Symbiosis Institute of Management Studies, Pune

MBA – Semester 4 – Management Consulting

Case lets no. 1 and other questions - Basics of management on various aspects:

General management:

1. A very well known case – Satyam Computers – This corporate entity and Tech Mahindra case is
reputed to be a case for combination of takeover, acquisition and merger. How?

2. Usually acquisition means 100% buy out of the target company. In India, there are exceptions to
this.
Can you name the exceptions? Also state the reasons for this deviation.

3. You know that Tata group, especially Tata Motors and Tata Steel in the past decade had gone in
for acquisition globally.
Who had financed the deals? What is the status of such financier? In India, suppose there is a
financier like this, he/she comes under which statutory authority? What is the critical
difference between the international practice and Indian practice in this regard?

4. Your BOD recommends 50% dividend rate on the face value of equity shares. When a note was
put up to the general body, they wanted this to double. What can they do about this?

5. What is the difference between organic and inorganic growth in business? What are inorganic
growth initiatives? Explain through a suitable Enterprise Life Cycle graph.

6. Complete the build up through costs like manufacturing costs, both direct and indirect from cost
of production to total costs. Also explain where depreciation is accounted for on different fixed
assets depending upon their location and user functional department.

7. You often hear ‘sale at cost’. Also discount sales just before festival season starts. What is the
meaning of this expression? Sale at which cost? Total cost or fixed cost or variable cost? Knowing
the basics of marginal costing and its application of break-even analysis, answer the following
questions:
Which cost gets recovered first in any business, variable or fixed?
In terms of contribution and fixed costs, can you describe what happens in stage 1 of any
business in general and manufacturing sector in particular? In terms of volume of contribution
and the amount of total fixed costs? What is contribution equal to after break-even sales
point?

8. You know the components of working capital cycle. Each component is controlled by and taken
responsibility of by a particular functional department. Further each component is known by a
distinct name.
 Answer the following questions, both in terms of which department and the name of the
segment of operating cycle. Also in case it is available, name the driver of the particular
segment, in terms of policy.
Cash to materials = Time taken for supply of materials =
Materials to semi-finished good and finished goods =
Finished goods to sales =
Sales to debtors =
Debtors to cash =

9. You have heard of ‘Knowledge management system’. What is its role in problem solving and
decision making in an organization?

Marketing:

10. You are in FMCG sector. Highly competitive sector. Your main product range is beauty products.
Your GM (Sales) of late is not satisfied with the vigour in the market. He concludes that the sales
are more or less static. It requires some quick fix strategy.
What is your suggestion for the same?

11. You have heard of primary packing and secondary packing in the case of FMCG. Primary packing
is a part of ------------- costs while secondary packing is a part of ------------ costs.

12. At present you are giving 8% dealers’ commission. It is higher than your nearest competitor by
1%. Your management wants to reduce this over a period of say one or two years. You will have
to come up with suggestions to facilitate this?
What are the measures that you can think of in this regard to ensure two things at the end of
the period, namely, no reduction in sales and reduction in % of dealers’ commission?

Following four problems have been taken from Jay Abraham’s sales strategy article. Solutions
have been provided in the handout by faculty.

13. Problem: Restaurant chain put a new restaurant in a small town but had little money to
do the usual advertising blitz. What is the solution?

14. Problem: Newsletter publisher wanted to increase profits by selling very high mark up
non-prescription health products. What is your suggestion?

15. Problem: Business centre providing short-term offices with full administrative support
services wanted to increase their occupancy and thus greatly increase those profits. What is
your recommendation?

16. Problem: Computer consultant had challenges growing her clientele. What will you suggest to
achieve this?

17. What is the difference between credit period and Average Collection period?
18. Your sales executives are spending considerable time in collection efforts. Your GM – Marketing
is upset about this. He wants an alternative that will eliminate their collection efforts and also
contribute directly to the organization. What is the alternative he is thinking of?

19. What is selective credit period? Explain with a suitable example.

20. Have you heard of ‘credit rating’ of your customers? What are the parameters that you would
consider for this exercise?

21. In the case of advertisement, you have heard of imagery and punch line. What are these? Which
is audio and which is visual? Suppose you are a prospective customer, which one is likely to be
impacting you more and why? Can you give some examples of advertisements in which the
imagery is so powerful that you tend to forget the product? In short the core purpose of
advertisement is defeated.

22. You want to help a new dealer in setting up his shop.

What is the single most important financial parameter that you will discuss with him and
convince that it is indeed a viable proposition?

23. Among the financial ratios, which are the ratios that are critical for marketing/selling
department?

24. Marketing/selling strategy can either be short-term or medium term.

Can you give an example of short-term sales strategy?

25. You want to promote bills discounting among your customers some of whom are in public
sector. You do face serious obstacles in this.
In general give possible reasons for reluctance on the part of your customers to go for this and
in particular, what additional problems would be relevant for public sector in this regard?

26. When do you go in for ‘forfaiting’? Basic differences between factoring and forfaiting.

27. What is the difference between brand equity and equity in a limited company?

28. What is strategic rebranding exercise? Explain through examples.

29. What are receivable carrying costs?

30. What is the difference between a doubtful debt and a bad debt?

31. You have branches all over India. They incur expenses for running these branches. Where will
you classify this cost, under ‘variable’ or ‘fixed’ cost?
Marketing/HR:

32. At present incentive scheme in your organization for marketing/sales force focuses on only one
aspect, namely booking orders. This has been in vogue for more than 5 years. The sales force is
very happy. However this impacts the organization of late in terms of liquidity. What could be
the reasons for the same? Further as at the end of the year too, while the billing is complete
and the sales target gets achieved, there are any number of orders still to be despatched.
What could be the reasons for the inordinate delay in despatches despite invoices having been
raised? What can be done to improve the performance in this behalf?

33. Your HRM is calling for a brain storming session to discuss the consequences of the current
practice of giving accelerated increments for outstanding performance, be it in production or
sales/marketing. Your CEO feels that in the long run, it could be counter-productive to the
organization.
What could be the reasons for his fear? How can the practice be modified so that it serves
long-term interests of the organization?

HR:

34. You are in IT sector. The attrition rate is very high. Your management wants your department to
come up with some concrete suggestions to reduce this. Your company is already having
‘ESOPs’.

35. What is talent management system? What are its advantages to an organization?

36. Is ‘HR accounting’ mandatory in India? Do you know of a company that had voluntarily disclosed
this in its annual report first in India?

37. Your organization has a strong team of technical personnel besides good teams of employees in
other key departments including your department. You are heading L & D in the organization.
Your management wants to cut down costs on training without diluting its effectiveness. You
make up a plan for your own senior employees to give training, so called ‘in house’ training.
However this has not been effective.
a. Trace the reasons for the same
b. In what way the acceptance of their seniors as trainers by the juniors can happen? What
is required to be done by the system, your department and the senior technical
executives? Name some of the initiatives that would increase the in house trainers’
acceptance.

38. What are the differences between coaching in an organization and mentoring?

39. You are heading the L & D function in your enterprise. You have outsourced some critical
training to specialists in the market. One such area is ‘finance for non-finance’. The feedback was
very good if not excellent. The training vendor has stated clearly objectives of the program at the
beginning. This was going on smoothly for about 10 programs. However despite the vendor
 continuing his training on the same objectives and in the same manner, there began voices of
dissatisfaction among participants. They had given feedback that the training was not meeting
the objective. ‘From very good to not satisfactory’.

Examine possible reasons for sudden dissatisfaction and explain how you can correct them.

40. Your organization is looking for CGM – projects. Your board has shortlisted two candidates. Both
are technically and managerially very good. Both are external candidates. Very difficult to
choose between them. One is a voracious reader and is committed to acquiring certificates and
knowledge like nobody’s business. He has so far served seven companies. In the last two
companies, he was CGM – projects. The other one is involved in organizational development and
takes keen interest in the career path of the employees. The management had hired a HR
consultant to choose between them. He mingles with both of them and keeps them under
observation for ten days. He spends quality time with them. He comes up with his
recommendation and the management is surprised at his choice, if not shocked.

If you were to be the consultant, who will be your choice? Reasons for the same.

Operations:

41. At present your materials consumption is 62% of sales as against 58% industry average. Your
organization is as old as some of the competitors. Your CEO is relatively young and enthusiastic.
He believes in systems and has abiding faith in the budget system. Hence to correct this material
consumption problem, he takes out an interim order along with budget directing the production
department to ensure reduction in the consumption %.
What are the chances of success of such a move? Discuss and suggest a strong initiative to
improve the situation?

42. Your company has global suppliers of core materials especially, to the extent of 40% of your
requirement. Having regard to cost of shipment when you buy from global vendors, your
management wants to introduce ‘Kanban’ system.
What is this system? What is the global practice in this regard? What is the mechanism
employed here so as to save costs to both of the parties, the buyers and the sellers?

43. You are in consumer durable sector. Your ex-class mate is working in heavy engineering sector.
Which sector is likely to have longer working capital cycle? Why? In the heavy engineering
sector, which of the operating cycle segments would be having maximum duration in terms of
days? Why?

44. What are the practical difficulties in practicing ‘JIT’ in India in general?

45. What are inventory carrying costs?

46. Suppose you determine EOQ for management of inventory, what is the average stock that you
are holding?
47. You are an engineering firm. Your processes are too many. Hence your semi-finished goods level
is high. Your management wants to cut down process time. Can you at least suggest one way of
reducing this?

48. What are the overheads associated with manufacturing/production?

49. What are SOPs generally meant for? Can they be used for critical decisions?

Operations/HR:

50. Is wage a fixed cost or a variable cost? What is the current trend in India in this regard?

51. You have a considerable number of new workers taken in at the time of last expansion a couple
of years ago? All are unionised. The union leader is very dogmatic and committed to the union
movement. He is not corrupt. During negotiations with him, the minimum demand across all
cadres of workers is Rs. 1,000/-. You are shocked by this demand. Negotiations are going on.

Your management and your thinking is that there should be two levels of increment, one for the
old workers and the other for new workers. How will you convince the union with your paper
work?

Operations/Finance:

52. You are in operations. The inventory carrying cost is going up for the past two years. The finance
manager is trying to convince you on this through monthly MIS reports. The top management is
also worried about this.

They want you to sit with finance personnel and understand the criticality of the situation.

Answer the following questions in this behalf

a. What is the role of finance persons in inventory management?
b. Which of the departments coming under operations are responsible for the following?
Further what could be possible reasons for the same?
i. Pile up of materials due to large scale discount given by suppliers
ii. Semi finished goods holding for a long period
iii. Finished goods holding for a long period

Finance:

53. You are employed in I.T. sector. You have started having more and more clients in the USA.
Hence your management wants to go in for ADR that is sponsored?
What is meant by sponsored ADR?
What is the difference between sponsored ADR and regular ADR?
Considering that it is a sponsored ADR, on which stock exchange is it likely to be listed?
54. What is the difference between conventional bills discounted and factoring?

55. What are recourse finance and non-recourse finance? Explain with a suitable example.

56. Suppose your company has taken project loan. It wants to go in for corporate bonds as a public
issue. You would have given collateral for the project loan.
What is the status of this new bond in terms of collateral? Can a corporate issue bonds
without collateral? In case the collateral is the same assets as offered to project loan lender,
what is the arrangement? In that case, what is this bond known as?

57. Is there a ceiling on the % of dividend that a limited company can declare in India in terms of
provisions of CA, 2013? Can you give examples of companies declaring dividend in excess of
1000% of face value during the last decade or so?

58. In a cumulative preference share, does the dividend cumulate till redemption or conversion?

59. What is moratorium in the case of a project loan?

60. Suppose you put up your project loan proposal to your bank. For how many years you will
prepare your projections? What is the basis for the same?

61. About ratio analysis, what is LPG? What are the groups of ratios useful for analysis?

62. Explain the following different types of analyses.

a. Vertical analysis
b. Horizontal analysis
c. Common size analysis
d. Trend analysis
e. Industry analysis
f. Du Pont analysis

63. What is effective tax rate? What is its use in finance?

64. In year 1, ETR = 22% and in year 2 it comes down to 20%. What does it indicate?

65. You have been given the following figures for a firm. Draw your inference about its performance.
a. Year 1 – Operating income = 100; other income = 10 & PBT = 20
b. Year 2 – Operating income = 120; other income = 15 & PBT = 15

66. In debt to equity ratio, what is equity?

67. What are the benchmark ratios for the following? Also state whether they are maximum or
minimum?
a. Current ratio
b. Quick ratio
 c. Debt to equity ratio
d. Total debt to equity ratio
e. Interest coverage ratio &
f. Debt service coverage ratio
g. Inventory turnover ratio
h. Net profit ratio

68. Give the correct formulae for the following from finance angle. Please do not repeat what you
would have learnt in financial management as a general subject.
a. Tangible net worth
b. Quick assets ratio
c. Current ratio after adjustment with medium and long-term liabilities

69. What is the impact of financial leverage on an enterprise? Explain through an example.

70. What is the difference between fixed costs in marginal costing and operating leverage?

71. Why is “ROI’/‘ROCE’ a very critical ratio for any business?

72. You know different capital budgeting techniques. We are referring to IRR, NPV & Discounted
Payback period. Can you establish their suitability to the three different stake holders in an
organization like project owners, managers and lenders along with your rationale?

Finance & marketing:

73. Suppose your cost of capital is 15% p.a. You want to give discount of 1.5% to debtors for early
payment by one month. Is it ok? Examine and answer.

74. Your debtors’ turnover ratio is coming down from 3.2 to 2.3 in a couple of years. Answer the
following questions in this behalf.
a. What are the business risks that the situation poses to your enterprise?
b. What is the direct impact on your working capital cycle due to this?
c. In what way the situation would affect your cost of working capital?

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