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Volume:01, Number:03, Jan-2012 : RJEBS Page 1 www.theinternationaljournal.org
Table of Contents
Articles Role of Crop Insurance and its future prospects in India
RAJEEV SINGH
Competence Gaps In Company Directors In New Zealand
Graeme Cocks, Jens Mueller, Coral Ingley
Marine Products Exports : GDP Growth Prospect With Special Reference to Coastal aquaculture in India
Aslam Chinarong
Impact and influence of tourism in Mauritius: The Case Of Flic en Flac
Rajen Suntoo
A proposed conceptual TQM model for implementation to enhance business excellence for North Karnataka manufacturing SMEs
SHEKHARAPPA BHEEMAPPA MALLUR
INDIAN BPO- A STEADY GROWTH IN RECESSION PERIOD -WITH RESPECT TO REVENUE GENERATED
Suryakant D. More, Dr. U. M. Deshmukh
International Stock Market Integration: A Study of the US and the BRIC Markets
Sudhakara Reddy Syamala, Kavita Wadhwa
Search Engine Optimization – A Tool for Advertising in India
Venu Gopal Koppala, Santosh Ranganath Neelam
Volume:01, Number:03, Jan-2012 : RJEBS Page 1 www.theinternationaljournal.org
ROLE OF CROP INSURANCE AND ITS FUTURE PROSPECTS
IN INDIA
Dr Sebastian. T. Joseph
Sr.Assistant Professor Joseph School of Business Studies,
Sam Higginbottom Institute of Agriculture,
Technology & Sciences,
Allahabad, Uttar Pradesh.
Mr.Abhishek Janvier Frederick
Assistant Professor Joseph School of Business Studies,
Sam Higginbottom Institute of Agriculture, Technology & Sciences,
Allahabad, Uttar Pradesh.
Dr Rajeev Singh
Assistant Professor (Business Management)
Sr. Scale,
C.S. Azad University of Agriculture & Technology,
Kanpur, Uttar Pradesh.
Abstract
Revolutionary work by agriculture scientists and the efforts of farmers have helped to achieve
a breakthrough in the agriculture sector in the 1960s, popularly known as the „Green
Revolution‟. Higher agricultural production and efficient productivity achieved in subsequent
years has been the main reason for attaining food security to a larger extent. The country has
not witnessed any immense technological breakthrough in agriculture since then. The food
safety net requires enhanced agricultural production and productivity in the form of a Second
Green Revolution. Further, India is an agricultural country which is tantamount with risk and
uncertainty because the agriculture in India depends upon the natural input factors, i.e.
adverse weather conditions, flood, draught, peril etc. Uncertainties of nature have leaded
various problems to farmers as well as Indian agriculture. These problems can be reduced by
providing various kinds of securities and assurance to them. Crop Insurance is one and very
important of them. It helps in providing stability to farm production and increases the income
of the farmers. Crop insurance helps in stabilization of farm production and income of the
farming community. It helps in optimal allocation of resources in the production process.
Volume:01, Number:03, Jan-2012 : RJEBS Page 2 www.theinternationaljournal.org
Introduction:
Indian agriculture began by 9000 BC as a result of early cultivation of plants, and
domestication of crops and animals. This traditional technique was soon followed with
implementation of some modern techniques being developed for agriculture. Double
monsoons led to two harvests being reaped in one year. Indian farm products soon reached
the world via existing trading networks and foreign crops were introduced to India. In the
Middle Ages irrigation channels reached a new level of sophistication in India. Land and
water management systems were developed with an aim of providing uniform growth.
Despite some stagnation during the later modern era the independent Republic of India was
able to develop a comprehensive agricultural program.But it is not so easy to do agriculture in
India. It is totally full of risks and uncertainty. Agriculture in India is dominated by natural
factors. Monsoon is a gamble for Indian farmers. It has never been a stable phenomenon in
deciding and determining the fluctuating fate of farmers. Thus, farmers have been playing
with the diversified fluctuating conditions of climatic vagaries of untimely, uncertainty and
unequal distribution of rainfall. These characteristics of rainfall throughout the monsoon
regions, have determined the diversification of economy in general and enterprise systems in
particular. In fact, development of science and technology has widened the course of man‟s
life on the earth and has enhanced the quality of living organism. At the same time it has also
provided better conditions for the development of bacteria, pests and insects to grow and
sustain lives in millions and millions causing environmental damage. The consequences are
seen in a risk. The changing cropping pattern is not only the response to the science and
technology but also to the changing environmental conditions harnessing the growth and
development of various plants. The plants, originally find it difficult to grow in natural
environment (losing grounds) but find it convenient to take root in changed conditions (more
productive), more easily. But their effects and reactions are rarely realized at this stage by the
planners in the wake of developmental efforts, causing great risk. Low productivity and high
loans taken for agriculture are forcing the farmers to commit suicide. They are living a
stressful life even after giving others a peaceful life by fulfilling their most wanted need in
the form of farm products. India is a country where agriculture is one of the main dominant
forms of occupation. The role of the agriculture sector, however, remains critical as it
accounts for about 58 per cent of employment in the country (as per 2001 census). Moreover,
this sector is a supplier of food, fodder, and raw materials for a enormous segment of
industry. Hence the growth of Indian agriculture can be considered a necessary condition for
inclusive growth of other sectors. The growth of agriculture and allied sectors is still a critical
factor in the overall performance of the Indian economy. As per the 2010-11 advance
estimates released by the Central Statistics Organisation (CSO) on 07.02.2011, the agriculture
and allied sector accounted for 14.2 per cent of the gross domestic product (GDP), at constant
2004-05 prices. During the period 2004-05 to 2007-08, the GDP for agriculture and allied
sectors had increased from 565.426 thousand Crore to 655.080 thousand Crore, at constant
2004-05 prices; thereafter it stagnated at this level for two years (2008-09 to 2009-10)
(Figure1). In 2009-10, it accounted for 14.6 per cent of the GDP compared to 15.7 per cent in
2008-09 and 19.0 per cent in 2004-05. Its share in GDP has thus declined rapidly in the
recent past. This is explained by the fact that whereas overall GDP has grown by an average
of 8.62 per cent during 2004-05 to 2010-11, agricultural sector GDP has increased by only
3.46 per cent during the same period .
Volume:01, Number:03, Jan-2012 : RJEBS Page 3 www.theinternationaljournal.org
Website: http://indiabudget.nic.in
So coping up with these problems, crop Insurance Schemes are launched for the farmers.
Economic growth and agricultural growth are directly related to each other. Crop insurance
helps in stabilization of farm production and income of the farmers. It helps in optimal
allocation and utilization of resources in the production process. Indian Government has been
concerned about the risk and uncertainty prevalent in agriculture.
History of Crop Insurance in India:
In our country crop production has been subjected to the vagaries of the climate. Some of the
other problems that the Indian agriculture is constantly tackling with are the large-scale
damages that are caused as a result of the attack of pests and diseases. It is in a scenario such
as this in India that the issue of crop insurance assumes a vital role in the stable growth of the
agricultural sector. From 1972-73 to 1978-79, crop insurance schemes for crops such as
cotton, groundnut, potato etc, was implemented in selected places on "individual approach"
basis. During the period from 1979 to 1984-85, a pilot crop insurance scheme was
implemented for Food crops & Oilseeds on "Area approach" basis. Based on the experience
of the pilot scheme, a Comprehensive Crop Insurance Scheme (CCIS) was implemented from
Kharif 1985 till Kharif 1999. This scheme was introduced by Prof.Dandekar in 1976 and it
was implemented in 1985 on all India level. In fact this period of introduction also coincided
with the introduction of the Seventh-Five-year plan. This initial scheme was of course later
substituted and replaced by the National Agricultural Insurance Scheme.
The present crop insurance scheme, i.e., National Agricultural Insurance Scheme (NAIS),
launched by the Hon'ble Prime Minister on 22nd June 1999 replaced the CCIS from Rabi
1999-2000 seasons. In the crop insurance history, the question of introducing a crop
insurance scheme was taken up for examination soon after the Indian independence. The first
aspect that was examined related to the modalities of crop insurance. The issue under
consideration was about whether the crop insurance should be offered under an Individual
approach or on Homogenous area approach.The Individual approach of the scheme
indemnifies the farmer to the full extent of the losses. Also the premium that is to be paid by
him is determined with reference to his own past yield and loss experience. The Individual
approach for these schemes necessitates reliable and accurate data of crop yields of individual
farmers for a sufficiently long period, for the fixation of premium on actuarially sound basis.
The Homogenous area approach on the other hand was aimed at envisaging a homogeneous
area from the point of view of crop production and similarity of annual variability of crop
production. The homogenous area approach was found to be more favourable. This is
Volume:01, Number:03, Jan-2012 : RJEBS Page 4 www.theinternationaljournal.org
because it would facilitate the provision of a single unit treatment to various agro-climatically
homogenous areas and the individual farmers and allow them to pay the same rate of
premium and receive the same benefits, irrespective of their individual fortunes.
Crop Insurance Schemes in India:
According to Economic Survey 2010-11 four crop insurance schemes, namely the National
Agricultural Insurance Scheme (NAIS), Pilot Modified NAIS (MNAIS), Pilot Weather Based
Crop Insurance Scheme (WBCIS), and Pilot Coconut Palm Insurance Scheme (CPIS) are
under implementation in the country.
National Agricultural Insurance Scheme:
A Central Sector Scheme namely, National Agricultural Insurance Scheme (NAIS) is being
implemented in the country since Rabi 1999-2000, as a part of risk management in
agriculture with the intention of providing financial support to the farmers in the event of
failure of crops as a result of natural calamities, pests and diseases.
The scheme is available to all the farmers – loanee and non-loanee - irrespective of their size
of holding. Loanee farmers are covered on compulsory basis in a notified area for notified
crops whereas for non-loanee farmers scheme is voluntary.
The Risks Covered Under the NAIS are:
a. Fire & Lightning
b. Storm, Cyclone, Hailstorm, Typhoon, Tempest,
c. Hurricane, Tornado
d. Flood, Inundation & Landslide
e. Drought, Dry spells
f. Pests / Diseases
The Scheme envisages coverage of all the food crops (cereals, millets and pulses), oilseeds
and annual commercial/horticultural crops, in respect of which past yield data is available for
adequate number of years. Crops covered by the implementing States/UTs during Kharif and
Rabi seasons under NAIS. The premium rates are ranging between 1.5% and 3.5% per cent
(of sum insured) for food and oilseed crops. In the case of commercial/horticultural actuarial
rates are being charged. Under the scheme, at present, 10% subsidy in premium is available
to small & marginal farmers. All financial liabilities under the scheme are shared by the
Central and State Governments on 50: 50 basis. The scheme is at present being implemented
by 25 States and two UTs.It is a yield guarantee scheme operating on “Area approach” basis.
The implementing States/UTs can notify any unit area of insurance i.e. block, mandal, tehsil,
circle, phirka, gram panchayat etc. keeping in view the availability of past yield data and
capacity of the State to undertake requisite number of Crop Cutting Experiments (CCEs).
Research Methodology:
Agricultural insurance is one of the appropriate ways to overcome the risk in agricultural
production and to increase farmers‟ income security. In this study, the influence of insurance,
on farmers‟ risk attitudes in India have been investigated as a case study. Thus sugarcane
Volume:01, Number:03, Jan-2012 : RJEBS Page 5 www.theinternationaljournal.org
insurance type is closer than wheat insurance type to one of the main aims of agricultural
insurance system study, which is increasing farmers‟ tendency to take risks. Insurance for
farmers helps greatly in reducing risk horizontally across the states (a drought in Rajasthan is
mitigated by a bumper crop in Andhra Pradesh) and vertically across big and small farmers.
In fact, states which have accepted the scheme require that any farmer borrowing from any
financial insists take insurance too. Unfortunately, data from the scheme so far shows that
only 4 % of the Rabi (winter) crop and 11 % of the more risk-prone Kharif (monsoon) crop
holdings are insured. On the positive side, the %age of the holdings covered is more than the
%age of area covered indicating better penetration among the small land-holders, the most
vulnerable farmers. Most of the crops covered were food crops (summer paddy, wheat)
indicating that food security is the primary concern for India‟s small farmers.
Data Collection:
Data have been collected using stratified multi-stage cluster sampling method. The sample
included wheat and sugarcane farmers in India. Results of estimating risk aversion
coefficients of farmers, using Safety First Rule (SFR), showed that insurance along with
giving inputs, mechanization services, and lookout of farms by sugar plants led to continuous
insurance purchase by farmers in consecutive years. Therefore farmers tended to welcome
insurance and the effect of insurance on their risk aversion coefficients was positive.
However, discontinuity of insurance purchase by wheat farmers in consecutive years and
farmers‟ lack of confidence in insurance system caused the influence of insurance on wheat
farmers‟ risk aversion coefficient to be insignificant.
Volume:01, Number:03, Jan-2012 : RJEBS Page 6 www.theinternationaljournal.org
Source www.aicinsurance.org
The above illustration depicts the crops which are covered under NAIS which are further
bifurcated in Kharif and Rabi seasons prevailing in the country.
Volume:01, Number:03, Jan-2012 : RJEBS Page 7 www.theinternationaljournal.org
Source www.aicinsurance.org
The above illustration depicts the Business Statistics of NAIS for 19 Rabi seasons prevailing in the
country and the various states union territory coming under the beneficial ambit of the scheme.
The below graph clearly depicts the present numbers of farmers covered and farmers benefited
under the NAIS in the State and UT which are availing the scheme till Rabi Season 2009 since the
launch of the policy.
Volume:01, Number:03, Jan-2012 : RJEBS Page 8 www.theinternationaljournal.org
The Pilot Modified NAIS (MNAIS):
Keeping in view the limitations/shortcomings of the existing scheme, the Government has
approved the Modified NAIS for implementation on pilot basis in 50 districts from rabi 2010-
11 season. The major improvements made in the MNAIS are: actuarial premium with subsidy
in premium at different rates, i.e. 40 per cent to 75 per cent depending upon the slab,
provided to farmers, all claims liability on the insurer, unit area of insurance reduced to
village panchayat level for major crops, indemnity for prevented/sowing/planting risk and for
post harvest losses due to cyclone, payment up to 25 per cent advance of likely claims as
immediate relief, more proficient basis for calculation of threshold yield, minimum indemnity
level of 70 per cent instead of 60 per cent, and private-sector insurers with adequate
infrastructure allowed (at present, ICICILombard, IFFCO-Tokio and Cholamandalam-
MS).Only upfront premium subsidy is shared by the Central and State Governments on 50:
50 basis and claims are the liability of the insurance companies. Seven States have already
notified the areas for implementation of the scheme during rabi 2010-11. It is expected that
the scheme will be notified by 14-15 States.
Weather Based Crop Insurance Scheme (WBCIS):
Efforts have been made to bring more farmers under the fold of crop insurance by
introducing a Weather Based Crop Insurance Scheme (WBCIS) as announced in the Union
Budget 2007 in selected areas on pilot basis. The WBCIS is intended to provide insurance
protection to farmers against adverse weather incidences, which are deemed to unfavourably
impact crop production. It has the advantage of settling claims within the shortest possible
time. The WBCIS is based on actuarial rates of premium but to make the scheme attractive,
premium actually charged from farmers have been restricted on a par with the NAIS. In
addition to the Agriculture Insurance Company of India Ltd. (AIC),private insurers have also
been included for implementing the scheme in selected areas. During kharif 2007 to kharif
2010, about 81 lakh farmers have been covered under the pilot scheme.
Coconut Palm Insurance Scheme (CPIS):
The CPIS is being implemented on pilot basis since 2009-10 in selected areas of Andhra
Pradesh, Goa, Karnataka, Kerala, Maharashtra, Orissa, Tamil Nadu, and West Bengal. The
scheme is administered by the Coconut Development Board (CDB) through the AIC. As on
30 July 2010, 14.33 lakh palms of about 27,023 farmers have been covered under the scheme.
VARIOUS OTHERS SCHEME
Rubber Plantation Insurance:
The scheme will be applicable to both mature and immature plantations. The policy will be
issued for a period of 7 years from the last day of the month of planting for immature plants.
It will provide Risk cover against Fire, Lightning, Riot, Strike & Malicious Damage, Bush
Fire, Forest Fire, Flood, Storm, Tempest, Inundation, Land Slide, Rock Slide, Earthquake and
Drought provided the Block /Taluka concerned is declared as drought affected by the
competent authority of the State Government. The policy is also extended to cover the loss or
damage caused by road/rail vehicles and wild animals.
Volume:01, Number:03, Jan-2012 : RJEBS Page 9 www.theinternationaljournal.org
Rainfall Insurance Scheme for Coffee (RISC) – 2010:
Rainfall Insurance Scheme – Coffee (RISC) is a insurance product specially designed for the
coffee growers of Karnataka, Kerala and Tamilnadu. This product is designed in consultation
with Coffee Board, Central Coffee Research Institute and the Coffee Growers of Karnataka.
RISC is expected to provide effective risk management aid to those coffee growers likely to
be impacted by adverse rainfall incidence.
The most important benefits of RISC are:
1. Trigger events like adverse rainfall can be independently verified and measured.
2. Parameters considered in designing this insurance product are relevant, appropriate
and to a large extent captures the rainfall induced risks affecting Coffee production.
3. Allows for speedy settlement of indemnities.
Any coffee grower, cultivating Robusta / Arabica variety of coffee in the selected Sub zones
of Karnataka are eligible to buy the insurance
Rabi Weather Insurance:
1. Provides protection against adverse deviations in a range of weather parameters like
frost, heat, relative humidity, rainfall etc. between December and April
2. Generic insurance product insuring crops like wheat, potato, barley, mustard, gram
etc.
3. Maximum liability is linked to cost of cultivation and varies from crop to crop
4. Allows for speedy settlement of claims, say within 4 – 6 weeks after the insurance
period.
Varshabima/Rainfall Insurance:
Sixty five percent of Indian agriculture is heavily dependent on natural factors, particularly
rainfall. Studies have established that rainfall variations account for more than 50% of
variability in crop yields. Its known that yields are variable, however, it‟s now being realized
that the weather, particularly rainfall is also becoming increasingly unpredictable and
uncertain. Although there is no way of controlling weather-factors, there is now a hope of
mitigating the adverse financial effects that rainfall can have on the rural economy,
particularly farm incomes. Varsha Bima covers anticipated shortfall in crop yield on account
of deficit rainfall. Varsha Bima is voluntary for all classes of cultivators who stand to lose
financially upon adverse incidence of rainfall can take insurance under the scheme. Initially
Varsha Bima is meant for cultivators for whom National Agricultural Insurance Scheme
(NAIS) is voluntary.
Conclusion:
Effective demands of small farmers in developing countries for a combination of a safety net
against yield risk and price risk coverage are essential. Such a type of revenue coverage as
used in the USA, and other agricultural economies of the world are assisting commodity
producers in developing countries with market-based risk management instruments
strengthening concept of protecting a floor price level through the purchase of put options
Volume:01, Number:03, Jan-2012 : RJEBS Page 10 www.theinternationaljournal.org
,growing potential of involving viable local agricultural and rural banks as well as other non-
financial intermediaries like agricultural input suppliers, traders agribusiness companies,
farmer producers organizations and mutual insurance associations as local transmission
mechanisms ,proposed revenue coverage farmers investment decisions leading to high farm
productivity and efficiency.
References:
Agriculture Insurance Company of India, Performance of NAIS, Country Profile,
(www.aicofindia.org).
Hazell P, Pomareda C & Valdes A, Crop Insurance for Agricultural Development:
Issues and Experience, (Baltimore: John Hopkins University Press, 1986)
India Development Gateway, Weather Based crop insurance Scheme
(WBCIS),(www.indg.in/agriculture )
Agriculture Today magazine 2010-2011
Economic Survey of India 2009-2010,2010-2011,(www.indiabudget.nic.in)
Government of India, Crop Insurance,(www.indiaagronet.com)
Raju, SS and Ramesh Chand, Agriculture Insurance in India: Problems and Prospects,
NCAP Working Paper No. 8, March 2008
Sinha, Sidharath, Agriculture Insurance in India: Scope for Participation of Private
Insurers, Economic and Political Weekly, June 19, 2004, P 2605-2612
World Bank, Piloting Weather Insurance Scheme in India, August 27,
2003,(web.worldbank.org)
Ahsan,S.M.,A.Ali and N. S. Kurian.1982 Toward a theory of agricultural insurance.
American Journal of Agric. Econ. 69(3) 520-529
***
Volume:01, Number:03, Jan-2012 : RJEBS Page 11 www.theinternationaljournal.org
COMPETENCE GAPS IN COMPANY DIRECTORS
IN NEW ZEALAND
Associate Professor Graeme Cocks,
Melbourne Business School,
Melbourne,
Australia
Associate Professor Jens Mueller,
University of Waikato Management School,
Hamilton,
New Zealand
Associate Professor Coral Ingley,
Auckland University of Technology,
Auckland,
New Zealand
Abstract
The well-published downturns of presumably stellar organizations worldwide, from Enron
and WorldCom in the USA, Siemens in Germany, Satyam in India, San Lu in China through
to South Canterbury Finance Corporation in New Zealand has created the foundation for a
growing interest in corporate governance and the accountability and importance of directors.
Many of the arguments now proposed for a greater focus on governance were advanced long
before these high-profile cases emerged, but it is a reality that governance has now moved to
a more central role when debating firms‟ performance and leaders‟ accountabilities in the
future. Aside from the popular headline-grabbing discussion, e.g. for Feltex in New Zealand,
or what individual directors did - or did not do - to advance their firms‟ fortunes, it is clear
that directors occupy a central position in the development of long-term strategies for a
sustainable future of enterprises.
Through effective governance strategies, owners seek to limit managerial „opportunism‟ and
prioritise owner and equity holder interests that, themselves, may have inherent conflicts due
to differences in their prioritization of long-term stakeholder interests. A key strategy to
marginalize potentially overbearing self-interest of management is for governance to involve
a board of directors to represent the owners‟ interests and instruct and evaluate management‟s
performance (Jensen and Meckling, 1976; Fama and Jensen, 1983 as cited in Cocks, Rennie,
Ingley and Mueller, 2010). Moreover, a firm‟s owners may not be in accord amongst
themselves in their priorities and interests (Cocks et al., 2010). These authors define the
agency relationship as one where a group of heterogeneous owners, of which each may have
conflicting interests and priorities, entrusts the firm‟s success to a managerial body. Thus, it
is even more important that governance strategies are put in place to protect the interests of
not just single owners but also multiple owners, each of whom may have somewhat unique
interests. In summary, our current economic climate has placed more emphasis on the
importance of governance, especially in relation to the separation between the owners‟
interests and those of management.
Volume:01, Number:03, Jan-2012 : RJEBS Page 12 www.theinternationaljournal.org
We have collected self-evaluations from more than 700 company directors in New Zealand
over 5 years (2006-2010) to determine whether these directors are qualified to perform such
elevated governance services. In key functional areas of corporate governance, such as
understanding corporate strategy, being knowledgeable about legal requirements, having
leadership skills and being able to work in a team, directors indicate significantly lower
competency score than in the only other area - “Commitment” - where the self-reported
competence level is much higher.
We believe this raises significant issues of how directors can be upskilled in functional
governance performance areas, or whether there is another pool of more qualified directors
available from which firms can satisfy their demand for better governance. Being very
„committed‟ to otherwise perform at quite an average competence level cannot be the best
best solution to infusing better governance skills in our organizations.
Background
As noted above, the recent financial downturn and the subsequent demise of many companies
have highlighted the importance of good corporate governance (Bhimani, 2008). For many
years, legislation around corporate conduct has stipulated direct and/or indirect compliance
requirements for businesses in many developed countries. These have increased in number
since the accounting scandals at the beginning of the millennium (Abdel – Kahlik, 2002;
Benston and Hartgraves, 2002). Changes to corporate governance legislation include
adjustments to the auditing process, refining financial reporting standards, strengthening
internal managerial controls, monitoring compensation packages and observing online
security and other technology standards. In 2002, Canada‟s Ontario Securities Commission
passed Bill 198 aimed at achieving „better corporate governance‟ (Ferris, 2007, p. 31).
Generally, the requirements of corporate governance legislation are aimed at encouraging
ethical corporate behaviour.
Mainly, corporate governance research addresses the issue of formulating and implementing
codes of business practice that protect the interests of passive shareholders (Aguilera and
Jackson, 2003). In fact, the protection of owners/shareholders interests is often woven into
the definition of good corporate governance: „If we follow the traditional Anglo-American
conception of the firm as a device to further the well-being of its owner-shareholders, good
governance is a matter of ensuring that decisions are taken and implemented in pursuit of
shareholder value‟ (Keasey, Short a& Wright, 2005, p. 2). The definition of corporate
governance in international research is greatly influenced by US formulations of corporate
governance which thus raises the issue of the extent to which these governance-related rules
are an appropriate fit for the rest of the world and for New Zealand. US definitions of
corporate governance are based upon agency theory and managerial capitalism and are
largely preoccupied with structuring governance codes of practice to ensure that managers act
in the interest of the owners and shareholders rather than their own best interests (Shleifer
and Vishney, 1997).
A recent definition of corporate governance is given by Colley, Stettinius, Doyle and Logan,
(2005, p.5), „Today, the public corporation itself operates as a form of representative
government. The owners (shareholders) elect directors as their representatives to manage the
affairs of the business. The directors, who as a group are referred to as the board of directors,
then delegate responsibility for actual operations to the Chief Executive Officer (CEO),whom
Volume:01, Number:03, Jan-2012 : RJEBS Page 13 www.theinternationaljournal.org
they hire. The CEO is accountable to the board of directors, which, collectively and
individually, is accountable to the shareholders. In addition to its role in selecting the CEO,
the board also advises on and consents to the selection of business and strategies of the firm,
as well as oversee results. In sum, this system of authoritative direction, or government, is
known as corporate governance‟.
The Financial Reporting Council combined code of 1998 (revised in 2006 and again in 2009)
combines the main tenets of the Cadbury Report, the Hampel Report and the Greenbury
Report. Each listed company was required to disclose how they formulated and structured
corporate governance, and out of this report came a set of best practice principles. The
influence of agency theory and a focus on owner/control separation is clearly seen in the
following three principles of the combined code (FRC, 2006). For example:
A. „Every company should be headed by an effective board which is collectively
responsible for the success of the company‟.
It is the responsibility of the board to lead the company with appropriate controls to assess
and manage risk. The board should formulate the strategic aims of the firm and make sure
that the necessary financial and human resources are in place for the achievement of the
firm‟s objectives. „The board should set the firm‟s standards and values and ensure that its
obligations to its shareholders and understood and met‟. Furthermore, all courses of action
and decisions that directors take ought to be in the interests of the company. Also stated in
this principle is the board‟s responsibility to hire and dismiss CEOs where necessary.
B. „There should be a clear division of responsibilities at the head of the company
between the running of the board and the executive responsibility for the running of the
company‟s business. No one individual should have unfettered powers of decision‟.
The chairperson of the board leads the board and ensures the board meets all its objectives.
The chairperson also acts as a source of information for the directors and must make sure that
the directors are kept well informed in a timely manner on significant aspects of company
business. Reports to the director must be clear and accurate. The chairperson must also liaise
with the owners/shareholders and maintain clear lines of communication with them. The
individual roles of the chairperson and the firm‟s CEO must be agreed by the board, put into
writing, and clearly delineated and understood. A CEO must not become the chairperson of
the board at any time unless major shareholders are consulted in advance.
C. „The board should include a balance of executive and non-executive
directors (and in particular independent non-executive directors) such that no individual or
small group of individuals can dominate the board‟s decision making‟. To prevent the board‟s
decision making from being dominated by one person, the board should include both
executive and non-executive directors. The board must ensure that the director is independent
in character and judgement and consider the significance of any potential conflicts of
interests such as any director haveing been employed by the firm in the last five years or
representing a significant shareholder.
Volume:01, Number:03, Jan-2012 : RJEBS Page 14 www.theinternationaljournal.org
Board Composition
The traditional view of the board of directors is of a group of individuals (traditionally
middle-aged men) with significant experience in the market within which that company
operates and with significant experience of the workings of that company. Consequently, the
membership of such boards was also traditionally and overwhelmingly constituted by
insiders, who might include family members (if a family company) friends, professional
advisors (lawyers or accountants) or substantial shareholders or their nominees. Even as late
as the 1980s when the idea was more likely to be debated in political and business circles, the
very notion that outsiders should be included was to some conservative thinkers an anathema.
After all, what could such individuals possibly contribute to a company they didn‟t
understand?
Consequently, such a presence was resisted in some other jurisdictions dominated by the
Anglo-American model of a unitary board (having the roles of both supervision and
management). Amongst those can be listed Australia and New Zealand as well as the United
States and the UK. Critics of the idea cited a range of reasons for their position. Some
objections to the idea of independent directors are likely to be very similar to those voiced 20
years ago. Inter alia, those include the fact that for many such directors their interests are
artificial (lacking strong links between the company‟s wellbeing and their own) a
characteristic that reduces their motivation to maximise performance; they may lack
experience and understanding of the business environment; they may well have a seat on a
range of boards, reducing loyalty and adversely affecting their focus on the company and its
wellbeing. In addition, and depending on the individual, they may perceive the position of
director as a chance to strengthen or maintain social or business networks, affecting the
degree to which they are truly independent.
Despite such objections, however, and as stated earlier, the independent director is a must for
the boards of public companies in a range of jurisdictions, increasingly mandated or
encouraged by legal and quasi-legal rules. As pointed out before, the OECD‟s promulgation
of guidelines in 1999 was the first trans-national display of determination to have
independent directors on the boards of Public companies. However, that does not mean it was
the first move to promote their presence. In order to provide an overview of these earlier
steps while not being too complicated, three exemplar legal/regulatory frameworks will be
considered, these being in turn the UK, United States and Europe.
Board Competence Research Findings
This research was designed to capture a broad cross-section of responses throughout New
Zealand and for a period of several years. In order to reach New Zealand business of all sizes
and industry classifications, the survey instrument was distributed to the client lists of several
supporting organizations. Further supporting the argument that the discussion of
„Governance‟ is highly relevant in New Zealand, more than a dozen national organizations
participated in the survey distribution, creating one of the largest data sets on governance in
the country.
Using distributors from different industries and in many locations throughout New Zealand
was intended to reduce bias in the sample group.
Volume:01, Number:03, Jan-2012 : RJEBS Page 15 www.theinternationaljournal.org
Distributing organizations were:
BNZ, ANZ, National Bank, Simpson Grierson, Business New Zealand, Employer and
Manufacturers Association (Northern), Otago Southland Employers,
PriceWaterhouseCoopers, 3 Media Group, Cameron Partners Investment Bankers, Swann
Recruiting, The New Zealand Shareholders Association, Venture Taranaki, NZ Institute of
Management, Unitec, Waikato Chamber of Commerce, Business Mentors of New Zealand,
Employers and Manufacturers Association Central, Canterbury Employers Chamber of
Commerce, New Zealand Venture Capital Association, Ministry of Womens Affairs, Te Puni
Kokori, Chartered Secretaries of New Zealand, Human Rights Commission, Crown Company
Monitoring Advisory Unit, Waikato Management School.
More than 700 director responses were collected from New Zealand businesses, representing
most industries and all sizes. Given that more than 98% of New Zealand businesses are
SMEs, this survey is applicable mainly to SMEs.
A direct connector to the inclusion of independent directors in firms is their competence in
matters relating to governance. Using the approach for directors to self-evaluate the
performance of themselves and that of their fellow directors, with all replies being
anonymous and thus more reliable, this research wishes to identify whether directors consider
themselves above-average competent in areas which relate directly to the discharge of their
governance duties.
When given the opportunity to select in which of the traditionally applicable governance
skills areas directors were most competent (strategic leadership, finance/auditing, group
decision making, commitment, etc.), directors in New Zealand firms Directors consider their
level of commitment exceeds their level of competence in all other areas. More directors self-
reported that they have „excellent‟ “commitment” to their firms than directors in any of the
other skills categories, for which the majority of directors only self-reported „very good‟
skills. This raises issues as to the ability of SME directors to perform to an acceptable level in
the key functional areas of governance. While “commitment” is a less tangible contribution
and thus is easily over-interpreted, specific skills areas such as “finance/auditing”, “strategic
planning”, etc. require detailed sub-skills that many directors do not seem to possess in
abundance.
Conclusion
We believe that the interest in independent directors may be tempered by their lack of skills
commonly associated with governance competence. As the development of formal boards for
SMEs appears to accelerate, more directors will be required to perform to an increasingly
demanding level of governance. Our research suggests the need to develop programs to
upskill directors in functional governance performance areas, to make good use of the pool of
directorship candidates. Being very „committed‟ to otherwise perform at quite an average
competence level cannot be the best best solution to infusing better governance skills in our
organizations.
Volume:01, Number:03, Jan-2012 : RJEBS Page 16 www.theinternationaljournal.org
Bibliography
Abdel-Khalik, A. (2002). Reforming corporate governance post Enron: Shareholders, Board
of Trustees and the auditor. Journal of Accounting and Public Policy, 21, 97–103.
Aguilera, R., and Jackson, G. (2003). The cross-national diversity of corporate government:
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Cocks, G., Rennie, M., Ingley, C., Mueller, J. (2010). Innovating from the top down:
Sustaining better governance through reformed boards.
Colley, J., Stettinius, W., Doyle, J., and Logan, G. (2005). What is corporate governance?
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and Economics, 26, 301–325.
Ferris, M. (2007). Applying bill 198. CMA Management, 81(4), 30–34.
FRC. (2003). The combined code on corporate governance. Retrieved June 2, 2010 from
http://www.ecgi.org/codes/documents/combined_code_final.pdf.
Jensen, M. C., and Meckling, W. H. (1976) Theory of the firm: Managerial behaviour,
agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.
Keasey, K., Short, H., and Wright, M. (2005). The development of corporate governance
codes in the UK. In K. Keasey, S. Thompson and M. Wright (Eds.), Corporate
governance, (pp. 21–42). West Sussex, UK: Wiley
Shleifer, A., and Vishny, R. (1997). A survey of corporate governance. The Journal of
Finance, 52, 737-783.
***
Volume:01, Number:03, Jan-2012 : RJEBS Page 17 www.theinternationaljournal.org
MARINE PRODUCTS EXPORTS: GDP GROWTH PROSPECT
WITH SPECIAL REFERENCE TO COASTAL AQUACULTURE
IN INDIA
Aslam Chinarong,
Research Scholar,
Dept.of Management studies,
Sathyabama University,
Chennai-119.
Dr.B. Yamuna Krishna
Research Supervisor,
Principal,
Sri Ramachandra College of Management,
Porur,Chennai
1.0: Abstarct:
Indian marine exports have crossed the $2-billion mark during first nine months of a
fiscal. Marine exports touched $2.028 billion during April-December 2010, registering a
growth of 6.60 per cent in quantity, 18.92 per cent in value and 24.70 per cent in dollar
realisations. What is noteworthy is the fact that the feat could be achieved in spite of
recession in global markets, a strengthening Indian rupee against major currencies and
economic tremors in Greece, Spain and Portugal which triggered all-round depreciation of
the euro against the dollar, the Marine Products Export Development Authority (MPEDA)
pointed out. There was considerable increase in export of frozen shrimp and squid during the
period. The trigger for this growth came from increased export of Vannamei shrimp, whose
introduction and cultivation in India's coastline was a recent phenomenon as well as increased
landing of squid from Indian waters. Frozen shrimp continued to be the major export item
accounting for over 48 per cent of the foreign exchange earnings.
Shrimp exports increased by 12 per cent in quantity, 34 per cent in value and 40 per
cent in dollar earnings. Unit value realisation for shrimp surged over 25 per cent during the
period. Frozen shrimp export also showed a smart increase to major destinations such as the
US and Japan. Export of Vannamei shrimp grew to 7,363 tonnes during the period. Frozen
fish was the principal item of export in quantity and second largest export item in terms of
value: accounting for 36 per cent of the total quantum of export and 18 per cent of the value
realization. Export of frozen squid accelerated by close to 88 per cent in terms of dollar
earnings, 78 per cent in rupee realization and 60 per cent in quantity. Despite rapid growth in
unit value realization of frozen cuttlefish by 30 per cent, the volume of exports declined by
21 per cent and rupee realization fell by 2 per cent.
The year 2011-12 has been a record year for the Sea Food Export sector. The Export
touched US$2.86 billion (an increase of 33%) amounting to Rs.12901 crore. Quantity
increased to 830,000 tons (growth of 19%). This has been one of the most successful years
not only in terms of performance for the sector but also this has been a very fruity year for
almost all the exporters. During the course of this historic year , the Indian Seafood Export
Sector was greatly distressed at the great tragedy that struck Japan, one of the pioneering and
Volume:01, Number:03, Jan-2012 : RJEBS Page 18 www.theinternationaljournal.org
key trading partners which has contributed very significantly to our sector’s growth during
the formative years, and even till recently has been the largest importers of marine products
from India. The present paper is
The present paper is focused on review of aquaculture trends in the production of
shrimp and scampi production in India. The data required for the study is collected from the
secondary sources and the author is in the aquaculture products related business. The
observations made in the market are presented as findings and suggestions and those are
correlated with the secondary data. Simple comparative techniques are used to compare the
results of the market and accordingly suggestions are presented. This paper can help in
assessing the importance of aquaculture in improving the GDP and economic growth of the
country.
Keywords: Aquaculture Performance, Economic overview, India GDP, Vannamei shrimp,
foreign exchange.
1.1 Overall export of marine products
During 2010-11 for the first time in the history of Marine product exports, the export
earnings have crossed 2.8 billion US dollars. This is also first time export has crossed all
previous records in quantity, rupee value and US$ terms. Export aggregated to 8, 13,091
tonnes valued at Rs.12, 901.47 crore and US Dollar 2,856.92 million. Compared to the
previous year, seafood exports recorded a growth of 19.85% in quantity, 28.39% in rupee and
33.95% growth in US$ earnings respectively. Average unit value realization has also gone up
by 11.87%.
There is a considerable increase in export of Frozen Shrimp and Frozen Squid during
the period. Large-scale production of Vannamei in addition to better productivity of Black
Tiger shrimp and increased landing of Squid contributed for the increased. This was
supported by better price realization of major items like Cuttlefish, Shrimp and Squid. The
figures must be viewed in the light of the scenario of continuing recession in the international
market, debt crisis in EU economies, continuing antidumping duty in US the sluggish growth
in US economy.
1.2. Major items of export
Frozen Shrimp continued to be the major export value item accounting for 44.17% of
the total US$ earning. Shrimp exports during the period increased by 16.02%, 36.72% and
42.90% in quantity, rupee value and US$ value respectively. Fish, has retained its position as
the major export item in quantity terms and the second largest export item in value terms,
accounted for a share of about 38.42% in quantity and 20.42% in US$ earning. Fresh
Cuttlefish recorded a growth of 19.56% in rupee value and 25% in US Dollar terms. Unit
value also increased by 34.18%, however, there is a decline in quantity (6.84%). Export of Fr.
Squid showed a remarkable increase in quantity 42.53%, 62.31% in rupee value & 69.14% in
US dollar realization. Unit value also increased by 18.67%.
1.3. Major export markets
European Union (EU) continued to be the largest market with a share of 26.78% in
US $ realization. Followed by South East Asia 16.43%, China with a share of 15.41%, USA
Volume:01, Number:03, Jan-2012 : RJEBS Page 19 www.theinternationaljournal.org
15.35% , Japan 13.06%, Middle East 5.19% and Other Countries 7.79%. The Marine
Products exports have strengthened India’s presence in Southeast Asia and Middle East
where the increase in quantity has been 57% and 26% respectively. There is a significant
increase in exports to African countries in comparison to previous year, although the total
exports to Africa remains very low compared to other regions.
2.1. Export production through aquaculture
During the year 2010-11, production from aquaculture has continued to contribute
significantly to the seafood exports from the country. The increased production is attributed
to a marginal increase in average productivity per unit area in the case of black tiger,
comparative reduction of disease occurrence and adoption of better Management Practices.
With introduction of exotic SPF L.Vannamei, the aqua farmers in Andhra Pradesh, Tamil
Nadu, Gujarat and Maharashtra have utilized an area of 2930.32 ha during 2010-11 for
farming of L.vannamei shrimp which has also contributed significantly to the increase of
seafood export from the country.
2.2 Shrimp Production
During the year under report the total tiger shrimp production has been estimated to
be around 118575.00 MT from an area of 113852.39 ha. State wise details of shrimp farming
are and production are given in Table-2. Compared to the previous year production of
95,918.89 MT 102259.98 ha area, shrimp production has increased by 22656 MT that is
23.62% while addition area of 11,592.41 ha was brought under culture which contributed the
addition production as well as increase of 11.34% in terms of area utilization. This was
attributed to adoption of better management practices by aqua farmer, and increasing demand
for cultured shrimp resulting in increased unit value and better raw material prices being
offered to the producers. It is estimated that shrimps worth Rs.682.00 crore over 2009-10
(Table-3).
Efforts taken by Marine Product Export development Authority (MPEDA) in
motivating the aqua farmers in adoption of better management practices and adopting bio-
security protocols have contributed significantly in improving the average production of
shrimp per unit area from 940 kgs per hectares to 1040 kgs per hectare resulting in increase
of productivity of 10.6% per hectare.
2.3 Total Aquaculture Production
Aquaculture production from export –oriented aquaculture during the year 2010-11
has improved significantly over the previous year with increasing number of aqua farmers
attempting to revive the activities by investing in the sector. The total production from
aquaculture is estimated to be 1,45,600 MT with a total value of Rs.3585 crore (Table-4) that
works out to an average farm gate price of Rs.246.00 per kilogram of wet weight. The
Production has grown an increase of 39.71% (41381.19 MT) in volume and 41.66%
(Rs.1054.30 crore) in value respectively over the previous.
Though it is anticipated that all the shrimp/scampi/L.vennamei produced from aqua
farms would be exported, some quantities produced would have found its way to the
Volume:01, Number:03, Jan-2012 : RJEBS Page 20 www.theinternationaljournal.org
domestic markets due to increasing demand for the seafood with attractive and remunerative
prices even in the domestic market that are being realized for the produce.
2.4 Outlook for 2011-12
MPEDA envisage an ambitious target of 4 billion US$ Marine products exports for
the year 2011-12. Increased production of L.Vannamei shrimp, increase in infrastructure
facilities for production of value added items and the regaining pace of Japanese market after
tsunami etc. are the helping factors to achieve this target.
5.0: Suggestions to Improve Aquaculture Contribution to GDP:
1. The sector can be recognized as allied agriculture activity and funding can be
provided on the quantum merit basis.
2. The direct subsidies can be given to farmers to improve the interest towards industry.
3. The firm subsidies should not be given to traders.
4. Processing infrastructure needs to be improved and mechanization is need of the hour.
5. Organised sector is to enter into industry to improve its contribution and to have mass
production.
6. Unorganized players need to be focused on quality and timely delivery of the products
to the processing unit for better quality preservation.
6.0: Conclusion:
Market potential of the industry is high and appreciable. Growth had remained
relatively strong until the quarter ending March 2011-but clear signs of slowdown have
emerged over the last 3-4 months. It was believed that the combination of factors-including
persistently high inflation, higher cost of capital, cut in fiscal spending to GDP, weak global
capital markets environment and slow pace of investment-will cause a further slowdown in
growth.
It was believed that over the next six months, support from all the major growth
drivers will wane at the same time. A deeper slowdown in growth than estimated earlier.
Hence, The F2012 GDP growth estimate was cut from 7.7% to 7.2% and FY2013 growth
estimate from 8.5% to 8%. On a calendar-year basis, The new growth estimates are 7.3% and
7.8%, down from the old forecasts of 7.7% and 8.5% for 2011 and 2012 respectively.
References:
1. Datt, Ruddar; Sundharam, K.P.M. (2009). Indian Economy. New Delhi: S. Chand
Group. p. 976. ISBN 978-81-219-0298-4.
2. Drèze, John; Sen, Amartya (1996). India: Economic Development and Social
Opportunity. Oxford University Press. p. 292. ISBN 978-0-19-564082-3
3. Morgan Stanley Research Asia Pacific ,August 1, 2011 P.2-11
4. Krishnan &Pratap S. Birthal ,Aquaculture Develop in India (2008) : An economic
overview
5. MPEDA Newsletter , July 2011, Vol.VIX No.7
6. Seafood Export Journal, Vol.XLI No.08 , August 2011.
Volume:01, Number:03, Jan-2012 : RJEBS Page 21 www.theinternationaljournal.org
Table-1: Export during 2010-11 compared to 2009-10
Export details April-March 2010-11 April-March 2009-10 Growth %
Quantity Tones 813091 678436 19.85
Value Rs.crore 12901.47 10048.53 28.39
US$ Million 2856.92 2132.84 33.95
Table-2: State wise details of shrimp farming 2010-11
S.No State Area
Developed(ha)
Area Utilised
(ha)
Production
(MT)
Productivity
(MT/ha/year)
1 West Bengal 51.659.00 47588.00 40725.00 0.86
2 Orissa 15174.00 5324.00 7520.00 1.41
3 Andhra Pradesh 58,145.00 42055.00 49030.00 1.17
4 Tamil Nadu 6,109.00 2281.16 4020.00 1.76
5 Kerala 15,099.39 11787.90 8075.00 0.69
6 Karnataka 3708.84 1715.00 2090.00 1.22
7 Goa 867.00 305.00 320.00 1.05
8 Maharashtra 1,329.56 829.88 1120.00 1.35
9 Gujarat 2,247.92 1965.65 5675.00 2.89
Total 1,54,339.91 1,13,852.39 118,575 12.4
Table-3: Shrimp Production through Aquaculture
Year Live weight (MT) Product weight
(MT)
Estimated Value
(Rs.Crore)
2009-2010 95,918.89 60,429.00 2,398.00
2010-2011 1,18,575.00 74,702.00 3,080.00
Increase 22,656.11 14,273.00 682.00
Difference % 23.62 23.62 28.44
Source: Secondary data/ Seafood Export Journal/ Various issues.
Table-4: Total shrimp & scampi production through Aquaculture
Year Live weight
(MT)
Product weight
(MT)
Estimated Value
(RS.crore)
2009-2010 1,04,217.81 64,664.96 2,530.70
2010-2011 1,45,600.00 90,038.00 3,585.00
Increase 41,382.19 25,373.04 1,054.30
Difference 39.71 39.24 41.66
Source: Secondary data/ Seafood Export Journal/ Various issues.
***
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IMPACT AND INFLUENCE OF TOURISM IN MAURITIUS:
THE CASE OF FLIC EN FLAC
RAJEN SUNTOO
LECTURER IN SOCIOLOGY
UNIVERSITY OF MAURITIUS
ABSTRACT
Purpose – The purpose of this paper is to provide an insight on the impact and influence of
tourism development in Mauritius, more particularly at Flic en Flac which is considered to be
a major tourist area. This paper aims at highlighting the metamorphosis caused by tourism
development on the rural community and also taking stock of the influence of tourism on the
culture and lifestyles of the inhabitants.
Design/methodology/approach – In this paper use of both primary and secondary data has
been made. Research methods used include document analysis, internet search, field
observation, informal talks and interviews with fishermen, visitors, elderly inhabitants,
youths, local businessmen, new settlers and community leaders.
Findings –The principal findings of this research indicate that considerable amount of
infrastructural development has taken place in the village. However, the majority of the
inhabitants are of the view that although tourism development has brought certain changes in
their lifestyles yet there has been very little improvement in their living conditions as quite a
large number of the locals are still struggling to make both ends meet.
Research implications – This paper has much relevance in the fast developing Mauritian
society as it may help the authority at reviewing its strategies for tourism development
throughout the country. Future sustenance of tourism development requires satisfaction of all
participating stakeholders.
Originality/Value – The results of this study will be helpful to assist tourism planners in
developing policies for tourism development that will be beneficial not only to the
investors and the state but also to the locals with a view to improve their welfare and living
conditions.
Keywords: Tourism, Tourism Development, Rural Community, Culture and Lifestyles.
Volume:01, Number:03, Jan-2012 : RJEBS Page 23 www.theinternationaljournal.org
INTRODUCTION
Mauritius is one of the most beautiful islands in the world. It is normally referred to as the
rainbow nation. Travellers and visitors consider the island, set in its turquoise sea, as an oasis
of peace and tranquillity in the Indian Ocean. Tourism is a major pillar of the Mauritian
economy. Since 1970s, it has contributed enormously to cause economic growth and
development in Mauritius. Tourist arrivals have been constantly increasing over the past
years and the country is expecting to welcome about two million foreign visitors annually by
2015. Tourism causes changes in almost all spheres- economic, social, cultural, political or
environmental- of the host community.
This paper is drawn from an on-going research on the impact and influence of tourism
development in Mauritius. In this study, the focus will be on a major tourist area which is Flic
en Flac. The main objectives of the paper, amongst others, are:
(a) To highlight the metamorphosis caused by tourism development on the rural
community and
(b) To take stock of the influence of tourism on the culture and lifestyles of the
inhabitants.
In this study use of both primary and secondary data has been made. Research methods used
include document analysis, internet search, field observation, informal talks and interviews
with 2 fishermen, 2 visitors, 4 elderly inhabitants, 4 youths, 2 local businessmen, 2 new
settlers and 2 community leaders. The qualitative approach to data analysis resorted to in this
paper and discussion help to get a better understanding and insight of the tourism
development and its impact and influence in the village of Flic en Flac.
The first part of this paper deals with a brief review of tourism development and the positive
and negative effects of tourism. Then follows, an overview of tourism development in
Mauritius and more particularly at Flic en Flac. In the second part, data collected through
informal talks and interviews will be analysed and discussed. Finally, a conclusion based on
the paper will be stated and two recommendations made.
Tourism and Tourism development
The World Tourism Organisation defines tourism as comprising activities of people
travelling to and staying in places outside their usual environment for not more than one
consecutive year for business, leisure and other purposes. Tourism has become a major
industry in all parts of the world. In Mauritius 871,356 tourists visited the island in 2009 and
in 2011 tourists arrival has been estimated to be around 950,000 according to the Central
Statistical Office (www.africanews.com/...tourism/). Tourism contributes to the extent of
10% of the Gross Domestic Product in Mauritius (business.mega.mu/.../tourist-arrival-
mauritius).
Goeldner and Ritchie (2006) argue that tourism development should aim at providing a
framework for improving the living standard of the people through the economic benefits of
tourism. For them, tourism development must create the necessary space for recreational
infrastructure that provides facilities to both tourists and residents. The local community
Volume:01, Number:03, Jan-2012 : RJEBS Page 24 www.theinternationaljournal.org
should be made aware of any innovation or development of infrastructure that cause
disturbances in the area. Vivienne et al (2002) clearly state that responsible tourism
development attempts to balance the needs of the locals with those of the promoters and
tourists. The participation of the rural community leaders must be encouraged to ensure
proper tourism development, thereby avoiding or at least limiting negative impacts. In his
model of tourist development, Miossec’s (1976) (cited in Pearce, D. 2006, Tourist
development) stresses changes in the provision of facilities and in the behaviour and attitudes
of both the tourist promoters and the locals. As the tourist industry expands, the local
attitudes towards such development may lead to the acceptance of tourism, resentment
towards it or simply its rejection.
Positive and negative effects of tourism
Tourism development has significant impact on the economy and culture of the host
population. It is a fact that such development is accompanied by positive and negative effects,
both economic and social.
For Elliott (1997), Governments are a fact in tourism as they provide essential services and
the necessary basic infrastructure for tourism development. The state involves in tourism
mainly because of its economic importance. It is an undeniable fact that the tourism sector
makes enormous contribution to cause economic development of a country. Many direct and
indirect employments are created and tourism generates considerable amount for the host
society. The economic benefits of tourism development such as the improvement in
infrastructure and services, employment opportunities and increased business activities in the
rural areas help to raise the quality of lives of the inhabitants. Doswell (1998) claims that
tourism, promotes cultural exchange and creates an audience for the local arts, particularly
for music, dance and handicrafts. Tourism enables locals to meet new people and learn new
culture and lifestyles.
However, some people consider tourism as a curious modern disease that may negatively
change the ways of life of the locals. For Mac Naught (1982), tourists may have undesirable
‘demonstrative effects’ on the residents. The culture of the tourist may cause cultural shocks
to the locals. The behaviour and dress codes of the visitors are not always welcome by the
natives, more particularly by the traditional inhabitants. Vivienne et al (2006) are also of the
view that tourism can cause considerable social and cultural cost to the community.
An Overview of Tourism Development in Mauritius
Tourism is a main industry in Mauritius. It has been an important vehicle for socio-economic
growth in the country. Tourism is growing and developing fast as the country is expecting to
welcome around 2 million tourists by the year 2015. Consequently much importance is
attached to tourism development which is thought to bring benefit to all tourism stakeholders.
Tourism in Mauritius has always generated large amount of foreign revenues and the tourist
industry has provided many direct and indirect employment to the Mauritian population.
Tourism development means a holistic approach to the development of the tourist industry
where all the stakeholders, that is, the investors, the clients, the employees and the
community, gain out of the business operation. In fact, it involves broadening the ownership
base such that more people benefit from the tourism industry, skills development, job and
Volume:01, Number:03, Jan-2012 : RJEBS Page 25 www.theinternationaljournal.org
wealth creation and ensuring the geographic spread of the industry throughout the country
(www.capegateway.gov.za › ...> Economic Sector Development)
Tourism development requires a very good planning on the part of the authority and the
promoters. There are many factors that account for Mauritius as being a success story in
attracting tourists. The fact that the country has a socio-economic and political stability
remains the sine qua non for the constant increase in tourist arrivals over the last three
decades. As a safe and stable holiday destination, Mauritius, with its subtropical climate,
offers its excellent white sandy coral beaches beautiful lagoons to attract foreigners. The very
hospitable nature of Mauritian population is an added value to welcoming tourists. The
concern and marketing strategies used by the state also help tourism development in the
island. According to the Country Report on Mauritius
(www.fao.org/DOCREP/004/AB586E/AB586E03.htm0), tourist arrivals have been rising by
more than 8 percent a year and the tourism industry has become one of the most dynamic
sectors of the economy, accounting for 19 per cent of gross export earnings and providing
employment directly and indirectly for about 50,000 people.
Given that the tourism continues to expand and that the country is expecting future growth in
tourist arrivals, necessary investment should be done to develop and innovate further the
infrastructure like the airport services and the building with up-to-date amenities that can
accommodate international conferences, seminars and cultural events amongst others. The
sustainability of tourism development necessitates a review of the tourism policies and
developmental plans to make them more effective to respond to emerging challenges in the
tourist area. Sustainable tourism development is premised on the responsibility of the
government, the tourist industry and private tourism promoters to ensure that long-term
prosperity and quality of life of the future generation is not placed at risk
(www.unescap.org/ttdw/Publications/TPTS.../Toreview_No22_2141.pdf). In Mauritius, the
Tourism authority has already started to consider the effects of tourism on the environment
and all precautions are being taken to avoid environmental degradation due to tourism
development. The environment impact assessment is carried out rigorously before permit and
licences are issued for the construction and innovation of buildings, in particular hotels and
restaurants.
Tourism in the rural community of Flic en Flac
Flic en Flac is one of the most popular and renown places in Mauritius. It is in fact a small
village which is found on the west coast of island with a population of around 1500 people
comprising mostly Hindus and Christians. The village has one of the most beautiful beaches
and an excellent lagoon where swimming is safe and various water sports can be practiced.
Thousands of Mauritians and foreigners spend at least a day at the beach annually. During
school holidays many Mauritian families rent apartments and bungalows which are located
within a walking distance to the beach to spend memorable time with their children.
The first big and beautiful hotel namely La Pirogue Hotel was constructed in the midst 1970s.
During that period, the inhabitants were given priorities by the hotel management when the
recruitment exercise was done. Thus locals, both literate and illiterate, could get an
employment at the hotel. Besides, the village of Flic En Flac has also witnessed considerable
amount of infrastructural development and improvement since the start of the construction of
La pirogue Hotel. The constructions of new roads and improvement of the existing ones and
Volume:01, Number:03, Jan-2012 : RJEBS Page 26 www.theinternationaljournal.org
the provision of safe water, electricity and telecommunication services were very much
appreciated by the inhabitants.
The hotel was inaugurated in June 1976. The Government, under the leadership of Sir
Seewoosagur Ramgoolam, showed much commitment to go for tourism development in the
island. Since then many hotels have been built. Today, there are many big hotels like Hilton,
Sugar Beach, Sofitel and several small hotels in the region of Flic en Flac. The scenery of the
village has completely changed with the coming of the new buildings, luxurious apartments,
bungalows, beautiful restaurants, supermarkets and shops selling both handicrafts and trendy
clothes. The state has recently invested much to market Flic en Flac as a safe place for both
locals and tourists. CCTV cameras have been placed nearly everywhere in the village.
Besides, facilities like cybercafé, banking, post office, casino, pharmacy, clinic and massage
saloons are available to both locals and foreigners. The latter can also enjoy the sunny
climatic condition, the calm sea and facilities like diving and deep sea fishing.
Tourism development at Flic en Flac has always been controlled and well managed by the
District Council of the region as compared to such development in other parts of the island.
Certain obligatory and strict rules had to be followed by business men and investors for the
construction of buildings and for obtaining licences to operate small businesses and
commercial outlets.
Transport services have also been considerably improved in the village. Residents and
tourists can move easily from Flic en Flac to the major towns like Quatre-Bornes and
Curepipe. There are also regular buses to and from the capital city of Port Louis. Taxis
facilities and renting of cars are available but such services are not always within the reach of
the locals.
Gentrification as a consequence of Tourism Development
Gentrification is a term that was coined by the sociologist Ruth Glass in 1964. He explained
the process of gentrification as an invasion of working class quarters of London by
middleclass people. For Ruth the process continues until all or the majority of the working
class people are displaced (members.multimania.co.uk/gentrification/whatisgent.htm).
Gentrification is the movement of affluent people into areas that were previous occupied by
working class people. Normally the rich people buy property and land there. The Collins
Concise Dictionary defines gentrification as a process by which middle-class people take up
residence in a traditionally working –class area. With the development of tourism at Flic En
Flac, a process of gentrification has taken place. Hundreds of people from the middle and
upper classes, who are either locals from other regions or mauritians living abroad, have
acquired land, bungalows, luxurious apartments and studios at Flic en Flac. However, the
process of gentrification in Flic en Flac is different as most affluent people have acquired
property not to reside there but to rent to foreigners or to the host population. Normally
gentrification leads to the displacement of locals and poor natives. At Flic en Flac this has not
happened. The reason behind it is that the majority of the inhabitants live in crown lands
which have been leased to them by the authority against the payment of a relatively lower
annual fee. The new comers have bought lands that belonged to the sugar estates or to the
private land owners. Gentrification has lead to the creation dual type of residents, one very
rich and one relatively very poor.
Volume:01, Number:03, Jan-2012 : RJEBS Page 27 www.theinternationaljournal.org
Analysis and Discussion
To get a better insight of the impact and influence of tourism development on the rural
community of Flic en Flac, field work was carried out. Some questions were prepared to get
information on the extent to which locals welcomed tourism development during the midst
1970s, their views on the infrastructural improvement, their experiences of living in one of
the most famous tourist areas and the feelings about the changes brought in their culture and
lifestyles.
To carry out the investigation, the methodology used included observation, informal talks and
interviews with 16 locals and 2 visitors. Although such a methodology has its weakness and
is often regarded as unethical, given that the researcher does not always reveal his identity,
yet the strong point lies in the fact that respondents feel more at ease to interact and answer
questions. Moreover, the possibility of probing becomes easier by using such a technique.
The language used was mainly Creole with the exception of two cases where French was
preferred as the respondents were visitors from Reunion island.
The first question put forward to the respondents was about their opinions and views of
tourism development in their rural area. The majority of the respondents showed positive
attitudes towards tourism. The elderly respondents recounted that inspite of some resistance
at the initial stage of tourism development during the 1970s, most inhabitants were satisfied
to see tourism coming to their village. The promoters and the government authority marketed
the tourist project well and the native population was given hopes that employment creation
in the hotel would be beneficial for people in the locality. The locals were happy and some 15
inhabitants, with little or no education, were trained and recruited by the la Pirogue hotel. As
tourism development expanded during the 1980s with the construction of more hotels,
bungalows and apartments, more jobs were created and many women were employed as
maids. According to the respondents, many locals were having two jobs. Men who were
working in the tourism sector were also part-time fishermen or agricultural labourers.
However, when the tourist sector became stabilised after some years, the hotels preferred to
get more skilled workers who came from other regions. Locals were no more given priorities
as it was the case initially.
When asked about their views on tourism development, nearly all the respondents welcomed
the improvement in infrastructural development in the area. Inhabitants felt certain
improvements in their living conditions as many facilities were put to their disposal.
Respondents availed themselves of the different facilities offered in the village. They could
easily move to the different parts of the country as the public transport system was quite
regular. However, all the four youth respondents were of the view that the village lacked
spaces for youth development. For them, there was a lack of recreational activities in the
region. The disco clubs and the restaurants were unaffordable for most of the youngsters of
the village according one youth respondent. However, the two visitors from the reunion
island were of different views. They claimed that Flic en Flac was a nice region to spend
holidays as all the necessary infrastructures are available. When asked to name some, they
gave examples of the massage saloons, the casino, the beautiful beach, the local restaurants
and the spar supermarket where provisions could be bought at low prices.
On the question regarding how they feel about living in one of the most prestigious tourist
regions of the country, all the native respondents felt that they had become strangers in their
Volume:01, Number:03, Jan-2012 : RJEBS Page 28 www.theinternationaljournal.org
own local communities. For them, the new residents who have bought lands, bungalows and
apartments treat them as low class and backward people. Whenever there is a robbery and
any crime committed, the locals are blamed in the first instance. The respondents cited
various cases where after authority inquiry it was found that in most cases the culprits were
people who worked in Flic en Flac but were citizens of other villages. Gentrification and the
influx of middle class people in areas where the poor live normally lead to the division of the
society between the ‘us and them’ phenomenon. New residents would not mix with the poor
locals and the latter are taken as scapegoats for any misfortune that hits the former. Besides,
the majority of the local respondents, particularly the four elderly ones, stated that it is the
native population of Flic en Flac who have facilitated the development and growth of so
many hotels in the village yet they have neither been recognised nor given the opportunity to
get involved in the tourism development. One of the elderly respondents, who was formerly a
community leader, argues that the authority and the tourism promoters have fooled them at
the initial stages of tourism development by promising the inhabitants that many advantages
that would be accrued to them with the development projects. The locals believed them and
accepted tourism and other related activities without resistance or complain.
When asked about the impact and influence of tourism on their culture and life style, the
youth respondents felt that due to tourism they have learnt new lifestyles and new culture.
They consider themselves to be modern. However, the majority of the respondents are of a
different view. For them, tourists’ behaviour and their dress codes have negatively affected
the traditional culture and values. Many a time, according to two respondents, their relatives
had some form of cultural shock near the beach on seeing topless female tourists. The
respondents go further to explain how some youngsters in the village do not listen to their
parents. They want to stay trendy as the visitors and they spend all their money on
fashionable products. Consequently, tensions and quarrels between children and parents have
become frequent, which in some cases lead to family breakdown.
Conclusion
From the study, it has been found that tourism is a success story in Mauritius. Since
independence, the state has given all the necessary infrastructural support to the growth and
advancement of the tourist sector for the socio-economic development of the society.
Tourism development in the rural areas has generated thousands of direct and indirect
employment for the population, particularly for the locals in coastal villages. The paper
shows that the residents of Flic en Flac welcomed the development and improvement of
infrastructure taken place in the village due to tourism development. Inspite of the positive
economic impact of tourism in the village, the local people are not given the opportunity to
participate or to get involved in the tourism development projects. Practically nothing is done
to improve the standards of the livings of the locals once the hotels start their operations. The
inhabitants also note that tourism has had some negative effects on their cultural values and
living conditions.
Recommendations
Based on the study, it is recommended that government should encourage the use of
the 2% mandatory Corporate Social Responsibility (CSR) Tax paid by the hotels and
other tourism related operators of the Flic en Flac region for the purpose of financing
local projects that will improve the welfare and living conditions of the members of
the local communities. For instance, the CSR may be used to support schooling of the
Volume:01, Number:03, Jan-2012 : RJEBS Page 29 www.theinternationaljournal.org
children from poor families and creating up to date recreational facilities for the
young people. The Ministry of Social Integration together with the Ministry of
Education and that of Gender can work in collaboration to help the local communities
to come up with viable social projects to be financed by the CSR money.
Tourism Development Policies should include training facilities and job placement
opportunities to be offered to the locals with a view to facilitate their recruitment in
the tourist sector. During school holidays, secondary level students of the rural areas
could be given the opportunities to go for job placement in the hotels against the
payment of some stipend.
.
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***
Volume:01, Number:03, Jan-2012 : RJEBS Page 30 www.theinternationaljournal.org
A PROPOSED CONCEPTUAL TQM MODEL FOR
IMPLEMENTATION TO ENHANCE BUSINESS EXCELLENCE FOR
NORTH KARNATAKA MANUFACTURING SMES
S B Mallur,
Research Scholar & Asst Prof,
M.E.D, STJ Institute of Technology,
Ranebennur-561115, Karnataka.
N L Hiregouder,
Principal,
K C College of Engineering & IT,
Nawanshahr-144514, Punjab
Bhimasen Soragaon,
Faculty Member,
Dept of Mechanical Engineering,
Ballari Institute of Technology and Management,
Bellary-583104, Karnataka.
ABSTRACT
The purpose of this paper is to present a proposed conceptual total quality management
(TQM) model for implementation to enhance business excellence for north Karnataka
manufacturing small medium-sized enterprises (SMEs). The development of this model is
based on the TQM literature review, the structured interviews, and general characteristics of
295 Manufacturing SMEs in the northern Karnataka firms. This model provides the users
with a number of practices, drawn mainly from the northern Karnataka firm‟s experiences in
general and their failures and problems in particular. The present study attempts to fill the
gap by identifying the critical factors of managing the manufacturing SMEs quality, and
proposes a holistic conceptual framework for the implementation of TQM in the
manufacturing industry. The benefits of this model helps its users in evaluating the strengths
and weaknesses of their TQM implementation, targeting their improvement areas, setting up
an action plan for improvements, and tailoring a special part to the needs of their firms. The
conceptual model for TQM implementation dedicated to the manufacturing SMEs and
guides them through from the start to end of the TQM implementation process.
Key words- Total Quality Management (TQM), Manufacturing small and Medium- Sized
Enterprises (SMEs), North Karnataka (NK), Business excellence, critical factors
Volume:01, Number:03, Jan-2012 : RJEBS Page 31 www.theinternationaljournal.org
1.0 INTRODUCTION
Total Quality Management (TQM), an evolutionary concept, has evolved with human
civilization. In recent years TQM has received attention worldwide. TQM has evolved
because of continuous change in global economic structure and hence changes in
expectations of customers. The recent trend can be attributed to the recognition of importance
of quality in global competition. TQM is viewed as an organization wide philosophy
requiring all employees at every level of an organization to focus his or her efforts to help
improve each business activity of the organization [21]. Since TQM underlines the
involvement of whole organization, it is affected by the whole organization. Whether it is
people who are working in and for the organization, the activities going in the organization or
the infrastructure facilities, everything affects TQM environment. Viewing from customer‟s
side it is the quality of product; value for the money spent and post sales facilities.
Commitment and involvement are the key issues for employer and employee. Conducive
work environment demands attitudinal changes. Similarly synchronization of activities
among departments is desirable.
Self-sassement is a compréhensive, systematic and regular review of an organization‟s
activities and results referenced against the EFQM excellence model. The self-assessment
process allows the organization to discern clearly its strengths and areas in which
improvements can be made and culminates in planned improvement actions that are then
monitored for progress. In the USA, self assessments are carried out against the Malcolm
Baldrige National Quality Award (MBNQA) model, Europe uses the European Quality
Award (EQA) model and Japan uses the Deming Prize (DP). A comparative study was
accomplished by [1] on four major quality awards: the Deming Prize, the European Quality
Award (EQA), the Malcolm Baldrige National Quality Award (MBNQA), and the Australian
Quality Award (AQA). They describe three factors that encouraged many western countries
to introduce quality awards. Thèse factor are: quality is a significant contributor to
competitive superiority; benchmarking and self-assessment are essential techniques to
improve performance; and the success of the Deming prize in Japan.
This paper presents the development of implementation model TQM in SMMEs of north
Karnataka region. The development of this model was based on the TQM literature review,
the structured interviews, and general characteristics of SMMEs in the northern Karnataka
firms. This model provides the users with a number of practices, drawn mainly from the
firms‟ experiences in general and their failures and problems in particular. The model can
assist its users in evaluating the strengths and weaknesses of their TQM implementation,
targeting their improvement areas, setting up an action plan for improvements, and tailoring a
special part to the needs of their firms.
2.0 DEFINITIONS OF TQM
Defining of what TQM really is does seem to be a tough job by itself. For instance, [23]
says TQM is “an approach to improving the effectiveness and flexibility of business
as a whole”. It is an essential way of organizing and involving the whole organization, every
department every activity every single person at every level. [14] defined TQM as a total
system approach, and an integral part of high level strategy which works horizontally across
functions and departments, involving all employees, top to bottom, and extends backwards
and forwards to include the supply chain and the customer chain. [6], considers the
Volume:01, Number:03, Jan-2012 : RJEBS Page 32 www.theinternationaljournal.org
importance of TQM for a number of reasons, viz., TQM is increasingly taught as an academic
subject; there is broad based developing body of research on TQM; TQM and quality
management are often confused; and evidence reading the „success‟ of TQM is mixed. [10]
[11] defined it as a management approach that encourages everyone in the organization to
focus exclusively upon serving the customer. [8] Defined quality management as approach
to management comprising mutually supported principles, where each of them is supported
by a set of practices and techniques. ISO 9000:2000 defined TQM as coordinated activities
aimed at the control and direction of the organization towards quality [15]. It is visible from
the various definitions that there is no unique definition of the TQM but there is a common
thread of customer satisfaction and continuous improvement in all most all definitions of
TQM.
3.0 CRITICAL SUCCESS FACTORS (CSFs) OF TQM
The critical factors of TQM are almost invariant across countries. The leaders, policy makers
and strategists, human resource managers, process managers, information managers,
marketing and supply chain managers focus on certain factors of TQM, of course, with
suitable adaptations, as critical factors that contribute to the success of TQM. The critical
factors of TQM identified are Leadership & Top Management Commitment (LTMC), Vision
and Plan Statement(VPS), Supplier Quality Management (SQM), System Process Quality
Improvement (SPQI), Total employee involvement (TEI), Education and Training(ET),
Performance appraisal, Recognition(PAR), Customer Focus Satisfaction and(CFS),
Evaluation (En), Work Environment and Culture (WEC), Continuous Improvement (CI),
and Communication(Co), with a perspective on how to use critical factors as the foundation
for driving transformational orientation in order to create a sustainable performance of
business excellence. Although, TQM is a well-established field of study for business
excellence the success rate of TQM implementation is not very high. The major reason for
TQM failure is owing to the tendency to look at TQM as tool and not as a system.
Critical success factors are indicators of what must be achieved if an institution is not only to
satisfy its customers but also move ahead on the paths of its vision statements. The past
decade has seen many firms focusing on Total Quality Management (TQM) as a means of
improving profits, market share and competitiveness. Although TQM is a proven approach
for success in manufacturing, services and the public sector, several organizations failed in
their campaigns because of many reasons like lack of top management commitment, ignoring
customers etc. It is necessary to understand what are the reliable and valid critical success
factors of TQM, and how these factors influence operational and business performances and
excellence. The most commonly used critical TQM factors cited in the literature are top
management commitment and support, customer focus, supplier‟s quality management,
design quality management, quality data reporting, usage of quality control tools, training,
work environment and culture, employee involvement, employee empowerment, quality
related training, product quality, and supplier‟s performance. Each of these critical factors has
more than one dimension.
3.1 Independent variables
Several attempts have been made to review, study, identify, justify and evaluate the critical
factors that constitute TQM strategy. As reported in the TQM literature, several review
papers have been published by researchers such as [28], [13], [3], [25], [2], [5], [31], [9],
[16], [18], [26], [30], [20], [22], [27], [24], [17], [1]and the most recent review of TQM
literature is by [4].
Volume:01, Number:03, Jan-2012 : RJEBS Page 33 www.theinternationaljournal.org
3.2 Dependent variables (business excellence)
The literature review indicated that different researchers adopted different variables for
measuring overall business excellence. To date, no uniform measures have existed.
Therefore, the constructs of overall business performance had to first be identified so that this
research could be conducted. Researchers have identified different variables used for
measuring organizational business excellence shown in Table 1.
Table1: Performance measure proposed by literature
Author(s) Measure Variables
Brah et al. (2002)
[7]
Quality
Performance
Product/service quality, Employee and
service
quality Process quality, Supplier
performance
Lakhal et al.
(2006) [19]
Organizational
Performance
Financial performance, Operational
performance
Product quality
Tari et al. (2007)
[32]
Quality outcome Customer result, People result, Quality
performance
Feng et al. (2008)
[12]
Organizational
Performance
Operational performance, Business
performance
Su et al. (2008)
[29]
Organizational
Performance
Quality performance, Business
performance
R&D performance
4.0 METHODOLOGY
The objective of this study is to development of a conceptual total quality management
(TQM) model for introduction and implementation of TQM and also to investigate the
relationship between TQM and Business Excellence (B E) in small and medium sized
manufacturing enterprises (SMMEs) in the north Karnataka region. To that end, a survey
questionnaire was developed. A total of twelve constructs were proposed, which were felt to
be important for TQM implementation. For scoring purposes, a five-point Likert scale was
employed with a score of 1= strongly disagree; 2=Disagree; 3= Neutral; 4= Agree; 5=
strongly agree, for practice (The level of perceived importance to the factory) and 1= Not
important at all; 2=Not important; 3= Neutral important; 4=Important; 5= very important for
Importance (The level of perceived importance to the factory). Having validated the
questionnaire through expert validation and pilot testing, a sample of 950 companies of small
and medium enterprises in north Karnataka region, were randomly selected from the Directory
of the north Karnataka small scale industries association (NKSSI) and the data base of the
Karnataka Small and Medium Industry Development Corporation (KSMIDEC). The full
survey, through the mailed questionnaire, and personally visited the some companies was
carried out. Although the response rate was initially not encouraging, various techniques were
used to improve the response rate including providing a stamped self-addressed envelope, and
personalization (a hand-written note) on the covering letter in the follow-up stage. As a result
responses of 315 being returned. 10 of the 315 returned responses were incomplete, resulting
in only 295 (48 medium and 247 small) responses considered for final study, i.e. 31.05% valid
response rate which the authors felt to be reasonable for this kind of study. The responses
were analyzed using the SPSS Version 11.5 statistical package
Volume:01, Number:03, Jan-2012 : RJEBS Page 34 www.theinternationaljournal.org
5.0 SURVEY RESULTS
5.1 General profile of the company
Table 1 shows that the respondents of small and medium sized companies. Respondents from
small-sized companies, defined in this study the investment in plant and machinery is more
than twenty five lakhs rupees but does not exceed rupees 5 cores. This is followed by
medium-sized companies the investment in plant and machinery is more than rupees 5 cores
but not exceeding Rs.10 cores.
Table: 1 Classification of respondents by type of company
Type of Company Respondents
Number Percent
Small 247 83.7
Medium 48 16.3
Combined 295 100.0
Source: Research Survey Data
Table 1 indicates the classification of respondents by type of companies. It is evident from
the finding that higher percentage (83.7%) of small type of companies established as
compared to 16.3% groups of industries focused as medium manufacturing enterprises.
Table.2 indicates the classification of respondents by type of group of industries. It is evident
from finding that straightly higher percentage (76.6%) of non ISO groups of industries
focused as compared to ISO (23.4%).
Table: 2 Classification of respondents by type of groups
Groups Respondents
Number Percent
ISO 69 23.4
Non ISO 226 76.6
Combined 295 100.0
Source: Research Survey Data
6.0 RELIABILITY ANALYSIS
Using the SPSS reliability analysis procedure, an internal consistency analysis was performed
separately for the items of each critical factor. Cronbach‟s alpha is commonly used for this
purpose. Values of Cronbach‟s alpha range between 0 and 1.0. Higher values indicating
higher reliability. The value of each variable, as measured by each statement on the scale
of 1 to 5, is computed using the reliability analysis procedure shown in Table 3. The
alpha values range from 0.8259 to 0.9148, which indicates an internal consistency with
the alpha value of more than 0.70, so no items were dropped from each variable. These
results are therefore acceptable and are a reliable.
Table: 3 internal consistency analyses
Quality management
practice
No. of
items
Alpha
value
Item for
deletion
Alpha if item
deleted
LTMC 7 .8818 none .8833
VPS 7 .8511 none .8532
SQM 6 .9023 none .9019
SPQI 6 .9064 none .9065
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TEI 7 .8506 none .8546
ET 7 .8653 none .8606
PAR 7 .8639 none .8608
CFS 7 .9188 none .9193
En 9 .9019 none .9017
WEC 9 .9270 none .9262
CI 7 .9090 none .9089
Co 5 .8421 none .8437
Total 84 0.885 none 0.885
Source: Research Survey Data
7.0 A THEORETICAL TQM IMPLEMENTATION MODEL From extensive review of total quality management literature, the external and internal
environment affecting an organization‟s quality performance and the twelve critical success
factors of TQM are identified. Based on the critical success factors of TQM, a theoretical
TQM model is developed. This model describes the primary quality management methods
which may be used to assess an organization‟s present strengths and weaknesses with regard
to its use of quality management methods.
Fig.1: Theoretical TQM implementation model on TQM extension practices and BE Using this model as a basis for this research, a proposed TQM implementation model in small
and medium sized manufacturing enterprises is shown in Fig.1. The degree of
implementation of quality principles (84 variables) has been measured using a five-point
ELEMENTS OF BE
SOE
QOP
SBP
SOC
F1. LTMC
F3. SQM
F2. VPS
F6. ET
F5. TEI
F4. SPQI
F11. CI
F7. PAR
F8. CFS
F10. WEC
F9. En
F12. Co
BUSINESS EXCELLENCE
(BE)
Volume:01, Number:03, Jan-2012 : RJEBS Page 36 www.theinternationaljournal.org
scale. The level of implementation of twelve TQM factors will then be determined by
calculating the averages of the scores of the corresponding variables.
8.0 DEVELOPMENT OF THE CONCEPTUAL TQM MODEL FOR
IMPLEMENTATION
Of all the critical success factors considered, leadership and top management commitment is
of critical importance. The present work, based on the foregoing thorough review of the
prescriptive, conceptual, practitioner and empirical literature on TQM spanning over many
research articles, identifies twelve critical factors of quality management as critical for the
institution of a TQM environment in manufacturing organizations. The following critical
success factors (CSFs) are identified from the literature survey and through discussions with
the CEO and managers of small and medium manufacturing enterprises of northern
Karnataka and experts from management and engineering institutions.
Leadership & Top Management Commitment (LTMC).
Vision and Plan Statement (VPS).
Supplier Quality Management (SQM).
System Process Quality Improvement (SPQI).
Total Employee Involvement (TEI).
Education and Training (ET).
Performance Appraisal, Recognition (PAR).
Customer Focus and Satisfaction (CFS).
Evaluation (En).
Work Environment and Culture (WEC).
Continuous Improvement (CI).
Communication (Co).
Thus, the proposed TQM model consists of twelve critical factors (independent) of
TQM that are identified, help to understand on how to use critical factors as the foundation
for driving transformational orientation in order to create a sustainable performance of
business excellence. Following are the four elements (dependent) of business excellence.
Satisfaction of Employee (SOE).
Quality of Product (QOP).
Satisfaction of Customer (SOC).
Strategic Business Performance (SBP).
Independent critical factors can be broadly grouped under four categories as follows.
Step 01: Drive to preparation and awareness
- Leadership & top management commitment.
- Vision and plan statement
- Total employee involvement
- Continuous improvement
Step 2: Focus to asses & develop
- Customer focus and satisfaction
Step 3: Standardize, improve and review
- Education and training
- Work environment and culture
- Supplier quality management
- Communication
Volume:01, Number:03, Jan-2012 : RJEBS Page 37 www.theinternationaljournal.org
Step 4: Prepare to implement
- Performance appraisal and reorganization
- System process quality management
- Evaluation and measurement analysis
The conceptual TQM model helps to understand the overall business excellence in
terms of Satisfaction of Employee (SOE), Quality of Product (QOP), Satisfaction of
Customer (SOC), and Strategic Business Performance (SBP). North Karnataka SMMEs can
optimize the use of this model by blending it with and applying it to their own situations,
because SMMEs are different in terms of their people, goals, structure, products, services,
and processes, allowing their own methods to better suit their situations and consequently
develop their own ways to business excellence. Thus this model shows that the application of
critical factors of TQM practices in combination can lead to improvements in overall
business excellence.
The conceptual TQM model is divided into four main steps, all of which need to be
addressed once the motivation for TQM has been identified from top management
commitment. The motivation will set the overall strategic direction of TQM and influence the
relevant importance of each part of the TQM model. Of the four steps of the TQM model the
first one: „drive to preparation and awareness‟, includes leadership & top management
commitment, vision and plan statement, total employee involvement, continuous
improvement; the second one: „focus to asses and development‟, include customer focus &
satisfaction; the third one: „standardize, improve and review‟ includes education and training,
work environment and culture, communication, supplier quality management; and the fourth:
“prepare to implement”, includes performance appraisal & recognition, system process
quality improvement, evaluation & measurement analysis. These independent critical factors
are, in essence, are tools of the intellect that have been forged in the administrative theory,
tempered in manufacturing quality management. „Business excellence‟ and „Changing the
culture‟ are the elements which must be considered at all stages, not only in the initial
organizing activities, but also primarily results from the other initiatives described, interacts
with them throughout the process, and will evolve with the organization‟s operating
experience of TQM. People, both as individuals and working in teams, are core to TQM and
without their skills and endeavors continuous improvement will simply not occur.
A diagrammatic representation of the TQM model is given in fig. 2. The performance
of the system (output or business excellence) should be constantly measured using metrics,
and should be evaluated and analyzed with respect to benchmarks that are set up, and a
feedback is given to the system for taking corrective steps. The comments (feedback) from
the customer, regarding the delivered products, along with their suggestions and new
requirements, are again fed into the system for its enrichment. All the factors that are
discussed above are vital components for quality improvement, and are derived from the
literature and through interaction and discussions with the managers.
9.0 TQM IMPLEMENTATION METHODOLOGY
There are four major steps that TQM typically implemented. TQM is a process that never
ends and establishing organization wide TQM generally takes three or more years. The
various steps involved in attaining total quality management in small and medium sized
manufacturing enterprises are explained as below.
9.1 Step 01: Drive to Preparation and Awareness
It is concerned with gaining thorough knowledge of what can and what should be expected
from introduction of TQM and its implementation.
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At this stage, particular attention is required first at management‟s commitment for quality in
all aspects through a vision and plan statement which describes how a company wants to be
seen in its chosen business, by total employee involvement and continuous improvement and
by creating working environment for quality management.
9.2 Step 2: Focus To Asses & Develop
A successful organization recognizes the need to put the customer first in every decision
made. The key to quality management is maintaining a close relationship with the customer,
in order to determine fully the customer‟s needs, as well as to receive feedback on the extent
to which those needs are being met. Thus, it is very important to find customer satisfaction
and customer perception of quality. The insights gained can clearly help the organization to
improve quality.
9.3 Step 3: Standardize, Improve and Review In this stage step up the planned implementation programme, step by step quality is people &
if any institution is really people oriented, it needs plenty of words to describe the way the
people ought to treat one another. Communication is on expression of teat and confidence in
people and inducer cooperation involving people assisting the trust and confidence in people
and inducers cooperation involving people assisting the each other not because they perceive
their long term goals to be identical but because they seem to realize that their own welfare
lies in not harming each other‟s interest.
Communicating the company‟s total quality management performance to vendors involve
some basic principles that care used to communicate the programme intentionally, i.e.
Vendors must be led to appreciate the benefits to be gained by using TQM. For this purpose
companies can publish alternative brochures and even conduct vendors clean it for
encouraging their supplies to join with them in specific quality improvement and quality
management programmes. All these programmes are based on the principles & benefit from
good purchaser vendor relationship.
For improving production and quality in any organization key techniques are based on
quantities data. There are many quantities techniques for the process control and
improvement but these are generally referred as seven basic tools. Some of these techniques
are data related to input, process and output are obtained in respect of certain parameters for
quantities analysis facilities decision making in improvements in the process for better
production quality, efficiency and cost effectiveness.
9.4 Step 4: Prepare To Implement Rewards are the form of employee‟s involvement in which the organization identifies and
recognizes the employees who have made positive contribution in the success of the
organization. The reward should be commensurate to the situation and level of achievement,
i.e. the higher the achievement, the higher the reward. Recognition and rewards can be in
many forms but it is always better to develop new ideas to suit the local situation for
recognition. In many of the responding companies, rewards range from simple handshake or
pat on the back to banquets in honor of the individual or team. The rewards are appropriately
presented so that fellow employees know about it.
Thus integrating the efforts at various levels and using the above factors of TQM
implementation as the foundation and pillars of an implementation strategy an organization
can plan a transition to total quality management culture. By using the above model, it is
hoped that north Karnataka companies shall be able to implement TQM in a systematic
manner.
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Fig. 2: A conceptual TQM implementation model for implementation in the small and
medium sized manufacturing enterprises (SMMEs)
IMPROVEMENTS IN
Results
(Dependent
variables)
Legend: SOE: Satisfaction of Employee
QOP: Quality of Product
SOC: Satisfaction of Customer
SBP: Strategic Business Performance
CSFs: Critical Success Factors
CF: Critical factors
QOP
SBP
SOC
SOE
Elements of
Business
Excellence
--Leadership & Top Management Commitment.
--Vision and Plan Statement. --Total Employee Involvement
--Continuous Improvement
--Customer Focus & Satisfaction
--Performance Appraisal & Recognition
--System Process Quality Improvement.
--Evaluation &Measurement Analysis
--Education and Training.
--Work Environment and Culture.
--Communication. --Supplier Quality Management.
.
STEP I
DRIVE TO
PREPARATION, AND
AWERENESS
FOCUS TO ASSES
&DEVELOP
STANDARDISE,
IMPROVE & REVIEW
PREPARE TO
IMPLIMENT
FEED
BACK
C
S
Fs
Critical factors
for TQM
implementation.
(Independent
variable)
LEADS TO
BUSINESS EXCELLENCE
Out put
STEP IV
STEP II
STEPIII
CUSTOMER
NEEDS
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9.5 Elements of Business Excellence
Total quality management (TQM) has been proposed to improve business excellence and
received considerable attention in recent researches. Business excellence (B E) is a
systematic approach to achieving and sustaining business improvement and organizational
growth. The business excellence way of working is based on total quality management
principles, particularly the focus on balancing stakeholder‟s interests, collaboration and
continuous improvement.
This study empirically examines the extent to which TQM and business excellence are
correlated and how TQM impacts various levels of business excellence. In this study, a
conceptual TQM model is developed according to a literature review. This conceptual TQM
model demonstrates the relationship between critical factors of TQM and business excellence
through examining the direct and indirect effects of twelve critical factors TQM on four
different levels of business excellence. The proposed conceptual TQM model and hypotheses
were tested by using data collected from information-related small and medium sized
manufacturing enterprise (SMMEs) in the north Karnataka.
9.5.1 Satisfaction of Employee (SOE)
Satisfaction of employee is the terminology used to describe whether employees are happy
and contented and fulfilling their desires and needs at work. Employee satisfaction is also a
measure for how happy the workers are with their job and working environment. Keeping the
morale high among workers can be of tremendous benefit to any company, as happy workers
will be more likely to produce more, take fewer days off, and stay loyal to the company.
There are many factors in improving or maintaining high employee satisfaction, which the
wise employers would do well to implement. Job security, Equity, fairness, and equal
opportunities, recognition and reward schemes, leadership style and ability, relationships with
coworkers, promotion opportunities, and other factors may improve employee satisfaction.
9.5.2 Quality of Product (QOP)
According to Garvin (1987), product quality consists of eight dimensions: performance,
features, reliability, conformance, durability, serviceability, aesthetics, and perceived quality.
Performance refers to operating characteristic of a product. Feature refers to additional
characteristics that supplement a product‟s basic function. Reliability reflects the probability
of a product being available for use or failing within a specified period of time. Next,
conformance refers to the degree to which product design and operating characteristic meet
the predetermined standard. Durability can be defined as the amount of use one gets from a
product before it deteriorates. While serviceability reflects speed, courtesy, competence and
ease of repair. Aesthetics refer to personal judgment of appearance of products, their sound,
taste or smell. Lastly, perceived quality is about the reputation of the provider.
9.5.3 Satisfaction of Customer (SOC)
It is important to focus on the customer, both internal and external i.e., the employees and the
users of the end product. A successful organization recognizes the need to put the customer
first in every decision made. Customer satisfaction can be measured by comparing product
quality and service quality with those in the other firms in the same industrial sector. Use of
customer satisfaction information can provide a focus and direction for continuous
improvement throughout the entire firm. Such information can be used to improve TQM
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implementation efforts, seek opportunities to improve product and service quality, and study
the time dimension of TQM implementation. The ultimate measure of company performance
is customer satisfaction. Thus, it is very important to find customer satisfaction and customer
perception of quality. The insights gained can clearly help the organization improve quality.
9.5.4 Strategic Business Performance (SBP)
Total Quality Management (TQM) tries to meet customer expectations. TQM is a strategic
way for revamping the operations of organization for the above goal. It means that TQM is
not an addition to anything else. In short, TQM is an organizational strategy formulated at the
top management level and then implemented throughout the organization. The overall
success of TQM depends upon different major steps such as achieving total quality in Human
Resource Management, total Quality in Business Strategy, TQ Business Process Management
etc. Annual sales growth, Profits, market share is typical measures of strategic business
performance.
10.0 ESTABLISHMENT OF RELATIONSHIP BETWEEN INDEPENDENT
VARIABLES WITH DEPENDENT VARIABLES FOR BUSINESS EXCELLENCE.
Literatures on total quality management practices and organizational business excellence are
abundant. Organizations are motivated to embrace quality management practices with the
principle objective to achieve improved organizational business excellence. Generally, these
studies are mainly focused on large organizations and the majority of the studies are on
organizations in developed economy. There is less number of studies of quality management
practices on small and medium enterprises. The objective of this theoretical TQM
implementation model is to show the critical success factors that influence organizational
business excellence for small and medium enterprises when they are adopting standard based
TQM as a system of their quality management practice. The primary thrust in this proposed
study is to enable the findings of this research to be utilized as guidance to organizations and
consultants to establish and prioritize the critical success, factors that should be addressed in
order to achieve improved organizational business excellence. Identifying and prioritizing to
address the critical success factors as the determinant of organizational performance would
enable small and medium enterprises to improve in quality management practices.
The proposed TQM implementation model for the research is illustrated in the model
shown in Figure 7.2. Organizational business excellence will be the Dependent Variable
(DV) and the critical success factors for standard based management are the Independent
Variable (IV).
10.1 Independent variable (Critical Success Factors)
The conceptual TQM model for this study addressed the critical success factors on
organizational business excellence for small and medium enterprises that adopt quality
management practices using standard based management systems. The critical success
factors for quality management developed by a number of authors had been be utilized for
this study.
10.2 Dependent Variables (organizational business excellence)
Organizational business excellence (Neely, Gregory & Platts, 1995) can be defined as the
process of quantifying the efficiency and effectiveness of action, and „performance measure‟
as a metric used to quantify that action. In Total Quality Management and quality
importance of performance indicators has been highlighted as important criterion in
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achieving quality excellence. Quality measures are seen to represent the most positive step
in broadening the basis of business excellence measurement (Bogan & English, 1994).
11.0 THE IMPORTANCE OF THE STUDY
Small and Medium Enterprises often are constrained by their resources such as financial,
manpower and time to embark on quality management practices. Adoption of TQM system
is perceived as an economical option to embrace quality management practices in the
organization. Knowledge and understandings of the critical success factors of TQM system
on organizational business excellence for small and medium manufacturing enterprises will
facilitate to influence or establish the determinants for the success of small and medium
enterprises in their organizational quality practices in their pursuit for organizational
competitiveness, and consequently, organizational business excellence. These determinants
will be utilized as prescriptive measures for the small and medium enterprises in their
strategic decision makings in order to achieve positive organizational excellence. It is
anticipated that, small and medium enterprises that focused on these critical success factors
would be able to economically concentrate to enhance these factors in order to economically
achieve their quality management exercise.
The relationship between twelve independent variables with dependent variables
(business excellence) comprising of four components. The final findings indicate that there
exits positive higher significant relationship between independent variables with business
excellence for both small and medium companies and ISO and non ISO certified companies.
11.1 Perceived relationship between independent and dependent variables (Small and
Medium)
The findings indicate that there exits positive higher significant relationship between
independent variables with business excellence for both small and medium manufacturing
enterprises.
Table 4: Relationship between independent and dependent variables (Small and
Medium sized manufacturing enterprises)
Sl. No Aspect Relationship with Business Excellence (r)
Small (n=247) Medium (n=48)
1 LTMC 0.790 0.822
2 VPS 0.741 0.860
3 SQM 0.852 0.807
4 SPQI 0.795 0.786
5 TEI 0.757 0.853
6 ET 0.869 0.888
7 PAR 0.807 0.837
8 CFS 0.727 0.732
9 En 0.895 0.930
10 WEC 0.789 0.650
11 CI 0.778 0.759
12 Co 0.532 0.594
Source: Research Survey Data r = Correlations co-efficient
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It is evident from the chart (establishing) under which establishes the relationship between all
twelve independent variables with dependent variables (business excellence) comprising of
four components. The final findings indicate that there exits positive higher significant
relationship between independent variables with business excellence for both small and
medium companies (Table 4).
11.2 Practice relationship between independent and dependent variables (Small and
Medium)
Table 5: Relationship between independent and dependent variables (Small and
Medium sized manufacturing enterprises)
Sl. No Aspect Relationship with Business Excellence
(r) Remarks
Small (n=247) Medium
(n=48) Com
(n=295)
1 LTMC 0.879 0.923 0.796
2 VPS 0.891 0.953 0.764
3 SQM 0.921 0.893 0.843
4 SPQI 0.867 0.845 0.790
5 TEI 0.894 0.939 0.775
6 ET 0.954 0.949 0.872
7 PAR 0.937 0.965 0.810
8 CFS 0.912 0.935 0.727
9 En 0.955 0.948 0.901
10 WEC 0.934 0.935 0.761
11 CI 0.929 0.940 0.773
12 Co 0.886 0.901 0.541
Source: Research Survey Data r = Correlations co-efficient
It is evident from the chart (establishing) under which establish the relationship between all
twelve independent variables with dependent variables (business excellence) comprising of
four components. The final findings indicate that there exits positive higher significant
relationship between independent variables with business excellence for both small and
medium companies (Table 5).
11.3 Relationship between critical success factors (independent) and dependent
variables (ISO and Non ISO)-Perceived
It is evident from the chart (establishing) under which establish the relationship between all
twelve independent variables with dependent variables (business excellence) comprising of
four components. The final findings indicate that there exits positive higher significant
relationship between independent variables with business excellence for both ISO and non
ISO companies (Table 6).
Table 6: Relationship between critical success factors (independent) and dependent
variables (ISO and Non ISO)
Sl. No Aspect Relationship with Business Excellence( r)
ISO
(n=69)
Non ISO (n=226)
1 LTMC 0.817 0.838
2 VPS 0.505 0.852
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3 SQM 0.793 0.852
4 SPQI 0.761 0.818
5 TEI 0.772 0.768
6 ET 0.957 0.820
7 PAR 0.908 0.768
8 CFS 0.409 0.837
9 En 0.878 0.916
10 WEC 0.796 0.794
11 CI 0.981 0.651
12 Co 0.910 0.321
11.4 Relationship between critical success factors (independent) and dependent
variables (ISO and Non ISO)-Practice
Table 7: Relationship between critical success factors (independent) and dependent
variables (ISO and Non ISO)
Sl. No Aspect Relationship with Business Excellence( r)
ISO
(n=69)
Non ISO (n=226)
1 LTMC 0.817 0.838
2 VPS 0.505 0.852
3 SQM 0.793 0.852
4 SPQI 0.761 0.818
5 TEI 0.772 0.768
6 ET 0.957 0.820
7 PAR 0.908 0.768
8 CFS 0.409 0.837
9 En 0.878 0.916
10 WEC 0.796 0.794
11 CI 0.981 0.651
12 Co 0.910 0.321
It is evident from the chart (establishing) under which establish the relationship between all
twelve independent variables with dependent variables (business excellence) comprising of
four components. The final findings indicate that there exits positive higher significant
relationship between independent variables with business excellence for both ISO and non
ISO companies (Table 7).
12.0 VALIDATION OF PROPOSED TQM IMPLEMENTATION MODEL
THROUGH REGRESSION USING ESTIMATION PROCEDURES
This is the final section of the research study that designed to validate and evaluate the
proposed conceptual TQM implementation model based CSFs of TQM. The manager of the
company gave the perceptions, comments, criticisms, and suggestions to the conceptual TQM
model. The comment made by the company about the conceptual TQM implementation
model was regarding the overall acceptability of the conceptual TQM model. The company
agreed that the role of top management commitment is an important role to play in
implementing the TQM program. Top management commitment alone, without vision and
plan statements, employee involvement in process, continuous improvement, customer focus
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and satisfaction, education and training, work environment and culture, supplier quality
management and other CSFs will not bring the program into success of business excellence.
In statistical theory it is always ascertained with 10% of the main sample accounted for
the validation of the research tool. Hence small and medium companies sample subjected has
been considered. Thirty (n=30) companies were selected and subjected for validation. Further
the model was formulated considering all the factors. The assessment of factors collected
from the selected thirty companies and received back with responses. The model so
constructed with the appropriate validation can be made use in the entire relevant field which
found to be more appropriate and suitable. The model is also further helpful in the predictions
aspects. The validation of the proposed TQM implementation model was undertaken through
a case study involving thirty SMMEs with the objective of establishing relationship between
independent variables and dependent variables.
The predicted business excellence (BE) value comprising twelve critical factors
worked using simple regression co-efficient. This estimated value is has been compared with
business excellence for sample size n=295+30=325. To ascertain the goodness of fit or on par
results between absorbed business excellence and predicted business excellence values the χ2
test is employed.
The computed χ2value found to be 3.74 is with lesser compared to χ2 table value
(3.86). Hence it can be concluded that the absorbed business excellence in relation to
predicted business excellence found to be non significant. However it can be concluded that
the validity component found to be stronger in establishing the difference between absorbed
BE and predicted BE as non significant. The overall predicted BE worked to be 3.43(X)
subjected for 95% confidence interval to estimate the population parameters (µ) ranges
between 3.10 to 3.86. The range of value of the confidence interval depicts the narrow
difference with responses to predicted business excellence value. With the procedure
followed above with actual and predicted value of BE resulting with strong validation with
respect to the component BE excellence under study. Hence, this conceptual TQM model can
be utilized to the North Karnataka region as the sample selected is appropriate and
Representing the same region.
13.0 VALIDATION METHODOLOGY
T-tests are statistical tests that are used to determine whether there are significant differences
between two groups with respect to a given endpoint. Most calculators and spreadsheets have
functions that will calculate the t-value for once enter the data. However, t-values are
relatively easy to calculate, especially if the sample numbers are small. Once calculate a t-
value it can determine whether there are statistically significant differences.
Calculate the mean for each of the samples. To do this, add all the values in each sample and
divide by the number of values present
Explicit expressions that can be used to carry out various t-tests are given below. In each
case, the formula for a test statistic that either exactly follows or closely approximates a t-
distribution under the null hypothesis is given. Also, the appropriate degrees of freedom are
given in each case. Each of these statistics can be used to carry out either a one-tailed test or a
two-tailed test. Once a t value is determined, a p-value can be found using a table of values
from t-distribution. If the calculated p-value is below the threshold chosen for statistical
significance (usually the 0.10, the 0.05, or 0.01 level), then the null hypothesis is rejected in
favor of the alternative hypothesis.
(Avg. of business excellence) - (presumed avg. predicted business excellence.)
t = -----------------------------------------------------------------
(S D of sample) / (sq. root of sample size)
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For above equation, the differences between all pairs must be calculated. The pairs are either
one person's pre-test and post-test scores or between pairs of persons matched into
meaningful groups (for instance drawn from the same family or age group: see table). The
average (XD) and standard deviation (SD) of those differences are used in the equation. The
constant μ0 is non-zero if you want to test whether the average of the difference is
significantly different from μ0. The degree of freedom used is n − 1.
13.1 Calculating the T-test for Comparing Two Means
The t-test is often used to calculate the significance of observed differences between the
means of two samples. The t-test is generally used with scalar variables, such as length and
width, and so on. The null hypothesis is that there are no significant differences between the
means.
1) First, calculate the variance in each of your samples:
Calculate the sample variance, which is an indicator of how much variability there is in
responses, for each of the samples. To calculate the variance, subtract the mean from the first
value, then square it and divide by the number of samples in the set minus one. Continue to
do this for the second value, and then the third, continuing until you have a value for each
sample, then add them all together. In math terms, the variance
(s2) = the sum of (x(1) -- x(mean)) / (n-1).
(χ2 cal. value) = the sum of BE – x (mean of predicted BE)) / (n-1).
2) Second, calculate the t-value
Calculate the t-value by taking the absolute value of the mean of sample one minus the mean
of sample two. Divide this value by the following: the square root of the variance of sample
one divided by the variance of sample one added to the variance of sample two divided by the
variance of sample two. This will give you a single t-value with which you can determine
significance by looking on a t-table.
Formula for the t-test
3) Third, calculate the degrees of freedom
Calculate the degrees of freedom by adding the samples of both means (n) which leads to the
overall sample size (N), and subtract 1.
N = n1 +n2 and df = N –1
4) Compare your t-value with the critical t-value
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Compare the t-value and calculated with the t-value associated with the appropriate degrees
of freedom. If the t-value is greater than the t-value reported in the table, this indicates that
the two samples are significantly different from one another.
For a given df, if your t-value is larger than the value in the table, the null hypothesis of no
difference between the means should be rejected. Again, biologists use a p-value of 0.05 or
less as an indicator of significance.
5) Report the results of the t-test
The calculated t-value is less than t-tabulated value (1.96), the finding reveals the both the
estimated methods under the package found to be similar and identical.
Predicted business excellence (mean) less than compared with 95% Confidence Interval (C
I) found to be (3.10) less than that (3.42) less than that (3.86).
Calculated χ2 value is less than tabulated χ2 value is Non Significant.
Hence Validated
14.0 RESULTS AND DISCUSSION From the analysis in the previous sections it is evident that the following inferences can be
drawn.
A conceptual implementation model for TQM implementation in the north Karnataka context
has been derived based on the discussion of the findings of the investigations of the practices
of north Karnataka organizations and knowledge of the literature. The conceptual
implementation model illustrates the relative criticality of the critical quality factors and their
interrelationships, and the conceptual implementation model is constructed using inputs from
the north Karnataka organizations, in order to offer north Karnataka management relevant
guidelines for decision making for TQM implementation.
This research study makes several contributions. The study proved the positive
relationship between TQM practice and all the various measures of manufacturing objective
attainment, as well as organizational business excellence improvement, revealing the strong
linkage of TQM and manufacturing objective as well as organizational business excellence.
Most of the critical quality factors identified and used in the construction of this
conceptual implementation model are used in other current conceptual model of
implementation provided by researchers, experts and consultants, and national quality
awards.
The proposed TQM model is comprehensive model comprising twelve critical factors and
aspects of TQM, and four elements of business excellence.
This chapter empirically examines the extent to which TQM and business excellence
are correlated and how TQM impacts various levels of business excellence. The relationship
between twelve independent variables with dependent variables (business excellence)
comprising four components indicate that there exits positive higher significant relationship
for both small and medium companies and ISO and non ISO certified companies.
To ascertain the goodness of fit or on par results between absorbed business excellence
and predicted business excellence values the χ2 test is employed. The computed χ2value
found to be 3.74, which is lesser compared to χ2 table value (3.86). Hence it can be
concluded that the absorbed business excellence in relation to predicted business excellence
found to be non significant.
The actual and predicted value of BE resulting with strong validation with respect to the
component BE under study. Hence, this conceptual TQM model can be utilized to the North
Karnataka region as the sample selected is appropriate.
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15.0 CONCLUSIONS
This research paper presented a model for implementing TQM in small and medium sized
manufacturing enterprise to achieve business excellence. The model is an integration of the
twelve critical factors and four elements of business excellence, which cover all the groups
for total quality management implementation. The analysis has established a high positive
relationship between independent variables and dependent variables of business excellence
for both small and medium enterprises and ISO and non ISO certified companies.
The validation of the model using regression analysis and ANOVA technique has clearly
established the difference between absorbed business excellences (BE) and predicted BE as
non-significant thereby confirming the valid for application in this region. However, the
holistic approach adopted in this model makes it suitable application in any part of the
country.
The final part of the TQM implementation model is the outcomes. It is hoped that at the
end of the implementation of the TQM implementation model, organization can satisfy its
customer and achieve continuous improvement in order to achieve business excellence to be
competitive in the world competition. TQM implementation model system also focuses in
helping a company grow and on focusing efforts on continually increasing profits.
To conclude, the proposed TQM implementation model can assist its users in evaluating
the strengths and weaknesses of their TQM implementation, targeting their improvement
areas, setting up an action plan for improvements, and tailoring a special part to the needs of
their firms.
ACKNOWLEDGEMENT
The authors are greatly indebted to all the small and medium sized enterprises of North
Karnataka who responded enthusiastically to our survey. Without their active involvement,
this research study would not have been successful. We are also grateful to the Research
Center at B.V.Bhoomaraddi College of Engineering & Technology, Hubli, for facilitating the
conduct of this study.
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INDIAN BPO- A STEADY GROWTH IN RECESSION PERIOD -
WITH RESPECT TO REVENUE GENERATED
Mr. S. D. More
Research Scholar
Vivekanand College Kolhapur
Co-ordinator YCMOU Nashik
Dr. U.M. Deshmukh
Research Guide
Chh. Shahu Inst. Of Business Edu. & Research,
Kolhapur.
Abstract
The Indian BPO companies are the important sectors in which the 37 percent growth is
observed in last three years and various companies are now looking for the varied jobs
through the outsourcing assignments with in and out side the country. This paper highlights
on the BPO industry in India its growth and sector wise share of the companies. The
dynamisms of the industry and various risks and suggestions for making the BPO a largest
revenue attracter for this decade.
The time when much part of the world is facing recession , the Indian BPO has also shown
courage to maintain and grow steadily in this hard times. The advantage lies in hard working
capacity of Indian employees with skills in language and ICT facilities in this year.
The authors have done the decent effort to highlight the Indian BPO with respect to its
growth, prospectus and problems so that the
Volume:01, Number:03, Jan-2012 : RJEBS Page 52 www.theinternationaljournal.org
Introduction :-
Business Process Outsourcing (BPO) can be defined as the act of utilizing services of third
party by a company in short even a small function like birthday celebration may also be
outsourced for few activities in the main task and in the mean time your time and efforts may
be reduced of course with some cost. Nowadays many companies can not perform all the
tasks in the company itself due to cost and expertise, the outsourcing in short is a old
tradition followed even in ancient India and various tasks were performed through the skilled
people.
Most popular services are Data Capture, call center , document management , and recent
emerging areas like KPO , LPO, and e-learning. Many other countries like China, the
Philippines and few other countries including America are giving stiff competition to Indian
BPO sector. This paper highlights on the status of Indian BPO Sector merger and acquisition
adopted as growth strategy by India BPO Companies and risks with its solutions are also
given to benefit the BPO companies .
Growth of BPO an Overview
The economic crises all over the world also has some effect on Indian BPO sector but still
following figures shows the gradual growth I revenue coming out of BPO companies in
India. The IT Industry grew globally by 5.6 percent in 2008 and reached $ 1.6 trillion .
Software and services grew by 6.3 percent and is $ 1 trillion in 2008. Globally BPO grew by
12 percent in 2009 and reached $71.6 billion. Total software and services had shown a
growth of 10.5 percent in 2009 as compared to 32 percent in 2008. BPO has shown the
growth of 18 percent and it is highest among all the segments in IT industry in India.
Segment wise IT Revenue ($Billion)
Company Amount Year
IT services 13.5 2005
17.8 2006
23.3 2007
31 2008
35.2 2009
BPO 5.2 2005
7.2 2006
9.5 2007
12.5 2008
14.8 2009
Engineering Services 3.8 2005
5.3 2006
6.5 2007
8.6 2008
9.5 2009
Volume:01, Number:03, Jan-2012 : RJEBS Page 53 www.theinternationaljournal.org
Source :Nasscom Directory
According to NASSCOM worldwide IT revenue is expected to be $12 trillion by 2012
whereas the BPO worldwide revenue is expected to touch $ 181 billion by 2012. In India
total IT revenue is expected to touch $ 132 billion and BPO share would be around $30
billion by 2012. The domestic IT BPO revenue is expected to reach Rs. 2,00,000 crores ($50
billion) by 2012.
Indian export is also growing at steady space. Total IT BPO export has reached $ 47.3 billion
in 2009 i.e. it has shown growth of 16 percent.
Region wise Export Revenue Received to India
Region Percentage of Revenue Year
America 68.30% 2005
67.18% 2006
61.00% 2007
60% 2008
Europe 23.10 % 2005
25.14 % 2006
30.10 % 2007
31 % 2008
Rest Of World 8.60 % 2005
7.69 % 2006
8.50 % 2007
9.00 % 2008
Source : NASSCOM Directory
IT-BPO Revenue ($ Billion)
IT Revenue Year BPO Revenue
37.4 2006 7.2
47.8 2007 9.5
64 2008 12.5
71.7 2009 14.8
132 2012 30
Source : NASSCOM Directory
Indian BPO has shown the steady growth over a period of last five years and it is motivating
to know the future growth in the Indian BPO during future.
Hardware 5.6 2005
7.1 2006
8.5 2007
12 2008
12.1 2009
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The Present Problems in Indian BPO :-
Stress Related Problems
The BPO industry has been facing the problem of good health due to working hours and long
term seating with exposure to computers and other devices for interacting with the clients.
From sleep disorders to digestive problems, from back aches to depression, everything has
been associated with many nights stay in offices .
The long working hours, erratic timings, travel time, work pressure and insufficient breaks
have always been the factors causing stress amongst the BPO goers. And when you add lesser
amount of money over and above these factors, the stress increases manifold. The employees
in the BPO sector really work hard during office hours.
The sleep is the main cause of stress related problems in BPO ans stress after all does affect
your sleep, as our survey reflects. While only 32% people complained of sleeping disorders
in the 2008 survey, the figure has taken a massive jump this year with 44.5% of the people
surveyed complaining of sleep related problems. The number of people with digestive
disorders has also gone up from 21 % to 28% this year.
However, it's not that companies are not aware of the health issues. Most companies ate
offering benefits like free health checkups, regular tests, etc. Also, a lot of them have
switched on to the concept of non-smoking premises to keep their employees off cigarettes.
And yes, even the health minister is at it. Who knows, there might be a separate health policy
for the night walkers soon. The Insurance policies are also given which deal with health
related coverage to the employees of the BPO Sector.
Conclusion
The Indian BPO industry has really shown the steady and encouraging growth in this period
of time when the whole world is facing recession due to various reasons. The effect of this
has given the boost to Indian BPO companies to show their skill and make the world wide
impact of the hard working and intelligent youth of the country.
The problems of the health of the BPO employees have also shown the concern about their
future diseases which will be of course taken care by employers by giving the best share in
terms of salary, off time and good working conditions for the employees. The Global
environment in the coming decade will also make positive effect on Indian BPO due many
favorable conditions as compared to other countries.
The authors feel that the research in this sector will revel very interesting points which can be
used for making positive developments in this sector.
Volume:01, Number:03, Jan-2012 : RJEBS Page 55 www.theinternationaljournal.org
References :
1) Donald R. Cooper , Pamela S. Schindler – Business Research Methods – 9th
edition
Tata McGraw-Hill Publishing Company Limited – 2006 ISBN 978-0-07-062019-3.
2) ICFAI March , 2007 - Banking Operations ISBN :81-7881-609-1
3) Tas, J. & Sunder, S. 2004, Financial Services Business Process Outscourcing,
Communications of the ACM, Vol 47, No. 5
4) Harmon, P. 2003, An Overview of Business Process Outsourcing, Business Process
Trends Newsletter, Vol. 1, No. 9
5) Cover Story NASSCOM Announces Top-15 ITES-BPO Exporters Rankings for FY
06-07
6) The Untapped Market for Offshore Services, 2006
7) Willcocks, L., Hindle, J., Feeny, D. & Lacity, M. 2004, IT and Business Process
Outsourcing: The Knowledge Potential, Information Systems Management, Vol. 21,
pp 7–15
8) Gilley, K.M., Rasheed, A. 2000. Making More by Doing Less: An Analysis of
Outsourcing and its Effects on Firm Performance. Journal of Management, 26 (4):
763-790.
9) Website references :- www.nasscom.in , www.sbi.org, www.wikipedia.com
***
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INTERNATIONAL STOCK MARKET INTEGRATION: A STUDY OF
THE US AND THE BRIC MARKETS
Sudhakara Reddy S Faculty member, IFHE University,
Hyderabad, India.
Visiting Research Scholar,
Syracuse University, NY.
Kavita Wadhwa Faculty member, IFHE University,
Hyderabad, India.
Visiting Research Scholar,
Syracuse University, NY
Abstract
A complete understanding of various stock markets of the world is important in the present
global era of financial uncertainty. International investors should track their markets of
interest to understand the forces behind the integration of stock markets in order to realize the
possible risks and returns of global diversification. In this paper an attempt is made to
understand the integration of BRIC emerging markets, which are gaining prominence in the
investment community with the United States. The data for the study is considered from
01/04/2000 to 31/01/2010. The results indicate that there is a varying degree of cointegration
among the BRIC and US nations which is mainly due to the trade relations between these
countries.
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Introduction
Over the last decade, there has been a rapid growth in all the stock markets of the world.
Between 1995 and 2005, the total size of global capital markets rose to 115% to $US140tr.
McKinsey Global institute forecasts markets will grow to around $US214tr by 2010. Capital
has been flowing across the borders in the form of equity (direct and portfolio), debt and
financing from banks also increased very strongly. Japan, China and oil rich countries make
up a large portion of the global savings pool. The United States continue to account for
almost two-thirds of global capital imports (in fact it was no.4 in 2006).
A complete understanding of the integration of various stock markets which are
located all over the world is important in the current environment where liberalization has
taken place all over the world. International investors should track their markets of interest all
over the world to understand the forces behind the integration of stock markets in order to
realize the possible risks and returns of global diversification (Mukherjee, 2004). So, it is
important to understand the US stock markets’ integration with the other emerging world
super powers such as BRIC nations, ASEAN nations or the developed markets such as UK. If
the stock markets of various countries are integrated, then the investors investing in these
stock markets should know that their investment portfolios are not properly diversified and
investing in them will not lead to long term long term gains. Policy makers need to
understand the forces responsible in driving the stock market integration and such
understanding will help in providing a better grasp of the global stock markets and the impact
of those on their economies. Here an attempt is made to understand the interdependence of
the US stock markets with those of the BRIC nations.
There is a lot of importance being associated with BRIC nations in the recent past
saying that they are going to be the next super powers in the world markets by 2050
(Goldman Sachs report). These four countries have quite different backgrounds and each of
them are growing with the almost the same pace with differing strategies. They are some
complex issues which influence the growth of these nations. If BRIC nations can work out
their somewhat complex issues, then it is almost certain that they are going to be the
triumphant economic powers and the entire world will be looking towards them. This will
help the BRIC nations and other nations of the world in terms of business and trade.
In this paper analysis has been made from the US investor’s point of view to best
identify the markets which will give higher returns and his portfolio will be well diversified.
Literature Review
There are broadly three categories of literature on stock market Integration. The first category
of studies also called as ‘contagion effect’ simply examines on the basis of economic
fundamentals. It explains the stock market interrelationships to determine how a specific
group or individual stock markets are interdependent. The second category of research also
termed as ‘Economic Integration’ is interested in finding out the interrelationships and the
possible changes in such relationships based on the facts that more the economies of two
countries are related, more the influence on stock market returns, interest rates and inflation.
The third and last category of studies based on the ‘stock market characteristics’ such as
industrial similarity, volatility and market size tries to explain why stock markets are
Volume:01, Number:03, Jan-2012 : RJEBS Page 58 www.theinternationaljournal.org
interdependent by either decomposing or modeling stock market correlations (Mukherjee,
2004).
Contagion Effect
The first category that is, the studies of contagion effect are studied by various authors for a
long time. Sharma and Kennedy (1977) made an attempt to test the random-walk hypothesis
by applying the technique of runs analysis and spectral densities by examining the price
behavior of Indian market with US and London stock markets. By observing monthly indices
over a period of 11 years starting from 1963 to 1973, they found that the behavior of Bombay
Variable Dividend Industrial Share Index (BVDIS) was statistically indistinguishable from
that of London Financial Time-Actuaries 500 Stock Index and S & P’s 425 Common Stock
Index. Their spectral densities estimated for the first difference series of each index
confirmed the randomness of the series. The conclusions from the tests are that stocks listed
on the Bombay Stock Exchange follow a random walk behavior and are equivalent with the
stock price behavior of other stock markets of advanced industrialized countries, like US and
UK.
Jorion et al., (1986) have examined issue of segmentation versus integration of the Canadian
equity market relative to global North American market. Monthly data for rates of return on
the Canadian stocks were taken from January 1963 to December 1982. As far as the main
findings of the study are concerned, the authors rejected the joint hypothesis of integration of
the North American markets.
Taylor and Tonks (1989) used the bivariate co-integration technique by Engle and Garner
(1987), and found that there was a co-integration between the stock price index of the UK
with the stock price index of the US, Germany, Netherlands, and that of Japan for the period
between 1976 and 1986. They could not find any co-integration of the stock price indices of
these countries in the period between 1973 and 1979.
By taking the monthly stock price indices from 1971 to 1988 of US, Japan and Indian stock
markets Rao and Naik (1990) studied the inter-relatedness of these markets. They tried to
cover the episode of the October, 1987 world market crash and the Indian stock market boom
of 1985-87 and subsequent fall in 1987-88 in their study period. By applying the cross-
spectral analysis they concluded that the interrelationship among the three markets were, in
average, very low.
Choudhury (1994) tried to examine the relationship among Asian Newly Industrialized
Economies (NIEs), Japan, and the US by using the daily data for the period between 1986
and 1990. The author used variance decomposition and impulse response functions and found
that the US led the NIEs and that there were significant linkages between the markets.
Amanulla and Kamaiah (1995) attempted to examine the stock market efficiency by
measuring the integration among different exchanges in Indian Stock Market. The data used
was the RBI monthly aggregate share indices relating to the all India, and five selected
regional stock exchanges, viz., Bombay, Calcutta, Madras, Delhi and Ahmedabad during the
period 1980-1993. By using two market integration approaches, such as, Ravallion approach
and Cointegration and error correction approach they concluded that Bombay, Madras and
Calcutta stock exchanges were integrated and thus not efficient. But Ahmedabad and Delhi
Volume:01, Number:03, Jan-2012 : RJEBS Page 59 www.theinternationaljournal.org
stock exchanges confirmed the existence of market efficiency at the sense that these stock
markets were not integrated during the study period.
Angela Ng. (2000) had tried to examine the magnitude of changing nature of volatility
spillovers from Japan and the US to six Pacific-Basin equity markets. Weekly data relating to
equity indices, in terms of US dollars, were used. The indices used are the Hang Sang Index
(Hong-Kong), the Korean Composite Stock Price Index, the Kuala Lumpur Stock Exchange
Composite Index, the Stock Exchange of Singapore All Share Index, the Taiwan Stock
Exchange Weighted Price Index, Stock Exchange of Thailand Index, the Tokyo Stock Price
Index and the S & P’s 500 Index. Their study consists of various tests based on the ARCH
family of model developed by Engle (1982) and generalized by Ballerrslev (1986). Bivariate
GARCH (1, 1) model was used for the Japanese and the US returns, while univariate
Volatility Spillover model for the Pacific-Basin markets. The authors concluded that both
regional and world factors, influenced by important liberalization events, were important for
market volatility in the Pacific-Basin regions. Again, their findings showed that Japanese and
the US shocks together account for less than 10 per cent of the weekly variation in returns.
Roca and Selvanathan (2001) analyzed the linkages between the equity market of Australia
and those of Hong Kong, Singapore and Taiwan. They used the Granger-causality, Variance
decomposition and impulse responses analysis based on the MSCI database between the
period 1975 and 1995. The results showed that the Australian stock market is not
significantly linked with any of these markets.
Chang (2002), by using daily closing price indices from 1995 to 1999 tried to explore
whether there exist any long-run benefits from equity diversification for investors who invest
in two Chinese share markets, namely those of Shanghai and Shenzhen Stock Exchanges. In
order to test the integration between the markets they used three tests, namely the
Multivariate Trace statistics, Harris-Inder approach, and the Johansen method. All the tests
used by them suggested that these two Chinese share markets are not pair wise co integrated
with each other. In other words, there were no long-term linkages between these two Chinese
share markets and thus there exist potential for investors from diversifying in these two
Chinese share markets.
Bose and Mukherjee (2006) tried to examine the integration of Indian stock market using
tests like pair wise and group wise co-integration and Granger-Causality with the developed
markets of the world such as US, Japan and other Asian markets. They used the daily closing
price indices data from January 1999 to June 2004. Their results suggest that the degree of
integration that is found to be not very high implies that the nature of integration with
emerging Asian markets does not yet warranty any immediate concern for India regarding
possible contagion and also shows that there is still much scope for reaping benefits of
portfolio diversification, by investing in Indian markets.
Financial Crisis and Integration
The above studies focused only on the existence of inter-linkages between various
markets. But another set of studies focused not only on the inter-linkages between the stock
markets but also on various international and national events such as the 1987 October stock
markets crash which affected the stock markets worldwide. They also studied the evolution of
stock market relationships.
Volume:01, Number:03, Jan-2012 : RJEBS Page 60 www.theinternationaljournal.org
Neal (1987) tried to examine the working of international capital markets between
Amsterdam and London in the early eighteenth century. The author used the bi-weekly stock
price data from August 9, 1973 to December 19, 1974. The Auto Regressive Moving
Average Model (ARMA) which is a standard estimation technique was used for the price
changes. The conclusion was that London and Amsterdam stock markets were efficient and
well integrated from second quarter of eighteenth century onwards.
Campbell and Hamao (1992) tried to study the integration of long term capital markets in US
and Japan by using the predictability of monthly excess stock returns on US and Japanese
equity portfolios over the US Treasury bill rate. Stock prices and dividends are taken from the
Centre for Research on Security Prices (CSRP) in case of US and for Japan from the
available stock price indexes of Nekkei 225. Auto correlation methodology was used and
they could find out that there is common movement of expected excess returns which suggest
that there is at least a partial integration of US and Japanese stock markets.
Faff and Mitto (2001) examined whether capital market integration varies across industries.
They have considered Australia, Canada and US capital markets and used matched sample
design where companies are matched by size and industry. The tests were conducted in the
Capital Asset pricing model and multi-factor pricing frameworks between 1983 and 1992.
The results suggest that the global industry stocks such as oil and mining stocks are priced in
a relatively integrated while regional industry stocks such as consumer and capital goods
stocks are priced in segmented markets and also the Australian stocks were priced in different
markets than the Canadian and US stocks prices. These findings also suggest the notion that
economic and trade linkages are a dominant factor in international asset pricing.
Hardouvelis et al., (2006) tried to study the evidence linking the process of increased
integration of European stock markets in the 1990s to the prospects of the formation of EMU
and the adoption of the euro as the single currency. They used weekly, deutschmark
denominated, dividend-adjusted, and continuously compounded stock returns based on
Friday closing prices in the 11 EU countries. The weekly risk-free rate is the German
Eurocurrency rate. Belgium and Luxembourg are aggregated into one market. The period of
study was between February 7, 1992 and 26 June 1998. They concluded that UK market
showed no signs of increased integration with the EU stock market and the integration in
Europe was a Euro-specific phenomenon which is independent of possible simultaneous
world-market integration.
Lagoarade et al., (2007) studied the stock market integration of MENA (Middle Eastern and
North African) countries and its implications for international portfolio investment allocation
by using four different co-integration methodologies. The study significantly rejected the
hypothesis of a stable long-run bivariate relation between each of these markets and the
EMU, the United States, and a regional benchmark which indicated that there are significant
diversification opportunities for the three categories of investors. They also concluded that
these markets displayed heterogeneous reactions by extending the methodology to capture the
effects of economic, financial, and political events.
Mukherjee and Mishra (2007) tried to investigate the price co-movement and hence the inter-
market relations among India and 22 other foreign countries form all over the world and also
to find out the possible forces that affected the evolutions of such international stock market
Volume:01, Number:03, Jan-2012 : RJEBS Page 61 www.theinternationaljournal.org
integration among India and other countries. Their study was done by using Geweke (1982)
measures of feedback on the daily closing price index data over a period of 16 years from
1990 to 2005. The annual feedback measures revealed the evolution of inter-market
relationship on the same day and/or the lead-lag relationship across days for all the pairs of
Indian and other foreign markets. The contemporaneous Geweke measures indicate a
significant same-day relationship among the stock markets in India with that of almost all
other foreign markets considered in the study.
Stock Market Integration and Degree of Interdependence
There are other studies which apart from concentrating on the examination and degree of
interdependence of stock markets, concentrated on finding out why stock markets are
interdependent. Most of the studies addressed this issue and they laid emphasis on
decomposition of stock returns into country and industry effects, only a few of them have
tried to examine the other economic variables that may drive stock market co-movement.
Meric and Meric (1989) found empirical evidence that diversification across countries results
in greater risk reduction than diversification across industries. Their inter-temporal stability
tests indicated that the longer the time period considered the better proxies ex-post patterns of
co-movement can be for the ex-ante co-movements of international stock markets. Their
seasonality tests also signified that international stock market co-movements were stable in
the September- May period and relatively unstable during the period from May to September.
Chen and Zhang (1997) attempted to explain the extent of stock market correlation with
extent of bilateral trade. They calculated the correlations between the emerging stock markets
of Korea, Malaysia, Thailand, Taiwan, the Philippines, and Mexico, and the developed
markets of the US, Hong-Kong, Japan, Canada, Singapore, Australia, New Zealand, Austria,
Belgium, Denmark, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden,
Switzerland and the UK. After dividing the world into four regions: the US, Europe, Japan
and the Asian Newly Industrialized Economies (NIEs), they calculated each country’s
correlation with each region, and then tried to determine whether those correlations can be
explained by the extent of bilateral trade between country and the region. Overall, they found
that stock market interdependence was positively correlated with the extent of trade.
Gutierrez et al., (2007) examined the linkages between two parallel stock exchanges trading
the same shares in Colombia namely the Bogota Stock Exchange and the Medellin Stock
Exchange. The empirical analysis was conducted by using monthly data of the stock prices of
13 companies during the period from January 1963 to June 2001. The authors concluded that
the two stock exchanges can be best described as fully integrated over a period of almost four
decades, so that arbitrage opportunities could have been exploited in the short-run but not in
the long run. Furthermore, the analysis of the short-run dynamics of the models offers support
to the view that the location of a company’s headquarters appear to matter in stock price
formation.
Khoon (2008) tried to study the capital mobility in Malaysia with three main trading
countries, namely the US, Japan and Singapore by evaluating the consumption patterns in
Malaysia. Malaysia’s annual data 1960-2000 on real private final consumption was used as a
measure of the consumption variable and annual real GDP was used as a measure of the
income variable. The GMM model was used to test the different equations. The results
Volume:01, Number:03, Jan-2012 : RJEBS Page 62 www.theinternationaljournal.org
indicate that Malaysia exhibited a substantial amount of financial openness despite periodic
exchange controls.
In particular, there are a significant number of stock market integration studies with respect to
US. But most of these studies focus on developed markets (Roca et al., 2001). A small
number of studies have included in their investigation the markets of Australia, Hong Kong,
Taiwan, Singapore (Chowdhary, 1994, Kwan et al., 1995; Kwork 1995; Maish and Maish,
1997).
But no study focused specifically on US equity market interaction with the BRIC (Brazil,
Russia, India and China) nations.
In the above context it is very interesting to see how US is related with the BRIC nations.
The present study tries to fill the gap of finding out the interdependence and co-movement of
US stock markets with BRICs’ stock markets.
Methodology
The present study is based on the secondary data related to daily closing figures of the
Australian and BRIC nations’ stock market indices over the period from 01/04/2000 to
31/01/2010. Table 1 shows the general stock indices of the countries used for the present
study. The data is taken from Yahoo Finance (for Brazil, China, US) and the websites of
National Stock Exchange (NSE, for India), Russian Stock Exchange (RTS, for Russia). There
were a few practical problems regarding the inconsistency of the overall data which was
because of different calendar holidays followed by different countries. Some of the countries
had more number of working days than US and some of them had less number of working
days than US. So, a SAS program is used to match the daily returns/prices of different
countries according to the calendar dates. It is assumed that the timing of the trading sessions
of the stock exchanges may not completely be related and it will not add any value by taking
into account the real trading time of different stock markets under study, therefore, the same
has not been taken into account.
Table 1: Stock Exchanges and Stock Indices under study
S. No Country/Region Index Symbol
1. US S&P 500 GSPC
2. Brazil IBovespa BI
3. China Shanghai Composite SC
4. India S&P CNX Nifty NSE
5. Russia RTS Index RTS
3. 1 Descriptive Statistics
Table 2 provides summary statistics of the index prices, namely sample means, minimums,
maximums, medians, standard deviations, skewness and kurtosis. It can be observed from the
table that standard deviation of BI is highest, thus showing highest volatility during the
period of study. No other index is closer to BI in volatility and RTS shows the least volatility.
It can be further inferred that all the indices showing positive skewness. The values of
skewness and kurtosis shown in the table suggest that the stock prices are not normally
distributed and hence
Volume:01, Number:03, Jan-2012 : RJEBS Page 63 www.theinternationaljournal.org
Table 2: Characteristics of Distributions of the Stock Indices under study
Symbol Mean Median Max Min Std dev Skewness Kurtosis Obs.
NSE 2358.222 1851.725 6272 854.2 1364.348 0.86644 -0.39155 1998
GSPC 4094.824 3502.8 6853.6 2673.3 1106.533 0.82288 -0.64327 1998
SC 2053.686 1677.215 6092.06 1011.5 1043.591 1.942593 3.148433 1998
RTS 878.8099 618.31 2478.87 131.02 678.7364 0.797093 -0.82187 1998
BI 28509.23 23073 73517 8371 16733.7 0.844846 -0.42154 1998
the data may not be stationary, that is there might be a unit root in the time series data under
study.
4. Results and Discussions
Return of the indexes is used to find out the correlation of the BRIC markets with US stock
market. Daily returns have been calculated by taking the natural logarithm of the daily
closing price relatives, i.e. r = ln (Pt / Pt-1). Where, Pt is the closing price of the tth
day.
Pearson Correlation is used to find correlation between the stock market returns. Testing of
stationarity (unit root test) is done by using Augmented Dickey-Fuller test.
Granger causality test will be used to identify the direction of influence from one series to
another.
4.1 Correlation Table 3 shows the return correlations among the various indices under study. It can be
clearly seen form the table that all the BRIC stock markets are weakly correlated with the US
stock market. This gives a first indication that the US stock market and BRIC stock markets
are not highly interdependent. Also, it can be observed there does not exist any strong
interdependence among any of the markets. The highest of correlations of US is with India of
about 36% and least is with China with about 16%.
Table 3: Correlations of Returns of the Stock Indices under Study
This gives an understanding that neither US market nor the BRIC markets is playing a
dominant role in influencing the other markets. The correlations need to be further verified
for the direction of influence by the Granger causality test and for long-term movements
among the returns of stock markets. These tests provide a better understanding is the data is
stationary over time and therefore, there is a need of stationarity test for the time series data
under study.
Symbol AOI BI SC NSE RTS
GSPC 1 0.1616 0.1576 0.3633 0.2872
BI 0.1616 1 0.0339 0.1926 0.2219
SC 0.1576 0.0339 1 0.0749 -0.0654
NSE 0.3633 0.1926 0.0749 1 0.1933
RTS 0.2872 0.2219 -0.0654 0.1933 1
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4.2 Unit Root Test
Table 4: Augmented Dickey Fuller Test (ADF test)
Exogenous: Constant
Lag Length: Automatic based on SIC, MAXLAG = 25
*MacKinnon (1996) one-sided p-values.
Deterministic terms: Intercept
In very simple terms, a unit root test is used to test a time series for stationarity. The most
appropriate and widely used tests are the Augmented Dickey-Fuller (ADF) test and Phillips-
Perron (PP) test. Here, ADF test is used to test for the null hypothesis that unit root exists for
all the time series data.
From table 4, it can be inferred that the null hypothesis about the existence of a unit root can
be rejected for all variables using the intercept terms in the test equation at the level form. So,
it can be concluded that no variable contains a unit root, which is non-stationary.
4.3 Granger Causality Tests
Having done the unit root test for stationarity of the time series and the Pearson correlation
among the stock price returns under study, there is a need to capture the degree and the
direction of correlation among the stock returns. The Granger Causality tests are conducted
for this purpose. These tests involve testing of whether the lagged values of one time series
have any significant explanatory power for another study. The null hypothesis is that there is
no Granger causality between the series. The Granger test considers the following models for
finding out whether US stock market prices causes BRIC nations’ stock market prices
separately or BRIC nations’ stock market prices cause US stock market prices.
To test whether Australian stock market causes Brazil stock markets
(Australia→ Brazil) the following equation is considered.
= t-1 +
t-1 + u1t
In the same way the equation to test whether Brazil stock market causes Australian stock
market can be written as
= t-1 +
t-1 + u2t
Where it is assumed that the disturbances u1t and u2t are uncorrelated.
Symbol
Level
Lag
Length ADF Statistic P-value*
AOI 0 -21.3330 0.0000
BI 0 -20.7436 0.0000
SC 0 -20.5766 0.0000
NSE 1 -15.6812 0.0000
RTS 0 -21.5808 0.0000
The critical values form MacKinnon (1996) for rejection of
H0: Intercept
1% level -3.4332
5% level -2.8627
10% level -2.5674
Volume:01, Number:03, Jan-2012 : RJEBS Page 65 www.theinternationaljournal.org
The similar type of equations can be formed for the other stock markets of India, China, and
Russia and tested for the Granger causality. Table 5 gives the results of the Granger test for
the stock markets under study.
Table 5: Summary of Pair-wise Granger Tests
From the table it can be viewed that US stock market is not playing a dominant role in
influencing the other stock markets, since the direction of Granger Causality is not always
following from US to the stock markets of BRIC countries. It can be seen that US is causing
the stock markets of China and Russia only. This implies that in the long run the China and
Russian stock markets can be influenced by the US stock markets but not Indian and
Brazilian stock markets. China is also Granger causing US, so these two stock markets are
interdependent but Russia is not Granger causing US. US is not Granger causing Brazil but
Brazil is Granger causing US. This implies that Australian stock market depends on Brazil
stock market but Brazil does not depend on US stock market. Coming to the case of India,
there is no two way interdependency between the US and the Indian stock markets. That is
US stock market does not Granger cause Indian stock market and Indian stock market does
not Granger cause US stock market.
Conclusion
This study is a continuation of research on the very interesting topic of growing
interdependency among the stock markets of the world. There is lot of evidence that the
major stock markets of the world are trending together. So, in this situation the investors look
for diversification of their assets so that their risk will be reduced. So, this paper focuses on
the study of interdependency of US stock market on the famous emerging BRIC markets
which are going to influence the world markets in the coming years. So, knowing whether the
BRIC nations are influenced by the US stock markets will help the investors to take a
decision to invest in these markets or not for the purpose of diversification. The correlation
among the market returns is not substantial as can be viewed from the correlation table. It is
also evident that the degree of correlation varies between the US and BRIC markets. By using
Granger Causality test which is a well used tool for studying the interdependency among the
global stock markets. In the case of US and BRIC markets there is no complete
interdependency. The interdependency between US and India is insignificant implying that
the investors of US can safely put their funds in the Indian stock markets. But there is atleast
a unidirectional relationship between the US and other stock markets of the BRIC nations.
Also Brazilian stock market is not influenced by the US stock market. But the Chinese and
Russian stock markets are interdependent on US stock markets. All these results are due to
the reasons of their trade relations. Based on this, these results will be useful for the
Direction of Causality F-Value P-value Decision Direction of
Causality
US → Brazil 0.5693 0.5659 Do not reject No Causality
Brazil → US 4.2988 0.0137 Reject Unidirectional
US → China 24.1086 0.0000 Reject Bidirectional
China → US 4.8835 0.0076 Reject Bidirectional
US → India 0.5642 0.5689 Do not reject No Causality
India → US 0.5842 0.5576 Do not reject No Causality
US → Russia 5.9648 0.0021 Reject Unidirectional
Russia → US 1.4195 0.2420 Do not reject No Causality
Volume:01, Number:03, Jan-2012 : RJEBS Page 66 www.theinternationaljournal.org
individual and institutional investors of US for managing their asset portfolios in terms of risk
and the policy makers to take decisions regarding trade with these countries.
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***
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SEARCH ENGINE OPTIMIZATION –
A TOOL FOR ADVERTISING IN INDIA
K. Venu Gopal
Faculty Member
Department of Management Studies
Aditya Institute of Technology and Management
Tekkali, Andhra Pradesh, India – 532201
N. Santosh Ranganath
Faculty Member
Dept. of Commerce and Management Studies
Dr. B.R. Ambedkar University
Srikakulam, Andhra Pradesh, India – 532410
Abstract
Search engine optimization is the process of improving the visibility of a website or a web
page in search engines via the "natural" or un-paid search results. As an Internet marketing
strategy, SEO considers how search engines work, what people search for, the actual search
terms typed into search engines and which search engines are preferred by their targeted
audience. The companies who are using the SEO for the purpose of advertisement are getting
more new customer than the companies using the other methods. In the 1990s India has
witnessed a massive expansion of advertising, and the advertising sector has quickly been
taken over by foreign advertisers and agencies that are affiliated with foreign advertising
agencies. The whole advertising sector demonstrates a remarkable degree of concentration.
The profile of most advertised products is dominated by advertising for personal products.
The strategies used in India have undergone significant change in recent years, and there has
been increased customization to the local culture alongside a major intensification of
strategies aimed at targeting rural markets, to stimulate the purchase the products of foreign
companies. This paper explores the profile of contemporary advertising in India in the wider
context of trends with search engine optimization, the recent changes in advertising
techniques in India and SEO as tool for the marketing development.
Keywords: Internet Marketing, Niche Markets, Creativity, Motivation, Search Engine
Marketing.
Volume:01, Number:03, Jan-2012 : RJEBS Page 69 www.theinternationaljournal.org
Advertising Management – An Introduction
Advertising management is the process of overseeing campaigns that seek to inform
and attract consumers regarding a particular good or service. This process begins with the
first stages of the market research that helps to create the advertising strategy, moves on to
the development of the general outline for the campaign, the creation of a specific plan of
action and the launching of the completed project. Without effective advertising
management, ad campaigns and public relations efforts tend to founder and produce little or
no results. Effective advertising always begins by engaging in competent advertising
research. The research helps to identify the sectors of the consumer market that are most
likely to positively respond to a given product.
In order to identify these niche markets within the larger group of consumers,
researchers will not only seek to understand what appeals to these buyers but why those
goods and services have that inherent appeal. The data collected from the research can then
be used to enhance the marketability of products, addressing everything from function to
packaging. The next phase of the advertising management process has to do with deciding
exactly how to apply the data collected during the research stage. Here the basis for deciding
on what forms of advertising are most appropriate begins to take shape. Depending on the
specifics of the products and the nature of the niche markets that the campaign will seek to
connect with, advertising services such as print media, and radio, television or the Internet
may be deemed the most appropriate options.
Once the niche markets are identified and the determination of which types of
advertising media are most appropriate for the campaign, advertising management focuses on
the creation of the specifics of the overall campaign. This may involve such elements as the
development of print ads for use in magazines and newspapers, audio campaigns for radio
advertising, or commercials appropriate for television broadcast or streaming across the
Internet. Because any given campaign may use several advertising options in one campaign,
the process of advertising management also involves making sure all strategies complement
one another and present a unified public image to consumers.
To function in advertising management, it is necessary to possess the proper training.
Advertising training is often a combination of formal education and experience derived from
working under the direction of more seasoned professionals who have learned over time how
to identify and interact with consumers in order to secure the data needed to structure a
campaign. While creativity and inspiration are always vital elements in any advertising
campaign, the ability to organize and view the greater picture are essential to managing the
process and launching a campaign that will successfully reach the right consumers and
generate the desired amount of revenue over the lifetime of the campaign.
Research in Advertising
Research in advertising is done in order to produce better advertisements that are
more efficient in motivating customers to buy a product or a service. The research can be
based on a particular advertising campaign or can be more generalized and based on how
advertisements create an effect on people’s mind. Lots of approaches are involved to go
about conducting an advertising research like economical, psychological, demographical and
sociological.
When designing an advertisement for a particular product many things should be
researched like where it should be displayed, whether the advertisement can be printed in
newspapers or magazines or broadcasted on television or radio or published on the Internet.
Many methods are undertaken to collect relevant information. The research itself is of two
Volume:01, Number:03, Jan-2012 : RJEBS Page 70 www.theinternationaljournal.org
kinds, syndicated and customized. Syndicated research is a single research done by the
company that is available to other companies as well. Customized research is research based
on certain criteria and is done for a particular company and its results are available to only
that company.
Pre-testing or copy testing is a type of customized research that determines the in-
market efficiency of an advertisement before it is released or before the final production. The
more the pre-testing is done the more likely that it will be a successful advertisement and
each pre-testing should be applied number of times. This can done by studying the level of
attention the customers have, motivation, brand linkage, communication and entertainment.
Flow of emotions and flow of attention are broken down and studied individually. The results
are applied on the advertisement that is still being developed to recognize the weak points
and replace them. A reliable feedback loop can guide the researchers, client and the agency to
work in harmony. Tests should be applied during the storyboard stage of ad making. This is
an early stage and the results are highly predictive. During this process images are selected
and used as integrated campaign print ads.
Post-testing or ad tracking studies are either syndicated or customized. Studies are
done over a period of time or continuously. The in-market research is done to understand a
brands linkage, performance, awareness, and preference along with product attitudes and
usage. They are done by, conducting interviews either on phone or Internet. Testing the
finished advertisement provides the confidence and gives an idea whether it is following the
strategy.
All the above studies should facilitate the client’s advertisement development make
the end product easier to achieve. The study should contain rational information having not
only surface knowledge but also provide deep in-sight that will open window to a customer’s
mind. The customer, too, should provide precise information based on facts and not based on
imaginary thinking and self-delusion. He should be able to explain the role of advertisement
in the whole marketing plan. Working in vacuum doesn’t get the desired result. The basis is
to provide in-depth understanding about the consumers for improving on the advertisement
techniques and other marketing decisions. The traditional methods of qualitative and
quantitative techniques have been improved to analyze the information with good insight.
The rapidly changing likes and needs of the customers are difficult to track, but should be
studied in order to increase the quality of advertisement. The changes are because of the huge
number of options offered to them by the market.
Advertising in India Indian Advertising starts with the hawkers calling out their wares right from the days
when cities and markets first began. Concrete advertising history begins with classified
advertising. Ads appear for the first time in print in Hickey’s Bengal Gazette, India’s first
newspaper. To ‘advertise’ meant merely to ‘inform’ until the end of the eighteenth century,
and the early newspapers and periodicals announced births, deaths, arrivals of ships from
England, sale of household furniture, etc. some journals like the Bengal Journal even offered
to print government advertisements free.
The front page of most such journals carried only advertisements. But before long
persuasive copy began to replace mere information. This is evident from the appearance of
punch lines such as ‘superior to anything of the kind hitherto imported’ and ‘warranted to the
first quality’. Discounts and special services also began to be offered by the beginning of the
nineteenth century. Later, new products and services established themselves on the market
through the advertisement columns of the newspapers and periodicals. The power of
advertising increased rapidly with the growth in trade and commerce. The Advertising
Volume:01, Number:03, Jan-2012 : RJEBS Page 71 www.theinternationaljournal.org
planning cycle helps in isolating the roles of each department in an agency such as Client
Servicing, Creative, Media and Research. It guides the agency through various stages of
formulating, creating, releasing and evaluating an advertising campaign.
Figure 1: Advertising Planning Cycle
With the increasing impact of the industrial revolution on our country, the number of
advertisements from British business houses rose sharply. ‘Agents’ flourished at the time as
space contractors, obtaining advertisements for newspapers and periodicals on a commission
basis. Leading newspapers like ‘The Statement’ and ‘The Times of India’, which had their
own advertising departments, offered their own facilities to ‘agents’. This was of great
advantage to both the advertiser and the publisher, for the advertiser, it saved the bother of
preparing a suitable layout for the advertisements, for the publisher, it assured a certain
uniformity of standard in the advertisements appearing in its column. This practice was
responsible for turning advertising into a distinct profession. These ‘agents’ were forerunners
of the ‘advertising agencies’.
Advertising is a big business in this era in India. Indian Advertising industry has
witnessed a prominent globalization. With the inception of various divisions, the advertising
industry has undergone a sea change. Indian consumer's deepening pocket and blooming
markets for ad-spends have touched new heights in India. The Indian Advertising Companies
are creating stories and brand experiences in a way that engages and involves. The Best
Indian sites offer the names of the top Advertising Organizations in India. Here is a list of the
top Indian websites and a quick glance at them will help you to get the required knowledge
about the websites.
Table 1: Top Advertising Companies of India
Crayons Advertising
and Marketing Pvt Ltd
This company is in existence from 25 years and the clients of this
company include Air India, Fortis, MTNL, Bank of Maharashtra
and many more.
Euro RSCG Advertising
Pvt Ltd
The company is the global agency network and the largest brand
of Havas, the 5th largest global communications group.
Madison Advertising
Pvt Ltd
The company is 23 years old and is famous in this advertising
sector. It deals in Advertising, Media, PR, and sports, business
analytics.
Sasi Advertising Pvt
Ltd
This agency is 30 years old and is one of the largest South Indian
Advertising Agency. The company deals with Branding, Public
Relations, Event Management, Direct marketing and many more.
Ogilvy and Mather This is one of the leading advertising companies in India. This
company has offices across the globe.
Xebecindia.com The company offers variety of services like Brand Building, Print
Production, Advertising, Public Relations and Market Research.
Volume:01, Number:03, Jan-2012 : RJEBS Page 72 www.theinternationaljournal.org
J Walter Thompson
India
One of the most popular companies in the advertising industry is J
Walter Thompson India. This company is the first one to introduce
pioneer careers in ad for women.
Mudra Communication
Pvt. Ltd
This is one of the renowned advertising companies of India. This
advertising organization was founded in the year 1980 at Mumbai.
FCB-Ulka Advertising
Ltd
One of the best companies in India in the advertising arena is
FCB-Ulka Advertising Ltd. In US, this advertising company ranks
third and tenth in the world having about 188 offices in 102
countries.
Rediffusion-DY&R This Advertising company of India has made a benchmark in the
field of creativity. India's 5th largest advertising company is
Rediffusion.
McCann-Erickson India
Ltd
The prominent name among the best advertising companies of
India is McCann-Erickson India Ltd.
RK Swamy/BBDO
Advertising Ltd
It maintained the record of remaining consistently among the top
ten advertising agencies in India. Established in 1973, this
advertising reached great heights.
Leo Burnett India Pvt.
Ltd
It has a significant presence in about 96 offices in 10 countries.
This advertising agency was awarded the 'Worldwide Agency of
the Year' in 2004.
Technology in Advertising Options
After the advent of online selling sites, shopping has been made so easy that it can be
done within the comfort of the home. Online selling gave rise to online advertising also
known as advertising, which is proving to be the best way to reach a larger audience within a
short time using less money. There are many options available on the Internet to get started.
Creating a website and then placing its link on different websites is one of the ways. Pages
can be submitted to the search engines after applying search engine optimization techniques.
Websites offer various payment methods. Some take money for simply placing an ad
or link on their website, some take money only if a visitors clicks on the link or website and
some take money only if the visitors visits a link and have bought something or availed some
service. There are options available for the type of ad being placed. There are pop-up ads,
banner ads, wallpaper ads, polite ads, video ads, etc. Businesses with really low budget can
send mails to targeted customers. Radio stations offer a good price to advertise during the
non-peak time. Get in touch with the local station and try to ask for a discount. The same
applies to television; even they have a minimal amount for advertising slots during the non-
prime hours, especially after midnight. Contact different television station to compare
pricing.
The age-old tradition of advertising in yellow pages directories is always a success.
All businesses from small to big register themselves in the yellow pages and have sworn to be
benefited from it. People can look up for contact numbers, addresses and services offered
directly from the pages. Newspaper is the next best thing. First analyze the audience to be
targeted by age group, sex, and location. Choose the local newspaper and section where the
ad should be placed depending on the audiences to be targeted. The classifieds department of
the local newspapers have special offers, find out in detail about the pricing structure for the
size of the advertisements, number of words, font size, etc.
Volume:01, Number:03, Jan-2012 : RJEBS Page 73 www.theinternationaljournal.org
Design the business cards with accuracy. Try to include all the vital information about
the business like the name of the company, where it is located, services provided, working
hours, and contact information like landline number, cell number and person to be contacted.
Personalized business cards are good way of reaching the genuine customers. The word of
mouth is also a good method of advertising. Try growing the links in your network and join
organizations which deals with advertising like trade associations and chamber of commerce.
Active participation in events of these organizations eventually helps reaching more number
of people.
Other way to advertise is to give presentations on your products. Brochures can be
inserted in the business presentation package. Other than things like history of the company
and annual turn-up, once again business cards can be included in the package. Distribute
newsletters with information about the latest offers and discounts. Informational letters of a
page length and e-mails can be sent too on a regular basis. All this can become lot easier by
getting in touch with companies who can provide the mailing list of a particular locality and it
comes for a very small price. Again the yellow pages can be referred to get information about
such companies. After getting the information get in touch with company to get a copy of the
latest mailing list. Different companies charge different prices.
Search Engine Optimization process:
Optimizing a website may involve editing its content and HTML and associated
coding to both increase its relevance to specific keywords and to remove barriers to the
indexing activities of search engines. Promoting a site to increase the number of back links,
or inbound links, is another SEO tactic. The initialism "SEO" can refer to "search engine
optimizers," a term adopted by an industry of consultants who carry out optimization projects
on behalf of clients, and by employees who perform SEO services in-house. Search engine
optimizers may offer SEO as a stand-alone service or as a part of a broader marketing
campaign. This research will evaluate the impact of SEO on the advertisement of firm.
1. Consultation & Keywords Research Analyze
Once we set the wheels in motion, the first thing we do is search the current status of
your company’s website to find the best ways to implement SEO changes. Every site is
different for optimization and every Daily Server program is tailored specifically to your site
and no one else’s. Part of this first step is also to research your industry to figure out the most
useful and targeted key words, which you will then review and approve based on your
specific goals.
2. Unique Content Creation
Second, our content writers create unique, useful, and creative content for your
website, utilizing the list of highly targeted keywords with good density that has been decided
upon. Again, you will take part in this step of the process by letting us know which content
you like best and want to include in your site.
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Figure 2: SEO Process
Source: www.indian-seo-company.com
3. Web Development or Redevelopment
Next, our programmers will take all of the gathered data and content and integrate
both into the actual website. Daily Server will change your entire website (on the backside
only and without affecting any other processes) so that it will optimally communicate your
keywords to any search engine. This includes changing Meta tags, alt tags, graphic text,
internal link structure, and sub-pages to ensure that your site is search engine spider friendly
and syncs up with the best search engine algorithms.
4. Internal & External Link Building
The most important part of achieving a high ranking among search engines is to create
well-developed incoming links. This crucial step establishes many direct connections
between your site and other sites. These links increase your traffic by sending relevant links
to your industry and website. Daily Server offers one-way links from major directories,
reciprocal link exchange, and fee-based directory submissions. We always get the most
effective and quality links to ensure a high search ranking.
5. Directory & Search Engine Submissions
After completing website optimization which are content creation, website
redevelopment, and link development, we will submit your website to all the major search
engines and directories including Google, Yahoo, AltaVista, HotBot, AllTheWeb, AOL,
iWon, Netscape, MSN, Lycos, Teoma, Ask, and DMOZ (Open Directory). Furthermore, we
will submit your company’s website to some of the fee based directories, such as Yahoo
Directory, and several other quality directories, which will add to your link popularity.
Lastly, if your Website has indexing issues for search engines, we will create and submit site
maps to both Google and Yahoo via their respective programs.
6. Monitoring & Reporting
As the final step, to ensure that our optimization service is correct and accurate, we at
Daily Server will run a ranking report comparison between pre-SEO treatment and post-SEO
treatment. This report will be sent to your company so that you may check its accuracy. A
similar report will be run every 30 days and sent to you by mail so that you can see the
continued improvement of your rankings. In addition to the monthly ranking reports, our
technical staffs will check the website on daily, weekly, and monthly routines to ensure
website integrity and verify that the website has not been dropped by any major search
engines.
Volume:01, Number:03, Jan-2012 : RJEBS Page 75 www.theinternationaljournal.org
Search Engine Optimization and Advertising
In today’s net-savvy world it has become common for any business to have a website
which they use mostly for advertising their products and services. With the advent of search
engines it has become even easier for the customers to search for the stuff online. For a
website to be successful its link should land in the first three pages which the search engine
brings and the rank of the page should be high which means many visitors come to the site.
This can be achieved by applying search engine optimization or popularly known as SEO.
This is a marketing strategy which increases the quality and quantity of traffic flow to a
particular website via search engines.
SEO not only affects the search engine results, but also image search, video search
and industry specific vertical search engines. It determines how a search algorithm functions
and searches what is popular with people. When a website link is submitted to a search
engine, a spider crawls through a page to gather links which lead to other pages and stores
those pages on the server of the search engine. The information collected from these pages is
sent to the indexer, whose job is to extract information from those pages such as the
keywords and their weights, the location of the page and other links that are stored for the
spider to crawl in future.
In the beginning, the search engine optimizer algorithms were dependant on the
keywords, Meta tags, and index files provided by the Webmaster. Meta tags provided
information about a particular page, but using them for indexing the pages didn’t prove to be
successful as some Webmasters added irrelevant Meta tags to increase the number of hits and
earn huge ad revenue. They even changed the HTML of the web pages to achieve a good
rank for the page. But this was a case of abuse as it fetched irrelevant pages.
Search engines then began utilizing complex ranking algorithm, which were difficult
for the webmasters to manipulate so as to provide web surfers with genuine results. The rank
of the web page was calculated mathematically by functions using strength and quantity of
the inbound links. The higher the rank of the page the more chances it had to be viewed by a
person. Later algorithms were developed which considered various other on-page factors
such as rank and off-page factors such as hyperlink. Since the webmasters couldn’t
manipulate the page rank, they began exchanging, selling and buying links, which lead to link
spamming and even creation of numerous sites dedicated for this purpose.
SEO as a tool for Advertising in India SEO and Search Engine Marketing (SEM) have fast gained importance as a part of
owned media. The online advertising market in India, according to IMRB for 2009-10 was
estimated at 785 crore and is expected to grow to almost 1,000 crore in 2010-11. Of this,
search advertising was estimated at 368 crore in 2009-10 and is expected to touch 460 crore
in 2010-11. Despite the impressive numbers, user defined search optimization however is still
nascent in India. Madan Sanglekar, principal partner - invention, Mindshare calls SEO the
"behind-the-scene, boring cousin" of the digital world. "This is a small but growing market.
Since it is more process oriented and tool driven, it isn't given as much importance as, say,
websites or micro sites or apps are." He adds that brand managers tend to give 90% of their
attention to the site itself and only about 10% to SEO. "Website decisions are taken by brand
managers and not the IT staff in an organization. But when it comes to SEO, it is relegated to
the IT staff."
Agencies may rue the lack of attention, but brands like HDFC Life and Volkswagen
use SEO to maximize their brands' presence online. For HDFC Life, SEO is a core activity in
its marketing pie and though it takes only 0.1% of the entire marketing budget, it has given
the brand through targeted efforts an increase in organic traffic to its website at around 20%.
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Sanjay Tripathy , EVP & head, marketing & direct channels, HDFC Life says, "More than
50% of our traffic comes in through the search engines on a month-on-month basis where as
on an average we have around 4.5 lakh visitors on our website monthly."
Volkswagen has a dedicated team monitoring the search results, volumes and
analytics and their customer management system (CMS) system that ensures high ranking of
its corporate site on major keywords. "It would be wrong to say that the SEO is only meant
for online companies. We have experienced in the past that offline activities are also driving
the online searches even for companies that are primarily using mainline media e.g. the Vento
'Talking newspaper' was the second most searched word on that particular day" , says Lutz
Kothe, head-marketing & PR, Volkswagen Passenger Cars, Volkswagen Group India.
For matrimony portal Shaadi.com, SEO is a long-term strategy. "Over the last several
years, we have put in time and effort to make sure that we rank high on keywords related to
our area of business including our brand name itself. This not only helps drive traffic to
Shaadi.com but also helps increase our brand exposure and awareness. Every month, we get
thousands of new members to our site through organic search (SEO) results" , says Ram
Bhamidi, VP - online marketing, Shaadi.com.
The time for SEO to come on its own is still away and for most Indian companies
their websites are just an extension of the current TVC. "SEO is one of the oldest forms of
marketing on the web", says Gautam Mehra, business head - Mumbai, Connecturf. "But there
are two kinds of companies which are using it — brands that do it because everyone else is
there, and those for whom SEO is a primary focus, like finance and travel brands." Coffee
retail chain Café Coffee Day (CCD), which isn't big on traditional media has used SEO and
the digital medium to its advantage.
Conclusions
The advertising and marketing and advertising strategy uses the fact that when
persons want to buy anything or look for certain alternatives they test first on the internet.
Search engine optimization is the process of improving the visibility of a website or a web
page in search engines via the "natural" or un-paid search results. In general, the earlier, and
more frequently a site appears in the search results list, the more visitors it will receive from
the search engine's users. SEO may target different kinds of search, including image search,
local search, video search, academic search news search and industry-specific vertical search
engines. SEO is not an appropriate strategy for every website, and other Internet marketing
strategies can be more effective, depending on the site operator's goals. A successful Internet
marketing campaign may also depend upon building high quality web pages to engage and
persuade, setting up analytics programs to enable site owners to measure results, and
improving a site's conversion rate. In today’s net-savvy world it has become common for any
business to have a website which they use mostly for advertising their products and services.
With the advent of search engines it has become even easier for the customers to search for
the stuff online.
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