We have applied the Michigan Model to understand the factors present in the environment

which will affect our company and based on that we have deduced some strategies which we
will implement for sustaining in the market.

MICHIGAN MODEL

Following are the various economic and political factors which will influence the future
strategies:

ECONOMIC FACTORS-

Unemployment rate: In September 2020, India had an unemployment rate of over 6 percent. It
was a significant improvement from the previous months. Due to implementation of total
lockdown the unemployment went up to 24 percent on May 17, 2020. This was also a result of a
decrease in demand as well as the disruption of workforce faced by companies. Furthermore,
this caused a GVA loss of more than 9 percent for the Indian economy that month.

The trickle-down effect: Between February and April 2020, the proportion of households that
witnessed a fall in income shot up to nearly 46 percent. Lockdown resulted in the job losses,
specifically those belonging to Indian society’s lower economic strata. Several households
terminated domestic help services that is essentially an unorganized monthly-paying job. Most
Indians spent a large amount of time engaging in household chores themselves instead.

Household spending/consumption: With many employees being laid off and remaining facing
a drop in income, the purchasing power of people declined. This resulted in decreased spending
and increased savings. Current sentiment of people is negative towards spending.

New Labour Laws: New labour laws were implemented by the government which lead to many
changes in the structure for employees. People who were from unorganised sectors are now
divided in two categories, platform and gig workers and they need to be provided with social
security which was not the case earlier.

Migrant Crisis: Due to lockdown most of the people working in shop floor level left
for their hometown. Now, when the unlock has started, there is a shortage of
employees available for the job since after watching the attitude of employers
and the government during lockdown, people are reluctant to come back.

Aid from the Pradhan Mantri Garib Kalyan Yojana: The most devastating impact of the virus
and the lockdown has been on the economically backward classes, with limited access to
proper healthcare and other resources. This resulted in the government having launched
various programs and campaigns to help sustain these households. Under the Pradhan Mantri
Garib Kalyan Yojana, 312 billion Indian rupees have been accrued and provided to around 331
million beneficiaries that included women, construction workers, farmers, and senior citizens.
The need for more aid to be supplied was announced in mid-May, to mainly support small
businesses through the crisis.

POLITICAL FACTORS -
Policies implemented by the government during lockdown as well as unlock varied from state to
state. With the increase in the number of cases, some of the states are thinking of again
imposing lockdown. This hinders the smooth flow of transfer of goods from one state to another.
Interstate movement of the products now requires various levels of permissions from different
authorities resulting in an increased work for company officials. There is also an increase in the
time required to acquire the permission for transfer of goods.

Cultural forces:
We can know the impact of cultural forces through the Hofstead dimension of national
culture. Here we can use two dimensions of his model which can give us an idea on
how to strengthen our organisational culture if there is any other emergency like Covid.
We have to see whether our organisation follows a culture of collectivism or
Individualism. If the organisation is following individualism then we should take
measures to push it towards collectivism because in the future if we find ourselves in a
similar situation such as Covid-19 then the people in the organisation should help each
other to sail through the tough times. At the same time we also have to make sure that
we increase the Uncertainty avoidance index(UAI) using affecting employee
engagement activities.

The following are the proposed changes in strategy:

Mission and strategy

In the period Post COVID-19, the mission of the company should have the following main
constituents-

1. Ensuring Company survival and minimising company losses by restructuring existing

structures and practices to better align with the post COVID-19 environmental conditions
discussed above.
2. Retaining talent within the company in order to be equipped for the expected uptick in
traffic in the future.
3. Instituting sufficient safety measures to protect the employees and customers.

To achieve the above constituents of the company mission, a shift in strategy would be
required. With the recovering economy and decreasing restrictions on retail by the government,
the revenue of the company should return to earlier levels in 6-12 months. In the next two
months however, the consumers would continue to prefer online retail to brick and mortar
stores. Online retailers however face uneven services due to slowdowns in the delivery supply
chain. This creates a gap between the customer demands and the available supply.

The company can capitalise on this gap by repositioning itself as a short-range delivery
provider. It can leverage its Brick and mortar locations as logistical hubs to deliver goods which
were earlier available at the store. As the delivery ranges would be small, the company can
reduce the delivery cost of each package and undercut the online platforms.

Owing to the upward tick in the Indian economy (Economic Times 2020)1, it can be understood
that the revenue of the company can equal its revenue before the pandemic in the next 12
months. At that point the company and its competitors will be in the market for shop floor
employees, which would push up the recruitment and labour costs. Hence a conscious attempt
should be made to retain the talent within the company. This can be achieved by cross training
employees to perform functions more suited to the delivery methodology in the short run.

Organisation structure

According to the Michigan model, the mission and Strategy discussed above would have effects
on the Organisation structure as well. Since the company in question is in the retail space in
India, it can be assumed that stores are being run on a franchise model. The franchisor
generally holds discretionary rights on the business model of the franchisee (Dady Gardner
P.A.)2. This would allow us the legal avenue to institute changes in the business structure.

As discussed above, the shops will become predominantly a delivery platform. The retail space
will be curtailed to reflect the more modest consumer interest in it and the rest of the store
space will be repurposed to be used as a mini distribution hub.

An initial assessment will need to be done to assess the viability of each store regarding its
location within red, orange and green zones, the potential customer base available to each store
and the manpower available in each store. After completion of the assessment, viable stores
can be opened with some structural changes.

Since franchisees are mostly akin to divisions within a company, they have their own support
and managerial staff. They do not usually coordinate with each other to deliver the services.
This system would need to be altered slightly to allow for a limited coordination of deliveries and
products. A backend app could be developed to direct the customers to the nearest store/
delivery centre near them and provide contact information for the same.

1 Pti. “Indian Economy on Verge of Slow Recovery as Worst Is over: PHDCCI.” The Economic Times, 25 Oct.
2020, economictimes.indiatimes.com/news/economy/indicators/indian-economy-on-verge-of-slow-recovery-as-
worst-is-over-phdcci/articleshow/78855404.cms.
2 Dady Gardner P.A. “Change in Franchise Business Model.” Dady & Gardner, 5 Oct. 2018,
www.dadygardner.com/blog/business-model-franchise-agreements.
Human resource management

As per our strategy, an effort should be made to retain workers. Shift leaders within each store
(there is usually 1 or 2 for each shift worked) would need to be trained on effective
communication, requisition and transfer procedures. Further, the job descriptions of the store
workers will also need to be altered slightly. The responsibilities will shift from stocking shelves
and customer support to order aggregation. Although an automated system could be preferred,
due to the short delivery range and limited customer base, it would be viable to continue
manually. Some selected workers might also be reassigned to be delivery personnel. This could
be done via personal transport of the employee with a small stipend attached to each kilometre
travelled.

Moreover, in order to identify the talent within the company, segregation should be made on the
basis of current roles with subdivisions for high, average and low performing workers within
each group. Cross training and role shift should be first offered to high performers and then
moving to average and low performers once the upper levels have been satisfied. An opposite
approach should be taken in terms of layoffs. It should start with low performers and then move
to upper levels.

Drawing from accepted practices of Performance management, the division between high,
average and low performers should be kept at 30%, 50% and 20% respectively. By laying off
workers from low performers first, we can reduce labour costs by up to 20% (on the basis of
headcount) without harming performing workers.