FIM- Cases

8/10/2019 FIM- Cases

1/18

1

I NDI AN INSTITUTE OF FOREIGN TRADEMBA(IB)

1stTrimesterFundamentals of I nternational Management


2/18

2

Start-Up Case

ALL ABOVE BOARD

It works in a Myriad ways. The hand of the independent director on the

board of the company, that is. There is this strictly in-the-realm-of-

grapevine story that the prime movers in the exit of star performer Phaneesh

Murthy from Infosys, following allegations of sexual harassment, were the

companys high profile overseas independent directors. The companys board

boasts personages such as former senator Larry Pressler and former head of

World Economic Forum, Claude Smadja. And no, we have no more details on

that particular story!

Independent directors, essentially directors with no business relationship with

the company (as shareholders, suppliers, even competitors) who exist as a

mandatory SEBI (Securities and Exchange Board of India) requirement for

listed companies the rule says half the board of companies with a non-

executive chairman needs to be constituted by independent directors add a

significant amount of polish and sheen to the company image. And they

bring to the table good consel born out of specialization in their respective

fields as well as years of experience. As Larry Pressler observes, Most of our

duties on the Infosys board are to help make business judgments to enhance

shareholder value. Of course any chance I get to put a good word for

Infosys, I do, but it is such a well-known and gold-plated company that its

reputation is very well established among interested customers.

There is no arguing the fact that independent directors that are names are

good for the brand equity of the company. That could be one reason why

start-ups, especially those in the IT services and Business Process

Outsourcing area, go all out to snare names for their boards. For instance,

Bangalore-based telecom software product company Subex Systems, has high

profile fund manager Vinod Sethi (formerly of Morgan Standley) on its board.

Even large companies, such as Infosys, HLL, and Godrej Consumer Products

can benefit, in terms of brand equity, by having names on their boards. HLL


3/18

3

has C.K. Prahalad, Infosys, the two luminaries named in the first paragraph,

and Godrej, management guru Bala Balachandran.

Companies, however, are rapidly realizing that independent directors can do a

whole lot more than reinforce brand equity or market a company (passively,

of course_ to key target groups. Just ask Anand Mahindra, Vice Chairman

and MD, Mahindra and Mahindra. The M&M board sports names such as Dr.

Ashok Ganguly (former Chairman Hindustan lever) and Anupam Puri (former

chief of McKinsey India). Dr. Ganguly has had years of experience in R&D

and he heads our R&D subcommittee, he has regular meetings with me and

the R&D heads and outlines action-oriented agendas and also lays a lot of

emphasis on accountability for execution of ideas, says Mahindra. Puri

spends an amazing amount of time with our company and sits down with all

senior executives whenever possible. Sometimes one gets a lot of

consultation from these members without having to go formally to a

consultant.

Independent directors are particularly important in todays context where

they oversee governance and fiduciary issues. They also look into the

compensation of working members and issues of succession planning and are

also great as a source of strategy validation, says Nandan Nilekani, CEO,President and MD, Infosys Technologies.

But how do companies actually go about picking these independent directors?

R. Gopalakrishnan, Executive Director, Tata Sons, who is himself an

independent director on the boards of ICI, Castrol, and Anand Bazaar Patrika,

has a three pronged filtration process whilst picking directors for companies

that he heads. Personal stature of the director, complementarity of his

background with the others on the board, and how much time he can givethe company serve as three filters. What I mean by complementarity of

statures is that I dont want three stalwarts who are all lawyers or tax experts

on board, then thats the only subject well wind up discussing at meetings

and if the person is going to be on a 100 boards, then I would think twice

about it.


4/18

4

As for how the search process actually unfolds, IMC (Indian Merchants

Chamber) President and well-known chartered accountant Shailesh

Haribhakti, who is on the board of nine listed companies and several unlisted

ones, recounts, Companies invariably search for independent directors

through their own top management teams. For instance, when I was auditor

of Wockhardt, I knew the finance head of the company well, when he went

on to another company, he recommended my name for independent

director.

The compulsions for seeking the right type of independent director are rapidly

evolving given the global nature of businesses and the need for market

specific knowledge. Take the case of an American multinational that is in the

process of signing on marketing consultant Kamini Banga as independent

director just prior to its entry into the Indian market. I cant name the

company right now, but they are planning to enter the Indian market and

they find my work experience in their market significant, she explains.

Banga has other interesting observations on the way companies are actively

looking to fill their boards with all the right ingredients. Companies are out

on a limb to get the right kind of diversity into the board. Some companies

are specifically looking for women directors, while others are looking atrepresentation by a particular community since they realize that the right mix

on the board actually reflects on the bottomline (of the company) and

research is starting to bear this out.

Sharp segmentation in consumer markets is also driving the need for diversity

in the boardroom; a sizeable proportion of customers, for instance, is female.

The appointment and tenure of independent members is not without

controversy. The list of independent directors across a clutch of companies atany given time reads like a roundup of the usual suspects. Moreover issues

like the age and tenure of these directors are also being actively debated by

corporate governance committees, notably the one set up by SEBI and

headed by Infosys Chairman N.R. Narayana Murthy.


5/18

5

Believers in the laissez faire regime like Harsh Goenka, Chairman, RPG

Enterprises feel that issues of age and tenure are best left to the companies

to decide. And the issue of picking people from the buddy club? Often you

see the same names since they provide the maximum value to a company

and have had successful track records. May be there is some influence of a

network but we are really graduating from that, he emphasizes.

Meanwhile companies like Infosys have constituted dos and donts for their

own execs in terms of independent directorships. For example, Infosys does

not permit any of its working board members, barring Narayana Murthy, from

taking up independent directorships in private sector companies. It is just a

way to ensure that the working members stay focused on the company,

shrugs Nilekani.

Self-policing of this kind should have a ripple effect and is possibly the best

way to ensure that the highest levels of corporate governance are achieved.

Source: Business Today, February 29, 2004, pg. 144-146.


6/18

6

Module ICase 1 : Apologetic Ajay

Ram Narain, one of the field sales managers of Major Tool Works, Inc., was

promoted to his first headquarters assignment as an assistant product

manager for a group of products with which he was relatively unfamiliar.

Shortly after he undertook this new assignment, one of the companys vice

presidents, Ajay Kumar, called a meeting of product managers and other staff

to plan marketing strategies. Narains immediate superior, the Product

Manager, was unable to attend, so the Director of Marketing, Vipul Jain,

invited Narain to the meeting to help orient him to his new job.

Because of the large number of people attending, Jain was rather brief in

introducing Narain to Ajay Kumar, who, as Vice President, was presiding over

the meeting. After the meeting began, Ajay Kumar a crusty veteran with a

reputation for blu tness began asking a series of probing questions that

most of the Product managers were able to answer in detail. Suddenly he

turned to Narain and began to question him quite closely about his group of

products. Somewhat confused, Narain confessed that he did not know the

answers.

It was immediately apparent to Jain that Ajay was new to this job and was

attending the meeting more for his own orientation than to contribute to it.

He was about to offer a discreet explanation when Ajay, visibly annoyed with

what he took to be Narains lack of preparation, announced, Gentlemen, you

have just seen an example of sloppy staff work, and there is no excuse for it!

Jain had to make a quick decision. He could interrupt Ajay and point out that

he had judged Narain unfairly; but that course of action might embarrass

both his superior and his subordinates. Alternately, he could wait until afterthe meeting and offer an explanation in private. Inasmuch as Ajay quickly

became engrossed in another conversation, Jain decided to follow the second

approach. Glancing at Brewster, Jain noted that his expression was one of

mixed anger and dismay. After catching Narains eye, Jain winked at him as a


7/18

7

discreet reassurance that he understood and that the damage could be

repaired.

After an hour, Ajay, evidently dissatisfied with what he termed the

inadequate planning of the marketing department in general, abruptly

declared the meeting over. As he did so, he turned to Jain and asked him to

remain behind for a moment. To Jain surprise, Ajay himself immediately

raised the question of Narain. In fact, it turned out to have been his main

reason for asking Jain to remain behind. Look, he said, I want you to tell

me frankly, do you think I was too rough with that kid? Relieved, Jain said,

Yes, you were. I was going to speak to you about it.

Ajay explained that the fact that Narain was new to his job had not registered

adequately when they had been introduced and that it was only some time

after his own outburst that he had the nagging thought that what he had

done was inappropriate and unfair. How well do you know him? he asked.

Do you think I hurt him?

For a moment, Jain took the measure of his superior. Then he replied evenly,

I dont know him very well yet. But, I think you hurt him.

Damn, thats unforgivable, said Ajay. He then telephoned his secretary to

call Narain and ask him to report to his office immediately. A few moments

later, Narain returned, looking perplexed and uneasy. As he entered, Narain

came out from behind his desk and met him in the middle of the office.

Standing face to face with Narain, who was 20 years and four organization

levels his junior, he said, Look, Ive done something stupid and I want to

apologize. I had no right to treat you like that. I should have remembered

that you were new to your job. Im sorry.

Narain was somewhat flustered but muttered his thanks for the apology.

As long as you are here, young man, Ajay continued, I want to make a few

things clear to you in the presence of your bosss boss. Your job is to make

sure that people like myself dont make stupid decisions. Obviously we think

you are qualified for your job or we would not have brought you in here. But


8/18

8

it takes time to learn any job. Three months from now I will expect you to

know the answers to any questions about your products. Until then, he said,

thrusting out his hand for the younger man to shake, you have my complete

confidence. And thank you for letting me correct a really dumb mistake.

Case Questions

1. What do you think was the effect of Ajays outburst on the

other managers at the meeting?

2. Was it necessary for Ajay to apologize to Narain? Why?

3. How would you respond to the kind of apology that Narain

received?

4. What would it be like to have Ajay working for you? To work

for Ajay?

5. How does Ajay define Narains responsibilities as an assistant

product manager? How does he define his own role as a top

manager?


9/18

9

Module I I :

Case 3: Bangla Resorts (Bats)

Sourav Ganguly, president of BATS., sat down at the conference table withhis management team members, Niloy, Bratin, Amit, and Bipul. BATS. owns

ten Holiday Inns in Georgia, eight hotels of different types in Canada, and one

property in the Caribbean. It also owns two Quality Inns in Georgia. Sourav

Ganguly and his managers got together to define their mission and goals and

to set strategic plans. As they began their strategic planning session, the

consultant they had hired suggested that each describe what he or she

wanted for the companys domestic operations in the next ten years how

many hotels it should own, where to locate them, and who the target market

was. Another question he asked them to consider was what the driving force

of the company should be that is, the single characteristic that would

separate BATS. from other companies.

The team members wrote their answers on flip-charts, and the consultant

summarized the results. Sourav Gangulys goal included 50 hotels in ten

years, with the number increasing to 26 or 27 in five years. All the other

members saw no more than 20 hotels in ten years and maximum of 15 or 16within five years. Clearly there was disagreement among the top managers

about long-term goals and the desirable growth rate.

With the consultants direction, the team members began to critique their

growth targets. Amit, director of operations and development, observed, We

just cant build that many hotels in that time period, certainly not given our

current staffing, or any reasonable staffing we could afford. I dont see how

we could achieve that goal. Bipul, the accountant, agreed. Niloy then

asked, Could we build them all in Georgia? You know weve centered on the

medium-priced hotel in smaller towns. Do we need to move to bigger towns

now, such as Jacksonville, or add another to the one we have in Atlanta?

Sourav Ganguly responded, We have an opportunity out in California, we


10/18

10

may have one in New Jersey, and we are looking at the possibility of going to

Jacksonville.

The consultant attempted to refocus the discussion Well, how does this all fit

with your mission? Where are you willing to locate geographically? Most of

your operation is in Georgia. Can you adequately support a national building

effort?

Bratin responded, Well, you know we have always looked at the smaller-

town hotels as being our niche, although we deviated from that for the hotel

in Atlanta. But we generally stay in smaller towns where we dont have much

competition. Now we are talking about an expensive hotel in California.

Sourav Ganguly suggested, May be its time we changed our target market,

changed our pricing strategy, and went for larger hotels in urban areas acrossthe whole country. May be we need to change a lot of factors about our

company.

Questions

1. What is BATS mission at present? How may this mission change?

2. What do you think BATS mission, strategic goals, and strategic plans

are likely to be at the end of this planning session? Why?

3. What goal-setting behavior is being used here to reach agreement

among BATS managers? Do managers typically disagree about the direction

of their organization?


11/18

11

Module I I I

Case 5: Red Bus

Everyone agreed that Red Bus had problems. The company was operating on

paper-thin margins and could not afford to dispatch nearly empty vehicles or

have buses and drivers on call to meet surges in demand. In the terminals,

employees could be observed making fun of passengers, ignoring them, and

handling their baggage haphazardly. To reduce operating costs and improve

customer service, Red Buss top executives put together a reorganization plan

that called for massive cuts in personnel, routers, and services, along with the

computerization of everything from passenger reservations to fleet

scheduling.However, middle managers disagreed with the plan. Many felt that huge

workforce reductions would only exacerbate the companys real problem

regarding customer services. Managers in computer programming urged a

delay in introducing the computerized reservations system, called Trips, to

work out bugs in the highly complex software. The human resources

department pointed out that terminal workers often had less than a high

school education and would need extensive training before they could be

expected to use the system effectively terminal managers warned that many

of Red Buss low-income passengers didnt have credit cards or even

telephones to use system, emphasizing that the data they had studied

showed that Trips would improve customer service, make ticket buying more

convenient, and allow customers to reserve space on specific trips. A

nightmare resulted. The time Red Bus operators spent responding to phone

calls dramatically increased. Many callers couldnt even get through because

of problems in the new switching mechanism. Most passengers arrived tobuy their tickets and get on the bus just like they always had, but the

computers were so swamped that it sometimes took 45 seconds to respond to

a single keystroke and five minutes to print a ticket. The system crashed so

often that agents frequently had to hand-write tickets. Customers stood in

long lines, were separated from their luggage, missed connections, and were


12/18

12

left to sleep in terminals overnight. Discourtesy to customers increased as a

downsized workforce struggle to cope with a system they were ill-trained to

operate. Ridership plunged sharply, and regional rivals continued to pick off

Red Buss dissatisfied customers.

Question

1. Was the decision facing Red Bus executives programmed or

nonprogrammed?

2. Do you think they should have used the classical, administrative, or

political model to make their decision? Which do you believe they used?

Discuss.

3.

Analyze the Red Bus case in terms of the six steps in the managerialdecision making process. Do you think top executives paid adequate

attention to all six steps? If you were a Red Bus executive, what would you

do now & why?


13/18

13

Module IV:

Case 7: TVSS Company

In 1978 the TVSS Company underwent an extensive reorganization that

divided the company into three major divisions. These new divisions

represented TVSSs three principal product lines. Mr. Sundaram, TVSSs

president, explained the basis for the new organization in a memo to the

board of directors as follows:

The diversity of our products requires that we reorganize along our major

product lines. Toward this end I have established three new divisions:

commercial jet engines, military jet engines, and utility turbines. Each

division will be headed by a new vice president who will report directly to me.

I believe that this new approach will enhance our performance through thecommitment of individual managers. It should also help us to identify

unprofitable areas where the special attention of management may be

required.

For the most part, each division will be able to operate independently. That

is, each will have its own engineering, manufacturing, accounting

departments, etc. In some cases, however, it will be necessary for a division

to utilize the services of other divisions to utilize the services of other divisions

or departments. This is necessary because the complete servicing with

individual divisional staffs would result in unjustifiable additional staffing and

facilities.

The old companywide laboratory was one such service department.

Functionally, it continued to support all of the major divisions.

Administratively, however, the manager of the laboratory reported to the

manager of manufacturing in the military jet engine division.

From the time the new organization was initiated until February, 1988, whenthe laboratory manager Mr. Rao retired, there was little evidence of

interdepartmental or interdivisional conflicts. His replacement, Mr. Sampath,

unlike Mr. Rao, was always eager to gain the attention of management. Many

of Sampaths peers perceived him as an empire builder who was interested in

his own advancement rather than the companys well-being. After about six


14/18

14

months in the new position, Hedge became involved in several

interdepartmental conflicts over work that was being conducted in his

laboratory.

Historically, the engineering departments had used the laboratory as a testing

facility to determine the properties of materials selected by the design of

experiments and subsequent evaluations of the experimental data. Sampath

discussed this with Mr. Subbu of the engineering department of the utility

turbine division. Subbu offered to consult with Sampath but stated that the

final responsibility for the selection of materials was charged to his

department.

In the months that followed, Sampath and Subbu had several disagreements

over the implementation of the results. Subbu told Sampath that, because ofhis position at the testing lab, he was unable to appreciate the detailed design

considerations that affected the final decision on materials selection.

Sampath claimed that Subbu lacked the materials expertise that he, as a

metallurgist, had.

Subbu also noted that the handling of his requests, which had been prompt

under Raos management, was taking longer and longer under Sampaths

management. Sampath explained that explained that military jet engine

divisional problems had to be assigned first priority because of his

administrative reporting structure. He also said that if he were more involved

in Subbus problems, he could perhaps appreciate when a true sense of

urgency existed and could revise priorities.

The tensions between Subbu and Sampath reached a peak when one of

Subbus critical projects failed to receive the scheduling that he considered

necessary. Subbu phoned Sampath to discuss the need for a schedule

change. Sampath suggested that they have a meeting to review the need forthe work. Subbu then told Sampath that this was not a matter of his concern

and that his function was merely to perform the tests as requested. He

further stated that he was not satisfied with the low-priority rating that his

divisions work received. Sampath reminded Subbu that when Sampath had


15/18

15

suggested a means for resolving this problem. Subbu was not receptive. At

this point, Subbu lost his temper and hung up on Sampath.

Question

1.

Sketch out a simple organization chart showing TVSSs three divisions,

including the location of the laboratory. Why would the laboratory be located

in the military jet engine division?

2. Analyze the conflict between Mr. Sampath and Mr. Subbu. Do you

think the conflict is based on personalities or on the way in which the

organization is structured?

3. Sketch out a new organization chart showing how you would

restructure TVSS so that the laboratory would provide equal services to alldivisions. What advantages and disadvantages do you see in the new

structure compared to the previous one?


16/18

16

Module V:

Case 9: Lincoln Electric

Imagine having a management system that is so successful people refer to it

with capital letters- the Lincoln Management System and other businesses

benchmark their own systems by it. That is the situation of Ohio-based

Lincoln Electric. For a number of years, other companies have tried to figure

out Lincoln Electrics secret how management coaxes maximum productivity

and quality from its workers, even during difficult financial times.

Lincoln Electric is a leading manufacturer of welding products, welding

equipment, and electric motors, with more than $1 billion in sales and six

thousand workers worldwide. The companys products are used for cutting,

manufacturing, and repairing other metal products. Although it is now apublicly traded company, members of the Lincoln family still own more than

60 percent of the stock.

Lincoln uses a diverse control approach. Tasks are rigidly defined, and

individual employees must meet strict measurable standards of performance.

However, the Lincoln system succeeds largely because of an organizational

culture based on openness and trust, shared control, and an egalitarian spirit.

Although the line between managers and workers at Lincoln is firmly drawn,

managers respect the expertise of production workers and value their

contributions to many aspects of the business. The company has an open-

door policy for all top executives, middle managers, and production workers,

and regular face-to-face communication is encouraged. Workers are

expected to challenge management if they believe practices or compensation

rates are unfair. Most workers are hired right out of high school, then trained

and cross trained to perform different jobs. Some eventually are promoted to

executive positions, because Lincoln believes in promoting from within. ManyLincoln workers stay with the company for life.

One of Lincolns founders felt that organizations should be based on certain

values, including honesty, trustworthiness, openness, self-management,

loyalty, accountability, and cooperativeness. These values continue to form

the core of Lincolns culture, and management regularly rewards employees


17/18

17

who manifest them. Because Lincoln so effectively socializes employees, they

exercise a great degree of self-control on the job. Production workers are

paid on a piece-rate system, plus merit pay based on performance.

Employees also are eligible for annual bonuses which fluctuate according to

the companys fortunes, and they participate in stock purchase plans.

Bonuses are based on a number of factors, such as productivity, quality,

dependability, and cooperation with others. Factory workers at Lincoln have

been known to earn more than $100,000 a year, and the average

compensation in 1996 was $62,000. However, there also are other, less

tangible rewards. Pride of workmanship and feelings of involvement,

contribution, and esprit de corps are intrinsic rewards that flourish at Lincoln

Electric. Cross-functional teams, empowered to make decisions, takeresponsibility for product planning, development, and marketing. Information

about the companys operations and financial performance is openly shared

with workers throughout the company.

Lincoln places emphasis on anticipating and solving customer problems.

Sales representatives are given the technical training they need to understand

customer needs, help customers understand and use Lincolns products, and

solve problems. This customer focus is backed up by attention to the

production process through the use of strict accountability standards and

formal measurements for productivity, quality, and innovation for all

employees. In addition, a software program called Rhythm issued to

streamline the flow of goods and materials in the production process.

Lincolns system has worked extremely well in the United States. The cultural

values, open communication, and formal control and reward systems interact

to align the goals of managers, workers, and the organization as well as

encourage learning and growth. Now Lincoln is discovering whether itssystem can hold up overseas. Although most of Lincolns profits come from

domestic operations, and a foreign venture in the 1990s lost a lot of money

for the company, top managers want to expand globally because foreign

markets are growing much more rapidly than domestic markets. Thus far,


18/18

18

Lincoln managers have not developed a strategic control plan for global

operations, relying instead on duplicating the domestic Lincoln system.

Question

1.

What types of control feed-forward, concurrent, or feedback are

illustrated in this case? Explain.

2. Based on what youve just read, what do you think makes the Lincoln

System so successful?

3. What changes might Lincoln managers have to make to adapt their

management system to overseas operations?

Documents

FIM- Cases