA women. RWH buys product and holds stock until fair rates can be negotiated. Specifically. “By doing this.. With this in mind they aim to establish a distribution system for the RWMA products in the rural villages of same nine districts. which were less than the market prices. 205 4. Prior to the introduction of RWH. RWH was established to provide market as well as technical and financial services to rural producer groups through district level associations. branding. Mahapatra. “Moreover. With this knowledge. To reduce these groups’ dependence on middlemen. arranging the proper human resources. RWMA had a long history of working with the State Government of Gujarat to implement need-based programmes for rural women below the poverty line. finding an appropriate distribution system and finally. Technical services are intended to improve the productivity and quality of production. by which the rural producers themselves will be rural consumers also. Lastly. by linking rural producer groups directly to local markets through establishing backward and forward linkages” says Mrs. financial services. RWH has been able to educate rural producer groups about the markets for their goods and has also been able to provide feedback to the rural producer groups about the viability of their products. Rural Women’s Marketing .. who often exploited them by offering prices. the rural producer groups expect to have the capacity to manage the marketing of their products independently” . This work with rural producer groups revealed that these groups were removed from the market for their products and were forced to rely on traders or middlemen. It aims at helping the poor to reach markets and increase his bargaining strength through organizing a large base of members. RWH offers technical services. In this context. RWH’s formation furthered RWMA’s objective of self-reliance. Financial services are intended to help producer groups enter new markets by offering capital loans at fair rates. She continues. as they do not have adequate cash supply. . and marketing support to its village based rural producer. RWMA is quite aware that this requires firstly evaluation of the potential of such an implementation in terms of demand for RWMA products. Moreover. promotion etc.Pradhan. RWMA also wishes to explore the possibility of a reverse supply chain. RWH also offers information about prices. which women themselves are unable to do. RWH’s main goal is to provide marketing and other support services to rural producer groups. marketing services are intended to help RWMA members understand the details of their markets better.
Non-availability was found to be the second most common problem expressed by the consumers. The rental costs for the warehousing can be met out of the commission retained by the District Office. The inventory maintenance is to be demand driven and replenishment of stocks will be done on the basis of orders received from village-based demand Mrs. Alternative-1 The level of intervention can be seen at two levels. irrespective of income segments. district association and the village based retailer are 12%. Mahapatra admits that the major problems experienced by the consumers in both Vadodara and Sabarkantha districts. Retailers are given a lot of importance as they directly deal with the consumers and can assess the demand. it has been found that approximately 50 percent of the respondents have to go to Taluka shop to buy the products. The alternatives must be considered keeping in mind the physical. September.206 Vilakshan. The physical distribution is to be directly from the production centre to the demand centre based on the orders placed by the distribution centres.0 PHYSICAL DISTRIBUTION SYSTEM centres. She was aware that consumers were variety seeking and wondered if the product portfolio was too narrow to offer the customers such variety in the the choices. RWH would handle the transportation on the basis of orders received. The cost of transportation will be borne by the distribution centres. As per the RWMA procedure for starting any new activity . The respective margins for RWH. RWH has got its fixed plans for these three components. The inventory rotation will be done on the basis of 10-15 days credit given to the village retailer members. Warehousing will be done at the district level. The proposed “Distribution Network” will be demand driven. locational and infrastructure constraints in the areas where the system is to be instituted. warehousing and inventory management. 5. 6. 5% and 15%. which will be treated as the distribution centre. such as. is the lack of availability of the products in the villages. village level and district level. 2007 Mrs. while providing sustainability over a period of time and strength to the organisation. XIMB Journal of Management . Mahapatra was seriously contemplating that the best alternative should give the best returns to the members of RWMA and should also be compliant with the vision and objectives of the organisation.0 ALTERNATIVES The components of physical distribution system are mainly transportation. From the consumer survey. She was also thinking about the replicability of this model of distribution in other areas of operation.
if willing. embroidery etc. 207 a committee can be formed by the savings group coordinator. which will take up the distribution network in various RWMA villages. The requirements at the village level are mainly as follows : Alternative 1 (A): Provision of credit to SHG members is one of the major requirements for the establishment of a retail business. At the village level. The committee can then constitute Spear Head Teams. But Mrs. . two kinds of members of RWMA can be involved in the distribution network. Rural Women’s Marketing . Without sufficient experience. maintenance of accounting records etc. This will save the cost of establishing an outlet and also give a wider market access. can the retailers make it sustainable with changing choices and preferences of the customers? Alternative 1 (B): The mode of selling to be adopted by the village based retail members could be either pheri (like a hawker) from village to village. the additional staff members hired for the purpose of the distribution network and the local coordinator.. can provide assistance. This helps in ensuring the stake of the members in the effective running of the business. Will this provision of 2 credit provided by District association decide success of RWH? What if the District association is not in a position to extend the credit support and there is a lot of potential for marketing of its products? Is it worthwhile for RWH to give a bank guarantee to village based retailer for the loan. Mahapatra is having some reservations about this mode of selling. Training can be given to the members involved in the distribution network for purposes of inventory maintenance and strategies to be adopted for marketing of their products.. her concerns are : Can all the products of RWH be sold in this way through pheri? Can this “pheri” mode of selling be there to supplement Groups of adolescent girls undergoing livelihood training programmes such as sewing. or it can be done through the savings of the groups themselves. These are primarily RWMA Self Help Group members and adolescent girls of Kishori Mandals2. For this purpose the District Association. The first option can be promoted in Sabarkantha where it is more socially acceptable for women to be able to move out of houses and villages. provided the retailer is dealing exclusively with RWMA’s products? This will mostly give RWH a stronghold in the villages with an established distribution channels. in groups or by setting up of retail establishments in villages. The members can be given loans for starting up the business if they contribute at least 50% of the total investment on their own.Pradhan.
Phase-1: In the first phase. There may be some problems in the former case. But this also must be considered that. RWMA is providing them support with financial assistance from the Gujarat Government. Retailing of RWMA products could be another such activity in which they could be involved. These are the widows of the victims of the Gujarat riots. They can sell only from their residence. 2007 the established retail store? What will be the replicability of this mode of selling in other areas? Alternative 1 (C): In the Kishori Mandals. The Shanta Bens’ can be evaluated on a case-to-case basis on the basis of individual interest and personal circumstances. preference should be given to those Kishoris. members can start the distribution system with existing shops in the villages belonging to RWMA members who own retail establishments at village level. XIMB Journal of Management . Mahapatra looks at two phases for this alternative. with this RWMA as an organisation will increase its reach with increasing membership. September. mostly the members are school going adolescent girls who get married in 2-3 years and move out of the villages. RWH can initiate the marketing of products in 810 villages on a pilot basis. this comes out clearly. which have got good demand in these areas. Hence. Initially in the first phase. While talking to the case writer. Those with adequate family support can also put up stalls in the marketplaces. They are given livelihood training in form of stitching and embroidery classes etc. they basically sell spices and handloom products.208 Vilakshan. RWMA Savings Group members who are interested in opening shops or direct marketing at . Will it be possible to monitor them and will this channel be efficient? Mrs. Mahapatra worries as the women are mainly from the minority community and are constrained by social norms which prevent them from moving out of their houses. So is it a risk worth taking and handing over the retail business to the Kishoris? How will it benefit RWH in the long run? Again Mrs Mahapatra wonders if it will be sustainable. Alternative 1 (D): The other members that RWMA could involve in the retailing chain are Shanta Bens’. The Spear Head Team members also can be involved by giving them samples of products when they go to various villages. Since they are mainly located in urban areas in Vadodara and Modasa. Alternative-2 Here Mrs. In this case the shops would go over to their families who would not necessarily be RWMA members. where the Kishoris may get married in some other village. Both the phases comprise an initial stage of pilot testing and subsequent expansion plans. who have already finished schooling or the ones who have been married into the village.
RWH can expand the distribution network by involving more and more members at village level. Alternative-3 Institutional marketing Banas Dairy. the milk union of Banaskantha district wants to start retail outlets in its village level milk cooperative societies. Rural Women’s Marketing . provided that is in synchronization with the objectives of RWH. The criteria for selection of villages where the system will be initiated on a pilot basis can be based on retailer’s positive response. On the basis of feedback received regarding sales growth and consumer response from the first phase of implementation. this is compliant with the vision and objectives of RWH. the demand potential of the village. Mahapatra is also open to any new marketing channel not included in the above three alternatives.Pradhan. A marketing arrangement for RWMA products in Banaskantha can be explored through this channel as the pilot project for RWH rural distribution network is not to be initiated in the Banaskantha district initially.. She is also worried that the pilot villages may not be similar to the other targeted villages which were to be covered under the expansion plan? Phase-2: In the second phase of implementation. existing number of retail establishments in the village and more importantly. be applied to the retailers of the RWMA villages? This limitation can be overcome either by direct marketing by RWMA members or by marketing through existing village based retailers in non RWMA villages. 209 village level can also be involved on a pilot basis.. RWMA villages however are scattered and this constaint limits the potential for marketing of the products. It may be worthwhile to use the channels like Banas dairy but this may not promote RWH as a separate entity. size of the village. The RWMA’s image in the village. For the purpose of establishment of the distribution network a critical mass of consumers is essential. distance from the Taluka. This is however possible only if a contiguous area is covered. the marketing strategies can be modified. The possibility of Pheri mode of selling can also be explored here. Though it may lead to dependency on an external channel member. The Gram Sabhas can be called in various villages to encourage women to come up and open retail establishments with the permission of the village elders and this would also be an effective promotion channel for the products. For this purpose it wishes to procure items of household consumption for selling through their establishments. Will it be really a limitation? Can the concept like satellite retailer. . Mrs. Mrs Mahapatra is worried about how to supply these retailers regularly.
the issue of sustainability. XIMB Journal of Management . the strategy should be concrete and there should be no gap in the structure”. Mahapatra. . “As RWH is competing in the market with numerous players with varying ethos. feels Mrs. Mahapatra. “Finally. September. Mahapatra is closely looking at the alternatives. a value proposition needs to be provided both to the rural consumers and the producer as well as retailer members to see this venture successful” hurriedly adds Mrs. richness of product portfolio and replicability of this model of distribution would eventually determine her decision.210 Vilakshan. 2007 Though Mrs. She is also trying to make the retailing strategy right so that the distribution can end with perfection.
natural resource management. Revised August 24. support to self motivated micro enterprises. micro credit. MMS. and roles of various players in its building and functioning of this community based institution. SVS. The major interventions of SVS are related to self help groups (SHG) development and management. namely Sarvodaya Vikash Samiti (SVS) and Mahamaya Mahila Samiti (MMS). and various characteristics of the mobiliser which had affected the development and sustainability of MMS. Author acknowledges their respective contributions. its various stages. from the Government of Orissa they received the * award as “Best SHG Organising Agency in Khurda” under the government programme named ‘Mission Shakti’. 2007. Received June 28. of Khurda district of Orissa. Associate Professor. 2007. It operated in eight Gram Panchayats having 64 villages. It also explains various roles of a community mobiliser (in this case SVS) in institution building process. is not only known among the villagers but also commands respects in local media. a grass-root NGO. Xavier Institute of Management. However. SVS has formed around 312 SHGs having 3865 members. the case also brings some questions forth related to the sustainability of the institution and also on the true objectives of the mobiliser. The case explains the process of institution building. The NGO has done very good work of community mobilization by organizing people and is among one of the known organizations in the district. The case is the outcome of project work done by Amaninder Kaur. one among seven self-help groups (SHGs) promoted by SVS in the village Hirapur. Also.Management case A Tale of Two Samitis* Niraj Kumar1 Abstract The paper presents a case study involving two village based institutions. an NGO.0 PROLOGUE Sarbodaya Vikash Samiti (SVS). is engaged in appliqué based activities and said to be meeting it’s objectives. Nikhar Ganesh. has been working in Khurda district of Orissa since 1995. 1. . and has helped in the 1. Bhubaneswar. SVS received an award from UN for world leaders in 2001. email: niraj@ximb. Under Mission Shakti.in. Characteristics of SVS and various efforts made by it have facilitated the development of an only women based village institution and have helped its members to add in their income.ac. and Salil Mahajan (PGPRM students of batch 2005-07) under the course "Community Mobilsation and Institution Building".
2007 formation of a federation of women’s SHGs named as ‘Aanchalika Mahila Mahasangha’. XIMB Journal of Management . although not all. the state capital of Bhubaneswar. . The number of members in each SHG did not vary much after they were formed and the The village Hirapur is located at a distance of about 24 kms from Bhubaneswar. In the year 1998.212 Vilakshan. So. Eighty per cent of the village population is composed of OBCs (other backward castes). Out of seven SHGs. It has also undertaken projects related to natural resource management with special emphasis on water resources.0 SVS IN VILLAGE HIRAPUR The scheduled caste and the general caste people reside at different areas separately in the same village. SVS mobilized these women and formed SHGs. which were composed of scheduled caste women members. SVS started working in this village in 1995. SVS has tied up with Oriental Insurance Company. it started forming women SHGs based on various demand based livelihood activities and convinced village women to take up those activities in groups. It has disbursed about 1. and rest are SCs (schedule castes) and of general catgory. So they were also involved in manual labour and some other activities. There are around 45 households and the village population is 200. Seven SHGs were formed by (SVS) in the village. The financial conditions of these villagers were also not very good. one each in appliqué work and flour mill business. The women in village were not directly involved in any income generating activity and were mainly involved in household work. The village had agriculture based economy. had become defunct. The NGO has collaborated with Emami India for the distribution of its consumers’ products in rural Orissa with the help of women SHGs. Activities of SVS are funded by various international organizations and local level partner organizations and have got very good coverage by local media. had sufficient landholding. five were functioning and two. 2. They were not able to generate enough cash surplus from the livelihood activity undertaken and hence they were not able to pay back the loans extended by the banks. With the expectation of a major policy change. terracotta. particularly those from the schedule caste. brass and bell metal and flour mill. Out of these five operational groups. It worked on various issues related to natural resource management and infrastructural development of the village. three were into hand bag making.14 crores of rupees under the micro-credit scheme with the recovery rate of 80-90%. fisheries. September. special task forces for disaster management and developing village contingency plans. SVS has formed various women SHG groups which are working on different livelihood activities such as dairy. formation of Pani Panchayats. when NGOs will be allowed to undertake micro insurance business. appliqué.
cash book. loan financing. bags. such as chanduas (canopies). chhatri (umbrella). and also informed them about potential business ideas. general ledger. minutes of meetings. Out of a total 10 members. letter holders etc. lamp shades. Some of the important rules were: SHG was to have an election process to select the president and the secretary. Registers related to members’ profile. overdue registers. saving details. who agreed. These are generally of pure bold colours in floral and animal shapes emerging from a background of contrasting colour. The women interested to become the president and secretary were asked to contest the elections in which all the members were to raise their hand to show their preference.0 MAHAMAYA MAHILA SAMITI After the initial discussions with women villagers. a few reluctantly agreed as they realized that they did not have to lose any thing at least during the early phase of their work. undertaking monthly monitoring. created by sewing of patches of coloured clothes onto a large canvas. The SHG. - - . and loan and savings pass books were to be maintained. and functioning. were explained about the concept of SHG. formation. It explained them about various aspects of SHG management like. internal and external loans. Appliqué work is a handicraft. 3.. conducting meetings. its objectives.Kumar. to the more popular umbrellas. wall hangings. collection. Jhalar (frill) and Batua (pouch) that are used in religious functions. pillow covers. In a few weeks of time. also made of cloth. SHG was able to decide about its norms and rules for its functioning. All the members. members’ demand. Secretary was to be responsible of maintaining all accounts and president of overall management and day to day working of the group.. Tarasa. bed covers. whereas two members were from general category and were above poverty line. 213 NGO was guiding almost all the SHGs in their respective works. Although most of them most were not too convinced about the idea of appliqué craft. balance. named as Mahamaya Mahila Samiti became functional in the year 1998. SVS helped them streamlining their functioning. the head of SVS held a meeting with few selected members and informed them about the potential of appliqué craft works in the village. The work ranges from the items crafted in traditional forms. ladies’ hand bags. eight members were from other backward class and were below the poverty line. A Tale of Two .
trained rest of the group members. health. appliqué they prepared. still the group was to decide about the exact amount payable to a member based on her capability to repay back the loan on time. various group activities and performance such as total sales.e. money input and outputs. Loans given by the group could be for different purposes such as business. house construction etc. None of the members or their family members had any experience of appliqué works and the art was totally new to them and to their social culture. 20. September. They were to contribute Rs. Members shared their profits on an equitable basis. at an interest rate of 15-20% p. In this meeting. The members took their time to prepare items and then gave it to the president. 2007 - All the members of the SHG were eligible to get loans. A single piece of appliqué art took around 3-4 woman-days to complete and fetched around Rs. SVS on behalf of Mahamaya Mahila Samiti purchased raw materials from Pipli. 50 per month and this fund was to used for internal lending. profits for the month. and distributed among the members of the SHG. President sold those items to the businessmen from Bhubaneswar after she negotiated the price of each item. wherein the members got their share of profit on the basis of their contribution i. the loan amount was to be given to a particular member and fixed along with the rate of interest to be charged. Decision about sanctioning of the loan to particular member was to be decided in the meeting by secretary in consultation with president and other group members. agriculture. The group started working with the two sewing machines belonging to secretary and president. as a part of their SHG linkage scheme.000 to 25. were to be discussed. loan status etc. XIMB Journal of Management . Members were then given their share taking out the cost price of the raw materials. For internal lending. Both president (Mrs. realizing the potential of this livelihood option arranged training in appliqué craft for president and secretary of SHG.a.. these SHG members could also borrow from micro finance institutions amounting to Rs. This was to be done on the basis of member’s contribution to the group. Prabhati Pahari) were from general category. and had been at their respective positions since the formation of the group. Over and above this internal lending. Snehlata Rautrai) and secretary (Mrs.214 Vilakshan. SVS. the date and timings of which were to be decided by the secretary. a nearby town and also the centre of appliqué crafts.000. They were allowed to have loan through internal lending of around double the balance of an individual account. in turn. Meetings were to be held every fortnight. Both. Though the amount of loan available to the members was twice the saving balance of the member. 70-80 which they felt was very less vis-à-vis the - - .
SVS. There was no loan in the either against SHG or against any of its members. The group agreed to continue with appliqué work. now we give them money when they require” was the comment of one of the members. In response to the requirement of capital. Members were of the opinion that this option would not be sustainable in the long run as it required lot of funds to purchase individual sewing machines. which they later paid back.. They also compared themselves with other fellow villagers attached with the SHG working on hand bag making. 4.0 FIVE YEARS LATER In 2003. The theme and colours used in the crafts reflected their mythological beliefs. Designs on the crafts are generally the depiction of the religious festival or of their local deities.000 per month (Rs. . “Earlier we used to request our husbands for money. The group had a total working capital of sixty thousand rupees. after 5 years of smooth functioning of Mahamaya Mahila Samiti. Each member of the group worked for around 5-6 hours per day and profits were distributed on the basis of their contribution as per the pieces made by particular member. who were earning much higher profits. SVS made them aware of the availability of subsidized loans from government and MFIs. these profits were considered as low but after the schematic lending and with an increase in group’s fund. 350-400 per woman member).. a central government sponsored project. This loan is highly subsidized subject to the condition that about 70% of the SHG members should be Below Poverty Line. there were inhibitions amongst these two functionaries the President and the Secretary and they looked upon these members as inferiors. with both the president and the secretary belonging to the elite forward caste and the other members belonging to the OBC group. schematic loan is provided to SHG’s after monitoring their performance for 3-4 years. with the passage of time.500 4. SHG earned around Rs. the patron NGO. requested members to continue as the activity would attract major support from government and would be beneficial in the long run. All the members in the group got stitching machine which they bought out of a loan of Rs.Kumar.3. The 2 money per piece was fixed by the group consistent with trader’s price. However. They were also reminded of the religious importance of the appliqué art. On an average. Initially. 2100 from MFI. 215 time it took to prepare and when compared to other activities. they wanted to get into hand bag making. Under Swarnajayanti Gram Swarozgar Yojana (SGSY). In the initial stages. A Tale of Two . And so. the scale of operations increased leading to a sharp increase in group profits. things changed and they started considering the other eight members as part of their institution and reservations based on caste totally vanished. Mahamaya Mahila Samiti was led by members of the upper caste.
September. in front of them was to sell their crafts directly in the haats (urban retail outlets) so that they could get better prices. their margins got eroded.216 Vilakshan. The organization also became the part of networks supported by agencies like ORMAS (a state run marketing agency) and CAPART (a Government of India agency). 120 thousand was the loan component. SVS assisted them in getting the sanctions of the loan of Rs. 80 thousand was the subsidy component and rest Rs. 2007 they received a schematic loan2 Rs 2 lakh under SGSY scheme and out of this around Rs. and in the process. This ended the stalemate and every one agreed to have the community hall in the village on the community land. Bhuabneswar. Mahamaya Mahila Samiti prepared various items in appliqué and sold them in the Bhubaneswar market through middlemen. 80 thousand. Now. Members decided to use this subsidy amount to construct a SHG house in the village and they looked for community land for the purpose. Bhubaneswar. compared to middlemen’s prices. the SVS again came forward and helped the SHG to sell product in the state level sales centre (Ekamra Haat) in the state capital. Calcutta. the SVS intervened in the matter and explained the benefits of such infrastructure in the village to the objecting villagers. they intend to take up the activity of hand bag making! . Realising the problem. it would be called as community house. therefore. President and secretary who had been managing the funds and day to day activities of the SHG proudly shared their register showing that they had already repaid the amount with interest. SHGs largely depended on middlemen. and also convinced the members of SHG that instead of calling it a SHG house. which provided opportunity to sell their products in different cities in the country where exhibitions of handicrafts were organized by the government and nongovernment agencies. Smiling photographs of president and secretary at their stalls in various cities like New Delhi. XIMB Journal of Management . In the absence of a marketing network. Villagers objected to this construction as they said that the village land belonged to 200 residents of village and the land could not be given to a group having only 10 members. As this opposition against the SHG increased. 200 thousand under SGSY and then facilitated the construction of ‘SHG house’ out of the subsidy amount of Rs. now hanging in the village community house and also in the album of NGO chief are the testimonies of accomplishments of Mahamaya Mahila Samiti (MMS) and Sarvodaya Vikas Samiti. The challenge.
1. credit card and student loan processors. Bhubaneswar. 2007. * 1 Received August 20. Revised September 10. 3IS is used as the name of the company. email: sanjaym@ximb. There are different models such as applicable to different situations. 2007. utilities. The model is also dynamic in terms of accommodative. The processes can be different for products. This method lays emphasis on iterative testing environment to achieve high quality and time bounded software delivery by using a repeatable packet of software components.ac. In the present case an innovative method of software development applicable to product particularly with insight and offshore teams has been suggested. services and solutions. It had revolutionized the image based payment processing industry by providing simple- to-install and easy-to-maintain core applications that are capable of meeting specific customer needs. Using predetermined performance indicators it is found that the new model shows better result.in . telecom.Management case Reliable Iterative Testing Environment (RITE) -a Case of Software Development Model* Sanjay Mohapatra1 Abstract During the last fifty years software development as a business has seen phenomenal growth. Associate Professor in Xavier Institute of Management. change request without affecting the timeline for delivery.0 THE COMPANY AND THE BACKGROUND 3IS Software is a leader in providing software products for use in remittance and payment processing industry and has been in existence for last 25 years. This is based on the experience of a company which prefers to remain anonymous. but it is not the real name. government and non-profit organizations. The case is based on the experience of a fortune 500 company but the name is disguised. The customer profile of the company includes regional and money-centre banks. insurance companies and mutual funds. Different models have been developed to streamline and codify the developmental process.
These models are waterfall model. Royce (1970). and rapid action development model. Aydin (2005). eighty-eight Fortune 500 companies have been in its list of clients. However. design. this model is flawed as in the real world of software development. In fact. A brief review at the company from time to time has shown the relative strengths and weaknesses of various models based on which the company has concluded that direct applications of such models will not adequately fulfil its software quality and efficiency goals. Mills (1973) came up with a model called Iterative model. the project team goes back to earlier stage from the present stage repeatedly till the design specifications match with changes made in the requirements by customer. 2007 3IS has been a dominant player in software products business (the other two software businesses are known as software solutions and services).0 MODELS OF SOFTWARE DEVELOPMENT – A REVIEW Royce (1970) proposed waterfall model in which software development follows a sequential order of life cycle stages. 2. spiral model. iterative model. The existing models and their deficiency as analysed by the company have been briefly narrated in the following section. Scrum (1986). integration. Boehm (1970). agile software development model. prototype model. These life cycle stages are: requirement specification. From the beginning 3IS has not been quite satisfied with the various models of software development practised by other competing companies and also with the models as available in the published materials. and Curt Sampson have proposed agile methodology as a model for software development. These models can be used for developing software products. September. which can be used for developing applications for customers who are not clear about their requirements. . chaos model. The company has been in development of such products particularly for very large organizations. construction.218 Vilakshan. XIMB Journal of Management . In this method the entire project team necessary for completing the project including customers is located in bullpen and face to face communication is encouraged for discussion instead of Software Engineering projects follow different lifecycle models. The model can be used for building large projects for which domain competency is not adequate both with the customer as well as with the development team. In this model. installation and maintenance. there is a need for flexibility to accommodate any change in requirement and thus in following the stages sequentially such accommodation may not be possible. testing. Abraham (2003). as of March 2007.
business analysts. In Chaos model. Also this model is difficult to use in large projects and cannot be used where offshore development is preferred to take advantage of highly skilled and low cost professionals. in the customer’s judgment. This model is favoured for large projects. One of the well known agile methodologies is Extreme Programming (XP) (Kent Blanc. risk factors would include development cost overruns. performance 2 related to stability and reliability of the final production cannot be tested in prototype as prototype may not be scalable at all times. This method involves preference for face-toface communication. managers and technical writers. and Rapid action development (RAD) model (McConnell. Prototyping is part of design process and after incorporating feedback. The office may include testers. 219 depending on written documents. Belz. Hence this is used for mission critical applications (for defence applications) and will be overkill for software development. result in a less-than-satisfactory final product. interaction designers. However. or any other factor that could. S. 1988. designers. they may be product managers. In Prototype model (Haag. This again can be used for small to medium size applications and is not feasible with large production requirement. a prototype or working model is developed first to check design and feature aspects of the application to be developed and to get user feedback so that risk and cost associated with the final application is reduced. 1987) combines prototype and waterfall model. this includes programmers and their “customers” (customers define the product. and James. et al. The bullpen2 also includes testers. Nobody writes tens of thousands of lines of code in one sitting. and managers. technical writers . P 2003. Reliable Iterative Testing . In Spiral model. This method has a lacuna that it can be used only at customer site and for small applications and it cannot be off shored. Spiral Model (Boehm. or the clients).Mohapatra. In this approach. the product is ready for p r oduction. one line at a Most agile teams are located in a single open office sometimes referred to as a bullpen.. They write small pieces. operating cost miscalculation. in whih software is developed in small packets and lot of importance is given to testing and writing test cases even before coding. and very little written documentation relative to other methods. Therefore the method is criticized as lacking discipline. Feedback is obtained from customers on this prototype and if required a second prototype is developed which is an improved version of the first prototype. 1986 and Livary.2006. 1996 and McBreen. Ward Cunningham and Jeffries Ron. 1996..1980).. projects can be thought of in pieces. There are also other development models such as Chaos model (Raccoon. 1995). At a minimum. requirements are gathered in details and a prototype is developed after preliminary design. .
These models are used for developing applications where requirements are fairly stable and the size of the application is small. Also handling complex applications and change requests during development life cycle becomes difficult in both these models. and IT technical resources which are combined with short. September. An offshore-onsite model is used when the company wants to leverage on highly skilled workers available in off-shore locations at low cost. An important. Availability of domain knowledge at offshore with the project team. 2007 time. However. the project team is housed at offshore in Chennai. where the development team is located at offshore locations. highly skilled personnel to develop these products. 2. The requirements are then passed onto offshore team to develop. for software product development. it has been observed that the following points become critical: 1. In the course of developing these requirements. verifying that the small pieces work. the customer changes the requirements also and these changed requirements need to be developed and delivered as per negotiated schedule. product committee and product development teams that are based at headquarter in USA. The existing software development models are not in a position to take care of such dynamic situation and often lead to delay in time schedule and spending more time while developing the products than agreed upon earlier with the customer. 3IS develops software products in offshore-onsite business model.220 Vilakshan. . The behaviour of a complex system emerges from the combined behaviour of the smaller building blocks. effective informal communication and simple project management. Then they build up from there. To be successful in this offshore-onsite business model. RAD projects are typically staffed with small integrated teams comprised of developers. which uses low cost. Inadequacies present in the existing models are shown in table 1. Excellent communication protocol between offshore-onsite teams. test and then deliver them to the customer. fundamental principle of RAD is that each iteration delivers a functional version of the final system. The customers are based at onsite and the requirements are gathered at onsite. XIMB Journal of Management . However. these models do not help in addressing the issues faced by the offshore team. unity of vision and purpose. These models represent software development models that have been in practice for long time. end users. iterative development cycles optimizes speed. The organization structure for executing projects in 3IS has project committee.
A small application can be scaled upto a large application. Prototype is developed first. better preliminary design. Developments are carried out in small iterative cycle. Rigorous review in each state. and IT technical resources.. Second prototype may be made of requirement Timelines are Requirements are frozen. flexible Requirements need to be captured through interactions. Reliable Iterative Testing . 221 Skill set required is available with the team . Each iteration delivers a functional version of the final system. Requirements are gathered and prototype developed. Prototype and waterfall combined.. Waterfall Model Description of Model Each stage follows the previous one Assumption of the model Requirements are process Mohapatra. Lines of codes are written and then tested immediately. RAD projects are staffed with smallintegrated teams of developers. end users. Projects are combination of small pieces. Bullpen method. Performance in terms of response time can be similar with final development.Table 1: Comparison of Software Development Models Interactive Prototype Chaos RAD Spiral Agile Model Name/ Model Feature Revisiting the earlier stage repeatedly. Stress on face to face communication. Customer site only. Acceptance from the customer is taken on prototype before further development.
software Narrow scope application. for testing. Small sized application. XIMB Journal of Management . Overkill for application. No off shoring Small application Test planning and testing is the most critical stage. Scientific and research software applications. Can be used for complex application. Testing late in Timelines are the missed. Better test plans Less scope for error during implementation Customer requirements are well taken care of Small sized application. . development and customer involvement in test planning.Application Complex application Scientific application development. Cannot be used in Co-ordination medium. Effort is quite high. 2007 Good for small and medium projects where risk is low Weaknesses of the model Performance in terms of response time cannot be predicted when there is Expensive Time consuming. Defense application Requirements are not clear and not frozen Mission critical application. Can accommodate change requirement 222 Vilakshan. Complexity is low Risks associated with projects is low Strengths of the model Design aspects are well take care of. Can take care Structured of complex testing application. Can work for development and maintenance. Analyst. among all large sized stakeholders application could be development. development Difficult for cycle. Chances of failure at the end are less. Requirements are not clear. difficult. Robust product. High development cost. Can be used when domain competency is not available with project team. September. Defects are captured at early stage.
Minimal test planning. Change requests accommodate after development is difficult as availabilities of team members at a time is difficult. Cannot accommodate change requests after prototype is built. Mohapatra.. 223 . Large application development is not easy. Cannot be used for large application. Cannot be used for change requests. Reliable Iterative Testing . May not be scalable all the time.. Deadlines to take priority of over quality. a large user base in need time.
0 THE RITE MODEL 4. To address these teething problems while developing products for software applications. products are developed in packets. 7. 3IS software came up with a product development model called RITE model. Even though change requests are accommodated later on. . These packets are designed and developed in such a manner that these packets are independent of each other.224 Vilakshan. not only each packet is tested thoroughly. XIMB Journal of Management . the contract helps 3IS to track extra effort required to develop these change requests. and based on contract an integrated team is developed. In phase 1. 6. This helps in reducing time required to develop these requirements again. contract is signed with the customer. A packet consists of already developed functionalities that have been tested and ready to be used. Similar requirements received from different customers are grouped together and formed into these packets. 2007 3. The entire product is developed and delivered through an “integrated team” approach. As the the project progresses in its life cycle phase. 3 RITE model against other software development models lays emphasis on iterative testing. requirement gathering and analysis of requirements 4 When the customer is willing to be cited as a satisfied customer in the marketing prospectus prepared by the vendor organization. Also the organization in study (3IS Software) gets repeat business as well as good reference points 3 from its existing customers which means the customers are satisfied with the products supplied by 3IS Software. September. Contract is quite significant in RITE model as the entire scope is determined at this stage. After building these packets. Availability of expertise for carrying out requirement analysis and design with offshore project team. then the customer is known as reference point. This means that “packets 4“ are tested even during requirement phase. but also these are integrated and testing is carried out for each new product. Ability to deal with small. the testing of packets continues till the products are delivered to the customer. Using this methodology. medium and large customers using the same development model. After contract is signed and purchase order is received. Ability to accommodate change requests during development life cycle without affecting timeline as negotiated with customers. This also helps in billing accurately to the customer. Availability of iterative testing skills in the project team and at low cost. 3. Continuous interaction with customers from offshore team (both oral and written communication). 5. The methodology has four phases. This model has taken care of the issues faced by existing models while being able to produce high quality of deliverables.
Product team (all these are based in USA) and Project team based in Chennai. In phase 2.. apart from other things. Phase 3 primarily takes care of packets development and testing. Project committee works with marketing team in pre sales activities.0 THE INTEGRATED TEAM APPROACH The RITE methodology framework also addresses how 3IS puts together a project team to deliver a product. user training. negotiate with the customer and then enter into a detailed contract. timeline of delivery and the total effort Figure 1:* Phases in RITE model Phase 1 Requirement Definition (1) Pre-Sales (1) Project Plan (1) Testing (2) Phase 2: Design Acceptance Test (4) INTEGRATE D TEAM Design (2) Go Live (4) Develop (3) Implement (4) Testing (3) Phase 3: Construction Support Transition (4) Phase 4: Deployment * The figures in the brackets indicate the phase to which the life cycle belongs . Once a prospect is turned into customer. it is the responsibility of product committee to provide a detailed estimation. user acceptance testing and transition to support happen in phase 4. 4. Each of these phases is described here and a schematic diagram is given in figure 1. 225 is carried out. Product Committee. The Integrated Team consists of Project Committee. detailed design specifications and test scripts are written based on requirement analysis.Mohapatra. Reliable Iterative Testing . it helps the marketing team to clarify any doubts that a prospect will raise during the initial discussion period. And finally installation. This concept is called the Integrated Project Team Approach.. will highlight scope. The contract.
. These integrated packets would be delivered to the customer. a solution is designed which is to be delivered to the customer. This special requirement or customization would be specific to the customer and hence is not required to be part of product road map. Project Team Phase 2: Product Team This phase deals with design activities. would design different ‘packets’.226 Vilakshan. Once the gap analysis is done. The road map for products consists of timeline for developing different features. interaction with customers and industry experts. XIMB Journal of Management . The solution would be based on combinations of available products and customization Solution requirement to take care of special needs Director of the customer. These features would be part of the packets and would be developed by the product team. The product team directly reports to this product committee. Timeline for Project Product delivery of these products are matched Committee Committee with respect to the road map so that final project delivery schedule can be adhered to. Project offshore team is based in Chennai and has a primary responsibility of integrating packets. The project committee reports to solution director who is overall responsible for providing the products to customer. A schematic organization structure is shown in Figure 2. The team has expertise in testing and integration of packets. will be independent of each other and would be integrated by offshore project team. the complete solution is divided into packets. Phase 1: This phase deals with contract and requirement analysis. Based on analysis. gaps are found between customer’s “As Is” system and desired “To Be” system. 2007 that would be spent while executing the project. Based on this gap analysis. The product committee would also define what is known as road map for each product. Requirements are gathered and business analysts make Figure 2 : Integrated Team Structure analysis. iterative testing and delivering the final integrated products to the customers. Each packet is designed in such a manner that they become stand alone components that can be integrated with each other. The packets. The offshore project team reports to this committee. as explained earlier. September. some of these packets would be in the form of available products while the customization packet has to be developed specific to the customer needs. The product committee largely consists of domain experts. who based on market research. The Project team starts with requirement analysis at the customer site. Both product committee and product teams are based in USA.
As a result it is necessary that the team take initiatives to prevent these issues well in advance. processes and has achieved maturity in implementing processes will have approved and documented predefined estimation technique. All these are termed as issues in software parlance and they need to be reworked by the development team as per customer’s specifications and requirements. A customer would typically provide a statement of authorization where he (customer) would authorize the vendor organization to develop software as per his (customer’s) requirement. Reliable Iterative Testing . These rework not only lead to extra amount of time needed for completing the project assignment which delays schedule of delivery of the application.Mohapatra. To arrive at the final estimation. Using approved predefined estimation technique. The vendor would also be asked to provide estimation for the project. These faults are issues. Phase 3 : This phase deals with construction activities. Some of the techniques available are Function Point Delphi. COCOMO and Simple Medium and Complex (SMC) classification technique.. So if one stage has a faulty output it will only have a cascading effect on the next stage and the faults will get compounded. During phase 2. However an organization. standard estimation techniques are available. 227 Detailed specifications are prepared in line with the requirements analysis done in phase 1.. A project should start with purchase order being awarded to the vendor organization. . which has well defined. These deficiencies would lead to spending effort for reworking the application later on. Test cases are prepared in the current phase with test scenarios so that all the functionalities required can be tested. a project should calculate effort and time period required for completing the project. lot of emphasis is given on upfront activities such as design and test case preparation. vendor would gather requirements from the customer and get details on functionalities that need to be developed. and are injected into the software during the course of project execution. Also the customer may not like the look and feel of the software that will be developed resulting in rework of the software. Each life cycle stage has deliverables and output from one stage is fed into the next stage. software is delivered to customer. The causes for injecting these issues could be lack of complete understanding of the customer’s requirements. For estimating total effort and schedule required to complete the project. and communication gap between the development team and the end users. as they are called in software development projects. Domain experts to reduce rework effort by preventing defect injection at earlier stage review design specifications and test cases. it also results in development team spending extra efforts than initially estimated and it means extra cost of software development. At the completion of all LC stages.
008 003.228 Vilakshan.054 99.new event type (4) profile XML (3) cut-off administrator (4)cut-off scheduler (3)cutoff executor (3)Manual profile export (1)cut-off monitor. Enclosed in table 2 Table 2 : Estimation Method Req# 001.020 019.013 Send Notification to Edge on Days Final Batch H 30 018. (3)EOC Report (2)Trigger XSD (1)Profile XSD (1) the interval to retry must be configurableProfile Option (3)Script to set option (2)Profile Export (3)Cut-off Scheduler (4)End of Day (3)Toronto EOD (3)Box Complete Stager (20) Change to mail out 015.010 Description Same Day Effective Dating Add Group Node Virtual Cutoff Notification a sample estimation method used at 3IS software where the requirements are considered at micro level and then classified as Low/Medium/High/Very High L/M/H L H Hrs 5 30 Comment add another screen to same day effective dating Change to Cust Prof .001 99.067 019. 2007 Before entering into a contract with any customer.058 018. This estimation is then sent to the customer for approval. XIMB Journal of Management . September.002 L M L L 5 15 5 5 .059 018.071 Fixed Message To Mail Out Instructions Page Delphi Software Upgrade Batch Maintenance Module Header Eliminate Blank Field For Envelope Government Flip Checkbox Forced Match Report TMS Data base update documentation Import/Export updates L VH L M 5 60 5 15 batch maintenance utlity(5)menufile (1) DDE/EDE (7)Key Verify (3)Batch Edit (7)TFC Batch Export (2) Template Script update Force Match App (7)Force Match report (5)Menu file (1) 018. a detailed estimation is carried out.
Mohapatra. Table 3: List of key deliverables in RITE methodology Life Stages in RITE At contract/project initiation Project start-up.1 Car upgrade L=1-10 hrs M=11-20 hrs H=21-40 hrs VH=41-80 hrs Total 3IS L H M 6*5 3*15 3*30 1*60 5 30 15 30 45 90 60 225 approx 17 apps @ 2 days each Scale Each life cycle stage in RITE model has defined deliverables. is used as reference while developing software using RITE model. Reliable Iterative Testing . These deliverables ensure that proper and effective documentation is carried out without making these activities as overhead.003 Same Day Effective Dating Add Group Node Eliminate system use of user fields Mitek 3.008 99. This ensures that employees at all levels are familiar with deliverables expected out of them.. Table 3 lists key deliverables in RITE model. 229 001. QSD is internal to organization and is used as induction training material to new entrants at all levels.. Quality System Documentation. ongoing revisions to the project plan Client sign off on RD Following RD delivery Logical Day Test Plan at project initiation. test scripts at Design Upon completion of each iteration Ongoing throughout the testing process Upon client delivery Upon client delivery Upon transition to support Required Deliverables Statement of Work/Contract Project Plan and Iteration Plan Requirements Definition Detail Design Document Test Plan and Scripts Test Results Issues List Training Materials Customer/User Documentation Project Transition Documentation Lessons Learnt Documentation . an internal system that details all the procedures and processes.
5. On successful completion of testing. For example. testing happens at Using RITE. September. but also ensures that we receive good reference from our customers. On completion of each packet. 3IS Software has achieved customer satisfaction as issues were reduced and all functional requirements were met. rework is reduced as the team was able to capture issues earlier through testing. assesses. As a result. and incorporates the deliverables and activities that are appropriate for that project into the project plan. . the solution is then implemented at the customer location. it is tested with packets developed earlier. The RITE model thus ensures that all the issues are detected and fixed before each build so that the final delivery have less issues and are more robust and also ensures that all the functional requirements including change requests of the customer are incorporated into the system.230 Vilakshan. still at the end. analysis and design takes place primarily at the end of the requirements phase. The end deliverables were robust as the packets were tested in every iteration of development. each stage of packet development which is one of the unique features of this methodology. the project team reviews. XIMB Journal of Management . deployment of the products are carried out at the customer site. throughout the design phase. These packets include stand alone components from different products and the customized component to meet special requirement for the customer. It is important that within the initial phase of the project. This not only helps to foster a good relationship with the customer. Thus each packet goes through repetitive testing process which is quite different than other software development models (as discussed in Introduction section). User Acceptance Test is carried out at the customer site. tested comprehensively and finally released as a robust system. they are integrated with each other. Once all the packets are designed and developed. 2007 The figure 3 depicts the relative amount of time spent on each of the various process workflows during the project phases. After testing is completed. Even though at the outset it might seem that it would take more time to deliver the product compared to other software development models.0 BENEFITS OF RITE METHODOLOGY Figure 3 : Software Development Lifecycle Framework Phase 4: In this phase. and decreases during the construction phase (please see figure 3).
Mohapatra. An indicator called process compliance index (explanation beyond the scope of this paper) which is used to indicate the level of compliance to CMMI processes significantly improved (by 50%) over a period of 3 months after adopting RITE model while meeting business goals. we were also compliant to CMMi processes. Table 4: Benefits obtained through RITE Jan Mar ‘06 Process Compliance Index Configuration Issues/ person hour 2.0 FUTURE CONCERNS 3IS management has a concern that RITE methodology has not been used by other . 231 Being compliant to RITE model has also ensured that quality processes are compliant with SEI CMMI processes. 3IS Software was assessed at SEI CMMi level 3 at their Chennai location where RITE methodology is adopted for development (please see table 4). Customer satisfaction ensures further business growth potential for the vendor organization as well as become a reference for prospects also. while effort overrun is minimized. The benefits indicate that apart from meeting business goal. Other benefits obtained from RITE model were reduction in issues related to software configuration management. The effort spent is optimized as there is no need to spend time on developing a prototype. hardware cost and cost for maintenance of code) at the lowest level which result in customer satisfaction.38 2. RITE model is used for any size of the application development. In May ’06.32 Apr – Jun ‘06 3. Number of issues related configuration reduced by 30%. These results are available in company internal documents and available for verification. These two benefits are tabulated in Table 4.. Reliable Iterative Testing . The difference is in saving time as change request can be accommodated at later stages in this model while meeting all functional and performance requirements of the customer. Table 4 also indicates process compliance benefits that were achieved over a period of time. When the organization decided to go for assessment for SEI CMMI.2 Thus. solutions are delivered as per schedule. this model (RITE) accommodates change requests. Thus. 6. internal processes were assessed at level 3 indicating that processes are stable. while taking advantage of features of iterative model. As a result the customer is able to use the delivered solution for his business processes while keeping the total cost of ownership (cost of buying solution..3 3. Compliant to SEI CMMI model is an indicator that organization processes are matured and are performed consistently. RITE model is different from known software models practised in other development organizations.
Craig and Basili. Pages 55 to 66. B. Warsta. 1988.. A Spiral Model of Software Development and Enhancement. Raccoon (1995) The Chaos Model and the Chaos Life Cycle. In Advances in Computers (pp. Basili (June 2003). Salo. Barry Boehm. ISBN 0-321-18612-5. 1-66). An introduction to agile methods.1109/MC.1986.W. The concept is new and can be tried out in other organisations that have off-shore onsite business model. (2002).A Spiral Model Of Software Development And Enhancement IEEE Computer. REFERENCES Abrahamsson. Winston (1970). Siponen.. USA 1985. IEEE. P. “Managing the Development of Large Software Systems”. August 1986 Barry W. Proceedings of IEEE WESCON 26(August): 1-9. & Costa. J. B. 1981.2003. Boehm. P. 1996. New York: Elsevier Science... 254).1204375. pp. M. Taking feedback from all these practitioners. Turner (2004).. January 1995. June 2003 Larman. Jan 1987. Abrahamsson. Agile Software Development Methods: Review and Analysis. ISBN 002-376775-8 . “ A Hierarchical Spiral Model for the Software Process. Computer 36 (No. Royce.C. 35-37. 1985... 244-254. DOI:10. Victor R. J. (2003). Boehm. ACM Press. Macmillan Coll Div. International Software Process Workshop. 2nd. (1970). “Applying Process Programming to the Spiral Model. B. RITE can be fine tuned. Boehm. Number 1. ISBN 0-13-8221227 (pages 41-2.73-82. Proceedings ICSE9.” Acm Software Engineering Notes. Craig. . in ACM Software Engineering Notes. Iterative and Incremental Development:A Brief History IEEE Computer. James Martin. September. Barry Boehm. Boston. Boehm. July 1996. & Warsta.. “Build it twice”. O. XIMB Journal of Management . Rapid Application Development.” Proceedings Fourth Software Process Workshop. 2007 development organizations.. J. 6): pp 47-56. ACM SIGSOFT Software Engineering Notes (SEN). New Directions on Agile Methods: A Comparative Analysis..T. pages 165-194 Bohem B. M. D. (2004). Coto de Caza. Larman.. Ronkainen. Victor R.232 Vilakshan. “Iterative and Incremental Development: A Brief History” (pdf). Software Engineering Economics Prentice-Hall. R. Balancing Agility and Discipline: A Guide for the Perplexed. Appendix A. MA: Addison-Wesley. VTT Publications 478. 1980. J... J. Livary. & Ronkainen. Proceedings of ICSE’03. Trabuco Canyon. pp. May 1988. B. Boehm.. and Belz F. It will also be interesting to see how this model is applicable for solutions and services. A Spiral Model Of Software Development And Enhancement. Volume 20. P. Cohen. Lindvall. Anchoring the Software Process IEEE Software.
From Micro Credit to Micro Enterprise* S. Gram Utthan is a non-profit. in money lending activity. The authors would like to thank an anonymous referee for his comments on an earlier draft. at about 150 kilometers away from the state capital in the northeastern direction. Associate Professor of Economics. Xavier Institute of Management. This has become a business for them. 2007 . Govind Dash. Though he was sure that the organization was moving on the right track and fulfilling the socio-economic need of the communities for which it was set up. Bhubaneswar. Revised September 14. providing a regular source of additional income to them. Das 1 & Alok Pattanayak 2 Abstract Since its inception in the year 1990-91. Rajkanika block of Kendrapada district. it started developmental intervention in Pimpuri village of Kendrapada district with various activities on rural technology.Management case Gram Utthan . email: alok_sme@ximb. the Secretary of Gram Utthan was happy that the organization has made substantial progress. Mr. Govind Dash with a group of dedicated energetic professionals.ac.in . email: spdas@ximb. sanitation. among other activities. both internally and externally. They borrow money from bank at 1% per month and lend it to group members and others at a much higher rate. It was established in the year 1990-91 by the initiative of Mr. Gram Utthan.0 G R A M U T T H A N : T H E N E E D A N D INCEPTION profit. This rate goes up to even 10% per month in some cases creating opportunities for the NGOs to earn high * 1 2 Received February 27. Possibly due to such reasons many of the SHGs have started doing the money lending business. 1. he was keen to do more and looked forward to advice from competent professionals. community health. It has its registered office at village Pimpuri. non-formal education Self Help Groups (SHGs) are now-a-days involved. which started as an NGO and extended its micro finance support to SHGs and other members. This had also created an interest among rural women to form groups.in Project Officer. Initially. Xavier Institute of Management. Center for Development of Small & Micro Enterprise (CDSME). Bhubaneswar. went into setting up a packaging unit. 2007.ac.P. non-political and non-governmental organization.
With this objective it has started one packaging centre. of village covered No. Most of its customers are women who have come together to form a group of 10-15 members each. of Community Organizers (CO) External Fund leveraged (Rs. of Active Borrowers Amount of Loan Disbursed (Rs in Million) Amount of Loan Outstanding (Rs in Million) Average Loan size per SHG members (in Rs) Average Loan size per JLG members (in Rs) Portfolio Outstanding per Co. of Members No. At present it covers six different districts of Orissa namely. it has started thinking for the economic upliftment of its customers. Jajpur. Cuttack and Khurda. of staffs No. Bhadrak. which accumulates a loan outstanding of around Rs. In Million) On time Repayment rate Portfolio at Risk (PAR) Units 3503 1533 53262 991 238 25 6 15 157 96 305 59032 28513 411. 2006 with the name of Kalyani Packaging Centre (KPC). farmers clubs. Portfolio Outstanding per branch (Rs. Kendrapada.91 98. In Million) No. Gram Utthan has become more concerned for its portfolio and the customers. but. of SHG formed No. In Million) No. which will act as a marketing support for various products produced by the SHG members. This project was lunched on January 20. in the year 1995 it took a strategic decision to adopt micro finance as its core programme. JLG is a group of 4-5 members who come together to avail loan and become jointly liable for each other. 2007 and formation of youth clubs.72 . it has become one of the major developmental agencies recognized by national as well as international development partners. (Rs.30 crore. of panchayats covered No of Blocks covered District covered No. Dhenkanal. of members per Co. after one and a half decade. Besides these groups. etc.96 6847 11403 1. Then came into the picture the growth of Micro enterprises in a sustainable manner.5 1. It covers a customer base of more than sixty thousand in more than 25 blocks of these districts and in more than 1000 villages. of Branches No. it also gives loan to Joint Liability Group (JLG). of Borrowers per Co. of Cumulative loan disbursed No. September. No. SHGs.234 Vilakshan. of JLG No. It operates through 15 different branch offices.7 226. The details of status of Gram Utthan and its Micro Finance activities are given in Table -1 Table 1: The Status of Gram Utthan & its Micro Finance activities as on 31st December 2006 Status Item No. XIMB Journal of Management . Today. With the increase in the customer base. Besides providing mere loans to them.88 592 359 18.
0 OPERATIONS OF KPC 3. 10 lakh. the concept was operationalised on May 1. All the investment is made by Gram Utthan as the promoting organization.2 KPC Mission & Objectives The Mission of KPC has been succinctly put as “empowering the poorest of the poor in the society by creating financial self-sufficiency for them and preparing them to face uncertain future through SHGs under KPC network. But this model clicked only for two months. 3. This collaboration created a base for KPC. 4. Manager (Accounts). atta. sugar.1 The Business of KPC KPC bought the products. This restricted Gram Utthan to achieve the desired objective. to sell its products. HLL did not agree with Gram Utthan to sell products other than HLL products. salt. GRAM UTTHAN From Micro . The committee is the final authority to take any decision in respect of KPC. edible oil. employment to local rural women. tea. a leading FMCG marketing company in India. higher profit margin. Manager (Finance).” The objectives of KPC are similarly to achieve market penetration. At the time of writing this case. good quality products. the figure has increased to R.al. Then.Das et. it was the thought of the organization’s secretary to go for an alternate model for this. The initial investment in KPC was Rs. dry pea.3 KPC Managing Committee In the early stage Gram Utthan collaborated with Hindustan Lever Limited (HLL). 2006. The administrative coordinator heads the Managing Committee.0 EVOLUTION OF KPC 2. HLL did a consumer survey for 100 different households in the operation area of Gram Utthan. There arose conflicts between HLL and Gram Utthan on which products are to be sold. 235 The year 2006 was a turning point in the history of Gram Utthan.65 There is a managing committee for the smooth operation of KPC. The committee acts according to the operational policy of KPC. Administrative coordinator and Programme associate. The details of the functioning of this unit are elaborated further in following paragraphs. incense . chilli.1 Early Stage lakh. Besides. It took a new turn from its main activity of micro finance to micro Enterprise by starting one Packaging Unit at Pimpuri in the name of Kalyani Packaging Center (known as KPC). 2. The products were dal. 2. reasonable price and effective marketing of SHG products. The members of the committee include Manager KPC.. After several rounds of discussion among all the staffs and SHG members.. packed these and sold these through various channels. 2. He chose SHG to be the best one as there were many SHGs involved in its micro finance activity. HLL gave the technical inputs and training to all the staff of Gram Utthan involved in this activity.
XIMB Journal of Management . Adequate managerial and technical . The unit is run in a rented house. 200 gm. The cluster operates at Block level and 10-15 clusters together form one federation at district level. net weight of the item. At present the customer base for KPC comprises of 5 wholesalers and 130 retailers. need of the group members and their skill level. carrying the brand name (Kalyani) name. 100 gm. Gram Utthan to make it a self-dependent business entity. 500 gm and 1 kg 500 gm and 1 kg 50 gm. They are employed on daily wage basis (@ Rs. 500 gm and 1 kg 200 gm. 500 gm and 1 kg 50 gm.3. Till that day. 100 gm and 200 gm support is provided by the promoting organization. The basic criteria for group selection were travel time from their villages to the center. As per the present system. September. 100 gm & 200 gm 100 gm & 200 gm 100 gm.2 Role of Clusters The processing unit is located at Kothasahi about 1 Km away from Rajkanika. weighing and packaging. The products were packed in sizes as shown in table – 2. mustard and phutan. a full time manager is being appointed to look after the day-to-day affairs of this unit. Present status of the processing unit These were airtight polyethylene packets. Different processing members are allotted different works as per their skills. This federation and its representatives manage the entire KPC operation. 200 gm. The table . two members are nominated from each group. which is taken on lease for two years. 200 gm and 500 gm 50 gm. price and date of packing of the item. 30 per day) with a minimum 25 working days in a month. There are three different sections for cleaning. Table – 2 : Products and Size of packs Products Turmeric powder Tata tea Dal Sugar Salt Jira Ata Mung dal Chilli Sorisa Phutana Type of Pack 50 gm. 2007 sticks. name of the product. The whole process is being monitored by one supervisor selected from these processing members and he directly reports to KPC Manager. 100 gm and 200 gm 500 gm and 1 kg 200 gm. 500 gm and 2 kg 50 gm. 100 gm. about 15-20 village level SHGs are required to form one cluster.3 explains the above information about the present processing members working in KPC. With regard to selection of members who work in KPC. cumin seed. 3. 3. At present there are 20 processing members representing 10 different groups from two clusters.236 Vilakshan.
The daily turnover of KPC is around Rs.000. giving a profit of Rs. KPC purchased its materials and did the packing. Materials of 30 quintals were procured once in a week for Rs. GRAM UTTHAN From Micro . out of which items worth of Rs. During the production process. The whole stock after processing were sold in the market at Rs.Das et. who were involved in some group enterprise activity were selected. The materials were bought from various sources as shown in Table – 4. Faruque/ Debi Bhandar – Cuttack Madan Mohan supplier/ Bal Dev Jew flour mill – Kendrapada Roshan store – Cuttack Malgodown Raja Babu – Cuttack A. But.8. Roy – Cuttack. of Members Distance (in km) 7 7 10 3 3 2 6 8 Members 6 2 1 1 7 1 1 1 30 materials daily. to maintain the order-supply flow. own SHG production – Jarimul Own SHG production – Bharigada Nilachala printing – Bhubaneswar.60. stock of finished goods worth of Rs.. One member cleaned around 10-12 Kg of raw Agarbati Polythene Salt Oil (Ruchi) . which was converted into 400-500 packets.000. 237 Table – 3 : Village-wise grouping of members working in KPC and distance of the village from the packaging unit Village Tarassa Bharigada Kanjighai Ayatana Giria Pimpudi Sirisa Achutpur Total No.000. HLL gave the training to these KPC members on packaging. This was again sold in Table – 4 : Suppliers of various materials Raw material Harad dal/ matar/ sugar Ata Name of Suppliers Ishari general store/ mohd.4.al.000. cleaning and weighing. About the work distribution in KPC the following system was followed. Initially those SHGs.000 is being stored always in the storeroom of KPC. 3. which took a leading role in KPC marketing. comes to be around Rs.4 Business statistics Haldi Tea Chilli As stated earlier.2-2. the loss percentage. This accumulated to around Rs.3.000. which comes in terms of damaged / rejected items.K.000 were sold on credit which were collected after a week and before the delivery of the next stock. Later.5 lakh turnover per month for KPC.40. local market Prithvi Dairy – Jagatpur Utkal traders – Cuttack Initially. these SHGs were brought together to form clusters. These were delivered by the suppliers at KPC by a pick up van.65.5..
Yet.50 per quintal.238 Vilakshan. Rs. i. The next major cost is towards the cost Generator logbookSalary registerPass book – transaction with HO Stock register – raw material / finished goodsCashbookVehicle logbook . KPC borrows money from Gram Utthan in the beginning of the month by giving its Business plan proposal. September. which comes around Rs. 3.5 per quintal. 3 mm 40 piece • 6 piece tray • Palettes (15 piece) 2 kilowatt – Honda Price in Rs. KPC returns the money earned out of its business transaction after deducting all the expenses and payments. 11000 8000 7000 1200 850 1400 450 3000 450/ piece 130/ tray 200/ piece 30000 3. Table – 5 : Machines/Tools used in the Processing Unit Name of the machine Weighing machine Specification • Sansui – 6V / 2 Q capacity (20 gm accuracy) • 30 kg (2 piece) • 7 kg (1 piece) Seal machine • 12" plain (3 piece) • 8" plain (2 piece) • 10" spice Aluminum (1 piece) Sticker gun Printing machine Plastic tray Processing accessory 1 generator medium (3 line).330. The major expenses for KPC is towards the transportation cost. which is shown under other income for KPC.0 FINANCES 4. XIMB Journal of Management .5 Machine / tools used The Table – 5 briefs about various machines and Tools used in the processing unit. along with their specification details and price.1. 2007 the market at one-third of the actual price. At the end of the month.1 Cash Flow Analysis The inflow of cash to KPC is done by its promoting organization Gram Utthan through its Micro Finance Daily activity registerSales registerCredit registerLoan ledger (HO) activity. It also got some income from other sources by selling the empty bags in which raw materials were stored.6 Records maintained The following records/ books are maintained at KPC to have updated information about its business.e. there is no record for keeping track of the orders received and delivered. 4. The Labor cost comes to about Rs.
KPC.4 per kg. As of now. thus minimizing the waste materials and maximizing the cost of production. all the expenses have been divided into following four categories..0 PERFORMANCE ASSESSMENT OF KPC 5. 5. This ensured the packets to be stored for a longer period without being damaged..al.1 Salient Achievements To assess the performance of the processing unit of KPC.2 Value Addition In the process of making good quality products and adding value to it to attract more customers. weighing and filtering the products. • The processing unit used various modern tools and machines for packaging. which gave additional revenue for the unit.Das et. The various expenses incurred by KPC. the following major steps were followed by the processing unit. GRAM UTTHAN From Micro . The waste material thus collected out of this process was again reprocessed to make other byproducts like making fodder for cattle. Table – 6 : Revenue & Major heads of expenditure for KPC Heads of expenditure One Day’s Revenue Wage Machine Electricity Packaging House rent Printing Salary Asset maintenance Wastage Fuel Marketing cost Incidentals 700 2 100 350 35 100 104 5 5 6 300 Amount (in Rs. along with revenue in a single processing day is elaborated in the Table . 239 of grinding the raw material to produce powders. KPC is not having its own grinding unit. they are doing it in an outside unit by giving a price of Rs. Basically. All the processing staff were trained on packaging and filtering. Utmost care was taken during the process of filtering of waste and damaged material before going for the packaging of final product. the performance reports of KPC were collected from the organization. and summarized in table 7 below.) Fixed Variable 8000 500 • • • . Hence. Administrative Wage payment Loss / damage Marketing 5.6. The high administrative cost is still a constraint for KPC to retain maximum profit margin for its members. This ensured the quality of the product.
the data from one competitor. But.240 Vilakshan. have been considered which has been reflected in the following table – 9. as contributed to their overall family income.3 Other Quantitative Indicators The following parameters have been used in quantifying the success of the KPC. September. 2007 5. Before KPC. who comes in the second position in terms of price and quality in comparison to that of the KPC products. Then. This income source was also not certain and depended on the availability of work opportunities.25 b) Benefit to consumer through lower price c) Quality of product as reflected by increase in consumer base d) Better recoverythrough ensuring higher income to women members The details on these quantitative indicators are explained below: Incremental income received by KPC members A comparative study on income level of members associated with KPC was done to find out their monthly income before they were associated with KPC and after that. a) Incremental income accrued to the members Table – 8 : Average monthly contribution of members to family income Name of the Village Average monthly contribution of the members to family Before KPC Tarassa Bharigada Kanjighai Ayatana Giria Pimpudi Sirisa Achitpur Average Income 400 500 400 600 300 600 300 300 425 After KPC 700 750 600 750 600 750 700 600 681. Here. XIMB Journal of Management . these women members were involved in some or the other activities to earn their own income. Price comparison chart A comparative analysis of various products sold by KPC in the market in comparison to those products sold by other major competitors in the same market was attempted.8. The above table gives the data on 11 different products largely sold in the market by KPC. This additional income significantly contributed towards the increment in family income with more than 60 % increment in their average income. after joining KPC the members got secured earning towards their labour charge every month from KPC. the price of these products was compared with that of the . The table contains the monthly individual income figure of KPC members from the 8 villages. The data is given in the table .
The selection of Hub is based on the following criteria. for the marketing of their products. It is basically a wholesale shop situated in and around a main market of an area. 241 Table – 9 : Comparative Price List List of Items Turmeric powder Tata tea Dal Sugar Salt Jira Ata Mung dal Chilli Sorisa Phutana Market price 62 132 36 25 9 110 1520 50 90 30 45 KPC price 58 120 33 19. Besides this. But. It was Table – 10: Hubs and their distance from KPC Sl. No 1 2 3 4 5 Name of the Hub Patamundai Madanpur Chandbali Matto Adhajodi Distance from KPC (in KM) 33 40 8 28 38 Number of Agents 6 4 8 6 5 Market share (%) 20 22. where the marketing Hubs are located. KPC is being provided with one jeep by the promoting organization. it is not becoming economically viable for KPC.. due to heavy fuel consumption and expenses towards driver salary. number of agents working for that Hub and their respective market shares.80 96 1510 44. which covers 30 kms and two markets.75 4.5 20 25 12. Stock of Rs. The table – 10 tells about the presence of these Hubs with distance from KPC.50 85 27 38 operates with its 5 Hubs located in 5 different market places.Das et. Gram Utthan. At present KPC The table summarizes the customer base of KPC in 5 different locations.5 . doing a business of around rupees 30000 a day. KPC hires one auto rickshaw @ rupees 300 per day.al.. Hub is a strategically located shop to which KPC supplies most of its stock.20-30 thousand Good Regular retail sales Larger customer base Storage facility Market location Transaction capacity second most competitors in the market for that particular product. Marketing strategy for increasing Customer Base The marketing of KPC products is mainly done through their Hubs. In all the cases it was found that KPC price was cheaper than that of its competitor. Daily a stock of rupees 8000 is being marketed with this jeep. GRAM UTTHAN From Micro .
All together these 9 marketing channels explained in the above table contribute towards marketing of KPC products in the market. In order to increase the customer base. the market share of KPC products increased from 0 to 20 % on an average within a span of one year. 2007 clearly indicative from the above table that.5 93.6 94.8 98.6 100 97. September. It was tried to analyse various marketing channels used by KPC to market their products. The rest 20% were gathered from 7 other channels.4 Tarassa Bharigada Kanjighai Ayatana Giria Pimpudi Sirisa Achitpur .2 93.6 99.6 100 100 97. out of which again order sales and direct marketing contributed 15%. where the members of the Micro Finance activity are also the members of KPC. The second highest business came from all the hubs. of members taken loan before KPC 130 116 15 56 34 31 13 56 Table – 11 : Marketing Channels and percentage of Shares Channel Hub Retail sale Order sale Direct marketing Seasonal Festive / fair sales Counter sales Mobile selling unit – Van Other sales Share percentage 25 55 10 5 2 1 1 0. more than 50% of business was done through retail sales.5 0.6 94.7 92. The table – 11 explains the details of it.242 Vilakshan.4 Recovery % after KPC 97. Out of this. because of the entrepreneurial activity and among Total no. of members taken loan after KPC 157 135 28 79 68 46 31 83 Recovery % before KPC 96. These two together gave around 80% of business. irrespective of the distance from the main processing unit. KPC used 9 different marketing channels.5 93. These diversified Table – 12 : Recovery Status of KPC Village Total no. from where these members received incremental income on a regular basis.5 marketing channels ensure the marketing of the products of the members. Recovery status The status of monthly recovery in 8 major villages was collected.3 97. XIMB Journal of Management .
To assess the product quality and its impact on customer retention strategy. with the additional income they received from KPC..with a profit of Rs.with a profit of Rs.al. the figure is in increasing mode.. 1000/. In both the cases. The second and third column explains about the customer base in the village.4 Qualitative Indicators highlights the interaction and the feedback received from the Hub owner. the original MFI. 5. These are explained below.14 . the authors visited two different Hubs of KPC and interacted with the Hub owner. The above table highlights two major things. In other wards. 243 whom the profit of the business is shared. 2500/.100/After KPC: His daily business is more than Rs. GRAM UTTHAN From Micro . The table – 13 & table . 1000/. Table 13: Visit to the oldest Hub at Chandbali market Owner – Ramakant Parida Activity – grocery shop Experience in business – 18 years Before KPC: His daily business was less than Rs. Rajkanika Owner – Samar Behura Activity – variety store Experience – 3 years Before KPC: He was an employee getting his salary irregularly and was staying away of home After KPC: His daily business is more than Rs.with a profit of Rs. An attempt was made to find out the effect of KPC on the recovery rate for the loans taken by the KPC members from Gram Utthan. The table – 12 below gives information on the overall recovery status of the villages before and after the KPC came into effective. taking into account all the live accounts in those villages. The better recovery rate also justifies their increment in monthly income. the members were able to repay their loan more on time. The last two columns explains overall recovery rate of all the loanee members from these villages.Das et. Interestingly it was found that for all the KPC members from these 8 villages improved their recovery status with the organization. 300/Benefits • Increase in Profit margin • Expansion of Customer base • Available of Quality products • Free from packaging problem • Less hassles from weight and measures department • Lease rent from the House Table 14: Visit to the new Hub at Porolo Nahulia Chowk. 250/Benefits • Regular Cash flow • Giving time to his family • Gets Quality products for his own consumption • Less hassles from weight and measures department • Income from the contract of Gram Utthan Mess Besides the above quantitative indicators a few qualitative aspects of success have also been used in the present study.
Mr. B. as sorted below. which includes death claim. Hence the following three things are equally important for KPC to continue with its business.Govind Dash felt that there were several issues and problems to be sorted out. which will minimize the fuel consumption substantially. XIMB Journal of Management . But. Also the legal status of the promoting organization does not allow it to run this business. Replacement of the Jeep with a pick up van to supply finished goods.244 Vilakshan.0 ISSUES & CONCERNS • • • Registration under VAT Obtaining Food license Legal entity to conduct the business (under SSI or DIC) While KPC was doing well in the perception of management. It was planning to increase its customer base and capture more markets in terms of business. . The road ahead KPC was still at its infant stage and there was a long way to go for its sustenance. seeing the more business opportunity and demand in the market. KPC could face legal hurdles. Some of these are presented below: A. • • But all these meant that Gram Uthan will go more and more into direct manufacturing/process. KPC is trying a number of methods. C. 2007 6. But. Staying arrangement for members who come from long distances. to attract more members in its processing unit. September. they urgently needed few things to upgrade their business volume and hence the profit. instead of engaging itself in the original task of encouraging members to be entrepreneurs. Training on skill upgradation to sales executives and processing members Bringing the cluster federation into existence to take charge of KPC • • • • • The effectiveness of these methods is yet to be ascertained. partial disability claim and medical claim. Motivation for KPC members Due to some important issues like traveling long distance from villages and insufficient time for family works. Limitations for KPC KPC is still to be a registered entity. • Insurance coverage for the member and her family.. most of the members of clusters were not willing to be KPC members. • Set up of their own grinding unit which will minimize their grinding cost Power connection to the processing unit that will minimize the fuel consumption expenses by the generator. For this KPC is tied up with Royal Sundaram. Exposure visits to other units and areas Training on development Various skill Unless these were done.
ac. Received July 16. argues Burkholder. The process of outsourcing however is clouded by numerous controversies and misconceptions because we have forgotten this simple fact. Hoboken.274* Reviewer : Shiva Kumar Srinivasan1 Theoretical accounts of outsourcing generally begin with the implicit assumption that there is a fundamental difference between the ‘core’ and ‘peripheral’ activities of a firm. (2006) Outsourcing: The Definitive View.Book Review Nicholas C Burkholder. Firms are therefore advised to concentrate on the former and outsource the latter. the reasons cited for outsourcing by both federal and private sector managers are more or less the same. Adam Smith. pp. but the U. The case study on outsourcing with which this book begins however is not of the private sector. In other words. federal government. a number of blue collar jobs have always been outsourced by the federal government albeit without invoking the term ‘outsourcing. John Wiley & Sons. Traditionally. Jamshedpur.S. is just pushing the division of labour to its logical conclusion in order to harness the comparative advantages enjoyed by globally distributed vendors.’ The conceptual origins of outsourcing however can be traced to the work of the Scottish economist.in . XLRI. but enables the production of goods and services at predetermined prices provided a firm * 1. Outsourcing of peripheral and sometimes even core processes makes it possible to not only get a handle on costs. Outsourcing.’ Federal agencies continue to outsource work quietly and in small batches in order to take advantage of government-wide acquisition contracts (GWACs). Applications and Implications. outsourcing has always been there in some form or the other in both the public and private sectors and is very much in keeping with the ethos of the free enterprise system in the United States.8). According to a survey carried out by the General Services Administration (1998). As President Eisenhower put it categorically: ‘the federal government will not start or carry out any commercial activity to provide a service or a product for its own use if such product or service can be procured from private enterprise through ordinary business channels (p. NJ. email: shiva@xlri. 2007 Associate Professor.
diagnostic systems.30). illness. In either case.’ The success.’ then it will either substantiate the general argument in favour of outsourcing most non-core processes (and at least a few core clinical processes) or serve as a powerful counterexample. Burkholder sets out the basic modalities of outsourcing in this book before making the argument that ‘outsourcing is really sourcing. the hospital is an organization that has an additional set of burdens which arise from ‘industryspecific considerations’ including the fact that it is a ‘quasiresidential’ unit requiring support systems (like catering and laundry) on a daily basis. the complexity of a hospital’s mission makes it necessary to ask whether it is possible to define the circumstances in which doctors can focus on the core problem of human illness and the implicit model of health that this presupposes and outsource everything else.246 Vilakshan. Burkholder does not advocate outsourcing under all circumstances since it ‘doesn’t always work (p.61). if it turns out that outsourcing is not a good idea in hospitals. 38). Furthermore. So unlike the hypothetical firm that is preoccupied with the possibility of cost savings.61). should it turn out that .’ The quality of the relationship and the expertise demanded from the venture can make or mar an outsourcing contract and must therefore be approached with due caution. is to use a hospital ‘as the basic unit of analysis’ since health care is characterized by a high degree of vertical integration for a complex set of reasons (p. and strategy. insurance and payment modalities. regulatory structures. In other words the choice between vertical integration and outsourcing is by no means easy or pregiven. of an outsourcing venture depends on whether a firm is clear about its mission. if any. The most important of these is that hospitals are judged by ‘patient outcomes’ rather than efficiency per se (p. September.’ But. and so on (p. interestingly. ethical and ontological questions on what constitutes life. What would such a hospital be like? What would be the implications of such a structure on patient outcomes? Would they be favourable or unfavourable? In other words.74). pharmaceutical breakthroughs. Burkholder’s wager is therefore theoretically very interesting: if a hospital can stand in effectively for what economists identify as a ‘firm. But. recovery. the firm should remember to approach all ‘resourcing decisions holistically (p. The hospital must also be able to cope with changes in medical technology. The firm must also understand which of the top ten drivers of outsourcing discussed here are relevant to the business and/or the circumstances in which it finds itself. XIMB Journal of Management . argues Burkholder. 2007 understands the modalities involved in deploying technology effectively. this will not necessarily have any major implications on the strategic dimensions of outsourcing in a theory of the firm. A good test case for outsourcing. objectives.
’ If. 247 outsourcing has a positive impact on patient outcomes after all then the possibility of outsourcing can be defined as structurally inherent to a theory of the firm. 83). they will have to be willing to suspend these default assumptions about vertical integration and attempt instead ‘a careful evaluation of the cost and capability dynamics of each functional area…in order to facilitate effective decision making about the vertical integration versus outsourcing decisions undertaken by hospitals today (p. and demand management’ (p. and virtualization’ to derive competitive advantage (p. the firm must have ‘a clear exit strategy. According to the findings of The Concours Group.’ and have ‘a clear set of core values (92-93). in addition to having such a model.Burkholder. a firm can develop the competencies needed to manage relationships with vendors then it ‘can leverage the power of specialization. but will work effectively only if it is implemented in totality rather than in parts. As a reality check. and the inability to anticipate what the other party will do.. governance. The Definitive View .’ There are of course no guarantees that a decision to outsource will be successful and. operations management.. As a part of the outsourcing strategy.they include ‘strategy. Burkholder examines both a core clinical process like radiology and a non-clinical process like catering in order to generate learnings on how outsourcing can be linked to a theory of the firm. but appears to be so because it represents the default assumptions about how hospitals handle the ‘make-or-buy’ decision in order to increase positive ‘patient outcomes. 89-90). supply management. quite . program management. lack of trust between the firm and the vendor. His conclusion is that vertical integration is not necessarily the ‘optimal’ solution. lack of clarity on expectations pertaining to outsourcing.’ It seeks to ‘ensure that the strategic intents and outcomes of both parties in the outsourcing relationships are achieved’ and ‘that the results expected are the results realized (pp.90). It can be applied to not only outsourcing.’ If hospital administrators want an optimal solution.’ Outsourcing of governance however continues to be a problem. interestingly enough. globalization. 90). The model is of use to both companies that have started to outsource and those which want to try it for the first time. Concours therefore decided to translate a set of best practices into the Sourcing Management Model to help a firm manage life after offshoring. it is. a research firm based in Houston. The model as a whole seeks to ‘integrate’ these components. The different components of the model are described in detail . firms fail because they focus on the contract itself rather than on managing relationships with vendor(s). the principal mistakes that firms make include the following: uncertainty on matters pertaining to decision rights.’ participate in ‘detailed scenario planning. ‘but to many kinds of labor sourcing.
as Scott Gerschwer. adopt a holistic model for all forms of sourcing. make sure that resourcing decisions are made on a platform of performance (p. ‘the Achilles’ heel of outsourcing activity (p. ‘is the framework of decision rights that encourages desired behaviors in both the outsourcer and the client company’ whereas management ‘deals with making decisions and executing a set of processes or activities’ (p. Those who are serious about coming to terms with the changes that outsourcing represents should focus more on objectives and less on strategy. It is therefore important to work out these modalities and have a formal ‘decision rights matrix’ in place (p. not a piece of paper or a commodity to be purchased. but the inevitability of it as a socio-economic trend does not guarantee success for firms that try to outsource. Outsourcing. it was none less than George Washington himself who set the precedent for outsourcing in America when he delegated the training of his troops to the French general. the Marquis de Lafayette. There is also an interesting ‘glossary of outsourcing terms’ and a list of ‘outsourcing companies and services.’ It is therefore important to treat the vendor as a partner who is the subject of a relationship rather than an object to be managed. In Gerschwer’s formulation. it is governance modalities that are at fault. The book concludes with a collection of brief articles by experts on the economic and strategic dimensions of outsourcing along with specific instances. Governance. is ‘merely smart business’ and it is only a matter of time before this honourable tradition becomes routine business. . 2007 simply.’ This is because the terms ‘governance’ and ‘management’ are routinely conflated. finally. ‘sourcing is a relationship.247). during the revolutionary war (p.93).’ Burkholder’s advice to firms is that outsourcing is here to stay.149). XIMB Journal of Management . In other words. develop better performance metrics. September. one of the experts featured in this volume points out.99). and.94). more often than not.129). get HR to accept responsibility when human capital is outsourced. according to Burkholder. When outsourcing fails. Only then can the vendor ‘deliver results that exceed the contract expectations and add considerably to the intellectual capital available’ to the outsourcing firm (p.248 Vilakshan.
Overseas Press India Private Limited. the business focus shifted from customer retention to new customer acquisition. The basis of the business was the understanding of mutual dependence. Since the production capacity was limited. It was also very difficult to practically engage in meaningful one to one relationship with the large number of existing customers. Customer relationship management was there in the preindustrial revolution period. The mass produced. Gurgaon. Email: jmukherjee@mdi. when the marketer was the producer of the goods and services. Industrial revolution and the advent of mass production separated the producer from the marketer. Associate Professor. pp 296. There was an intuitive understanding that the interaction with the customer would continue even after the transaction was completed. specialized techniques namely advertising. product centric approach focused on increasing the consumer base remained the predominant paradigm of marketing practice till late twentieth century.Book Review Mosad Zineldin. Business thrived primarily on one to one relationship between the buyer and the seller. customer base was local. Price Rs 325/-.ac. The marketer knew and understood the individual consumer’s needs and was able to provide customized solutions (by a combination of product and service) to the specific requirements of the customer. not only from the marketer’s perspective but also possibly the buyer. 2007 1.in . there was more focus on improvements in marketing infrastructure like distribution networks. customer retention was the key to the survival of business. the distribution systems were not developed. sales promotion etc. It was important to get customers for the standardized products rolling out of the factories. There are fundamentally two broad options. With the development of information and communication technology (which * Received June 25. It was more cost effective to produce large quantities of standardized products. soft * Reviewer : Jaydeep Mukherjee1 Marketers have to find buyers for their offer (product or service). (2006) trm: Total Relationship Management. New Delhi. need fulfilment and long term orientation or in short . making those products affordable to larger consumer base.relationship. Management Development Institute. either to acquire new customers or retain the existing ones. However. Thus.
The second is to add the strategic aspects of product development in a typical linear new product development model. The starting point of the TRM paradigm is the criteria for enduring successful relationship management. motivation and innovation process of the organization. their interdependence. The first is by trying to incorporate the notion of “Prodserv” which is essentially based on the premise that notion of product is always accompanied by some service component and hence should be appropriately called “Prodserv”. marketing initiatives are formulated to retain the customer. The concept of “Total Relationship Mix” charts out the seven basic management issues faced by the marketer or business organization. resources. Total Relationship Management (TRM). location. it is once again possible to have customized one to one interaction with a large number of customers. With increasing competition in the market. organizational arrangements and institutionalization. This includes the willingness and motivation of the customer and the marketer. September. The establishing of relationship is considered to be about giving promises and fulfilling them while the developing a relationship is considered to be offering new set of promises – where fulfilment of earlier promises is a prerequisite. which are integrated by the information technology. The author has tried to fit in the idea of “total” in the product development process by two means. 2007 gives tremendous reach and information processing capability at an affordable cost). expectation. cultural fit. responsiveness. the interaction with the customer is increasingly viewed not as a transaction but as a long term relationship. which create and deliver value greater than what the competitors can. The author has tried to develop the notion of “TRM” by incorporating the elements of relationship paradigm in the existing well established management concepts like marketing mix. XIMB Journal of Management . This is an interesting way to set operating . Development in manufacturing technology and distribution infrastructure is increasingly making it possible to provide customized product and service to smaller groups of customers. total quality management and new product development. It includes managing the communication. the Customer Relationship Management (CRM) paradigm has once again gathered momentum as it is easier (or cost effective) to retain an existing customer than to acquire a new one. Thus. as advocated by the author is an attempt towards extension of the relationship management paradigm across all the business processes in the organization and the customer interfaces.250 Vilakshan. The lifetime economic value of the customer is estimated and based on that.
The application of the concept is expected to reduce the risk of loss due to inadequate market information. Today’s customers are not only demanding. customer knowledge and misreading of market. the nature of complaint is classified using a two by two matrix of frequency of complaint and impact of complaint. Satisfaction is an emotional response to the difference between what customers expect and what they receive. mutual trust. Total Relationship Management . It should be built on four generic factors. It is to be managed by aligning the internal organizational activities. competition and common values. 251 guidelines for the relationship management function and the key to success is to identify the right set of customers who would provide a steady stream of cash flow and profitable business. Close relationships accrue benefits. flexibility. The resource allocation decision is made on the basis of another two by two matrix. legal.Mukherjee. but require cooperation and sharing burdens also. wishes and concerns. they expect to be treated as individuals with their own needs. benefits. It tries to integrate the process of relationship management with customer (both for internal to the organization and external ones in the market) into the various functional domains. innovation. Building relationship is viewed as social and economic process. not all customers are appropriate for long term relationships. thus there is need to understand the realities of long term relationships before selecting the customers. overdependence etc. The author highlights that. Though total satisfaction is the objective. adaptation.. it is difficult to achieve and requires a complaint management process in place. communication. ecological and physical realities of the customer. cooperation. Since satisfied customers are desirable for meeting the objective for the loyalty and retention. processes and decisions to the external political. economic. Complaint management process suggested by the author is conceptualized as a two-step process. The possible problems to be avoided are the failure to identify coordination and monitoring cost.. Overall. trust and commitment. It uses the existing literature . interdependence. requiring interaction. loss of freedom and flexibility. commitment. understanding customer expectation is vital. The use of Quality Function Deployment (QFD) is recommended. comprising importance of complaint and effectiveness of resolution mechanism. interdependence. TRM is conceptualized as a combination of strategy (defensive) as well a philosophy. then solve the compliant by employing suitable resources. respect. the book tries to provide a comprehensive account of the possible application of the different perspectives of customer relationship management under different business processes. technological. First.
For a general reader interested in marketing. these references could have been possibly supported with relevant examples from the marketing practices to demonstrate the lacunae with the existing system of relationship management as well as showcase the efficacy of the notion of TRM. making the reading a bit difficult and in some cases repetitive also. XIMB Journal of Management . September. those are not really interwoven into a whole. 2007 very well and can be considered a good attempt at consolidating the existing body of knowledge but doesn’t really advance the notion of customer relationship management significantly. the book is not able to bring in fresh new concepts or insights. For a scholarly reader.252 Vilakshan. there are considerable references given in the book for the academics. Many of the points advocated are essentially cosmetic changes in the existing understanding of CRM. However. Though the book is segregated into eleven chapters. . mostly additions from some related topics in marketing.
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